Armata Pharmaceuticals, Inc. (ARMP) 2005 Q2 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Targeted Genetics second quarter 2005 financial results conference call. Today’s presenters are Stewart Parker, President and CEO of Targeted Genetics, and Todd Simpson, Target 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 opened up for a Q& A session. At this time, all participants are in a listen-only mode. Following today’s presentation, instructions will be given for the question and answer session. If anyone should require operator assistance at any time during the conference, please press the star followed by the zero. As a reminder, this conference is being recorded today, July 28, 2005. And I’d now like to turn the conference to Stewart Parker. Please go ahead, ma’am.

Thanks, John. Well, good morning, and I’d like to welcome all of you to the Targeted Genetics 2005 second quarter financial results conference call. Today, I’ll review the recent developments in our inflammatory arthritis program and update you on our other clinical and pre-clinical programs. We’ll talk about some additional business achievements and then I’ll give you some insight into what you can expect us to achieve in the coming months. Todd will also review our financial results for the quarter and year to date.

Before we begin today’s call, 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 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 quarterly report on Form 10Q. We also plan to file our quarterly report for the second quarter of 2005 on Form 10Q later this week.

So let me start this morning’s call with a discussion of the advances we’ve made in our inflammatory arthritis program. On Tuesday of this week, we announced encouraging preliminary results of our Phase I clinical trial of our product candidate tgAAC94 for the treatment of inflammatory arthritis. Now, in this study, 15 patients were randomized to receive either one of two escalating dose levels of tgAAC94 or a placebo. The trial contained a placebo arm at each dose level, which was included primarily to assess whether any adverse events that might be seen were attributable to intraarticular injection itself as opposed to an intraarticular injection of tgAAC94. So a total of four patients did receive placebo.

Our primary objective of the study was to evaluate the safety of a single administration of tgAAC94 injected into the joint. We achieved this primary end point, demonstrating that tgAAC94 was well tolerated and could be administered safely in arthritic joints. Now, we also collected data on secondary parameters including improvements in arthritic signs and symptoms in the injected joint as measured by changes in joint swelling and tenderness using standardized arthritis index scores. And although the study was not powered to demonstrate efficacy, we are encouraged by our findings. Specifically, in the treated subjects that four weeks after drug administration, nine out of eleven who received tgAAC94 experienced sustained improvement in signs and symptoms of disease following treatment. Further, preliminary data show that seven out of nine of these patients who received tgAAC94 and have been evaluated through week eight following treatment experienced sustained improvements, again in signs and symptoms of disease.

Now, in those receiving placebo, improvements in arthritis signs were noted in two out of the four subjects. All patients will continue to be followed for 24 weeks after injection, and additional clinical results will be reported at the next appropriate scientific venue later this year.

Although these data are preliminary, we are extremely encouraged by them and look forward to completing the 24 week follow-up period and reporting the data in full. In part, our excitement stems from the apparent validation the data provides to the results seen in our earlier animal studies. We started our program in animal models of rheumatoid arthritis and have conducted multiple pre-clinical studies to assess the safety and potential efficacy of tgAAC94. For example, in a rat model of arthritis, we were able to express the TNFR:Fc gene locally in an affected joint and significantly reduce ankle and hind pal swelling as measured by arthritis index scores. Data also suggested that animals treated in a single joint experienced a reduction in swelling in both the treated joint as well as the contra lateral joint. This was observed without accompanying elevated levels of systemic protein expression. So based on our compelling pre-clinical data, it was our hope to see these promising effects in humans. And we moved the program into Phase I testing.

We believe that tgAAC94 has significant commercial potential in a variety of inflammatory diseases. As I’m sure you know, anti-TNF alpha therapies are now widely used in the treatment of inflammatory arthritis and they are projected to garner revenues in excess of $7 billion by 2011. However, there are a number of patients successfully taking systemic anti TNF alpha therapies who do not fully respond and still have residual disease in one or two, or several, affected joints. These patients are our initial target market.

Now, that we’ve reported preliminary Phase I results, we will soon begin additional clinical trials with tgAAC94 in this broader patient population to target those patients who concurrently receive systemic anti-TNF protein therapies, but continue to suffer from one or more affected joints. We believe that tgAAA94 has significant clinical and commercial potential in a variety of inflammatory diseases. And as I’ve said, we’re very excited about our successful progress in this program.

Now, let me now turn to an update on the progress we’re making in our HIV vaccine program. We have continued to execute on our multifaceted program strategy for the development of tgAAC09 which is our AAV-based prophylactic vaccine candidate designed to protect against the progression of HIV infection to AIDS. As you know, this effort is in collaboration with the International AIDS Vaccine Initiative, Columbus Children’s Research Institute, and the Children’s Hospital of Philadelphia.

