美國安進 (AMGN) 2003 Q4 法說會逐字稿

Good afternoon and welcome, ladies and gentlemen, to the Abgenix 2003 year-end financial report and update conference call.

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

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.

Good afternoon, everyone.

Thank you for joining us for our 2003 year-end review call.

I'm Ray Withy, President and CEO of Abgenix.

With me here today is Ami Knoefler, 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 only the 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 2003, filed on November 14, 2003, for a description of the factors that may impact our results and the outcome of any forward-looking statements.

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

The purpose of today's call is to report on our accomplishments for 2003, review recent business developments, and provide a current outlook for 2004.

We believe 2003 was a turning point in Abgenix's transformation into a product development company.

We made progress in advancing our lead product, ABX-EGF, and confirming late-stage development and manufacturing responsibilities with our codevelopment partner Amgen.

Amgen has decision-making authority for development and commercialization activities, while Abgenix is responsible for clinical and commercial manufacturing.

We opened and received a state license for our clinical and commercial stage manufacturing plant, and entered into and began performing under agreements to manufacture clinical runs for two of our many technology licensing customers.

We realized milestones related to progress made by our most productive licensee, Pfizer, who moved an additional antibody product candidate into the clinic in 2003; and very recently this year informed us of another IND filing they may have made for an antibody generated with our technology.

And we added to our network of strategic development partnerships that enables us to access the biological expertise as well as the research scale required to successfully develop a diversified product portfolio.

These new partnerships, Chugai, Sosay (ph), Microscience, and most significantly AstraZeneca, position Abgenix to explore the promise of antibodies across multiple therapeutic areas.

They also set the stage for Abgenix to capture various levels of economic value from any future products through the network of diverse deal structures.

Finally, we managed the business according to plan and in line with our guidance to you, ended the year with cash in an amount approximately three times the net cash used in operations for 2003.

Turning to 2004, we have already made important progress against our goals for this year into the future.

We have seen our lead product candidate advance into pivotal late-stage development.

We launched the first clinical trial for ABX-PTH, an antibody for potential treatment of secondary hyperparathyroidism or SHPT.

Importantly, Abgenix still retains full commercialization rights for ABX-PTH; and we do not intend to partner during the product's early development.

We learned of a third IND filed on the XenoMouse-derived antibody being moved into the clinic by Pfizer.

Now let me go into some detail about the progress on our lead antibody product candidate, ABX-EGF.

We are encouraged by the FDA's recent approval of another EGF receptor inhibiting antibody, which we think is good news for the sector, for cancer patients, and for Abgenix.

ABX-EGF's fully human nature may result in a better safety profile than that of chimera for humanized antibodies. including reduced incidence of infusion reactions, reduced antigenicity, and less potential for allergic response.

We reported Amgen has initiated a U.S. pivotal trial evaluating ABX-EGF as a third-line monotherapy in colorectal cancer patients.

A Phase III study has also been launched outside the U.S. to support the product candidate's global development.

We believe that the U.S. trial, which has received a Special Protocol Assessment from the FDA, could form the basis of a regulatory submission as a monotherapy in advanced colorectal cancer patients who have been treated with prior chemotherapy.

We have already seen encouraging proof of concept data with ABX-EGF as a monotherapy in colorectal cancer patients.

Those data, which were obtained from an interim analysis of the first 40 efficacy evaluable (ph) patients in a Phase II study in second and third-line colorectal cancer, were presented at last year's ASCO meeting.

We expect the full results of this ongoing trial in 150 patients to be presented sometime this year.

A study to explore the safety of ABX-EGF as a first-line treatment in combination with chemotherapy is also underway in this tumor type.

The overall current Phase II program is evaluating ABX-EGF in five potential indications and will help to inform decision about the drug's later stage development.

Based on a preliminary analysis, we have recently closed enrollment in a monotherapy study in prostate cancer patients.

The preliminary findings do not meet our planned threshold to support pursuing the drug as a monotherapy in this patient group.

