美國安進 (AMGN) 2002 Q4 法說會逐字稿

Good afternoon and welcome ladies and gentlemen to the Abgenix year-end conference call.

At this time I would like to inform you that all participants are in a listen-only mode.

My name is George and I'll be your coordinator.

If at any time during this call, you should require assistance, please key star-zero.

At the request of the company we will open the conference up for questions and answers after the presentation.

I will now turn the call over to Dr. Ray Withy, President and CEO of Abgenix.

Please go ahead sir.

Thank you.

Good afternoon everyone and thank you for joining us for our year-end review call for 2002.

I am Ray Withy, CEO and President of Abgenix.

With me here today are Kurt Leutzinger our CFO, and Amy Connefler (ph), our Director of Corporate Communications and Investor Relations.

Before we begin, I must remind you that during the course of this conference call, the company may make projections or other forward-looking statements regarding future events or financial performance.

We caution you that such statements reflect on either company's current expectations and that actual events or results may differ materially.

Please refer to the risk factors and cautionary language contained in the documents that the company files with the Securities and Exchange Commission including the company's quarterly report on Form 10-Q for the third quarter of 2002, filed November the 14th, 2002, for a description of the factors that may impact our results and the outcome of any forward-looking statements.

The company undertakes no obligations to update any projections or forward-looking statements in the future.

Now the goal of today's call is to review some of our accomplishments in 2002 and to summarize our strategy and outlook for 2003.

The financial results are disclosed in our press release and we will not cite them here.

As we reflect upon 2002, we are pleased that we were able to stay within our projected range of operating loss in spite of a major setback in our product development business that reduced our expected 2002 revenues by 20 to $25 million.

Among our other achievements last year, we completed the building of our antibody production plant as planned, validation is now underway and we are on track to have the first product in the facility this spring.

We advanced the development of ABX-EGF with our partner Amgen.

I will update you on our continued enthusiasm for this program later in the call.

We entered new product development partnerships with Chugai and earlier in the year with U3 and Corvas, and we ended the year with a cash balance greater than three years use of cash in operations.

Looking forward, we also plan to end 2003 with a cash balance of at least three times the operating use of cash in 2003.

We will not give specific guidance on the amount of cash flow or ending balance.

But just as we did in 2002, we plan to manage the elements of cash flow to achieve the target ratio.

In our operations we plan to continue to develop our clinical and pre-clinical pipeline with new and exiting product development alliances.

Abgenix has an abundance of assets, including proprietary targets, a pre-clinical product pipeline, powerful antibody generation technology, a proprietary production saw (ph) line and state of the art process development and manufacturing facility.

Our antibody production facility provides 2,000 liter and 12,000 liter scale for supplying product for both clinical trials and commercial launch.

We plan to leverage our assets by entering into additional product development collaborations with partners who contribute expertise and cost sharing to create a much larger portfolio of product candidates than we could by ourselves.

The larger the product development portfolio, the lower the risk of product development.

Which is a desirable goal considering that less than one in five antibodies that enter clinical trials is expected to succeed?

An example of the type of collaboration we plan to do is our recent...

Excuse me, Alexander (ph)?

Alexander (ph) are you on this line?

Mr. Hogue (ph)?

Mr. Hogue (ph) are you on this line?

... percent of the worldwide profits.

Abgenix has the right to commercialize products in North America and worldwide manufacturing rights outside of Asia.

We expect to enter more product development partnerships in which we retain economic interests and products commensurate with our contribution to their development expenses.

With the strength of our antibody development assets, including multiple preclinical product candidates, in each of the diseased areas of inflammation, metabolic disease and cancer, both as toxin conjugate centered (ph) antibodies, we expect that our contribution to these partnerships will enable us to retain significant economic interests in the resulting product portfolio.

We also continue to evolve our integrated antibody platform.

Our XenoMouse and XenoMax technologies can generate thousands of antibody product candidates to a target, thus enabling the efficient choice of a product development candidate.

We intend to continue to license our technology outside of our previously described strategic product development alliances.

In addition, we plan to further enable our technology licensees in their own antibody development efforts by offering process sciences and manufacturing services.

For example, we recently announced that we will provide children access to such production services for those antibody product candidates that they choose to move forward from our long-standing collaboration.

