*********************
THE FOLLOWING IS THE TEXT OF QUESTIONS AND ANSWERS ASKED BY ANALYSTS, INVESTORS AND OTHERS DURING
THE CONFERENCE CALL HELD ON APRIL 3, 2006 AT 9:30 A.M.
Operator
(OPERATOR INSTRUCTIONS) George Fulop, Needham & Co.
George Fulop - Needham & Co. — Analyst
Thank you. It’s George Fulop from Needham & Co. Congratulations on the announcement.
Mike Astrue - EPIX Pharmaceuticals — CEO
Thank you, we’re very pleased.
George Fulop - Needham & Co. — Analyst
Can you please elaborate a bit more on some of the synergies and potential challenges in
integrating imaging with a neurologic drug development company? And perhaps some timelines of what
we can expect, milestones to look forward to, and also some of the clinical milestones?
Mike Astrue - EPIX Pharmaceuticals — CEO
Sure. We’re going to be giving out a lot more information about this once we file the S-4 and
the combined plans, and we have got some great decisions to make. These are companies when you look
at them combined have a substantial number of products, and a number of the Predix products bear
opportunities for multiple indications. You can’t do everything. The combined Board will have to
make some decisions as to what we’re going to focus on, what that’s going to mean in terms of the
precise clinical milestones and the burn rate and issues such as that. But there are a number of
Predix milestones that are coming over the course of the next year, in addition to the EPIX ones
that we’ve announced before.
So let me turn it over to Mike to just give a moment as to what the milestones you can expect from
the Predix part of the combined company are.
Dr. Michael Kauffman - Predix Pharmaceuticals — President & CEO
Yes, let me take a slightly different tact here. First of all, the combined companies’
business strategy is to leverage our various proprietary pharmaceutical assets, including both ours
and EPIX’s, to maximize the shareholders’ value. The combined team will have a critical mass of
pharmaceutical business expertise and development expertise. The new company will have a
diversified portfolio of late-stage products. This differentiates us from a great majority of other
biotechs and provides investors with multiple shots on goal.
In terms of milestones, we are fortunate as I said to have a number of different milestones, and
the ones ahead Mike addressed. To be clear, we have a meeting with FDA regarding the next steps for
Vasovist in early April. In addition, as you know, Vasovist is being marketed in Europe by
Schering. We expect to initiate a Phase II clinical trial in chronic obstructive pulmonary disease
or pulmonary arterial hypertension in mid 2006.
In addition, we expect to initiate a Phase II clinical trial in Alzheimer’s disease with Predix
03140 also in mid ‘06. The results from our first pivotal clinical trial with Predix 00023 are
expected in the second half of ‘06. Beyond these, we will have other important clinical development
milestones including potentially another one to two products in the clinic, and we are in
discussions with partners for some of our late-stage clinical assets.
So all in all, we have a number of shots on goal here. We now have the personnel, the financial
resources, and the appropriate business model to drive these things to create shareholder value.
George Fulop - Needham & Co. — Analyst
Thank you.
Operator
Dalton Chandler, Needham & Co.
Dalton Chandler - Needham & Co. — Analyst
Congratulations. Let me sort of ask George’s question in a slightly different way. You touched
on the technologies themselves, the EPIX technology for molecular targeting, for example. Can you
give us examples of the synergies specific to the technologies that you think you might able to
realize?
Mike Astrue - EPIX Pharmaceuticals — CEO
I think that although it is interesting when you start getting the scientists together on
things, that there are potential technological synergies that you don’t see. We’re not trying to
sell this deal based on technological synergies, and we declared right from the beginning as we saw
the pool of candidates that we were likely to pick from that it was relatively unlikely that we
were able to do that. So the synergies I think come from the situations in terms of the depth of
products at Predix.
