2008 Interview with: Alseres Pharmaceuticals, Inc. (ALSE-NASDAQ), CFO, Kenneth L. Rice Jr., J.D., L.L.M., M.B.A. - featuring: their development of therapeutic and diagnostic products primarily for disorders in the central nervous system (CNS) focusing on a diagnosis for Parkinson's Disease and recombinant protein-based drug for nerve repair in spinal cord injury.

Alseres Pharmaceuticals, Inc. (ALSE-NASDAQ)

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Alseres Pharmaceuticals Is In Phase III Clinical Trials With Their Altropane Technology That Will Allow Them To Diagnose Parkinson’s Disease And In Phase II With Their Cethrin Recombinant-Protein-Based Drug For Nerve Repair In Spinal Cord Injury


Alseres Pharmaceuticals, Inc.

85 Main Street
Hopkinton, MA 01748
Phone: 508-497-2360

Kenneth L. Rice Jr., J.D., L.L.M., M.B.A.
Chief Financial Officer

Interview conducted by:
Lynn Fosse, Senior Editor
Published – July 25, 2008

Kenneth L. Rice, Jr., J.D., L.L.M., M.B.A.

Executive Vice President - Finance & Administration
Chief Financial Officer and In-House Counsel

Mr. Rice brings over 25 years of experience in life sciences-related businesses to Alseres. Most recently, Mr. Rice served as Vice President, Chief Financial Officer, and Chief Commercial Officer of Aderis Pharmaceuticals, a privately held biopharmaceutical company. Mr. Rice previously held executive positions with MacroChem Corporation, Pentose Pharmaceuticals, Unisyn Technologies, Zymark Corporation, and Millipore Corporation. Mr. Rice earned his LLM Taxation from Boston University Law School, his Juris Doctor Cum Laude from Suffolk University Law School, and his MBA and BS/BA from Babson College.

Company Profile:

Alseres Pharmaceuticals, Inc. (Nasdaq: ALSE) is engaged in the development of therapeutic and diagnostic products primarily for disorders in the central nervous system (CNS). The Company maintains a world-class intellectual property position in the field of regenerative therapeutics. The Company's energy and focus is reflected in several important initiatives. Cethrin®, a recombinant-protein-based drug designed to promote nerve repair after acute spinal cord injury, demonstrated positive interim results in a Phase I/IIa clinical trial. The Company's research and pre-clinical programs include, Inosine for the treatment of spinal cord injury and stroke, Oncomodulin for the treatment of ocular injury and disease and research programs directed at a number of regenerative therapies including bone repair. The Company has a robust molecular imaging development program targeting diagnosis of Parkinson's disease and potentially dementia and ADHD. The Company's lead molecular imaging product candidate is Altropane® which is in Phase III clinical trials for the diagnosis of Parkinsonian Syndromes including Parkinson's Disease. The Company has research collaborations with Harvard Medical School and Children's Hospital Boston.

Mr. Rice, you have a considerable background in the industry; what attracted you to Alseres Pharmaceuticals?

Mr. Rice: “What attracted me to Alseres was the potential offered by the core technologies that we have for nerve repair especially in spinal cord injury and the diagnosis of degenerative nerve disorders like Parkinson’s and dementia.”


CEOCFO: Would you tell us about the technologies that you have?

Mr. Rice: “I will start with the nerve repair technology. Our lead clinical program in nerve repair is Cethrin®. This product is being developed to restore feeling and movement after a serious spinal cord injury. Fundamentally, what happens in a traumatic injury to the central nervous system, like a spinal cord injury or a traumatic brain injury, is that nerve fibers are broken. Nerve fibers form the connections by which the body communicates from the brain to the various muscles and organs. If nerve connections are broken it is like breaking a telephone line. We believe our technology allows the nerve fibers that communicate with each other to be reconnected and hopefully restore motor and sensory function in those patients that have been injured. On the diagnostic side it turns out that for many diseases, particularly Parkinson’s disease and dementia, there are simply no objective diagnostic tools today. This would be fine if not for incorrect diagnoses estimated at between 35 and 50%. There are some 18 million people in the US living with the effects of tremor or dementia and they don’t have a definitive diagnosis of what they have. In the case of tremor disorders there are 11 million people in the States alone with tremors, about a million and a half of whom are suspected to have Parkinson’s. Our imaging technology for the first time provides the physician with a visualization of the brains of these patients and through that visualization they are able to determine whether the patient has Parkinson’s disease or a tremor from another source that should be treated differently.”


CEOCFO: How does your diagnostic technology work?

