Armata Pharmaceuticals, Inc. (ARMP) 2004 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Targeted Genetics 2004 First Quarter Financial Results Conference Call. Today's presenters are Stewart Parker, President and CEO of Targeted Genetics; and Todd Simpson, CFO of Targeted Genetics. During the teleconference, all lines will be in a listen-only mode. If you would like to ask a question during this presentation, please press the number "1" key on your touchtone phone. Please keep in mind that pressing the number "1" a second time will withdraw your question. At this time I would like to introduce our first presenter, Stewart Parker.

Thanks, Don. Good morning and thank you for joining us. Targeted Genetics began 2004 with a string of successes and I look forward to exploiting our progress with you this morning. With the close of the first quarter, we now have three active programs in clinical development and financial strength that allows us to execute our product development plan for each of this program. We are very focused this year on the generation of clinical data that validates our gene-based approach to the treatment of acquired and inherited diseases. We believe that each of our three key development programs, we’ll update you on today is a [laughter] so that the important potential and opportunity impair in our technology base. And there are tremendous product opportunities than themselves.

Now as was previous quarter, throughout the course of this call I’ll be providing you with an update on the Company’s progress today as well as future milestones to look out for. You'll also hear from Todd Simpson, our Chief Financial Officer, who will review our financial results from the first quarter of 2004.

Now before I go any further, I would like to remind you that during the course of this call we may make projections and other forward-looking statements regarding future events or future financial performance of the Company. We do wish to caution you that such statements are indeed only predictions and actual events or results may differ materially from the statements we make. So please see our documents that we file from time to time with the SEC for information about risks that may affect the Company including our most recently filed Annual Report on Form 10-K.

The first quarter has been a very busy one on a number of fronts. We have spent a lot of time during the last several months presenting our progress at various conferences and then continued to generate excitement about the Company and the potential of gene-based therapy. With three product development programs now in the clinic, we are leveraging our approach to very diverse disease settings all joined together by our leading technology, adeno-associated viral or AAV vectors. Targeted Genetics is leading the charge in the development of AAV-based products. We have more clinical experience with AAV than others in this field and not only have we gathered extensive AAV safety data, but we are the first to demonstrate indications of efficacy using AAV-based treatment.

All of our experience supports the potential of AAV and its ability to play a significant role in the treatment and prevention of broad categories of disease. AAV can be used in traditional gene replacement as is the case of [white blood cells], it is also being evaluated in a vaccine setting with our AIDS vaccine program. And now we have begun utilizing it for targeted pricing delivery exemplified in our rheumatoid arthritis clinical program. Targeted Genetics also has conducted previous research involving the use of AAV for the treatment of hemophilia, another single-gene deficiency, where there is a need for protein replacement. In many ways you can look at our approach as targeted protein delivery. Gene-based delivery leads to in vivo protein expression in a targeted manner. It can be glycol or systemic. The process allows from low levels of sustained expression and could provide potential for less frequent testing and lower cost. So, as we move through product developments, we are learning more and more about the potential of AAV and of gene-based deliveries while at the same time emerging as a strong leader in the field. So, I began with this discussion because our AAV technology is, as I mentioned, playing a very important role at all of our core product development programs currently in clinical development.

Let me move now into updates on each of those programs. So, I would like to begin with our rheumatoid arthritis or RA programs. that have [occurred] during the first quarter, we’re very pleased to announce the advancement of this program into the clinic. In January we announced regulatory approval from both the U.S. and Canada to proceed with this trial. And in fact going ahead, we were able to take the final step to get the program up and running in the clinic and announced the dosing of the first patient in March.