To recap, earlier this year, we expanded clinical trial sites beyond Europe to include India, providing us an important opportunity to impact a country where HIV/AIDS has indeed reached pandemic proportions. We also released preliminary 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, and with IAVI's continued commitment, we’re working toward extending this trial to include additional dosing regimens, including an arm to evaluate the safety and immunogenicity of the vaccine after a second dose. This comprehensive approach is meant to expand our understanding of the optimal dosing regimens required to stimulate an immune response against HIV antigens using AAV. We expect to present further data from this trial at the end of this year and plan to expand into additional clinical studies as soon as possible.

Now, I’ll now give you a review of our pre-clinical development work with our partners for the quarter. We have a very productive partnership with Celladon Corporation for the development of AAV based gene therapies for congestive heart failure. In this collaboration, we’re leveraging our investments in the development, manufacture and clinical evaluation of AAV technologies and combining our AAV expertise with Celladon’s portfolio of gene candidates to pursue AAV delivered product candidates for congestive heart failure. We’re working with Celladon now to complete pre-clinical studies that would allow this program to begin clinical studies in 2006. In another collaborative effort, we’re working with Sirna Therapeutics to develop a product candidate for the treatment or prevention of Huntington’s Disease or HD. As part of this collaboration, this quarter we announced that Dr. Beverly Davidson, our academic collaborator at the University of Iowa, published encouraging pre-clinical results for potential treatment of Huntington’s Disease. The results of the independent pre-clinical study demonstrate that RNA interference therapy may have a beneficial impact on the symptoms and progression of HD. These findings are important because researchers now 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. Moreover, the study is the first to show that a therapy designed to inhibit the expression of this protein has indeed a beneficial effect on the disease symptoms. The study used RNAI and AAV stereotype 1 vectors to express short interfering RNAs which were directly injected into the brain of mice with HD. Vectors of this stereotype may have advantages when compared to some other AAV stereotypes in a neurological setting by providing higher transduction efficiency over a wider area of the brain. Although much pre-clinical work remains necessary, the proof of concept threshold has now been crossed that validates SIRNA as a potentially potent approach to treating Huntington’s Disease. We’re very exited to be working in partnership with Sirna and the University of Iowa towards the development of this SIRNA therapeutic for Huntington’s Disease.

Now, before I move to our intellectual property accomplishments for the quarter, I wanted to note that our academic collaborators presented important results of eight pre-clinical studies recently at the eighth annual meeting of the American Society of Gene Therapy, which took place in June. The studies presented were designed to evaluate AAV vectors in inflammatory disease and Huntington’s Disease, to assess cellular vectors that impact the efficiency of AAV mediated gene delivery and to evaluate the expression of large proteins. This pre-clinical work is very important, obviously, to our ongoing development efforts.

Now, during the second quarter, as I mentioned, we also broadened our intellectual property as it relates to our AAV manufacturing and technology platform. At Targeted Genetics, we’ve invested significantly in overcoming the hurdles related to scale up and production of our products. And that investment and focus has been paying off in our ability to manufacture our potential products at a scale amenable to clinical development and expandable to large scale production for commercialization. It has also paid off in the form of patent issuances, and this quarter we announced the issuance of three additional patents to protect these capabilities and infrastructure which is critical to our long term success and obviously add to our growing intellectual property estate for AAV.

So I’ll now turn to Todd Simpson, our Chief Financial Officer who will discuss the second quarter financial results.

All right. Thanks Stewart, and thanks again to everyone for joining in this morning. Earlier today we announced our 2005 second quarter financial results which included a net loss of $5.3 million or 6 cents per share, compared to a net loss of $4.5 million or 5 cents per share in the second quarter of ’04. For the first six months of 2005, we reported a net loss of $10 million or 12 cents per share, compared to $9.3 million which was also 12 cents per share for the same period in 2004. Revenue was $1.5 million in the second quarter of ’05, compared with $2.8 million in the second quarter a year ago. And revenue was $3.5 million in the first half of the year compared to $4.1 million for the first six months of 2004.

These revenues continue to reflect amounts earned under our AIDS vaccine collaboration with IAVI, which are down from 2004 levels as planned. 2004 results also include contract manufacturing revenue recorded in the second quarter of 2004. Our operating expenses were down modestly in the second quarter of 2005 to $6.6 million compared to $7.1 million a year ago, and were relatively flat at just over $13 million for the first half of both years. The decrease in operating expenses for the quarter ended June 2005 compared to ’04 reflects a decrease in G&A expenses, partially as a result of the sale of Celexis, our cell therapy subsidiary in July of last year.

And while total expenses for the year to date in ’05 are essentially flat with 2004 levels, this year’s expenses similarly reflect a decrease in G&A expenses, offset by slightly higher R&D expenses which are attributable to our AIDS vaccine and our arthritis programs, but as well as our new programs in congestive heart failure and Huntington’s Disease.