We have got a strong cash position access to public capital. We have also got a Sarbanes-Oxley
compliant team, which is not easy for a private company to build. We have got a very strong
clinical operations team that particularly has done some heroic work recently, completing the 2104
trial. So we have got some real organizational symmetries. We’ve got a good chemistry — no pun
intended — between the management teams. There are a lot of people in both companies that have
known each other from past roles.
We think that the integration here will be much easier than what you would normally see in a
merger. The companies are nearby. We’re comparably sized in terms of the number of employees, and
there is a good track record of cooperation between a lot of the senior people.
Dr. Michael Kauffman - Predix Pharmaceuticals — President & CEO
Just to add-on — this is Michael Kauffman — a couple of points. Let me hit home on what Mike
said. We really didn’t go into this on either side I think with specific scientific synergies in
mind. The goal here was to take a critical mass of people which end up being quite complementary
between the two companies, particularly in the development arena as well as in the financial arena,
and put them together with a series of products that include late-stage, mid-stage, and early-stage
assets, and with the financial resources available to bring these home in order to create real
value for shareholders. So that was the goal here, is to really put the people, the capital to
work.
Mark Monane - Needham & Co. — Analyst
Okay. Then shifting gears, I guess Vasovist was introduced at the European Congress of
Radiology about a month ago. Any early preview on how that program is going?
Mike Astrue - EPIX Pharmaceuticals — CEO
No, we will address it more on the quarter. As you know, the launch meeting was just a few
weeks ago. We would expect that there will be no or negligible sales for the first quarter, given
the timing of the launch. So we won’t really have any sense until a little bit later on in the
year. I think by the time of the quarterly call, we at least ought to be able to give some update
on sort of the specific timing in particular European countries, but we’re not prepared to do that
today.
Dalton Chandler - Needham & Co. — Analyst
Okay. Finally, I guess you’ll require a shareholder vote to close the transaction. Any other
significant conditions precedent to closing and any sense of the timing?
Mike Astrue - EPIX Pharmaceuticals — CEO
No, I think that here again as we have been saying from the outset, we expected to use stock
for this transaction. We always expected to go to the shareholders and persuade them that this is a
deal that makes sense. So we are on track as regards to that. It will take us a few weeks to file
the S-4 in that time, but there are no other significant barriers or preconditions that I am aware
of. I think right now, our next task once we finish the rollout today is to focus on the S-4,
getting that done as quickly as possible, and get the process moving as quickly as possible. I
think everyone is eager, everyone is excited by this transaction. Everyone is eager to get on with
it, so we want to get that S-4 done as quickly as possible, get to the vote as quickly as we can,
and start moving as a combined company as quickly as possible.
Dalton Chandler - Needham & Co. — Analyst
Thanks and congratulations again.
Operator
Martin Auster, GLG Group.
Martin Auster - GLG Group — Analyst
Martin Auster from GLG. Congratulations. I was wondering if you guys could talk a little bit
about the rate of cash consumption at Predix over the last year, and if there’s any sense of kind
of what Predix as a stand-alone might consume going forward.
Mike Astrue - EPIX Pharmaceuticals — CEO
Martin, we’re going to be providing all that information in the S-4 and, of course, it has
been changing as we go forward. The burn rate of the combined company is going to depend on a lot
of decisions that the combined Board makes and a lot of milestones. But we believe that we are
going to have cash until 2008, and we will be giving more precise guidance after the S-4. Mike, I
don’t know if you want to add anything to that.
Dr. Michael Kauffman - Predix Pharmaceuticals — President & CEO
I think that’s right. Again, look for the S-4 in the next several weeks, and keep in mind that
we will be running a number of clinical programs that will be here in order to really generate
value; always, of course, prioritizing as new data come in.
Martin Auster - GLG Group — Analyst
Also, gentlemen, what are your plans for getting out on the road and introducing the story to
investors over the next few months or so?
Mike Astrue - EPIX Pharmaceuticals — CEO
Well, we are eager to do that. I expect that we will get out, and we would like to talk to all
our major shareholders. We’d like to talk to new shareholders. We don’t have the specific plans
yet, but we should be out there often and early in the coming weeks.
