TO OUR STOCKHOLDERS,
Fiscal 2007 was one of the most significant years in SuperGen’s history. We successfully transformed SuperGen from a specialty pharmaceutical company, dependent on acquisitions of drugs from external sources, into a discovery-based, drug development company.
Our Company is now in its strongest financial position in more than five years. We ended 2007 with approximately $91 million in unrestricted cash, cash equivalents and marketable securities, no debt and we reported a profit for the first time in our history. SuperGen is no longer dependent on the commercial success of one product. Our Company has a product in clinical trials and several product candidates advancing to the clinical stage.
Although we have made many changes over the past four years to execute our strategy, our mission remains unchanged—to maximize stockholder value by developing novel hematology and oncology drugs that will address significant, unmet medical needs.
ENHANCING STOCKHOLDER VALUE
Fundamental transformation takes time. In 2007 we completed the sale of our unprofitable commercial franchise to Mayne Pharma Limited (now Hospira, Inc.), for up to $42 million; we sold the rights to the generic anticancer agents, mitomycin, paclitaxel and etoposide, to Intas Pharmaceuticals Ltd. for approximately $1.2 million; and, we earned $22.3 million in royalty payments from MGI PHARMA, INC. Collectively, these revenues and gains allowed us to optimize our discovery process and accelerate the development of drugs in our pipeline. Going forward, as the pharmaceutical industry continues to lose patent protection on many drugs, it will be our discovery and development of novel compounds that we believe will drive stockholder value.
THE FUTURE OF DACOGEN
In the latter part of 2007, Eisai Co., Ltd. announced its acquisition of MGI PHARMA, making Eisai our new commercial partner with respect to Dacogen. Eisai is a multi-national pharmaceutical company with over 9,500 employees, and estimated annual worldwide revenue for the fiscal year ended March 31, 2008 of over $6 billion. Eisai expects 2008 Dacogen sales to grow more than 30% over 2007 sales of $121 million. Eisai also expects to deliver North American Dacogen sales in fiscal year 2011 in the $300 to $350 million range. As a clear indication of its commitment to Dacogen, Eisai has already assigned 400 people to the commercial oncology effort in the U.S. Outside the U.S., Janssen Cilag, a Johnson & Johnson company, holds the sub-license for the development and commercialization of Dacogen. Sales that are just beginning to be reported outside the U.S. could represent a growing portion of our Dacogen royalty revenue in the future.
In addition to the 20% to 30% royalty rate payable to SuperGen on net sales of Dacogen, approximately $17.5 million of milestone payments will be realized upon the anticipated registration and subsequent commercialization of Dacogen in Europe and Japan. Overall, the financial engine that Dacogen royalties provide is especially significant because it is based on a 20-year, worldwide agreement for all indications and sales of the drug.
Dacogen was launched in mid 2006 by MGI PHARMA. The drug rapidly expanded the hypomethylation market overall and eroded market share of its competitor drug, Vidaza. During 2007, strong survival data from Dacogen’s competitor was announced. Although SuperGen’s share price was impacted negatively by this announcement, Dacogen’s market share and royalties payable to SuperGen have not eroded.
Estimates of the long-term market for Dacogen in MDS exceed $1 billion in the U.S. alone. Eisai has suggested this expanded market will be realized as a result of an increased use of DNA hypomethylation therapeutics in myelodysplastic syndrome (MDS), from approximately 45% of the patient population today to 90% of patients that could benefit from such drugs—a doubling of the size of the present market.
Since 2002, the European Organization for Research and Treatment of Cancer (EORTC) has been conducting an MDS survival trial in which a three-day regimen of Dacogen is being compared to supportive care. Results from this trial are expected to be announced in 2008. We anticipate that these results will have an impact on Dacogen sales and our share price.
The potential for Dacogen is just beginning to be realized—more than 30 clinical trials investigating Dacogen’s efficacy in multiple diseases are being conducted. In fact, physician researchers have already published survival results for MDS patients treated with Dacogen. In a recent Phase 2 trial studying a five-day regimen of Dacogen, the median survival of patients receiving the drug was 20 months. When these data were compared to survival data from similar patients treated with chemotherapy, the difference was significant in favor of Dacogen-treated patients.
THE CLIMB™ DISCOVERY PROCESS
Our future in the pharmaceutical industry is based on our ability to monetize novel, targeted therapeutics that are generated by CLIMB, our proprietary discovery process. Our approach to small molecule drug discovery merges rapid screening of large compound libraries with computational chemistry and systems biology techniques to identify drug leads that bind to target enzymes and proteins that are implicated in cancer. In 2007, we used CLIMB to screen more than two and a half million virtual compounds per day. That screening capacity is expected to increase to more than five million compounds per day by the end of 2008. Our compound library currently consists of a sextillion (1020) virtual compounds or fragment combinations.
We believe that CLIMB will change the current paradigm of drug discovery by reducing the time, cost and labor required to move from target model validation to lead drug identification and IND-enabling studies. Our goal is to produce one to two, novel IND-ready clinical candidates each year. The first of these candidates, MP-470, is currently in clinical trials and we expect our PIM inhibitor, SGI-1776, to enter the clinic in the second half of 2008. To help manage the development of multiple drugs, we have enhanced markedly the capacities of our pre-clinical, manufacturing and clinical operations departments.
FOCUS ON INNOVATIVE ONCOLOGY PRODUCTS
Our growing royalty revenue stream and significant cash position gives us the financial security to accelerate the development of our oncology product pipeline. We believe we now have in place the team, a strategy, a financial engine, an innovative discovery process, and the necessary development infrastructure to grow our hematology-oncology business and create sustainable stockholder value.
We believe we are at the cutting-edge of our industry’s practices, positioned to emerge as a leader in the discovery, development, and commercialization of next-generation, targeted therapeutics for cancer patients.
On behalf of the entire team at SuperGen, we thank you for your continued support.
Sincerely,
James S.J. Manuso, Ph.D.
Chairman, President and Chief Executive Officer
SuperGen 2007 Annual Report