Just for record -- and I apologize to those who have heard this before, our RA product candidate tgAAC94 represents a local RA gene-based approach to delivering a soluble receptor for the TNF-alpha protein. It is designed for injection directly into affected joints for those suffering from RA. RA as I am sure you know is a chronic disease that causes pain, sickness, swelling and lots of function in the joints. Anti-TNF therapies have been very successful in treating this disease. And yet the rheumotologists we talk with, maintain that 25-40% of those patients currently successfully treated with this therapy, still suffer from pain or problems in one or more major joints; tgAAC94 addresses this ongoing challenge and we believe may serve as a potential alternative or supplement to these therapies in patients where one of several joints that are not completely treated with systemic protein therapy. Our pre-clinical results have been very encouraging, demonstrating no safety issues at any dose levels and a reduction in symptoms of disease and animal models. The clinical trial we're in utilizes our AAV technology to deliver the DNA sequence encoding TNFR:Fc as the treatment for RA. This dose escalation safety trial is designed to enroll up to 32 patients with RA and is being conducted at roughly 8 sites in the U.S. and Canada. The trial is a multi-center, randomized, double-blind, placebo-controlled, study designed to assess safety of intra-articular delivery of tgAAC94. Other secondary parameters assessed are the ability of intra-articular administration of tgAAC94 to reduce pain and swelling in the injected joint and overall disease activity. The amount of local and circulating TNFR:Fc protein also will be measured. Participants will receive a single injection of tgAAC94 or placebo directly into an affected joint and will be monitored for approximately 6 months following injection. Dr. Philip Mease, who is the Chief of Rheumatology Clinical Research Division of Swedish Hospital Medical Center and Head of the Seattle Rheumatology Associates, and Dr. Edward Keystone, who is Professor of Medicine at the University of Toronto, are the lead investigators in the trial. Both of this researchers are considered experts in the field of RA treatment and we're very pleased with having them on board.

Now we are generating data in our other programs as well. We continue to enroll patients cystic fibrosis Phase IIb clinical trial. We are very pleased to have recently dosed the 50th patient in our study. After collecting 30 days data point, an independent data safety monitoring committee or DSMC will conduct an interim analysis. It will take some time for them to review, analyze and provide feedback. But after these steps are taken, we will be able to announce the DSMC's recommendation and expect that this will happen in the coming month. Now the analyses is structured so that if there is no observed difference in lung function in our interpatient between a product parameter group and the placebo group, the DSMC will recommend discontinuation of the trial. The data remain blinded as long as the study continues. We are certainly planning on continuation of the study and still remain on track to complete patient enrollment by the end of 2004.

Another important event that I want to mention with regard to our CF program was the publication of previous clinical trial results in Chest during the first quarter. Chest is the official Publication of the American College of Chest Physicians. These data were first to demonstrate statistically significant improvements in lung function after 30 days. And in smaller subset of patients we saw sustained improvement in lung function over a 90-day period when compared to placebo. These data form the basis for our current clinical trial designed primarily to measure improvements in lung function. We are also continuing to recruit volunteer's in our Phase I clinical trial testing our AAV-based AIDS vaccine product candidates. And in the first quarter, our collaborative partner, The International AIDS Vaccine Initiatives, announced the opening of an additional clinical site in Germany. This is Germany's first human trial of the vaccine parameter designed to prevent aids. And certainly represents continued progress in the programs during the quarter. As we have mentioned in the past that we intend to complete the dose escalation portion of this clinical trial by the end of 2004. Now just as a reminder this dose escalation trial will ultimately involve up to 15 healthy volunteers. Each participant in the study receives a single injection of the vaccine TGACO9. The primary goal of the Phase I study is to determine safety but will also monitor immune responses as well. Another important milestone we've added to our AIDS vaccine program was achieved during the first quarter. In January we announced the extension of our collaboration with IAVI to cover work through 2006. Our work plan and budget for 2004 was approved and as a result IAVI has committed up to 10.7m in funding to support work for the first year of the estimate collaboration. But throughout 2004 we will utilize these funds to support manufacturing of clinical products and we will also use these resources to fund pre-clinical studies designed to evaluate the [impurity] of various HIV antigens and a multi compounded AIDS vaccine. We are very pleased to continue work with this group and would really like to thank IAVI and the Columbus Children's Research Institute for their ongoing commitment with us in realizing the potential of an -- excuse me of an AAV dose vaccine to prevent AIDS.

