Armata Pharmaceuticals, Inc. (ARMP) 2005 Q1 法說會逐字稿

Good morning, ladies and gentlemen. And welcome to the Targeted Genetics First Quarter 2005 Financial Results Conference Call. Today's presenters are Stewart Parker, President and CEO of Targeted Genetics, and Todd Simpson, Targeted Genetics' Chief Financial Officer. Ms. Parker will open today's call with highlights from the quarter, followed by Mr. Simpson's financial update. The call will then be open to a Q&A session.

(Operator Instructions) I would now like to turn the conference over to Stewart Parker. Please go ahead, ma'am.

Good morning and I would like to welcome all of you to the Targeted Genetics 2005 first quarter financial results conference call. Today I will provide an update on the company and discuss what you can expect us to achieve in the coming months. Subsequently, Todd Simpson will review our financial results for the quarter and provide some updated financial guidance for the remainder of 2005.

Now, before I begin, 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 wish to caution you that such statements are only predictions and actual events or results may differ materially from the statements we make. So please do see our documents that we file from time to time with the SEC for information about risks that may affect the Company, also including our most recently filed annual report on Form 10-K. We also plan to file our quarterly report for the first quarter of 2005 on Form 10-Q later this week.

So, I will start this morning's call by discussing the progress we have made in our core clinical programs as well as our earlier stage collaborative product development programs. And first, I will lead with our product candidate tgAAC94 for the treatment of inflammatory arthritis. Now, tgAAC94 is a product, which consists of an AAV vector, containing a gene sequence encoding TNFR.Fc.

Targeted Genetics believes that tgAAC94 has significant clinical and commercial potential in a variety of inflammatory diseases. And we are currently conducting a double-blind, placebo-controlled, dose-escalation Phase I trial of the product in patients with inflammatory arthritis. The trial is designed to assess safety and preliminary improvements in signs and symptoms of disease following a single injection of tgAAC94 or placebo into the affected joints.The study is being conducted at eight sites in the United States and Canada and we are on-track to report results from this study in mid-2005.

Now, to put this program in the context with current therapeutic approaches for inflammatory arthritis, anti-TNF protein therapies have been very successful in treating various inflammatory arthritic conditions; however, Rheumatologists estimate that 15 to 40% of the patients currently treated with these therapies have one or more genes with persistent disease -- joints -- excuse me -- with persistent disease.

So our initial market target indication is to use the tgAAC94 in conjunction with anti-TNF protein therapy to address that residual disease. We believe that tgAAC94 may serve as a potential alternative or supplement to these therapies in patients where one or several joints do not respond to protein therapy or in cases where the disease itself is limited to major joints. We are excited about tgAAC94 and believe this product may present a significant market opportunity for us.

Let me turn to our HIV/AIDS Vaccine Clinical program. We also are continuing to execute on our multifaceted program strategy for the development of tgAAC09, a vaccine product candidate designed to protect against the progression of HIV. As you might remember this effort is in collaboration with the International Aid Vaccine Initiative, Columbus Children's Research Institute and Children's Hospital of Philadelphia.

Preliminary safety data were reported earlier this year and we are now making significant progress in moving a number of integrated program efforts ahead including; expanding our clinical trial program to other countries, evaluating higher doses of the vaccine, administering a second or boost dose of tgAAC09, evaluating a prime boost dosing schedule that would utilize tgAAC09 for the initial vaccination and a second product for the boost dose and finally, developing vaccines based on different serotypes or strains at AAV, specifically AAV1, which may be more efficient at delivering genes to muscles resulting in higher antigen expression levels and potentially a more robust immune response to the HIV delivered HIV antigen sequences -- the AAV delivered HIV antigen sequences -- excuse me.

In the first quarter, the initial clinical program was expanded beyond Europe to include India. Conducting trials in India provides an important opportunity to potentially have a major impact in a country where HIV/AIDS has reached endemic proportions. Also, this quarter we review the topline data of the ongoing Phase I trial in Germany and Belgium demonstrating that the vaccine is well tolerated. Based on this positive preliminary safety data, with IAVI's continued commitment and pending regulatory approvals, we plan to further expand this trial to include an arm to evaluate the safety and immunogenicity of the vaccine after a second dose. We believe these data will expand our understanding of the optimal dosing regimens required to stimulate an immune response against HIV antigens' using our AAV system.

