EXHIBIT 99.1
Letter to Stockholders
[CELSION LOGO] [CELSION LETTERHEAD]
March 22, 2004
Dear Stockholder:
We have made a great deal of progress over recent months. As we move forward, we
thought this would be a good opportunity to bring you up-to-date on recent
events and report on our progress in meeting our long-term strategic objectives.
Three years ago we shared with our stockholders our plan to revitalize Celsion
and to transform it from a small, R&D company with an interesting technology
portfolio into a dynamic biopharmaceutical enterprise with a balanced and
diversified pipeline of quality anti-cancer products, supported by a selective
portfolio of complementary and potentially complementary technologies.
The plan had (and has) four critical objectives:
o First, to obtain Food and Drug Administration (FDA) approval for our
benign prostatic hyperplasia (BPH) product, commercialize it and direct
the proceeds from such commercialization to fund the continuing
development of our cancer treatment technologies;
o Second, to put the company on a sound financial footing;
o Third, to develop, test and commercialize quality cancer treatment
products based on our heat-activated gene and drug delivery platform;
and
o All the while, to reposition Celsion as a full-fledged
biopharmaceutical company, rather than just a medical device business.
Over recent months we have made significant progress toward each of these
objectives.
PROLIEVE(TM) THERMODILATATION SYSTEM
On February 13, 2004, we announced that we had renamed our Microfocus(TM) BPH
800 Microwave Urethroplasty(TM) system the "Prolieve Thermodilatation System".
Less than a week later, on February 19, we received FDA premarketing approval
(PMA) for the Prolieve system and, almost immediately (on Monday, February 23),
Boston Scientific Corporation (BSC), shipped two Prolieve control units and 20
catheter kits to our first customer in Shreveport, Louisiana.
We believe that we have the best product on the market for the treatment of BPH,
and we are encouraged by the way our relationship with BSC is developing. BSC is
making a significant financial investment in marketing the Prolieve system. We
believe that their plans are solid, and we are confident that, in BSC's hands,
the Prolieve system should be a commercial success.
As BSC moves forward in marketing the Prolieve system, we expect to direct our
share of revenues to other critical corporate objectives.
FINANCIAL MATTERS
On March 11, we announced that we had met all the milestone obligations under
our distribution agreement with BSC. As a result, we have received aggregate
payments of $8 million from BSC, in the form of an additional $4 million equity
investment and a $4 million licensing fee, with an additional $2 million equity
investment due during the first week in April. In addition, as of February 6,
2004, we satisfied the preconditions to redemption, by us, of certain of our
outstanding Common Stock Purchase Warrants. As a result, we are now able to call
these Warrants at our election. Inasmuch as holders have the option to exercise
their Warrants upon a call, we expect that a call of all of the affected
Warrants would result in an additional cash infusion of $3 million. Following
that investment, we will have over $25 million in available funds on hand. Based
on our projected net average burn rate of between $800,000 and $900,000 per
month, we should be funded for around 30 months.
The Company's balance sheet is the strongest it has ever been.
PERSONNEL AND MANAGEMENT MATTERS
In light of his recent resignation, we would like to take a moment to thank Dan
Reale for his contributions to Celsion. We are sorry to lose his services, but
we respect his situation and we wish him all the best for the future. Dan's
departure, though untimely, has not disrupted our staffing plans and in fact,
has added additional urgency to personnel matters. In order to ensure that
Celsion is able to continue to move forward without disruption, Tony Deasey has
assumed the position of Chief Operating Officer. Since joining us as Chief
Financial Officer in 2000, Tony has been a moving force in establishing our
business and financial strategies and in executing those strategies
successfully. We are confident that, under Tony's leadership, we will continue
to make excellent progress.
As we looked toward receipt of FDA approval of our Prolieve system, we began to
shift the orientation of our staffing toward a biopharmaceutical orientation. We
recognize that in order to deliver against both our third and fourth objectives
we needed to add breadth and depth to our management team. Therefore, over the
last several months, we have made some key strategic additions to our management
team, including:
o Dr. Carolyn Finkle, Vice President of Regulatory Affairs. Carolyn
brings to Celsion significant experience in the pre-clinical and early
stage development of new drugs and genetic compounds. With Carolyn's
arrival, Dr. Bill Gannon, our Medical Director and Vice President of
Clinical Affairs, will turn his focus to designing and completing
clinical trials for our portfolio of products. We expect that Carolyn,
working with Bill, will make significant contributions as we work to
establish our core capability in the area of clinical development.
