ESSA Pharma Inc.

For the second quarter ended June 30, 2008, EPIX reported revenue of $17.4 million versus $1.8 million in the prior-year quarter. Net loss was $2.3 million, or $0.06 per share, compared with a net loss of $18 million, or $0.55 per share, a year earlier. R&D expense was $15 million, up slightly from $14.8 million, while G&A expense fell to $3.4 million from $4.5 million. Cash, cash equivalents, and short-term investments were $43.2 million at June 30, 2008. For full-year 2008, management reiterated guidance for revenue of $25 million to $30 million and a net loss of $45 million to $50 million. Management said cash on hand plus anticipated 2008 revenue should fund operations through the first quarter of 2009, with the new Kingsbridge equity facility potentially extending that runway beyond then.

Interim CEO Elkan Gamzu framed EPIX as having a broad set of opportunities, led by PRX-03140 for Alzheimer’s disease and the company’s strategy to monetize Vasovist. He emphasized the value of the proprietary in-silico platform, the depth of the pipeline, and what he called strong partnerships as core elements of the company’s value proposition. His tone was upbeat but measured, and he repeatedly said it is still early for major strategic conclusions as he has only recently joined the company.

Kim Drapkin focused on the quarter’s financial improvement and liquidity. She cited $17.4 million of quarterly revenue, mostly from GSK milestone payments including $3 million for lead candidate selection, $2.5 million for progress in the discovery programs, and $7.5 million for initiating the PRX-03140 Phase 2b program. She also reviewed the $43.2 million cash balance, the $100 million convertible debt outstanding due June 15, 2011 under certain conditions, and the Kingsbridge committed equity facility, which can provide up to $50 million over three years at a 6% to 12% discount plus 400,000 warrants at about $2.49 per share. She said the company expects its existing cash and 2008 revenue to fund operations through Q1 2009 and reiterated that 2008 revenue guidance does not assume new partnerships or large at-risk milestones.

Analysts asked about the timing and design of the PRX-03140 Alzheimer’s studies, including why the monotherapy study includes a positive-control arm and how enrollment would work for patients intolerant to acetylcholinesterase inhibitors. Management said the monotherapy data are expected by end-2009 and the combination-study data in 2010, and clarified that newly diagnosed patients can be randomized to any arm while intolerant patients would not receive Aricept. Questions also focused on the Vasovist monetization strategy and Kingsbridge funding; management said it is considering alternatives but currently leans toward waiting until approval to maximize value, while using Kingsbridge flexibly as milestones, partnerships, and market conditions evolve. There were also questions about 07034 and the unpartnered preclinical assets CCR2 and P2Y2, with management saying 07034 is still under assessment and the earliest a trial would start would likely be 2009, while partnering discussions for CCR2 and P2Y2 are ongoing.