In this way, we are able to leverage our integrated antibody discovery and development platform to generate shorter-term revenue that can partially offset our fixed costs in discovery, development, and production.

I would now like to update you on ABX-EGF, our most clinically advanced antibody product candidate.

We continue to plan with Amgen for the latest stage development of ABX-EGF.

Our 50, 50 co-development partnership with Amgen calls for them to implement the product's commercialization plan including the Phase Three program.

We continue to enroll patients in Phase Two trials in multiple indications including the ongoing monotherapy study in colorectal cancer.

It would be premature to provide specific timelines for presentations on these ongoing studies.

As we previously indicated, we do not intend to disclose interim study findings outside of a peer reviewed medical forum.

Nonetheless, we have conducted a preliminary analysis of the first 40 patients in the Phase Two monotherapy study in patients with colorectal cancer as planned and are continuing to enroll patients in this study.

We are planning to present these data at an upcoming medical conference.

Before I open the call to your questions, let me again summarize our outlook for this year.

In 2003, we intend to further develop ABX-EGF across multiple indications, develop our pre-clinical antibody pipeline with new and existing product development alliances that leverage our many antibody development assets.

Generate near to - near term revenue by licensing our technology and providing process development and manufacturing services.

And finally, we plan to manage the business to end 2003 with approximately three years of operating cash flow, as were able to do so successfully in 2002.

We will now open up the call to questions.

Ladies and gentlemen, this is your question and answer session.

If you do have a question or comment, please key star, one on your touchtone phone.

If your question has been answered or you wish to withdraw your question, please key star, two.

Questions will be answered in order they are received.

Again, star, one for questions.

And our first question comes from Mereth Jovar; please proceed.

Hi, it’s Mereth and also Katherine.

My question is really I understand you can't obviously give us the information about those 40 patients, but I was wondering when did you start enrolling those patients and sort of like when was the last of those patients enrolled?

I - Mereth how are you?

I can't really give you the answer to that question.

The monotherapy trial in colorectal cancer patients is being conducted with, by Amgen, our partner.

The enrollment has been going on for some time and are continuing and the details of which I do not have and would probably be - it would be inappropriate to answer.

I'm sure that you probably had disclosed previously when the trial started.

Yes, a trial was started near the - near the beginning of last year, and it - about - yes, during quarter one of 2002.

We were enrolling patients periodically during 2002 and as I think planned; we reached the interim analysis point in quarter four of '02.

OK.

Now in theory - OK? - Let’s assume that results are positive and obviously since you submitted an abstract even though [Inaudible] the results are, what are the plans assuming results continue to be positive to proceeding with the licensing strategy?

Yes, obviously the licensing strategy is of - is of significant importance and I know of interest to everybody.

We are in that planning process with our partner, Amgen.

Obviously the registration strategy is going to be dependent upon the data and it's also going to be dependent upon regulatory feedback.

It'll be very important for us to discuss our plans with the FDA and obviously incorporate their comments into the - into our planning process.

So there's a lot that's going to go into these plans and again, it's a little premature for me to tell you what the contents of the discussions that Amgen and Abgenix are having.

Are you in discussions right now with the FDA?

I'm not going to comment on that, Mereth.

Well, hey, you can't blame me for trying.

I think [Inaudible] Katherine has another question.

Can you just talk about the status of the first-line colorectal cancer trial?

Yes, the first-line colorectal cancer trial is a study in which we are comparing the effects of the ABX-EGF in combination with chemotherapy versus chemotherapy alone.

This is - this combination trial is ongoing and it's too early to give you precise timelines on the completion or indeed timelines on the presentation of the results.

But previously you had said you had expected results potentially in the second half of this year, so could you have results presented at [Inaudible]?

We have not made any determination as to where we would be presenting results, and it is very unlikely that results from a solid tumor study would be presenting at a hematology conference.

OK, thank you.

Thanks.

And our next question comes from Meg Malloy of Goldman Sachs.

Please precede, ma'am.

Thanks.

Good afternoon.

Couple of questions for you - I know you're not going to give the specific guidance and you're going to work your spend rate so that you're in the cash end the year (ph) with three years worth of cash.

Could you give us any kind of guidance in terms of revenues you might expect from leveraging services and manufacturing facilities? [Inaudible] OK, go ahead.

Let me hand over to Kurt to answer that.