Mr. Rice: “A patient will visit the physician’s office with a tremor and they don’t quite know what it is. The physician will take a medical history and perform a neurological evaluation of the patient using established scales for tremor disorders and Parkinson’s. These clinical diagnoses are incorrect anywhere from 35-50% of the time. To use our product, the patient will be sent to a nuclear imaging facility much like cardiac patients today. The patient is given an injection of our product, Altropane®. Their head is then scanned using a specialized camera called a SPECT camera or (single photon emitting computed tomography). The Altropane travels through the blood system to the brain and it binds to a specific site in the brain on a neuron that produces dopamine. In Parkinson’s the hallmark of the condition is that patients have lost many of the dopamine-producing neurons. If there are low numbers of dopamine producing neurons present in the patient, the scan will detect a very weak signal indicating that the patient has Parkinson’s. If the signal is strong, the physician can then determine that the tremor is caused by something other than Parkinson’s. We believe, over time, that the agent will help the physician and the patient by tracking the progression of their disease. This also provides huge benefits down the road for the companies with drugs in development that are intended to modify the progression of Parkinson’s. A good way to demonstrate arresting of disease progression is to show that the neuron level is actually not declining. We believe, Altropane will enable this.”


CEOCFO: Where are you in the process?

Mr. Rice: “Altropane is in Phase III clinical trials. We are about two to three years away from the market we believe.”


CEOCFO: What other products are you working on?

Mr. Rice: “The most exciting product in our nerve repair portfolio is a product called Cethrin. It is in Phase II clinical trials for the treatment of acute spinal cord injuries. There are about eleven thousand new spinal cord injuries a year in the U.S. and it is probably triple that worldwide. The injuries break down about 50/50 between upper spine or neck injuries; called cervical spinal cord injuries and the lower spine called thoracic spinal injuries. The cervical injury patients unfortunately generally wind up as quadra or tetraplegics, and have no movement or sensory function below their neck. The patients with thoracic injuries are very often paraplegic; they are wheelchair bound and can move their upper torso and upper extremities. Our drug, Cethrin, is administered to the patient during decompression surgery that two-thirds of these patients undergo right after their injuries. Cethrin is a small protein that is delivered topically one time to the patient during the surgery so we don’t ask the patient to undergo any additional procedures or any more invasive procedures than they are already undergoing. The drug blocks what we have identified scientifically as a master switch in the neurons that when activated causes nerve repair to be stopped.

With regard to the science, when you get a cut on the tip of your fingers new nerves are usually able to develop and make connections with other nerves and that restores the feelings in your fingertips. That process is generally known as nerve regeneration, however that process does not occur that often in the case of spinal cord injuries or some of the severe CNS injures like strokes or brain injuries. In those injuries useful function is very often lost permanently because the damaged cells cannot re-grow the connections. Further, the uninjured cells are generally unable to form new connections to compensate for the connections that have been lost.  For years researchers have been trying to find ways to improve outcome following these types of injuries. Our technology is based on facilitating reconnections by re-growing the connecting fibers called axons to restore sensory and motor function that is lost as a result of the injury. When I describe the axon regeneration process I like to use an automobile analogy; in order to cause an automobile to move forward one has to be able to step on the accelerator, which would stimulate the axon growth pathways. At the same time, the body has a very elaborate brake system and that brake system manages to stop axons from growing when the body’s biology system doesn’t believe they should grow. The brake system very often wins, and it is activated after the type of injuries we are talking about here. In addition to stepping on the accelerator, which the body tends to do naturally, it also is necessary to make sure that you keep your foot off the brake. We have spent a lot of time on a technological level developing and understanding these two pathways and we have identified them down to the level of two master switches. The one that Cethrin targets is a master switch called Rho, Rho is the switch that we believe turns on the brake system. Our goal at a fundamental level is to shut off the brake system thereby enabling the body to re-grow these axons, reconnect the nerve fibers as a result and restore function in these patients. That is what we believe Cethrin does.

Cethrin is in Phase II trials. We reported earlier this year the results from a Phase I/IIa clinical trials in initially 37 and now 48 subjects. We have tested the drug in both cervical and thoracic patients with very encouraging early results. As you may expect, the Phase I/IIa trial was predominantly a safety trial. That having been said, it did have efficacy measures in it as well. Those measures show that almost a quarter of all the subjects enrolled in the trial showed improvement against a validated scale used to measure severity of spinal injuries developed by the American Spinal Injury Association or ASIA. One progresses through the scale from level A through E, where A is the most severe and E is normal. All subjects that entered the trial were classified as being the most severe injuries, so-called ASIA A patients. We had a little over a quarter of the subjects in the trial respond and improve at least one level on the ASIA scale which compares very favorably to the published literature that says that one should expect somewhere between 6 and 7% of the subjects to improve. Most exciting to us, within the cervical subjects that were in our trial, almost 40% of these patients improved two levels or more, two of the thirteen subjects in this group are walking after having been treated with Cethrin and that simply doesn’t happen.

