News Reinforces Premise That Current CPEX Strategy Misguided
Rofé Questions Management Strategy to Continue Pursuit of Internal Drug Development
NEW YORK, April 5, 2010 (GLOBE NEWSWIRE) -- Arcadia Capital Advisors, LLC, part of a shareholder group that maintains an ownership interest in CPEX Pharmaceuticals, Inc. (Nasdaq:CPEX), commented on CPEX's recent announcement that "its partner, Serenity Pharmaceuticals, has entered into a global agreement with Allergan, Inc. for the development and commercialization of Ser-120, a product candidate currently in Phase 3 clinical trials for the treatment of nocturia that utilizes CPEX's patented intranasal drug delivery technology." As announced, Serenity Pharmaceuticals will receive an up-front $43 million payment from Allergan, and potential regulatory milestone payments of up to $122 million, while in contrast CPEX receives no (zero) up-front payment(s) from Allergan or Serenity. Sadly, in contrast, CPEX notes that it is only "entitled to sales milestones and low single digit royalties" on sales following commercialization of Ser-120.
"We are disappointed that CPEX management, via its latest press release, continues to base shareholder value creation on an unquantifiable belief versus a legitimate plan to generate shareholder value," commented Richard Rofé, Arcadia Managing Director. Arcadia notes that any future sales milestones and commercialization for Ser-120 presuppose an NDA filing and eventual FDA approval of Ser-120. As such, the timing, amount and certainty of any licensing revenue from Ser-120 to CPEX remain unknown. Furthermore, all indications suggest that any meaningful revenue to CPEX from Ser-120 licensing is still, at minimum, several years away. This also assumes that future clinical data supports an eventual NDA filing and that Allergan will undertake commercialization of Ser-120 and not some alternative formulation that uses drug delivery technology competitive to that provided by CPEX technology.
Rofé commented further on the CPEX business strategy, stating, "The recent CPEX announcement further validates our earlier public claims that CPEX should immediately cease its ineffective and costly pursuit of its Nasulin program. As illustration of this point, Serenity Pharma management has had a truly enviable track record. The Serenity leadership team has moved literally dozens of drug candidates through the development pipeline toward FDA drug approvals prior to forming Serenity. Despite being in business for less than four years, Serenity has demonstrated their ability to address a specific market need and progressed beyond Phase 2 and into Phase 3. Serenity has also been successful in attracting a market leader, like Allergan, to acquire a license with attractive terms to Serenity shareholders and shifts all the commercialization risk to Allergan."
Rofé continued, "In contrast to Serenity's drug development prowess, CPEX has consistently demonstrated a total and complete failure with respect to its drug development efforts. The CPEX Nasulin program remains mired in an early Phase 2 development with a complete lack of statistically significant results despite literally tens of millions in seemingly wasted R&D spending. The Nasulin program is clearly a failure both from a clinical perspective and in terms of its detrimental impact on shareholder value."
Rofé stated, "Over the long run, the Ser-120 licensing pact may end up contributing to future CPEX licensing revenue and cash flows, but it will be a long time before we see any meaningful impact. In the meantime, CPEX's focus on internal drug development is draining tens of millions in scarce corporate resources that could be better applied to enhance shareholder value. We again strongly encourage CPEX management to permanently discontinue its Nasulin development program and realign the Company to begin delivering cash flows to shareholders. CPEX is woefully undercapitalized, lacks sufficient clinical expertise and is guided by an out-of-touch board and myopic management team incapable of successfully executing the strategy they have been pursuing."
Richard Rofé concluded, "At one time, CPEX had some enviable drug formulation talent in Fred Feldman, Ph.D. Unfortunately, in February 2010, the Company announced Feldman had decided to leave the Company and was replaced as Chief Scientific Officer by Nils Bergenhem, Ph.D. Earlier, in February 2009, Robert M. Stote, M.D., left his position as Chief Medical Officer and was replaced by Lance Berman, M.D. Dr. Berman, prior to joining CPEX, was responsible for the strategic development of Pfizer's world-wide diabetes portfolio including the inhaled insulin program that proved to be one of the biggest and most costly commercialization debacles in the history of pharma drug development. Along with these changes in personnel, and the renewed focus on Nasulin, Mr. Sedor and the Board have transitioned CPEX from an area of strength to an area of competitive weakness. The shareholders have been feeling the negative consequences of these misguided actions as management sucks down fat salaries and consumes shareholder cash in pursuit of pet projects while the Board sits comfortably behind a set of governance provisions preventing the shareholders from deciding on the direction of their Company. We encourage CPEX shareholders to be vigilant in advocating that their shareholder rights be more fully protected from a conflicted and coerced board taking its fiduciary cues from an excessively compensated and inadequately performing senior management team. I appreciate the strong support I have received from shareholders and appreciate their encouragement as I strive to effect positive change."