We're not going to try to discuss the elements of cash flow that would lead to our year ending goal of the three to one ratio.

There are a number of pathways that lead to that targeted goal and we will, just like in 2002, choose which of those pathways that circumstances deemed to be the most appropriate to get to our year ending cash versus cash burn ratio.

Now the manufacturing plant is essentially complete and therefore the capital spending will be, you know, an order of magnitude lower than it has been and beyond this, there's not much we can say.

But I think we have a good track record of meeting the goals that we put out and I would ask you to you know, take that track record into account in assessing whether or not you think we can achieve this goal that we're presenting to you now.

OK, separately, can you give us any sense about the number of candidates that you would like to get into clinical studies, you know, on a proprietary basis this year.

Do you have internal targets along those lines?

Well I think the key here is to insure that we have put robust, stable partnerships in place through which we will be developing our further developing our pre-clinical pipeline.

And so it is a little early to project what would be the shared partnership goals for each partnership, through which we'll be doing product development.

Obviously, the ultimate goal is to accelerate product development for as many of the product, as the pre-clinical product candidate as makes sense based on the fundamental data that will emerge, both from ourselves and for the partnerships that we will form.

We think that through this alliance network of product development, we will be able to accelerate product development, but until we actually bring more of those partners on board and decide exactly which products to advance, it's very, very difficult to make projections along those lines.

I understand that, but you have a broad number of partnerships now and a lot of those are, you know, collaborative, 50-50 type arrangements and I was just looking for something like, you know, you're hoping to do between one and three new I&Ds (ph) this year or one and two, or you know, I guess you're not in position to put forth that kind of target, right?

We are not at the moment giving guidance along those lines.

OK, and do you have any idea in terms of your partners, and your own efforts, how many targets are currently being screened, you know, with potential for antibodies development?

Meg, I missed really the question.

How many targets are being?

Yes, how many targets do you think are being assessed, you know, as potential candidates for antibody development?

In the industry or by us?

Between you and your partners?

Oh, well we are, we have, let me back up and talk about the different types of partnerships that we have, because I think we need to begin to understand the different elements of our business and the partnerships that support each element of our business and not mix them up.

So, first of all, we have, as you know, had for a period of time the development of the technology licensing business.

Abgenix started off there and, in fact, did its first partnership in that area in late 1997.

Since then we've brought on a number of partners.

Now in these type of arrangements, we license the technology to our partner.

In many cases we then also make antibodies, potential product candidates to the target that the partner suggests, and then hand them over to the partner for subsequent worldwide product development.

So, we have a number and it is in the dozens of product opportunities that are at various stages of early to preclinical research and development by our partners.

Two such product candidates have entered into human clinical trials, one by Pfizer and one by Amgen.

Now we are not going to project the number of new products that will enter the clinic from that part of our business because it's really out of our ...

I totally understand on that.

Yes.

I know.

So now we are just beginning to develop a new series of partnerships that are much more focused toward product development.

Now obviously we've had for a number of years now, a single product product development partnership.

In fact, a co-development partnership with our partner Amgen for ABX-EGF.

We have now entered into a co-development arrangement with Chugai, and that will be for up to four preclinical product opportunities.

We also have early stage co-development partnerships with, for example, U3 and Corvas focused on certain aspects of oncology.

It is - we've also in the past put in place partnerships that gave Abgenix access to targets.

For example, partnerships with, for example, CuraGen Lexicon Genetics and so on.

It is, however, in the area of product development that we now need to bring on board further partnerships.

Partnerships that could be around single products.

Partnerships that make cover a disease area, or partnerships that may look something like the partnership we have recently announced with Chugai.

A number of different partnerships that will help us accelerate product development in different therapeutic areas and move products from our preclinical portfolio, eventually into clinical development, all in collaboration with partners.

OK.

And I guess just one final question; you mentioned a servicing component as part of a maybe a little bit of a new strategy or addition to your current strategy.

Could you elaborate on that a little bit more?

You'll facilitate...

Yes.

Well we have developed two critical assets that enable antibody discovery and development, and that is, as you know, our XenoMouse and XenoMax technologies as well as state of the art process sciences and manufacturing capability and associated facility.

Just as we have been offering our technology for license to third parties.

In partnerships that provide us a shorter-term revenue stream from the licensing of the technology and we then use that revenue to offset some of our fixed costs.