o Weiping Yu, Director of Drug Manufacturing Operations. Weiping is a
specialist in the area of formulation and manufacturing of liposomal
drug compounds. Since joining Celsion, he has been working with
Northern Lipids, our liposome-manufacturing consultant, to scale up the
production of ThermoDox(TM) as well as to establish and
institutionalize the control and production processes and systems
critical to manufacturing ThermoDox as a pharmaceutical. Weiping is
also working with Baxter Pharmaceutical, our commercial manufacturer,
to establish commercial production of ThermoDox.
o David Hicks, Director of Program Development. David is an experienced
product development executive whom we have hired to manage our breast
cancer program. Our experience with our BPH product demonstrates that
programs stagnate without dedicated, focused attention. We are
confident that David will manage the breast cancer program effectively
so that we get early, optimal commercial results.
o Raj Prabhakar, Director of Corporate and Strategic Planning. Raj, who
has gained his experience working with venture capitalists in the
biotechnology area, is helping us to develop business plans for each of
our technologies, which we expect to implement as we develop these
technologies and to utilize as we pursue additional corporate partners.
Finally, we have a search under way for an executive to head up our product
development efforts. Our ideal candidate would have significant experience in
taking pharmaceutical or biotech products from pre-clinical though Phase II/III
trials.
Over the coming months, we expect to identify other resource needs within the
organization. Now that we are adequately funded, we intend to fill those
positions as they are identified and when justified.
PRODUCT DEVELOPMENT
With our expanded management team in place, we are positioned to move forward
with the development of what we believe may be our most valuable technology--the
heat-activated liposome that we have licensed from Duke University.
We have encapsulated a common cytotoxic cancer drug, Doxorubicin, in this
liposome and have named the resulting compound ThermoDox. We are currently in a
Phase I clinical trial for ThermoDox in the treatment of prostate cancer and
expect to commence a Phase I trial for liver cancer using ThermoDox in the near
future. In addition, we have the capability to move ThermoDox into breast cancer
trials. At such time as we have proven that our heat-activated liposome is an
effective drug delivery medium, we intend to encapsulate other water soluble
cancer drugs, of which there are many, and to seek other applications of this
technology.
By the time you receive this letter, we will have completed the third cohort of
patients in our prostate cancer Phase I study. In that study we are using
ThermoDox in combination with the Prolieve system, with which we heat the
prostate to 41(degree)C, the release point of the drug. Enrollment in this trial
has proceeded more slowly than we had anticipated. However, last January the FDA
allowed an amendment to our protocol that broadens the population of potential
patients. In addition, in January we added a third clinical site in Myrtle
Beach, South Carolina. With these changes, we hope to complete the Phase I study
during the summer of this year and to move on to a Phase II study in 2005.
We have also filed an investigational new drug (IND) application in partnership
with the National Institutes of Health (NIH) to study the treatment of liver
cancer using ThermoDox with a radio frequency ablation (RFA) device as the
heating source. We are currently on clinical hold pending completion of
additional pre-clinical studies required by the FDA, but we expect to complete
these studies shortly and start treating patients promptly after this work is
completed.
If we show efficacy early in either (or both) the prostate or liver cancer Phase
II clinical trials, we should have the opportunity to explore broadening our
relationship with BSC or establishing relationships with one or more other major
players in the oncology market.
At the same time, we are continuing our two Phase II Breast Cancer trials. We
expect to reach the mid-point of the early stage study during the summer. When
we reach the midpoint, we will analyze the results and determine our future
course of action. We are also considering whether we can expand our ThermoDox
studies to include the treatment of breast cancer using either our Adaptive
Phased Array (APA) focused microwave technology, licensed from MIT, or the
Advance Phased Array radio frequency system that we licensed from Duke last
summer as the heat source.
CHINESE JOINT VENTURE
In December we announced the formation of a joint venture in China. This joint
venture has significant longer-term implications for Celsion. First, we believe
that we can submit our US FDA approved data for BPH to the Chinese regulatory
authorities and get rapid approval for our Prolieve system in China -- possibly
as early as the end of the year. In addition, we believe that, particularly for
our liver cancer and heat-activated genetic drug products, we may well be able
to complete human studies in China faster and at a lower cost than would be
possible in the US. At present, we are setting up the infrastructure of the
Chinese venture with our partners, starting with recruiting a first-class
general manager. We expect to be well positioned to supplement our US clinical
efforts and ultimately to take advantage of one of the most attractive markets
in the world.