Letting on the financial achievements for the company during the first quarter, while Todd will discuss more details related to this, I did want to point out that we further strengthened our financial sector during the first quarter by raising an additional 25.5m in new capitals. We felt that this allows us to not only complete our current clinical trials but to evaluate the results that initiate the next series of clinical trials, building value and advancing our product development programs. In this call we will explain we officially ended our collaboration with Elan in March and we gained a significant amount of intellectual property that was generated through the joint venture. The progress made through this joint venture was substantial and then that provided us with a much better understanding of one of our non-biogene delivery technologies and its potential in the treatment of cancer. That’s why it has gained through all the intellectual property now we have the ability to seek opportunistic ways to leverage this technology as it applies to metastatic cancer treatment, another diseases requiring targeted systemic delivery going forward.

So now I would like to turn the call over to Todd Simpson our Chief Financial Officer who will elaborate on some of these financial highlights and review our financial results for the first quarter of 2004.

Alright, good morning, thanks Stewart, and thanks to everyone for joining in today. For this morning I will just briefly cover our financial results but also highlight a few changes on our balance sheet that happened during the quarter.

First, as Stewart said, we completed a $25.5 million common stock offering in February, it was priced at 235 per share. This brought our cash balance at the end of March to $41.1 million up from $21.1 million at the end of 2003. At the end the objective of this financing was to top off our balance sheet and give us the cash we need so we [inaudible] our clinical program's forward, generate data, and assuming success move into the next stage of development.

Now Stewart also explained we just recently announced the official conclusion of our joint venture with the Elan called Emerald Gene Systems. Well, operationally the [JVs] has been inactive since 2002. It was just recently that we are able to agree with Elan on several topics related to the overall termination of the joint venture. So, at the end of the March we entered into an agreement that allowed Targeted Genetics to accomplish a couple of things. First, we retained our intellectual properties. Both the intellectual property initially licensed into the joint venture as well as the [IP] developed within the joint venture. Secondly, our Series B preferred stock held by Elan were converted into common shares and in doing so, we have reduced the number of shares issued down to 4.3 million shares. This conversion also stopped the accrual of further dividends that would have resulted in more shares of our common stock being issued. So, in total, a nice outcome for the Company. As part of that agreement we gave Elan a permission to begin the transfer positioning our common stock overtime. We were successful though in keeping a volume-based restriction over this process intended to keep it as orderly as possible. Based on our review of public filings, we believe that Elan has not yet traded any of the stock.

Earlier this morning we announced our first quarter results, which included a net loss of $4.9 million or 7 cents per share for the quarter ended March 31, 2004, compared to a net loss of 830,000 or 2 cents per share in the first quarter of 2003. Recall though that in the first quarter of 2003, we recorded revenues of $4.7 million under our former collaboration Wyeth and Biogen. This is the principal reason that our net loss in 2003 was lower than in 2004. Our revenue in the first quarter of 2004 was $1.3 million compared to $5.6 million for the first quarter of '03. Again 2003 include the Wyeth and Biogen revenue I mentioned. The primary source of revenue for the first quarter of '04 was from our AIDS vaccine collaboration with IAVI. We expect this to continue throughout the year and actually ramp up over the remaining course of the year in line with planned increases and development activities under the collaboration.

We also expect to recognize revenue under our contract manufacturing relationship with GenVec in the second quarter of this year. Now as we already reported, this manufacturing work was completed late last year; however, from a revenue recognition standpoint we have been awaiting final lot release testing of GenVec, which again we expect will happen in the second quarter.

Our operating expenses for the first quarter of 2004 were $6.2 million, the same as in the first quarter of 2003. R&D expense decreased by about $300,000 to $4.2 million while G&A expenses increased by $500,000 to $1.8 million, reflecting higher personnel and professional costs. So just to warp up, we continue to make great progress during this quarter and to improve our overall financial position and simplify our capital structure. The teams at Targeted are executing the very aggressive plan that we set for ourselves earlier in the year and generally we are operating very close to that plan.

So with that I am going to turn the call back over to Stewart.