We continue to enroll patients in a monotherapy study in advanced kidney cancer; and the study to examine the safety of ABX-EGF in combination with chemotherapy as a front-line treatment in non small cell lung cancer patients is also underway, and we expect accrual in this trial to be closing shortly.

Moving forward in this competitive space, we plan to be circumspect in communicating the scope and design of the broad clinical program for ABX-EGF.

We plan to inform you of the launch of any new pivotal trials, as well as other significant steps that Amgen may take in the drug's clinical development.

We'll also report to you on the results of Phase II studies at the time of their publication at medical meetings.

We would hope to see some data presented at this year's ASCO meeting in June.

We anticipate updating you once any specific posters or presentations are confirmed, most likely during our first-quarter update call currently scheduled for late April.

Moving forward, ABX-EGF will also be known by its generic name, panatunomab (ph).

Of course, Abgenix has been very active in the process development and manufacturing scale up for ABX-EGF.

Under the amended agreement, Abgenix will manufacture both clinical and early commercial supplies with Amgen's support and assistance.

During 2004, we have allocated significant resources in production and manufacturing to support the drug's late stage development and prepare for an individual BLA filing.

Turning to the rest of the portfolio, there are now six XenoMouse derived product candidates in clinical trials in addition to ABX-EGF.

Four of these products result from our technology licensing program and are being solely developed by the licensee.

We also have two products in clinic that are being fully developed by Abgenix -- ABX-MA1 and ABX-PTH described earlier.

ABX-MA1 is currently being studied in a Phase I single-dose dose rising study in malignant melanoma.

We will not have any data on this program until well into the second half of this year.

AstraZeneca has the first right to further develop and commercialize this product opportunity on terms yet to be negotiated.

On the AZ (ph) front we've been extremely pleased with the pace of this collaboration during kickoff in the past 4.5 month.

You will recall that the deal involved the discovery and development of a broad portfolio of up to 36 oncology antibody product candidates with an additional 18 potential codevelopment candidates.

The three-year target selection phase is underway, and our discovery group is working with AZ to identify targets and to generate and characterize antibodies that meet these aggressive development goals.

Towards the end of this year, we hope to provide a more specific update on how the alliance is progressing.

So where does this put us today at the beginning of 2004?

Let me end with a summary of our financial goals and expectations to help you frame the year.

As we invest with Amgen in the ABX-EGF program, and advance our clinical portfolio outside of oncology, we expect our R&D expenses to increase.

As planned, the $60 million credit facility that we put in place late last year with Amgen will help us manage our cash resources while we fully fund our 50 percent share of the ABX-EGF program (inaudible).

We are not yet able to quantify the portion of the $60 million credit that will be deployed this year, but we do expect to use it entirely during the next two years as ABX-EGF moves towards commercialization and we pursue a broad development program with our partner.

The loan will be repaid with future profits if ABX-EGV is approved and launched and is forgiven if for some reason it is not.

In terms of capital spending, our planned expenditures will be slightly less than 2003 levels, in the range of $20 to $25 million.

This reflects minor infrastructure needs for the manufacturing plant and our other facility.

We also expect to see a slight reduction in our manufacturing startup costs, referring to those costs associated with operating our antibody manufacturing plant such as labor, utilities and depreciation.

These costs are expected to decrease primarily due to our contribution in manufacturing ABX-EGF (indiscernible) product.

The R&D costs for the ABX-EGF program are shared equally with Amgen.

We expect to continue to have manufacturing capacity in excess of our own direct product development needs during the next several years.

This provides an opportunity for us to further offset our fixed cost.

A corporate goal for 2004 is to secure at least one manufacturing deal that can bring in revenues starting in 2005, as long as such an agreement does not detract from our focus on the ABX-EGF program.

Finally, we've started 2004 with $348 million in cash and cash equivalents.

We expect that the cash used in operating activities for 2004 to be in the range of $110 to $125 million.

We will continue to prudently manage cash resources while we pursue our drug development goal.