EVOLUTION TO A BIOPHARMACEUTICAL COMPANY
Our final, overarching objective is to transform Celsion into a full-fledged
biopharmaceutical company. We believe that we are now well along in this
transformation and that many of the component parts are in place. We have:
o Prolieve, an approved, versatile product that has the potential for use
not only for the treatment of BPH but also for Prostatitis and as a
component of our prostate and breast cancer treatment systems;
o Our Duke-licensed heat-activated liposome, a promising drug delivery
mechanism, in human trials;
o ThermoDox, a potentially effective cancer treatment drug, in human
trials;
o A powerful cancer repair inhibitor in late stage pre-clinical trials;
o An experienced team of engineers capable of developing effective
heating systems.
o A team of clinical and regulatory personnel with significant experience
in taking newly developed products through the clinical process; and
o Finally, a strong cash position.
We believe that our metamorphosis is well under way.
GOVERNANCE MATTERS
On March 4, 2003, we filed preliminary proxy materials with the Securities and
Exchange Commission in preparation for our annual meeting of stockholders on May
25, 2004. Certain matters in the preliminary proxy materials apparently have
caused confusion and concern among our stockholders. Although we continue to
believe that these are basic corporate governance matters, in order to alleviate
confusion and allay concern, we will briefly address those matters:
o The resignation of John Mon from our Board of Directors. While John Mon
resigned from the Board of Directors earlier this month, he did not
resign from his other positions with the Company. In fact, John is, and
will remain, a highly valued member of Celsion's management team. Under
newly adopted American Stock Exchange (Amex) rules, a majority of our
directors must qualify as "independent".
Prior to John's resignation, we had six directors, two of whom (John
and Augustine Cheung) are not independent because they are executive
officers, and one of whom (Kris Venkat) is not independent because he
also serves as a consultant to the Company on a limited basis. While we
have been seeking, and will continue to seek, two additional
independent directors (including a finance expert and an industry
specialist), at the time we made our filing with the SEC we simply had
not been able to identify appropriate candidates. Therefore, in order
to meet the Amex requirement, either John or Dr. Cheung had to resign.
John volunteered.
o 2004 Stock Incentive Plan. We are asking our stockholders to approve a
new employee Stock Incentive Plan that reserves an additional 10
million common shares for issuance under compensatory arrangements and
provides us with additional flexibility by broadening the range of
permitted arrangements beyond stock options and stock appreciation
rights. There are only 200,000 shares remaining under our current stock
option plan. In order to attract and retain key employees, we need to
be able to offer our employees the opportunity to share in the upside
of their efforts through equity participation. The additional shares
available under the new plan will permit us to continue to provide this
sort of equity participation. In addition, in the past, we have used
options under our plan to compensate our nonmanagement directors and
consultants. Such compensation has the dual benefits of conserving cash
and aligning the interests of our directors and consultants with those
of our stockholders. Again, the new share reservation will permit us to
continue to compensate our outside directors and consultants in this
manner. The shares reserved under our current, 2001 plan were
sufficient to meet our needs for three years. We expect that the shares
reserved under the proposed 2004 plan will cover our requirements for a
comparable period.
o Increase in Authorized Shares. We also are asking stockholders to
approve an increase in the number of authorized shares of our common
stock. At present, we are authorized to issue up to 200 million common
shares. Assuming stockholder approval of the new Stock Incentive Plan,
we will have 192 million shares either outstanding or reserved for
issuance pursuant to our stock plans or other securities (principally
warrants), leaving only 8 million shares for other purposes. We
currently have no need or intention to raise additional capital in
either the private or public markets or to enter into acquisitions or
other arrangements that would require us to issue shares. However, as
our technologies and products mature, we may well find it advantageous
to enter into strategic alliances with, or acquire, pharmaceutical or
biotechnology companies or their technologies. Equity could be a key
component of such transactions, and we need to have shares available to
provide us with flexibility in structuring any future arrangements or
transactions.
* * * *
In sum, Celsion is now in the strongest position in its history, with a clear
path ahead and the resources to follow that path.
In closing, we would like to note that our recent successes would not have been
possible without the hard work and dedication of our employees and consultants.
We would like to take this opportunity to thank them all on your behalf.
Likewise, the management and employees of Celsion would not have the opportunity
to achieve this position without your loyal support over the years. On behalf of
all of us, we extend to you our thanks.
Sincerely,
/s/ Max Link /s/ Augustine Y. Cheung
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Max Link, PhD. Augustine Y. Cheung, PhD.
Chairman President & CEO
Forward-looking statements in this letter are made pursuant to the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995. Readers are
cautioned that such forward-looking statements involve risks and uncertainties
including, without limitation, unforeseen changes in the course of research and
development activities and in clinical trials by us and by others; possible
acquisitions of other technologies, assets or businesses; possible actions by
customers, suppliers, competitors, and regulatory authorities; and other risks
detailed from time to time in the Company's periodic reports filed with the
Securities and Exchange Commission.