Thanks Todd. So to briefly touch base on near-term activities related to our three product development program, again look to hear from us in the coming months on the results of CF Phase IIb interim analysis. We’ll continue with taking enrollment throughout year with the expectation of taking a full completion by end of this year. We’ll also continue with patient enrollment in our AIDS vaccine clinical trial with the expectation of completing the dose escalation portion of the study by the end of the year. While we continue with this Phase I clinical trial, Targeted Genetics and IAVI will actively pursue its multi-component AIDS vaccine strategy. The collaboration believes that a multi-component AIDS vaccine will provide the best hope for preventing AIDS. And so this vaccine will include genes from both the regulatory and [structural] pricing from HIV. And after reviewing data from our ongoing pre-clinical studies, we will determine what we believe is the optimum protected vaccine against AIDS, so that we can begin to advance with the best AAV vaccine candidate. And now with our RA clinical trials underway, we’ll also continue to enroll patients into the study and fill project completion in the first quarter of 2005. As we continue to generate data in 2004, we’ll also continue to seek partnership opportunities to the best maximize capacity and potential of our additional technology assets and other product development opportunities. We look forward to participating again in the American Society of Gene Therapy 7th Annual Meeting, which is held in Minneapolis from June 2nd through June 3rd. This is an excellent opportunity for us to demonstrate publicly the progress that we are making as a leader in gene therapy.

We also will participate in the upcoming Rodman & Renshaw Global Health Care Conference in London and additionally we’ll hold our annual shareholders meeting here in Seattle at 9 o’clock on Thursday, May 20th at the Washington Athletic Club and we hope certainly to see some of you there.

So I will close this morning by thanking you all for your time. I must say that I am very proud to continuously share a substantial amount of progress we are making at Targeted Genetics from quarter-to-quarter. It has come a long way from where we were a year ago and we will continue to work hard to achieve aggressive product development goals going forward. It’s the result of our hard work and with next round of clinical data that will continue to build value for the company and build on the potential of our AAV based program so, with that we will be happy to answer any questions you may have.

Ladies and Gentlemen. We are now opening the conference to the question and answer portion of the call. If you would like to ask question please do so by pressing the "1" key on your phone. Please be aware that pressing the "1" key a second time will take you out of the question rotation, and our first question comes from the line Russell Gilbertson of Roth Capital Partners. Russell your line is open.

Good morning Stewart. Good morning Todd. I want to compliment you guys on the progress that you have made recently at Targeted Genetics. I’ve a couple of questions first question is in regard to your rheumatoid arthritis program. Could you comment on how the enrolment is projecting one and two could you give us some more detail on what exactly is being measure in terms of inflammation or swelling and is it questionnaire based or is it clinician based and how are you controlling that?

Okay, in terms of patient enrollment, we have always projected that we would complete approval of the patient in the first quarter of 2005 and as you know we don't actually announce patient-by-patient. So, we are right on track to do that, I think I feel very comfortable about that. In terms of measurement it is Phase I trial so it is primarily safety but we will be measuring all this sort of standard immulogical measurement that is qualitative and quantitative that are regarding these types of trials, as well as looking as I said things like TNF protein expression that is on a local and systemic basis or on going basis, The patients are all following for 6 months post drug administration, so we will get a very nice robust body of data there we think.

How frequently are you looking for patients there?

It depends on the measurement that we are discussing, I think most of this are done monthly.

Okay, My second question regards to the cystic fibrosis trial?

Yeah.

And that is as you said that enrollment is progressing on track there also?

Yes.

Okay, that's it, thank you very much.

Okay, thank you.

Ladies and gentlemen once again if you like ask a question please press "1" key on your telephone now. Ladies and gentlemen it looks like we have no further questions at this time.

Well, thank you all very much. We really appreciate everyone joining us this morning and look forward to updating you on our progress in the next quarter. Thanks.

Ladies and gentlemen, thank you for participating in today's 2004 first quarter financial results conference call with Targeted Genetics. This presentation will be archived and can be accessed at www.targetedgenetics.com.