Dear Shareholders,
A tremendous vitality characterizes our Company. The confidence and passion of Akela’s people derive directly from the performance of our candidate drugs in the clinical trial process. Notwithstanding recent drawbacks, we are making compelling progress with our lead compounds. Accordingly, we are proceeding with the knowledge that our principal objectives are solidly on course – and with the strong belief that our objectives will be met.
Moreover, we take pride in the fully realized integration during 2007 of our acquisition in the United States. The addition of Austin-based PharmaForm’s expertise is significant for two distinct reasons. On the one hand our subsidiary’s formulation technologies have provided Akela with additional abilities to maximize its existing pipeline. On the other, PharmForm has provided major new potential products to our pipeline.
Fentanyl TAIFUN®: In 2007 Akela’s drug development programs made important progress through the clinical trial process. Our lead candidate drug, Fentanyl TAIFUN®, is a dry powder inhaled treatment for breakthrough cancer pain. Fentanyl is a long-proven drug. Akela’s innovation entails a revolutionary formulation and method of self-administered delivery for Fentanyl.
In 2007 Akela’s inhalation therapy with Fentanyl TAIFUN® returned excellent Phase IIb data. It again demonstrated pain reduction in cancer patients at a significantly greater speed than the currently used self-administered analgesics. It is our conviction that Fentanyl TAIFUN® provides the ideal drug and delivery method for breakthrough cancer pain.
External support for that conviction became impressively evident in 2007. Janssen Pharmaceutica NV signed a licensing and development agreement with Akela for our novel formulation. Once Fentanyl TAIFUN® achieves regulatory approval, Janssen will market and distribute the product in the European Union, Eastern Europe, Russia, the Middle-East, Africa and Canada. Janssen will also be responsible for developing the product for additional indications. Akela received US$10.8 million upon signature of the agreement, and could receive up to US$33.6 million as regulatory milestones are met, and additional commercial milestones as objectives are achieved. Significantly, this agreement does not yet encompass the U.S. marketplace.
Our 2007 clinical trial data for Fentanyl TAIFUN® mandated rapid advance to a Phase III trial. The final stage trial to demonstrate efficacy, optimize dosage, and prepare the way for registration and commercialization is about to commence in Europe.
The start of this Phase III study has been delayed in the United States. Subsequent to year end, the FDA informed us that, due to GLP (good laboratory practices) deviations by the performing clinical research organization (CRO), Akela´s six-month inhalation toxicology studies should be repeated. No toxicological reasons were cited. We strongly believe that the submission for regulatory approval should not be delayed by more than six months. Submission for regulatory approval is now anticipated by Q1-2010 for the European Union and by Q3-2010 for the U.S.
Notwithstanding the setback in the U.S. regulatory environment, we have every confidence that the results of our multinational Phase III study will vindicate our years of unstinting work and the patient support of our investors. Should Fentanyl TAIFUN® advance to the marketplace, it can be expected to earn a healthy share of the US$1 billion-plus breakthrough cancer pain management market.
Akela’s GHRH: In 2007, equally importantly, we also announced positive results from our placebo controlled Phase II pilot trial investigating Akela’s GHRH (growth hormone releasing hormone) for the treatment of malnutrition in patients with late pre-dialysis chronic renal failure. This is a condition suffered by more than 300,000 patients in North America alone, who lack fully effective options for symptomatic relief.
Within only four weeks of treatment, Akela GHRH induced a highly significant stimulation of endogenous growth hormone secretion and a marked increase of circulating insulin-like growth factor as compared to placebo in patients with chronic kidney disease. These endocrine effects were associated with a significant and substantial increase in fat free mass and concomitant reduction in fat mass.
Our findings were outstandingly indicative of the therapeutic potential of Akela’s GHRH. For patients whose conditions are preventing the release of growth hormones, this drug is potentially an ideal treatment. Partnership discussions aimed at financing clinical studies and the provision of major milestone payments for Akela is currently taking place.
The market prospects for Akela’s GHRH, should its clinical progress fulfill our realistic expectations, are considerable. Further trials could encompass not only chronic renal failure but other wasting disorders such as wasting associated with cancer and HIV-infection. This potent drug could ultimately share in several billion-dollar markets.