Likewise, we will be able to offer our process sciences and manufacturing capabilities to potential customers outside of the strategic relationships that we'll form for product development.

Now likely customers are customers that are already licensees of our XenoMax and XenoMouse technologies and that was an example, the example of CuraGen is one such partnership where CuraGen, for the products it chooses from our long standing relationship, have agreed to use our process sciences and manufacturing capabilities in order to be able to manufacture - to get their products manufactured.

So that is leveraging this asset that we've built - that we've built for our product development efforts, leveraging it to bring in shorter-term revenue again to offset our costs.

OK.

Thank you.

And you next question comes from Craig Parker (ph) of Lehman Brothers (ph) .

Please proceed.

Hi, Ray, how are you?

Hi, Craig.

I may get a lot of the similar responses that Mereth (ph) got, but I'll try as well.

The refractory colorectal cancer study, I assume, as in most studies like this that you had to have at least one objective response to continue enrolling patients.

Can you comment on whether you're criteria required more than one objective response?

Good try.

No.

I guess I gave you a greater than or less than opportunity.

No.

We are - we are not disclosing anything about the results, preliminary results that we may have obtained in preliminary interim analysis.

And we just think it's appropriate to stick to that.

OK.

Can you remind me of the enrollment criteria?

Was it five FU Luchivoran (ph) and CPT 11 refractoriness?

Yes.

Those were the entry criteria and in addition we included oxaliplatin.

OK.

Good.

OK.

Do you know whether your partner will be discussing any of that data or any of the status of other ABX-EGF clinical trials on Tuesday?

I do know that as they do have the analysts meeting coming up on Tuesday, as you indicated next week, we have - we have coordinated very closely as we do with all of our partners, the appropriate communication and I would not anticipate that Amgen would disclose anything that we have not disclosed here today.

OK.

Great.

That's very helpful.

Thank you.

And our next question comes from Felicia Reed from Adams Harkness (ph) .

Please proceed.

Yes, hi.

So are you willing to comment on what the status is of the other ABX-EGF trials that are going on in prostate and non-small so long?

Do you know when we might be seeing some data from those or do we have to wait for Amgen to tell us that?

Well, the - each of these trials are on - enrollment is ongoing.

And we don't necessarily have to wait until Amgen tells you because Abgenix and Amgen are coordinating their communications, and so you will probably hear about it at approximately the same time from each of us.

The trials are ongoing.

When we have enrolled the patients and we have analyzed the data, we will communicate the results as appropriate at either scientific meetings or, if they impact the development program of the drug significantly, we would issue top-line results together.

Are you willing to comment on how enrollment is going in either of those two?

I know you were going to enroll 50 patients in the prostate trial and about 210 patients in the lung cancer study.

We're - enrollment is ongoing.

I - we're not going to comment on the exact status of enrollment.

They're proceeding and we are hoping to complete them in a timely manner.

OK, thank you.

Your next question comes from Roy Freedman (ph) of Edith C. Blum (ph).

Please proceed.

Good afternoon.

Couple of questions - first, are you still working on ABX-EGF for the renal indication?

And second, are you already receiving any revenues from contract manufacturing?

Thank you.

So, first question first - we are the renal cell - second part of the renal cell study is ongoing.

We have - enrollment is ongoing, and it's too early to give you a status on that program.

With regards to contract manufacturing, we are at the phase of completing the validation of our plant, we have our process sciences, both laboratories and pilot plant (ph), up and running, and we are out talking to our XenaMouse and XenaMax licensees about potentially moving their products into our plant.

It - manufacturing - process sciences and manufacturing is a - has a relatively long process, and so it will take a while to generate revenues even once a partnership has been formed.

But our first partnership in this area that employs manufacturing, as you know, was with CuraGen that we announced in January and in each of our co-development deals with, for example, Chugai and others, we have built in manufacturing rights for both developing the process and manufacturing.

I think it's fair to say that it will take a while for the revenues from manufacturing to emerge.

OK, thank you.

I have an update on your balance sheet.

Could you give more color on what the deposits and other assets - $32 million - consists of?

Yes, let me hand you over to Kurt.

I believe that the bulk of that would be clinical supplies of antibody intended for upcoming clinical studies.

