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From the CEO’s Desk

CELLCEUTIX PROVIDES UPDATE TO SHAREHOLDERS (01/29/2016)

My fellow Cellceutix shareholders,

I’d like to update everyone on the current position of our company and our portfolio of drugs in development. I encourage everyone to learn more about Cellceutix by reading our website, reviewing our filings with the SEC, and visiting clinicaltrials.gov.

2015 was a year of milestones and important developments at Cellceutix. On the corporate level, we signed a $30 million share purchase agreement with Aspire Capital, giving us the financial strength for our R&D efforts. As we prepared to move to the Nasdaq exchange, we strengthened our board with new independent directors and added several seasoned consultants with broad experience in getting drugs FDA approved. Our Nasdaq application remains active.

Oncology Studies

We have met our goals for the Phase 1 clinical trial of Kevetrin for advanced solid tumors being hosted at Dana-Farber Cancer Institute and Beth Israel Deaconess Medical Center.  The trial is evaluating Kevetrin under the most challenging of situations, treating late-stage, advanced solid tumor cancer patients that have exhausted other treatment options without success. The primary endpoints for the study are safety, determining the maximum tolerated dose, and establishing suitable doses for future clinical trials.

In collaboration with the trial’s Principal Investigator and hospital, we are in the process of amending the protocol and plan to enroll additional patients to further examine the direct effect of Kevetrin on tumor cells.  The option to conclude the trial is available to us, but we interpret Dana-Farber’s interest to conduct additional research as validating our belief in the potential for Kevetrin.  It would be unethical for us to continue unless there is strong science that the drug may help patients.

While that trial moves forward, sufficient data has been collected from the study for us to plan for advancing Kevetrin to a clinical trial for patients with advanced ovarian carcinoma. Our FDA meeting to discuss this will soon take place.

It is important to note that the FDA granted an Orphan Drug Designation to Kevetrin for the treatment of ovarian cancer.  In other indications for Kevetrin, we recently received Orphan Drug and Pediatric Rare Disease designations for the treatment of retinoblastoma, a serious eye cancer that typical presents in young children, and Orphan Drug Designation for pancreatic cancer.

Our oncology efforts also include an ongoing Phase 2 trial with Brilacidin-OM, an oral rinse treatment for oral mucositis, an often debilitating and painful side effect of chemotherapy and radiation therapy characterized by lesions in the mouth and pharynx.  The majority of head and neck cancer patients receiving chemoradiation develop oral mucositis, which can be so severe that treatment must be modified or stopped.  There are no FDA approved drugs to treat this condition, affecting some 450,000 people every year.  In November, the FDA granted a Fast Track designation for Brilacidin-OM for treating oral mucositis.

Recruitment in the trial is ongoing, as we look to add additional study sites to quicken the completion of the trial.

Antibiotic/Anti-Fungal Studies

I don’t believe that I can overstate the significance of defensin-mimetics as a new class of drugs and the potential impact they can have for a litany of indications.  One of the beauties of defensin-mimetics being modeled after HDPs are that they destroy pathogens just like the body would naturally by penetrating the pathogen’s cell wall, rather than via a biochemical approach like most classes of drugs do today.  Evidence suggests that they also have a prophylactic and healing capacities, benefits we are studying in the clinic and lab.  Importantly, the unique mechanism of action of defensin-mimetics to kill pathogens swiftly and thoroughly virtually eliminates the likelihood of drug resistance developing.

We successfully completed a Phase 2b trial of Brilacidin for acute bacterial skin and skin structure infections (ABSSSI) caused by Gram-positive bacteria, including Methicillin-resistant Staphylococcus aureus (MRSA).  The data showed that the efficacy of Brilacidin in all three different arms of the study, including two single-dose groups, was similar to the seven-day dosing regimen of the blockbuster drug Cubicin (daptomycin), the active comparator. There were no serious adverse events (SAEs) that were deemed by the principal investigator (PI) as related to Brilacidin.

There is no shortfall of news and articles highlighting the problems the world faces with so-called superbugs, bacteria that have grown resistant to every antibiotic available today, and the great need to develop new drugs to tackle this problem before we fall back into the antibiotic dark ages.  Drug resistance is a major problem and most drugs in development today are simply next generations of already approved drugs where resistance is already an issue, meaning that resistance is likely to develop against these new drugs as well.  To understand how many of these reformulations exist, consider that Brilacidin will be distinguished as the first new class of antibiotic to enter a Phase 3 program for ABSSSI in more than 20 years.  A second big problem is patient compliance with completing a therapy regimen to completely kill the bacteria so they don’t linger in the body and, ultimately, contribute to the resistance problem.  A one-shot killer like Brilacidin overcomes both of these leading problems, as it’s a type of medicine bacteria have never seen before; it shreds bacteria in a similar fashion as the immune system; and requiring only one treatment eliminates any risk of non-compliance.