Now, I would like to review our business development successes for the first quarter now. In early January we announced that we entered into two new products focused research collaborations with two companies, Celladon and Sirna. These deals illustrate the progress on our strategy to leverage the investment we have made in the development capabilities and infrastructure related to AAV-based products. And we believe are definitely a testament to our leading position in AAV development. AAV continues to show broad applicability and the possible payload it can deliver.

For example, we can utilize AAV to deliver genes, RNAis and other nucleic acid sequences. And we can potentially achieve very targeted and sustained levels of expressions. These partnerships are structured to provide significant upside for the company without particularly distracting us from our core product development programs.

The first base is with Celladon Corporation for the development of AAV-based gene therapies for congestive heart failure. As part of due diligence, Celladon conducted an extensive evaluation for available gene delivery technology, and concluded that AAV vectors have the greatest potential to address the medical and commercial needs of chronic diseases. We believe the combination of Targeted Genetics expertise in the development, manufacture and clinical evaluation of AAV-based therapies with Celladon's portfolio of gene candidates for congestive heart failure holds great promise.

Also, as part of this collaboration, Enterprise Partners and Venrock Associates venture funds that had invested in Celladon, made a $6 million common stock investment in Targeted Genetics, that definitely further validated the potential of this partnership.

Now we also formed collaboration with Sirna Therapeutics to begin research in Huntington's disease or HD, an incurable neurological disorder. The focus of the agreement is the development of a therapeutic short interfering RNA, or siRNA targeting the gene that encodes the approach in genes caused Huntington's disease and which will be expressed from our AAV vectors. Under the term of this agreement, we share the cost and potential revenue, while most likely to bring in a development partner as the program progresses.

Earlier this month, Dr. Beverly Davidson, our Academic Collaborator at the University of Iowa, published very encouraging preclinical results in the proceedings of National Academy of Sciences for potential treatment of Huntington's disease. The results of this preclinical study demonstrate that RNA interference therapy may have a beneficial impact on the symptoms and progression of HD. These findings are important because researchers for the first time have been able to attack the fundamental cause of Huntington's disease and reduce the protein expression from the disease gene. The study is the first to show that a therapy designed to inhibit the expression of this protein has a beneficial effect on the disease symptoms. The study used RNAi to treat a mouse model of HD. AAV vectors were used to express the short interfering RNAs and were directly injected into the brain of mice with HD.

The study by Dr. Davidson are going to show significant improvements in motor function in the mice and significant improvements in characteristic neurological damage compared to untreated mice. This study also demonstrated that levels of toxic HD protein in siRNA treated mice were reduced to 40% of normal levels. Now, although much preclinical work remains necessary, the proof of concept threshold has now been crossed to validate siRNA as a potential potent approach to treating Huntington's disease. It's extremely encouraging to see this groundbreaking research from the University of Iowa and we are very excited to be working in partnership with Sirna and the University of Iowa towards the development of an siRNA therapeutic for Huntington's disease.

We believe that these two collaborations validate our position as the leader in AAV manufacturing and product development and we definitely intend to continue to pursue additional strategic partnership of this elk in 2005.

Now, unfortunately, with successes, often comes challenges and disappointments and as you know, we released preliminary results of a Phase IIb study of tgAAVCF in patients with mild to moderate CF earlier this quarter. The data revealed that we did not meet the primary endpoint of improved lung function 30 days after initial administration of tgAAVCF compared with placebo. And as a result, we have discontinued the development of this program. We do intend to present a complete dataset from the study in a peer-reviewed forum later this year.

Now, Todd will take you through how this affects our cash projections for 2005 next. But suffice it say that we very quickly and smoothly redeployed the valuable resources we have, in order to focus efforts on our other product programs. While we are certainly disappointed with the results of our cystic fibrosis trial, we remain very excited about the number of opportunities ahead of us, opportunities that leverage our existing infrastructure and capabilities and definitely create a positive outlook for the company.