Cethrin is an orphan drug in the US. We will commence our Phase IIb trial a little later this year. We have also been fortunate over the past year or so to assemble what we consider to be a world-class group of scientific and clinical advisors on spinal cord injuries. Our approach of targeting the Rho pathway has indirect validation by virtue of the fact that many large companies in the space have declared nerve repair to be strategic to them and are working in the same pathways. Companies like Biogen-IDEC, Genentech, Novartis, Glaxo SmithKline, Johnson & Johnson and Merck, have all declared that these therapeutics are of strategic importance to them. We are ahead of everyone at this point with the world’s leading clinical program in spinal cord injury. We also have intellectual property protecting not only Cethrin, but also for molecules in pathways adjacent to and upstream of our core nerve repair technology. Our patent estate includes ninety issued and pending patents worldwide that cover pretty much all of the major pathways and targets in the space. We believe that positions us for productive discussions and possible collaborations with many of those companies as well.”


CEOCFO: How are you funded for all the development?

Mr. Rice: “In the late fall of 2004 on the heels of a major change in the management and the board, Alseres’ long term mission was changed to focus on nerve repair and neuroimaing. Our lead investor is a group out of New York called Ingalls and Snyder led by Mr. Robert Gipson. It is a syndicate of very high net-worth individuals that manages a little over $3 billion in cash right now and they own collectively about 70% of the Company. They have been providing most of the funding for us for the past three years and continue to do so. That said, we are a public company and that status will provide us with longer term access to the public capital markets as well.


CEOCFO: What is ahead over the next few years, and would you touch on some of the other products?

Mr. Rice: “As I mentioned before, the Cethrin program will start a Phase IIb trial later this year and that trial could take until the early part of 2010 to fully enroll. We are very excited about the fact that Altropane our lead imaging agent is so close to market. We expect that the final stage of our POET-2 program, which is the last Phase III pivotal trial program for Altropane, will start a little later this year or early next year. We started the first part of that program already. We are assembling what in the imaging business is called a “training set” of images which the readers can use to be trained on. We are about half way through that enrollment. We will follow that with the actual patients that will constitute the pivotal trial. We expect that in the 2010 timeframe we will be looking to submit Altropane for approval in the US.

We are also looking at Altropane in another indication area outside of Parkinson’s disease called dementia with Lewy bodies, which is a subset of Alzheimer’s dementia. It is very hard to differentiate the two. In this case if one is misdiagnosed, such as diagnosed with Alzheimer’s dementia and treated with anti-psychotic drugs, when in fact one has dementia with Lewy bodies, there is a very real medical risk that the side-effects of those drugs could be fatal in some cases. This is a significant opportunity to expand the potential for Altropane. We expect to be begin Phase II work with Altropane in dementia with Lewy bodies later this year as well.

Our preclinical pipeline is actually quite robust. We have technology surrounding the brake system, but we also have a great deal of technology on the pro-regenerative side of the equation. All of our experts are telling us that the best long term way to fully address issues of the magnitude of spinal cord injury and stroke and traumatic brain injury and other central nervous system traumas, is to be able to develop drugs that activate both pathways at the same time. Our preclinical efforts are focused on our pro-regenerative assets as well and we expect to be releasing pre-clinical animal data over the coming year or so from those assets.”


CEOCFO: Why should Alseres stand out for investors?

Mr. Rice: “First, we believe that we have the world’s leading neuroimaging program. Although we are not on the market outside the US as GE is, we are the only Phase III program in the U.S. GE is not here and they are not intending to come here. We have the opportunity to own the U.S. market, which as I said is something bordering on eighteen million patients over the next couple of years and we believe once Altropane is approved it will garner a great deal of that market very quickly. In addition, we know that we have the world’s leading clinical program in acute spinal cord injuries for which you are probably aware there are simply no choices today for the patient. There are no drugs to help acute spinal cord injury patients gain back motor or sensory function. We are ahead of the only other clinical program we know of that is being run by Novartis. We believe that we are by far the world leader in pre-clinical nerve repair technologies and behind all of that our intellectual property protects a much broader array of regenerative therapies, new technology and new cures in things like oncology and cardiovascular disease and bone repair. We believe we have a great array of assets and a strong team, with very good investors. We are actually a very attractive valuation today, trading at about a $50M market cap. We have $35 million of convertible debt on our balance sheet as well. One could look at us as a $75 to $80 million valuation with assets that approach over $1.5 billion of revenue opportunity.”


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“First, we believe that we have the world’s leading neuroimaging program. Although we are not on the market outside the US as GE is, we are the only Phase III program in the U.S. GE is not here and they are not intending to come here. We have the opportunity to own the U.S. market, which as I said is something bordering on eighteen million patients over the next couple of years and we believe once Altropane is approved it will garner a great deal of that market very quickly. In addition, we know that we have the world’s leading clinical program in acute spinal cord injuries for which you are probably aware there are simply no choices today for the patient.” - Kenneth L. Rice Jr., J.D., L.L.M., M.B.A.

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