Brilacidin is also effective against the stationary phase of bacteria.  Most bactericidal antibiotics require bacteria to be in an “active growth phase” in order for rapid killing to occur.  However, in endocarditis, catheter tip infections, prosthetic joint infections, and other biofilm-related infections, the bacteria divide slowly or not at all.  This is called the “stationary phase”.  Brilacidin is active against bacteria in both the rapid growth phase and the stationary phase, and it has been shown to disrupt biofilms.  This means that brilacidin, unlike most other antibiotics, has the potential to be used for biofilm-related infections caused by Staph aureus.   In addition, by killing bacteria in both phases (rapid growth and stationary), this decreases the opportunity for persistent bacteria to evolve into resistant bacteria.   This is yet another way that brilacidin can reduce the burden of resistance.

Brilacidin received designation as a Qualified Infectious Disease Product (QIDP) in November 2014. The QIDP designation was established as part of the Generating Antibiotic Incentives Now (GAIN) Act, passed by the U.S. Congress in July 2012, for the purpose of encouraging pharmaceutical companies to develop new antimicrobial drugs to treat serious and life-threatening infections. Receiving QIDP designation means that Brilacidin is now eligible for additional FDA incentives in the approval and marketing path, including Fast Track designation and Priority Review for development and a five-year extension of market exclusivity.

Since completing the Phase 2b ABSSSI trial, we announced positive top-line efficacy data and subsequently reported the corresponding 95% confidence intervals. In April 2015, safety and efficacy results from the 215-patient study were presented at the 25th European Congress of Clinical Microbiology and Infectious Diseases (ECCMID). In addition, population pharmacokinetic data from this study were presented in a poster at the Interscience Conference on Antimicrobial Agents and Chemotherapy (ICAAC) in San Diego in September 2015.

We are presently preparing for pivotal Phase 3 trials to evaluate Brilacidin for ABSSSI in a large patient population.  The Phase 3 ABSSSI program would include two Phase 3 ABSSSI studies, as required by FDA Guidance (October 2013), of approximately 700 subjects in each study. The two studies may enroll subjects simultaneously. In addition, the first study would include an interim analysis after a portion of the patients has been enrolled. This would provide an early assessment of both safety and efficacy.

We have also retained Ronald Trust, PhD, MBA, as a consultant to oversee regulatory affairs pertaining to the planned Phase 3 trials of Brilacidin.  Dr. Trust, who has held senior positions at Pfizer, Enzon, Wyeth/Lederle and Allergan affiliate Durata Therapeutics, has been involved with 11 drug approvals, including Durata’s DALVANCE® for ABSSSI in 2014.  We have worked vigilantly on a new formulation of Brilacidin so it can be safely stored at room temperature or simply refrigeration, rather than freezing. We believe that Brilacidin has so many distinct advantages over competitors that it could be the go-to drug of choice if FDA approved.

Dermatology

In August 2015, we commenced a Phase 2 trial of Prurisol, an orally administered small molecule for the treatment of plaque psoriasis. We are developing Prurisol under FDA guidance that a 505(b)(2) drug approval pathway is an acceptable pathway for its development. This offers the benefits of a faster development process. Prurisol was eligible because its active moiety of abacavir is the same as that of the marketed drug Ziagen® (abacavir sulfate). A murine xenograft model with human psoriatic tissue has shown robust activity of Prurisol in resolution of all signs of psoriasis without reoccurrence.  We have published images of mouse models demonstrating the robust effect of Prurisol in our lab studies.  Given that psoriasis is a chronic condition with limited effective therapies that the National Psoriasis Foundation lists as affecting 125 million people worldwide, we see a tremendous market opportunity for an effective new oral treatment. As previously reported, enrollment in the Phase 2 trial was completed in November and we are expecting top-line data in April/May 2016.

GI Diseases

Ulcerative Proctitis

A Phase 2 proof of concept trial for ulcerative proctitis is planned in Q1 2016.  We are excited to be pushing forward with this trial earlier than expected.  We are constantly exploring diverse indications for which we believe our defensin-mimetic franchise can improve clinical outcomes due to the anti-infective, anti-inflammatory and tissue healing properties of these compounds.  A prime target is ulcerative proctitis, a mucosal inflammatory disease of unknown cause involving only the rectum or the distal colon and rectum (proctosigmoiditis). The course of the disease is variable and ranges from complete resolution to easily maintained remission to frequent relapses or refractory disease. Oral or rectal 5-aminosalicyclic acid or corticosteroids are the initial treatments of choice, but long-term use of rectal corticosteroids should be avoided, as they have been known to produce predictable and potentially serious side effects. Brilacidin offers a potential non-corticosteroid treatment that may provide anti-inflammatory effects and be of benefit to patients with these conditions.  A successful trial opens up a pathway for multiple GI diseases, which may be a far larger market for Cellceutix then even the anti-infective market for Brilacidin.