PharmaForm Acquisition and Integration: The year 2007 started with a key event for Akela, namely the acquisition of PharmaForm, a GMP manufacturing site certified in the U.S. by both the FDA and DEA. The addition to Akela of PharmaForm’s expertise and platforms constitutes a powerful evolutionary step for us. It reinforces our character as a leading product development company, while bringing important technologies, products and synergies to our development pipeline. PharmaForm’s DEA certification will prove particularly important for Fentanyl TAIFUN®.
Once our acquisition of PharmaForm officially closed, we instituted a program of integration and fine-tuning to maximize the merging of our organizations. It was a year of transition, not without its challenges. Selected personnel and technology we had formerly located in Finland were transferred to Austin. Only a handful of our employees now remain in Finland. In the course of 2007 Akela and PharmaForm became a single unified team, such that today we feel as if we are building upon a deeply rooted common foundation.
The first product based on PharmaForm’s technology, EDACS™, is scheduled to enter a Phase I clinical trial in the first quarter of 2008.
EDACS™ is a drug abuse deterrent technology. It allows us to take proven compounds – widely used, long proven, non-proprietary drugs – and render them very difficult to abuse. EDACS™ makes it extremely hard, for example, to crush any kind of strong pain medication into fine powder, or to dissolve the medication in alcohol in less than four or five hours. With those means of misappropriation eliminated, the typical abuser of powerful pain relievers is stymied. At the same time, the desired release characteristics are maintained. Moreover, Akela´s formulation ensures that no inadvertent misuse will take place; the technology not only prevents willful dose dumping, it also protects against unintended dose dumping. Should a patient ingest alcohol after taking an EDACS™-medication, no dose dumping effect will result.
Our abuse deterrent technology shows promise of evolving into a powerful business platform. Since it involves established drugs, it can generate multiple products in a category where the time horizon to commercialization is considerably shorter than for new drugs. We are about to unveil two new abuse deterrent technologies. Since EDACS™ uses a hot-melt extrusion process; EDACS™ cannot be employed with heat-sensitive compounds. Our new technologies, CureTab™ and CureCap™, meet that requirement and represent two additional means of rendering drugs very difficult to dissolve or turn into powder.
Once we demonstrate the efficacy of our technologies, regulatory authorities in countries like the United States, where misappropriation of powerful painkillers and other drugs has become a major social concern, will likely take profound interest. The potential of our abuse deterrent platform is wide in terms of products, and exciting in regard to commercial prospects.
Postponed Share Offering in the U.S.: In the fall of 2007 we had intended to list Akela on the Nasdaq Global Markets Exchange, and float a public offering of US$35 million in the U.S. Prior to the event, to meet the initial listing criteria of Nasdaq Global Markets, we had consolidated our share price to above the minimum initial listing US$5 per share required.
As we began the offering, however, the sub-prime credit crisis severely destabilized the market. Exacerbating the storm was the fact that 2007 had been unkind for life sciences companies in general, particularly harsh on small caps in the field – and exceptionally severe on small cap drug developers headquartered outside of the United States. In the face of these adverse market conditions, we withdrew the offering.
Akela’s Stock Performance: The decline in our capitalization in 2007 was of course a major letdown for all shareholders. The protracted timelines that inevitably accompany our projects doubtless played a role in investors’ decision-making. So too, certainly, did all the factors that influenced the American marketplace in relation to our U.S. listing initiative. Accordingly, I consider that our performance and potential are not reflected in our share price. Akela’s stock, I submit, is significantly under-valued. With our superb clinical trial data, the expectation is high that we will achieve our endpoint objectives. I would then expect that our value will be appropriately recognized. In the year ahead we will continue to advance our projects with full confidence in their imminent success.
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Leading the team at Akela has always been an honor and privilege for me, given the level of commitment that Akela’s people have consistently and uniformly demonstrated. I wish to thank them for their resolute work, which forms the basis of all our accomplishments.
I wish also to recognize the steadfastness of our shareholders, whose indispensable support underlies our every achievement. In our industry, patience is obligatory and risk unavoidable, but the reward can more than compensate. I have every confidence that Akela is unwaveringly on the road toward our intended outcomes. I look forward to reporting further milestones of success in the months ahead.
Halvor Jaeger, M.D., F.C.P
Chief Executive Officer
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