Martin Auster - GLG Group — Analyst
Congratulations again. Looks like a good deal for both parties.
Mike Astrue - EPIX Pharmaceuticals — CEO
Thank you, Martin.
Operator
[Alex Silverman], Special Situations Fund.
Alex Silverman - Special Situations Fund — Analyst
Most of my questions have been answered. Just one I just want to clarify. Did you say we will
see Phase III results for PRX-00023 by year-end?
Dr. Michael Kauffman - Predix Pharmaceuticals — President & CEO
That is correct. The study was initiated under a special protocol assessment with FDA last
year in August, and accrual has been on track and we expect to announce data in the second half of
this year. This is the first of at least two Phase IIIs, and there will be additional data
following for generalized anxiety.
Alex Silverman - Special Situations Fund — Analyst
For general anxiety.
Dr. Michael Kauffman - Predix Pharmaceuticals — President & CEO
That is correct.
Alex Silverman - Special Situations Fund — Analyst
Great, thank you very much. Congratulations.
Operator
Ian Sanderson, Cowen & Co.
Ian Sanderson - SG Cowen — Analyst
Thanks for taking the question and congratulations. Are there any published Phase II data out
there for PRX-00023?
Dr. Michael Kauffman - Predix Pharmaceuticals — President & CEO
We have not yet published the Phase II data. We will be presenting at the National Institutes
of Mental Health meeting that is coming up in June of this year with those data. We did also
provide a press release on our website with the initial topline data from the Phase II of Predix
00023.
Ian Sanderson - SG Cowen — Analyst
Okay, and then could you — maybe this will be in the S-4, but can you be any more explicit on
the milestones that trigger the $35 million additional payment?
Mike Astrue - EPIX Pharmaceuticals — CEO
Yes, we can go through a little. We will have all that in the S-4, and it gets a little bit
complicated, so let me just give you sort of the brief overview. The triggers of the milestone are
the achievement of certain clinical milestones which are described in the merger agreement. In
essence, we’re looking for significant advancements in the area of efficacy or entering into a
validating business development agreement, which is worth at least $50 million in total and for which EPIX receives at
least $20 million in cash prior to June of 2008. So again, there’s a fair amount of detail. We’re
going to be filing the merger agreement. You’ll be able to see it in all its technical glory
shortly, but that is the overview of what it is.
Ian Sanderson - SG Cowen — Analyst
Great. Then the last one, on the partnering strategy for PRX-00023 and the others, do you plan
to conduct both Phase III trials and pay for those for PRX-00023, or would you like to partner
before you get the second Phase III?
Dr. Michael Kauffman - Predix Pharmaceuticals — President & CEO
So our goal is really to look at what deals are possible. We actually expect that the first
Phase III results coming out at the end of this year would be a very large value-creating event for
the Company. Having said that, depending on the market and what we believe we can do, we may well
execute the second Phase III with or without a partner. So we are in ongoing discussions with a
number of large pharmaceutical and large biotech companies on this compound.
The focus for the relationship with a partner is more on the marketing and commercialization side,
but there will be some focus on development as well. Keep in mind also that Predix 00023 is
appropriate for development in major depressive disorder, as well as potentially additional
psychiatric indications, which means that we do have a lot of potential here. So we will be
partnering this. At some point, we will try to optimize that point. Our goal is always to focus on
creating a lot of value for shareholders and patients, etc.
Ian Sanderson - SG Cowen — Analyst
Okay, thank you very much.
Operator
Mark Monane, Needham & Co.
Mark Monane - Needham & Co. — Analyst
It’s Mark Monane. Congratulations on putting the companies together. A question on the use of
the EPIX imaging agent. In terms of Alzheimer’s disease or dementia, there is often a vascular
component as well as a component related to primary Alzheimer’s disease. Is it possible in the
future to leverage 2104 in thinking about diagnostic strategies for dementia, regardless of the
type?