I will now turn to Todd Simpson, our Chief Financial Officer to discuss the first quarter results and provide guidance for the remainder of 2005. Todd?

All right. Thanks Stewart. And thanks again to everyone for joining in this morning. So, Stewart just highlighted we have several events in the first quarter that effect us from a financial standpoint and this morning I will cover a couple of things. First, I will highlight our financial results for the first quarter but then will also cover our cash position as well as provide some updated financial projections throughout the remainder of 2005 taking into account the discontinuation of the CF program but also the impact of our new collaborations.

So just to kick things off, we ended 2004 with approximately $34 million in cash on our balance sheet. We used about $4 million to fund our operations in the first quarter, which is net of the funding received from IAVI. So we ended the quarter with approximately $30 million in cash. As a reminder, our collaboration with IAVI provides full program funding for our AIDS vaccine work, and through the end of last year totaled approximately $20 million since inception of the program back in 2000.

This amount, however, doesn't include the cost of clinical trials since IAVI manages and funds those activities separately. We expect to receive up to $5.6 million from IAVI to support the program in 2005. And this was the principal component of our revenue in the first quarter.

Now, this morning we announced our first quarter financial results, which included a net loss of $4.7 million or $0.05 per share compared to a net loss of $4.9 million or $0.07 per share in the first quarter of 2004. Revenue in the first quarter of '05 was $2 million, so up from $1.3 million in the first quarter of last year. And again, this revenue primarily reflects amounts earned under our AIDS vaccine collaboration with IAVI. Throughout the remainder of 2005 we expect to see additional, but smaller amounts of revenue, from our collaboration with Celladon and to a lesser degree the collaboration with Sirna.

Operating expenses for the first quarter of '05 were $6.6 million, up from $6.2 million in the first quarter of '04. R&D expense was $4.5 million for the first quarter this year, up from $4.2 million in '04 and primarily reflects increased cost and activities into the AIDS vaccine program. G&A expenses remained relatively flat increasing just slightly to $1.9 million in the first quarter of '05 compared to $1.8 million in the first quarter of '04.

Now, on the cash front, and as Stewart just mentioned, following the results of our CF trial earlier in the quarter, we updated our operating plan to exclude CF related costs that were planned for later in the year to re-deploy our development and manufacturing resources in support of our other programs and to recast our financial budgets taking into account not only these changes but also the planned activities and funding under the new collaborations.

Now, we have previously provided guidance regarding our estimated expenses and cash requirements for '05 and under our updated operating plan, we have reduced our overall projected cash needs for 2005 by about $2.5 million or to the 20 to $22 million range. This means that our current cash resources should fund our planned activities until May 2006.

So with cash of just over $30 million at the beginning of the second quarter, we are in good shape for right now. But clearly, this means also that we will need to continue to look at ways of leveraging value out of our capabilities generating additional capital for the company and building our financial resources. So in spite of some obviously disappointing news for CF, we are off to a good start this year in our other problems and new collaborations. We are keeping a careful watch over our cash position. We have made adjustments to reflect the recent changes that we talked about today. And we are looking forward to reporting data from our clinical trial programs later this year, while at the same time continuing to focus on the ways to further leverage our capabilities in AAV and to additional opportunities.

So, I think, I will stop there and turn things back over to Stewart.

Okay. Thanks Todd. I will end today's call with a quick overview of near-term objectives. We are extending our Phase I HIV/AIDS Vaccine European Trial studies in accordance with our vaccine development strategy. Specifically, we are working to complete an additional dose regime and a subset of patients from the Phase I European HIV Vaccine Trial with a boost dose. Data is expected from this extension of the study well by the end of the year. We are also on track to report clinical data from the Phase I inflammatory arthritis trial in mid-2005. Subsequently, we will determine the next gap to initiate additional trials as appropriate.

We will continue pushing on our preclinical programs in congestive heart failure and Huntington's, driving them towards the clinical stage and also during 2005 we will continue to look for opportunities to leverage our technology assets, manufacturing capabilities and gene therapy product development expertise to create additional value for our shareholders.