Where antibody has a number of alternative uses, accounting literature requires us to record it as an asset, where the antibody can only be used in one study, then we expense it as we incur the expense.

OK.

And you’re fixed assets increased by about $41 million.

Was that related to the manufacturing built out?

Ah, yes, that would be as we spend money on the plant, it enters our fixed assets as the sort of construction in process account.

When the plant goes into operation, then it becomes a depreciable asset and our depreciation starts to rise on the P&L statement.

OK, thank you very much.

Your next question comes from Richard Mensuri (ph) of Power Partners (ph).

Please proceed.

Hi, yes, I just wanted to talk a little bit about cash management.

Looking at the balance sheet shows that you have close to $400 million in cash, and you've got about $200 million in debt.

I was wondering if you could comment a little bit on this, in this current low interest rate environment, how are you in terms of your return on the cash that you're getting.

And also, I'm wondering in terms of the debt, my understanding is it's trading at a discount.

Is part of your cash at all invested in any of your company's debt?

No, none of our cash is invested in our company's debt.

We invested in high grade government and some corporate securities.

The maximum maturity is three years.

The average however, of the portfolio as a whole is closer to the one to two year range depending on how we do the, you know, the opportunities at the time.

We do not invest in speculative investments in order to chase yield, because the return that we expect to get on our product portfolio outweighs a few basis points here and there on financial assets, and our primary goal is safety of principle, not maximizing yield, so that we will have the cash necessary to fund our clinical programs, where again returns are higher.

Understood.

So let me just ask you based on that, rather than investing in your company's securities at a yield of something like close to 15 percent, would it not make sense to redeem or repurchase some of the debt so that you're not paying such a high interest rate.

We are not a money manager.

We are a product developer and the use of the cash was for product development, not for investing in financial instruments.

We have a use for that cash, which we think has a higher return than 15 percent.

Buying back our securities is a, quite, rather an expensive thing to do when we expect to not have to pay back the convertible debt, because expect the stock price before the maturity date to rise to the point where we can convert that debt into stock.

That is our goal.

That is our expectation and we have four years in which to achieve that.

Understood.

Thank you.

Next question comes from Tom Shinkle (ph) of Imperial Capital.

Please proceed.

Yes, good afternoon.

Yesterday or the day before you announced that the ABX-CBL antibody trial was suspended because that antibody didn't have an improvement in results over the existing therapy.

Give us a feel, how much have you invested in this project?

Give us some color as to what you're future is with SangStat?

And then to move off a little bit, you're talking in terms of having enough cash to run three years worth of burn.

At the end of the three years, would you envision having commercial products in the market?

And roughly how long does it take to get these stage two or phase two clinical trials into a commercial product?

I don't want the dollar amount, but would by the end of three years at least one or two of these make it to the commercial market?

Well we don't expect to launch a commercial product within two years.

I think that if all goes well, one could hope for an EGF launch in the '06 timeframe.

Bare in mind though, that in the year of launch, there are heavy marketing expenses and so seldom is a new product profitable in the first year of launch.

Other factors that could improve our cash flow, would be an increase in the manufacturing activities so that by generating antibodies for other people's clinical trials and other people's product launches, that we can generate cash flow to offset our own product development and expenses.

How rapidly the manufacturing cash flows start to contribute is something we're not trying to project at this point.

I think we're going to need a marketing period to establish a book of business and then predictions may be easier sometime in the future but certainly not at this moment in time.

How much did we spend on CBL?

We have not disclosed that information and since the program is now terminated, I think this is probably late in the game to begin disclosing it.

Was there anything else in your question that I have missed?

I guess I'm looking for, you know, in rough dimensions taking a product through clinical trials costs approximately how much?

Granted, there's lots of ways to finance that.

Fifty-fifty or whatever.

Yes.

It's - indications specific it depends on the size of the trials required in order to show the biostatistical results your looking for.

But it can take, oh; three to five million dollars for phase one.

It can take a further 15 for phase two.

Phase three does can be 20 to 50 million depending on how large they are.

There are many estimates where the cumulative numbers are $100 million and plus to finally get a product on the market.

That's why we have adopted a partnering strategy.

We do not wish to gamble our entire fortune on one or two products.

We would be spreading out our risks and placing bets on a number of products in collaboration with others who will also put up part of the money and thereby making our capital stretch further and be invested at lower risks over a much broader portfolio.