It is my view that Abgenix has reached its peak levels of operating cash burn within the current business model.

We believe that the development timelines for ABX-EGF and the potential of significant mid term cash flows starting in 2006 from the AZ deal present a rather compelling future growth story.

So, in summary, we believe we've stabilized our cash burned, we've advanced our lead product candidate, most importantly we have put into place the strategy and infrastructure to enable us to develop a broad and diversified product portfolio.

And with our accomplishments during the past year, we have continued to deliver on the promise of antibodies.

I will now open up the call to your questions.

(OPERATOR INSTRUCTIONS) Meg Malloy of Goldman Sachs.

Thanks.

Just one.

I don't know if you can give us any more specific guidance on revenues or expenses, but I'm just curious.

I presume that the assumptions on revenues for '04 have to be a little bit higher than '03.

And can you give us any sense on -- with the manufacturing costs coming down what magnitude of reduction in that line we might expect to see for '04?

Sure.

Last year we gave no guidance on revenues and expenses because revenues can be very lumpy and the expenses were very much determined by some major events with ABX-EGF.

Was it going to get a signal in the interim analysis on colorectal cancer?

Now of course this year, the problem with giving guidance on expenses is that a significantly large line item on the R&D expenditure is ABX-EGF of which the primary driver of course of those expenses will be Amgen.

So it's really very, very difficult for us to give guidance on the expenses.

So, if you recall, what we did last fall with the restructuring of the Amgen -- our deal with Amgen, while we basically preserved the 50-50 codevelopment or 50 percent expense sharing, what we did was enabled us to put us to limit our cash exposure to the program in 2004 by limiting the amount of cash that would be spent on the program to $20 million.

Thereafter we could access then this credit facility that we put in place.

So, you see, we can anticipate or give you a range of our operating cash burn or our net cash used in operating activities within the range that I described, 110-125 million, but in terms of the components of revenue and expenses that make that up, and in particularly the size of the ABX-EGF program, it's very tough for us to quantitate at this point.

I can appreciate that.

But the --?

Now with the manufacturing startup costs, what -- I think certainly the 72 million of manufacturing startup costs also included a figure for the Lonza charge, if you recall, middle of last year.

And so, where I think we're heading is -- if you wanted to be the most conservative I'd use the quarter four run rate for manufacturing startup costs, and I think the extent to which it's lower than that is really going to depend on a number of factors including how many batches of EGF we make, etc., etc., which again is difficult to predict at this early stage.

Great.

And I assume that the bulk of that 20 million expense has been accomplished in terms of Abgenix's component -- for EGF?

The $20 million is -- are you asking will it be reached this year?

Yes.

Yes, I would say almost certainly.

Then one final question and I'll get back in queue.

That $60 million is a loan?

That is correct.

So that will not show up as revenues, is that correct?

That is correct.

Okay.

Thank you.

Meirav Chovav of UBS.

Hi, this is Catherine Kim.

I have two questions.

The first is on the ABX-EGF, your partnership with Amgen, do you have -- will you be receiving milestone payments, and specifically when you start pivotal trials or filing or approval?

No.

If you recall, the deal has been set up as a 50-50 codevelopment, and a 50-50 worldwide profit-sharing deal.

When we first did the deal with Immunex, there was some early milestones associated with the deal, and that was in order to compensate Abgenix for its previous early research and development cost on the program.

But as soon as those were made and, if you like, our contribution had been equalized, from then on our contribution is 50-50 and there's obviously no place for milestone payments in such a structure.

Okay.

And then on the renal program -- I'm sorry, the prostate, did you say that you had terms -- you are not continuing with that indication?

Yes.

At this point we're not going to continue with this indication as a monotherapy.

We took -- Amgen and Abgenix took a look at some preliminary data, and decided that it had not met some internal thresholds that we'd established.

So we decided that that is not the place for a priority at this point.

That doesn't mean we may not come back to it in the future, but at this moment we're not going to prioritize that indication.

Okay.