Dr. Michael Kauffman - Predix Pharmaceuticals — President & CEO
Right, and there are, of course, vascular dementias, etc. One of the reasons I’m excited about
this merger is because the potential utility of these products that EPIX has is just beginning to
be realized, particularly the clot-elucidating agent, 2104R, is very exciting. Now for specific use
in Alzheimer’s or potentially vascular dementia, we are investigating that, and we will certainly
look into that moving forward. But we can’t really speak to it at this time.
Mark Monane - Needham & Co. — Analyst
Terrific. Thanks for the added information.
Operator
(OPERATOR INSTRUCTIONS) A follow-up from Ian Sanderson, Cowen & Co.
Ian Sanderson - SG Cowen — Analyst
Thanks for taking the follow-up. This is for Michael Kauffman, and maybe a difficult question
to answer, but can you just kind of let us know when you pulled the IPO in Q4, what was the major
feedback you got from investors? Was this too early or what was the thing that was missing for
investors there?
Dr. Michael Kauffman - Predix Pharmaceuticals — President & CEO
Certainly. When we withdrew our IPO last year, the market conditions — and if you look at the
dates and the announcements, you recognize that BTK had fallen about 10% during the course of the
road show. Those market conditions were just not favorable, and the main reason we were given was
that the environment was not very appealing. At the same time, we did complete the road show and we
did have a potential offering. The Board decided eventually that, in the interest of the
shareholders, we elected to pull the IPO and focus on moving the clinical programs forward and
evaluating M&A opportunities, as well as waiting for the market to improve.
Luckily, as far as evaluating the M&A opportunities, EPIX was particularly interesting to us for
the many reasons we have given including the financial strength, the presence of late-stage
products, and the core groups of people in the company. Overall, we think this is a far better
transaction than the sort of go-it-alone transaction that we contemplated earlier.
Mike Astrue - EPIX Pharmaceuticals — CEO
I would just add too, our whole search was predicated on the notion that it was going to be a
chilly winter for all biotech companies that wanted to go public, and that certainly turned out to
be true. There has been very little IPO activity generally, and essentially the entire list of
companies we were looking at fit this description and it’s where we think there was very
significant value. Because the market was not open, these assets were available at a fraction of
what we think their real value is. So this is why I think it’s win-win for both companies, because
I think we’ve picked up some terrific assets inexpensively. And for Predix shareholders, now
there’s going to be not only cash but access to capital in the future. I think it is a win-win
combination for both companies.
Ian Sanderson - SG Cowen — Analyst
Okay. What does Predix bring to the table just in terms of net cash?
Dr. Michael Kauffman - Predix Pharmaceuticals — President & CEO
We won’t disclose that today. We will have it in the S-4. Suffice it to say that at the end of
Q1, the combined entities had $125 million in cash.
Ian Sanderson - SG Cowen — Analyst
All right. Thank you very much, very helpful.
Operator
[Shabaskan Bush] from Ewing Investment.
Shabaskan Bush - Ewing Investment — Analyst
I missed a couple of minutes of your conference call, and I apologize in case you answered
this question. Could you elaborate a little bit on the design of your current Phase III trial in
anxiety in terms of people enrolled, the endpoints you’re looking for, etc., etc.?
Dr. Michael Kauffman - Predix Pharmaceuticals — President & CEO
Certainly. The design of this trial with Predix 00023 is actually a fairly standard design
that the FDA requires for approval of all anxiety drugs. And in fact, as I mentioned, we have a
special protocol assessment agreement with the FDA from the get-go. The design is it’s a randomized
blinded trial. It’s being conducted in the U.S. alone at about 25 centers across the country. The
primary endpoint is the change in the Hamilton anxiety score, also called the HAM-A. It’s from
baseline until week eight for Predix 00023 at a dose of 80 milligrams a day versus placebo. Again, this is a very standard design. This is what
Lexapro, Effexor, and a number of other drugs used for their approval.