The Pipeline

The aforementioned compounds and clinical trials are, for good reason, the most actively discussed.  However, we are very excited about other studies, compounds and indications in our pipeline that are actively being studied and prepared for clinical trials, both in-house and by others.  Some of this work is underscored by the ongoing clinical studies, especially with respect to our defensin-mimetic franchise, which could provide us the opportunity to move directly into mid-stage trials when the time is right.  We’ve long said that ABSSSI is a gateway indication for the franchise and as we continue to prove the merits of Brilacidin, we believe expansion into other indications and development of our other defensin-mimetics will happen expeditiously.  These include:

Brilacidin for Topical Applications and Otic Infections

We are formulating and conducting preclinical experiments on topical Brilacidin for use in topical skin applications such as diabetic foot ulcer infections, and for ear-related infections, such as otitis externa or draining otitis media.

Defensin-Mimetics for Gram-Negative Bacteria and Fungi

Also in our antibiotic/antifungal portfolio, we are actively testing several of our compounds both in house and through research grants at major universities. In the Gram-negative program, our lead compounds are active in laboratory testing against some of the most problematic pathogens, such as Pseudomonas, Klebsiella, E. coli and Acinetobacter. We have compounds active against drug-susceptible strains as well as multi-drug resistant strains that produce Klebsiella pneumoniae carbapenamase (KPC). These are also called carbapenem-resistant Enterobacteriaceae (CRE). CRE has been identified by the Centers for Disease Control (CDC) as an “urgent threat” to public health. Importantly, several of our compounds have been shown to be active against CRE in the laboratory. These results were reported in an oral presentation at the European Society of Clinical Microbiology and Infectious Diseases (ECCMID) in Copenhagen in May 2015.

In our anti-fungal program, we have identified a series of HDP mimics that are highly active against Candida species and exhibit very low cytotoxicity against mammalian cell types. In 2014, we announced our collaboration with Fox Chase Chemical Diversity Center, which led to the award of a $1.5 million Phase 2B Small Business Innovation Research (SBIR) Grant. Laboratory experiments have shown that, like the antibacterial HDP mimics, the potential for resistance development by Candida is very low. Early studies have delivered promising results in mouse models of Candida in both topical and systemic applications. Additional studies of our HDP mimics suggest possible new treatments for other fungal pathogens, including Aspergillus strains.

Other

In addition to their antimicrobial activity, we are evaluating the use of current and future HDP mimics for disorders of barrier function, where the innate immune system plays a vital role. For these disorders, the goal is to exploit the anti-inflammatory and anti-biofilm properties to restore and maintain healthy skin and mucous membranes, and to treat refractory biofilm-related infections on natural and artificial surfaces. This would include inflammatory or trauma-related conditions of the skin, eyes, GI tract, and respiratory mucosa; exacerbations of chronic bronchitis and cystic fibrosis; and infections of catheters, valves, and prosthetic joints.  We have recently disclosed an agreement with one of the largest U.S. pharmaceutical companies that is currently evaluating Brilacidin as a component of certain implanted devices to prevent infection.  In December, the pharmaceutical company placed an additional order for more Brilacidin for their research.  There is still much work to be done for this novel use of Brilacidin and no final contract can be entered into unless Brilacidin receives FDA approval, but we consider this latest order as further validation of the unprecedented number of uses for which Brilacidin could provide a benefit.

Our Future

I think it’s pretty easy to see that we are not a “me too” type of a company or one that rests on its laurels with a couple of promising compounds.  We are filled with passion for our business and determined to be innovative in developing compounds for an array of indications for people that desperately need new options.  It’s impossible to touch on the minutiae of all that we have in motion in this letter, but hopefully I have provided some insight to the framework of Cellceutix. We greatly look forward to many milestones coming in 2016, including initiating the Phase 3 trials of Brilacidin for ABSSSI, a Phase 2 ovarian cancer trial, a Phase 2 proof-of-concept trial of Brilacidin for Ulcerative Proctitis, and depending on the data from the double-blinded Prurisol and Brilacidin-OM studies,  additional Phase 3 studies. None of these opportunities to develop new life-changing drugs for people in need would be possible without the unwavering support of all of our shareholders. I thank each and every one of you for being a part of Cellceutix and look forward to this new year.

Leo Ehrlich

Chief Executive Officer

 

Forward-Looking Statements

This CEO Letter contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 that involve risks, uncertainties and assumptions that could cause Cellceutix’s actual results and experience to differ materially from anticipated results and expectations expressed in these forward looking statements. Cellceutix has in some cases identified forward-looking statements by using words such as “anticipates,” “believes,” “hopes,” “estimates,” “looks,” “expects,” “plans,” “intends,” “goal,” “potential,” “may,” “suggest,” and similar expressions. Among other factors that could cause actual results to differ materially from those expressed in forward-looking statements are Cellceutix’s need for, and the availability of, substantial capital in the future to fund its operations and research and development; including the amount and timing of the sale of shares of common stock to Aspire Capital; the fact that Cellceutix’s compounds may not successfully complete pre-clinical or clinical testing, or be granted regulatory approval to be sold and marketed in the United States or elsewhere. A more complete description of these risk factors is included in Cellceutix’s filings with the Securities and Exchange Commission. You should not place undue reliance on any forward-looking statements. Cellceutix undertakes no obligation to release publicly the results of any revisions to any such forward-looking statements that may be made to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events, except as required by applicable law or regulation






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