And then could you give us an update on the renal program?

Sure.

If you recall, the renal program was in two parts.

A first part which was a dose rising study in four cohorts where we looked at 1, 1.52 and 2.5 mgs per kg given weekly for eight weeks.

We published about 18 months ago at ASCO -- ASCO 2002, and in that study we saw about a 6 percent response rate.

Now the patient population that we'd examined in that first part was a fairly diverse and very heavily treated and very late stage patient population, IL2 (ph) failures.

But patients who had received many rounds of treatment and were really quite end stage.

We decided that the 6 percent response rate also was a threshold that probably did not warrant moving forward in that diverse patient population.

So we designed a second part of the trial, which is in enrollment where we're looking at a very, very narrowly defined patient population in which we have -- in which they have also received only one or a very small number of prior biological therapies such as interlukin 2.

We're hoping with that very narrow patient population that if there is a signal to be found in renal cell carcinoma we'll design a trial to see it.

We're probably going to -- we're probably not expecting to see any data from that trial certainly before the end of the year.

Okay.

Thank you.

You're welcome.

Mike McNolte of Context (ph) Capital.

I know you currently have a strong cash balance and, given that your burn is starting to decline somewhat, capital may not be as much in the forefront as it has been in the past.

But I was just wondering if you could kind of touch base on what your thoughts are going forward regarding the convertibles, would you like to see them convert, have you thought about refinancing them?

And also, will you be coming back to the market at any point either later this year or early next year, please?

Sure.

So, with regards to the convert, the convert has a conversion price of just over 27.5.

And that is also due in the first quarter of 2007.

We therefore think that probably it does not make sense just at this moment in time to consider refinancing that convert.

Depending upon obviously the success of our portfolio and our lead product, it is possible that we could obviously move through that price, but in addition, if not then I think this year is not a time to worry about that.

Now, with regards to future financing, obviously we will be looking at possible opportunities to finance in the future, but really I have nothing else to comment on that.

Okay.

Thanks very much.

I appreciate it.

Alex Hittle of A.G. Edwards.

I was wondering if you could clarify the guidance here a little bit on the 110 to 125 million cash used in operating activities?

Should we then add the capital spending to that, or does that number encompass the capital spending?

That does not encompass the capital spending.

This is -- we are guiding you to the net cash used in operating activities, which will be shown on our cash-flow statement.

So, capital is in addition to that.

So if we're looking at what the draining down of the cash balance would be, we should be thinking $130 to $150 million?

That would be correct.

And hopefully by midyear we're going to be able to give you maybe a little bit more guidance on where we are with the net cash used in operating activities.

Okay.

And if I can kind of jump topics here and ask an unrelated follow-up.

I've seen that ImClone has some IP around combination therapies in the EGF pathway, and I'm wondering if in your development program that IP influences you to try and seek places where you can use ABX-EGF in a monotherapy setting, if you could comment on that at all?

Well, we have been developing, with our partner Amgen, a broad development program that encompasses both monotherapy as well as combination therapy, and future combination therapies.

We have not been factoring those particular pieces of intellectual property into our development plan.

So, something like your indication that you're not going forward in prostate cancer, that's really a flat out efficacy decision rather than one based on those other factors?

Let me clarify for you.

I think the intellectual property that you're referring to are claims that relate to combination therapy.

We are studying both ABX-EGF in a variety of different indications, some as a monotherapy, some as a combination therapy.

But actually the prostate study that we were doing was actually as a monotherapy.

Okay.

Thank you.

You're welcome.

(OPERATOR INSTRUCTIONS) Mike McNolte of Context Capital.

Sorry, I meant to ask this before.

With regards to the cash burn, you have the line of credit from Amgen.

Does the -- is part of the 110 or the 125, does that include let's say the 20 to 30 million that you might take down from the Amgen line?

Or should we add that on top?

How does it work just mechanically or from an accounting sampling please?

We are assuming that we will use -- we will spend at least $20 million on the program this year, and that 20 million is included in the $110 to $125 million guidance.