And on a closing note, Targeted Genetics' is scheduled to present later this morning at the WBBA Invest Northwest CEO and Investment Forum in Seattle and also on May 4 at the Rodman & Renshaw Conference in Paris, France. Both presentations will be webcast and details can be found on our website. I would also like to mention that the Annual Shareholders meeting for Targeted Genetics is scheduled for May 26 at 9'O clock AM and will be held at the Washington Athletic Club in Seattle. And now I would like to thank everyone for their continued support and for your time this morning. And at this point, we would be happy to answer any questions you might have. Mike?

(Operator Instructions) Our first question comes from Derek Jellinek from Roth Capital Partners. Please go ahead, sir.

Good morning. A couple of questions, if I may. First, how many patients have been enrolled and dosed in the rheumatoid arthritis trial? And second, would you briefly outline your developmental strategy TA -- sorry -- TgAAC94? And finally, will the 30 volunteers in the Indian trial of TaAAC09 be given a second dose?

Okay. So let's start with the inflammatory arthritis. We don't typically disclose for patients accruals but let's just suffice it to say, we are on track to be able to meet our timeline of announcing the data mid-year and that is definitely achievable, that's where we are. And so now I am going to go back and get all your questions and so the next question was, what is the next step for TgAAC94?

Right.

Okay. So the trial right now is in -- patients who are not -- who are presenting with disease in one or two major joints, but who are not on current anti-TNF other alternative therapies, they can be on the other DMARD but not on the anti-protein therapies. So that is first part of this safety study. Now most likely we will go into patients next through our concomitant anti-TNF therapies. And one of the key decision is, are those patients going to be purely rheumatoid arthritis patients or they are going to be ankylosing spondylitis patients as well, what type of inflammatory arthritic conditions are we going to be looking at. But it will be basically into that patient population where we will do some type of study before we can move ahead.

Right. And the last question I had was about the 30 volunteers in the Indian arm of the tgAAC09. Will they be giving a second dose?

That's not been determined at this point. The current protocol does not include that but IAVI, who is driving the clinical development of that program may come back and decide to do that. We just don't know yet.

Okay. Great. Thanks so much.

Thank you.

Thank you, sir. Our next question comes from David Miller from Biotech Monthly. Please go ahead with your question, sir.

Good morning and thanks for taking my questions.

Hi David.

Hi. Todd, do I understand it right that you had about 18 months of cash burn left?

Yes, that's in the range, mid '06.

In previous conference calls, dating back to last year, we thought we were going to have the TNF data first part of this year. And then I think in the most recent conference call it was going to be this quarter. And clinical at mid-year is not that much of a bump from Q2, can you talk about why the timelines has been pushed back a little?

I don't really think it has. We have always contemplated that we would initiate the study in March of '04 and we thought it would take about a year to run and then we have to analyze the data. So I think we have always said pretty much mid-year for data announcement.

Okay. Do you have any update on the negotiations with Amgen?

Nothing really new, David, other than we are continuing to have discussions in a very collage. I will look for it today and may have some new news for you, but...

I always have to ask.

That's pretty good news actually.

And then the final question is, with the HIV drug, when do you think you're going to be in the clinic with the multiclade or kind of the next generation of this technology?

Well, I think, that would -- there are so many moving parts to this program, it's a very ambitious aggressive program, but more than likely, the first step beyond looking at a Phase II program of the current product is to look at a fairly simple construct of AAV1 based. And that will probably be the next step we take before we move in into the multi-component.

Okay. Great. Thank you very much.

Thank you.

Thank you. (Operator Instructions) And ladies and gentlemen, it looks like we have no more questions at this time. Please go ahead.

Okay. Well, thank you very much. We very much appreciate everyone joining us and we look forward to updating you again in new future. Thank you.

Ladies and gentlemen, thank you for your participation in today's 2005 first quarter financial results conference call with Targeted Genetics. This presentation will be archived and can be accessed at www.targetedgenetics.com. Once again, that's www.targetedgenetics.com. Thanks again for joining today's conference. You may now disconnect. Thank you.