This is statistically powered to have a 90% power to detect the expected 2.5 to 3 point difference
from drug versus placebo. There are a couple of secondary endpoints, the clinical global impression
change and a number of other side effects endpoints that are incorporated into the trial. The
primary design and endpoint, again, is the standard one for the approval of anxiety drugs.
Shabaskan Bush - Ewing Investment — Analyst
Okay, and the number of people you try to enroll?
Dr. Michael Kauffman - Predix Pharmaceuticals — President & CEO
This is the 310-patient trial with randomization of one-to-one per drug versus placebo.
Shabaskan Bush - Ewing Investment — Analyst
Excellent. Thanks a lot.
Operator
[Stephen Silk], [Steve Silk & Sons].
Stephen Silk - [Steve Silk & Co.] — Analyst
Hello and congratulations. I was also interested in how much cash Predix was bringing to the
table. If you’re not disclosing that, could you tell us what the burn rate had been say for the
past three quarters on a quarterly basis, and had it been growing or has the burn rate kind of
flattened out at this point?
Dr. Michael Kauffman - Predix Pharmaceuticals — President & CEO
We can say that we will disclose as much detail as we will in the S-4, and that’s all we’re
prepared to say at this time.
Stephen Silk - [Steve Silk & Co.] — Analyst
Okay, thank you.
Operator
There are no more questions. I would like to turn the call over to Amy Hedison for closing
remarks.
Amy Hedison - EPIX Pharmaceuticals — IR
Thank you, everyone, for joining us, and we look forward to seeing you all on the road over
the next several weeks.
Mike Astrue - EPIX Pharmaceuticals — CEO
I thank you very much. Great day, it’s opening day for the Red Sox and a great day
for EPIX and aging right-handers generally. So thank you all, and I’m sure we’ll be talking to a
lot of you off-line. We’ll look forward to answering your questions. Thank you.
Operator
Thank you for your participation in today’s conference. This concludes the presentation. You
may now disconnect. Have a great day.
*********************
EPIX intends to file a registration statement on Form S-4 with the Securities and Exchange
Commission containing a joint proxy statement/prospectus in connection with the proposed merger.
Investors and security holders are advised to read the joint proxy statement/prospectus (including
any amendments or supplements thereto) regarding the proposed merger when it becomes available
because it contains important information about EPIX, Predix and the proposed transaction and other
related matters. The joint proxy statement/prospectus will be sent to stockholders of EPIX and
Predix seeking their approval of the proposed transaction. Investors and security holders may
obtain a free copy of the joint proxy statement/prospectus and any amendments or supplements
thereto (when they are available) and other documents filed by EPIX at the Securities and Exchange
Commission’s web site at www.sec.gov. The joint proxy statement/prospectus and such other
documents may also be obtained for free by directing such request to EPIX Pharmaceuticals, Inc. 161
First Street, Cambridge, Massachusetts, Attn: Investor Relations, tel: (617) 250-6000; e-mail:
ahedison@epixpharma.com or Predix Pharmaceuticals Holdings, Inc., 4 Maguire Road, Lexington,
Massachusetts 02421, Attn: Investor Relations, tel:
(781) 372-3260;
e-mail: investors@predixpharm.com.
EPIX and Predix and their respective directors, executive officers and other members of management
and employees may be deemed to be participants in the solicitation of proxies with respect to the
adoption of the merger agreement and the transactions associated with the merger. A description of
any interests that EPIX and Predix directors and executive officers have in the merger will be
included in the registration statement containing the proxy statement/prospectus that will be filed
with the Securities and Exchange Commission and available free of charge as indicated above.
Information regarding EPIX’s executive officers and directors is also available in EPIX’s proxy
statement for its 2005 Annual Meeting of Stockholders, which was filed with the Securities and
Exchange Commission on April 29, 2005. You can obtain free copies of these documents using the
contact information above.