Above that, we will draw on the credit facility, and that would not therefore appear in that number.

So the 20 million that you have is inclusive in the 110-125, so therefore your cash would come down by 20 million.

If you end up accelerating the program and you've spent more, and let's say you took down another 10, that would come from the Amgen line?

Does that make sense?

Yes, that's correct.

Now, going forward let's say for 2005, is it the same thing where you pick up 20 million or some number and then the line kicks in, or is it just that once you pick up $20 million, that's kind of your deductible if you will, then you get the rest of the line to use?

Well, of course it's a bit more complicated than that.

There's different algorithms for each year.

So, in 2004, which we viewed as a critical year as we were moving into pivotal studies, we wanted to limit the cash exposure to the $20 million.

So, if you like to use your analogy of a deductible -- nice analogy -- I think yes, that is the way it works in 2004.

Any unused part of the credit facility then gets carried over to 2005, and in 2005 and beyond the algorithm that is used is that we can draw down 50 percent of our 50 percent commitment, that turns into 25 percent of the program costs throughout the year.

There's no deductible in a sense applying, it's now more 50 -- half of our obligation we can draw down from the credit line.

So if you spend 40, you'll put up 20 and the Amgen line will also bring in 20?

That's correct.

And Amgen presumably would be spending 40 on their end.

That's exactly right.

You've got it, that's the way it works.

Okay.

And then on the reimbursement side when the monies come back in, is it where you -- rather Amgen gets to recoup their loan first and then you get your deductibles back type thing?

Well, let's imagine that we have used up all $60 million, so we owe Amgen 60 million, and the way in which that will be repaid is that when the drug is profitable, so when the P&L for the drug becomes profitable, then a proportion, which we have not disclosed, of our share of the profits each quarter will be used to repay that loan.

Or, we can of course repay the full amount in cash at any time.

Okay.

I got you -- just from a modeling standpoint.

Thank you very much.

William Slattery of Deerfield Partners.

Ray, if you could walk us through your expectations in terms of the upcoming melanoma study, and in particularly what are the thresholds for moving forward?

What kinds of activities do you expect to see, need to see?

And also if you could give us a better understanding of what particular characteristics of these melanoma patients you're going to be testing?

Thank you.

Sure.

These are late stage patients.

The primary purpose of the dose rising study is safety, evaluation of the drug.

We're doing a very careful design dose rising study, looking at starting off with low doses and rising to sort of much larger doses.

In addition to looking at safety we'll be looking at pharmacokinetics.

I'm not sure I've got an immediate answer for you of the details of the patient population into this study, but they are late stage patients.

Now, what we will also be doing, of course, is measuring things.

Just as you remember with ABX-EGF, we saw a skin rash that appeared in patients when we treated them due to the EGF receptor levels in skin.

And we were able to use this as a measure of -- almost like a measure of the titration of the dose.

Of course, we don't have an equivalent thing with the melanoma patients, but we will be looking possibly for biomarkers and to see if any of them respond to dose.

But that may come more in a second part of the trial, which if the safety is achieved then we'd move on to multidosing.

So it's early days with that program, though.

In addition, obviously to characterizing safety, will you be using technologies such as PET scanning to characterize the nature of any responses that you do observe?

Certainly we'll be looking at responses.

Remember, these are metastatic patients, and so we'll be using the standard measures, instruments for looking at tumor responses as a given.

Whether PET scans are used in that particular protocol, I don't remember off the top of my head to be honest with you.

Thank you, Ray.

You're welcome.

We have no questions at this time.

I'd like to turn the call back over to you for closing remarks.

Thank you very much.

Thank you for joining this call.

As you can see, I think we made a lot of progress in 2003, as we transformed ourselves into a product development company. 2004 has the potential to be an exciting year, and we're looking forward to updating you on progress.

Again, thank you all for your support.

Bye-bye.

Ladies and gentlemen, thank you for joining us on today's call.

You may now disconnect your lines.