How many antibody development projects do you feel capable of managing at any one time?

I think the - that's a very good question and one that we need to be continually be assessing as we bring on new partnerships.

I think it's very difficult to answer your question because each partnership, each development partnership is going to be different one from another.

And the number, total number of projects, programs that any one partnership can absorb and successfully manage will be - will in part depend upon the capabilities and resources that the partner brings to the table as well as Abgenix.

So it's very difficult to answer your question, generally.

But is it fair to say that something like EGF where you have a fair a single antibody with multiple uses, are there synergies from say pursuing four or five product opportunities at a time?

Well there's certainly synergies in pursuing multiple products.

The most, probably the most important factor to bear in mind is that the more projects you work on, the more programs that you work on, ultimately the more products that are under development, overall reduce your product development risk.

There's a significant attrition rate in the development of products and if you are developing a very few number of products, the odds may fall against you.

The more products that you have under development, the better chance that the odds of reaching the market will work in your favor and products can be successfully developed.

Our strategy is to develop a larger number of products and to do so, the way we will do so is to do them in the context of product development partnerships where we have varying degrees of economic interest in each of the products.

OK.

Thank you very much.

And you have a follow-up question from Mereth Jovar (ph) of UBS Warburg.

Please proceed.

Yes.

In response to a previous question you mentioned if you have a ABX, sorry EGF to be here in the market in '06.

That's a pretty - that's a pretty long timeframe.

We were thinking that it's quite possible in '05 timeframe.

Is this something that has to do with your collaboration or with research data or with just being conservative?

Mereth (ph), let me answer that one.

There is, as you know, a quite a number of pathways that registration pathways that could be adopted for the product in order for it to reach the market.

Each of those pathways are going to have different timeframes, time courses.

Until we get the results of our Phase Two program, until we have discussed with the agencies, it's very difficult to predict.

Certainly there's a wide range of potential dates at, years at which ABX-EGF could be launched and one would have to, you know, you could average them out and say they're somewhere in the range of '05, '06 or through to later if indeed the some of the earlier registration paths were not successful.

So, I think it's a wide range and I believe Kurt was giving you a sort of average there.

So instead of the average, what's the honestly we all know what the worst case scenario, that it's not going to be a product, but what is the best case scenario in terms of timing?

I'm not sure I would like to give you the best-case scenario in terms of timing.

Certainly the best-case scenario would be one in which we were able to move forward with a somewhat accelerated approval rate in the colorectal cancer indication, but we obviously have no way of knowing whether we will be on that path.

And when would you be in a position of knowing whether you are on that path?

Well I think we have indicated that the, when we are in a position to present the results of the monotherapy colorectal study, which we have indicated could be in the, by the middle of the year, I think the, the picture, the development path for this drug will become a little clearer.

Beyond that, I think it's, it would probably be more confusing than less confusing to speculate.

One last question, was the abstract, I know you submitted an abstract to ASCO.

Was the abstract accepted yet?

I really am not going to comment on the timing of ASCO's abstract.

I do not believe however, that ASCO has responded to the submission of any abstracts at this time.

OK.

Thanks.

Once again ladies and gentlemen if you do have a question or a comment, please key star-one.

There are no further questions at this time, sir.

Actually we do have a late question coming from Ilana Fogelman (ph) of Salomon Smith Barney.

Please proceed.

Here's a good question.

Can you tell us at least will the abstract or, let me say that question another way.

By May you may have had a chance to enroll more patients.

Will you be presenting only, the only on the 40 patients of the interim analysis, or do you think you'll be able include more patients?

We have not discussed with Amgen, our partner, or made, or ourselves, made any final decision as to the content of, of any publication or presentation, and we think that we may be in a position to give you more specifics when we actually have them.

OK.

Thanks.

There are no further questions at this time sir.

Well thank you.

I'd just like to end by thanking everybody for joining today's conference call.

We're in a tough time in biotech at the moment.

There's a lot, a lot happening and we think Abgenix has built a significant set of assets from which we can build a significant product portfolio in the context of the network of strategic alliances.

This reduces the development risk and potentially will accelerate product development.

We're looking forward to updating you on our progress in future conference calls.

Thank you very much indeed.

Ladies and gentleman, this concludes your conference.

Thank you for your participation, you may disconnect.