Now with respect to cash, we ended the quarter with about $25.5 million on our balance sheet, and therefore, we remain on track with our previous guidance of operating cash needs for this year in the $20 to $22 million range. So enough to fund our programs as currently envisioned until at least mid next year. This estimate, however, doesn’t yet include any planned funding from our partnerships in 2006. So even though our AIDS vaccine collaboration with IAVI runs through the end of ’06, as we’ve talked about before, the development plan and budget is established on an annual basis and that happens later in the year. Since we haven’t yet finalized the work plan and budget with IAVI for next year, we also haven’t yet made an assumption as to the level of funding expected from IAVI in 2006.

As Stewart mentioned, our collaborations with Celladon and Sirna are now off and running. Under the Celladon collaboration to treat congestive heart failure, remember that we agreed to commit $2 million in efforts towards the program as part of the initial $6 million equity investment made by Venrock and Enterprise last December. We’re on track to fulfill this commitment by the end of 2005 and therefore should begin to receive payments from Celladon for continued work in the congestive heart failure program in 2006.

The Sirna relationship is a cost sharing collaboration to support the development of the Huntington’s Disease program. Here we expect to receive smaller amounts of funding to cover development costs under the program this year and next. So with each of these collaborations, we’ll know more about the specific work plans and budgets later in the year and then should be able to provide an update on our assumptions for 2006 once we’ve finalized all the development plans.

Now, the last item I would like to briefly discuss this morning is our Biogen debt. And as many of you know, we have a $650,000 loan due in September of this year and a $10 million note that is due in August of next year. So obviously, an important component of our overall long term financing strategy is to continue to work with Biogen on restructuring these debt payments, which we’re doing, and we’ll be sure to provide updates on those discussions as progress is made.

So in closing, we continue to keep a careful watch over our cash position and the capital markets. We continue to make good solid, steady progress in each of our development programs. And we’ll continue to look for ways to leverage value out of our capabilities and to generate the additional capital for the company and build on our financial resources. So I think with that, I’ll stop and turn things back over to Stewart.

Okay. Thanks Todd. So I’ll end today’s call with a quick overview of the near term objectives of the company. First, we’re finalizing our plans to begin additional clinical trials with ttAAC94 in a broader patient population which does include those patients who concurrently receive systemic anti-TNF protein therapies, but continue to suffer from inflammation in one or more affected joints.

We obviously believe that tgAAC94 does have significant clinical and commercial potential in a variety of inflammatory diseases and we’re very excited to move this program forward. We are extending our Phase I HIV/AIDS vaccine European trial studies in accordance with our vaccine development strategy, and specifically we’re working to complete an additional dose regimen in 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 by the end of 2005. Also, during the remainder of 2005, we’ll continue to look for opportunities to further leverage our technology assets, manufacturing capabilities and gene therapy product development expertise to create additional value for our shareholders.

So on a closing note, I’d like to thank everyone for their continued support and for their time this morning. And at this point, we’re very happy to answer any questions you might have. John.

[Operator Instructions] David Miller. Please state your company followed by your question.

Hi, it’s David Miller at Biotech Monthly.

Hi David.

Good morning. Did you see contra lateral effects in the initial Phase I for AC94?

Right. We have not fully analyzed that data. That’s definitely an end point that we’re going to be looking at, David, as we follow the patients out, but we have not yet analyzed it.

Okay. And we would expect to get that when you present the data? Is that going to be later this year?

That’s our -- yes. That’s our expectation, later this year.

Okay.

There’s a 24 week follow-up period for all of the patients. And so, that timing-wise looks like it will be the end of the year.

Okay. You had mentioned that what you would like to do is you would like to do a concurrent trial next. Would you consider that a Phase I? And then when are you expecting to get into Phase II with this drug?

Right. So the study that we’re looking at broadly and it’s a little preliminary, but we’re looking at -- it will be officially a Phase I starting at the next log higher dose than where the study started. And there will be a placebo component of that trial -- of that component of the trial and then that will take -- our estimate is approximately a year to run, at which point we’ll cross over and do an open label. So we will be collecting efficacy data for that secondary end point.

Okay. Any idea the size of that?

Not at this point. We’re still working on that.

Okay. I mean, do you intend to size it to where you could actually get hard efficacy data or is there still more Phase I, couple dozen patient kind of thing?

David, still working on the size, I think it will be a little bit larger than that, but as to whether the second part will be powered for statistical significance for efficacy, I think we’re just going to collect open label data and see what we have.

Okay. And then my typical question is, is that there’s been any motion on the patent discussions with the folks from AmGen?

Well, I think we’re making progress. We’re continuing to discuss opportunities to structure things with them so that everybody’s happy. And we’re hoping that we’ll have something to talk about here shortly.

Okay. Great. Thank you very much.

Thanks David.

Derek Jellinek. Please state your company followed by your question.

Derek Jellinek; I’m with Ross Capital Partners. Good morning.

Hi Derek.

So just in relation to your inflammatory arthritis program, can you give us a breakdown on the patient population in terms of disease state? That is, rheumatoid arthritis, soratic arthritis or [inaudible] spondolytis?

Yes. As it turns out, although we broadened the study to include multiple types of inflammatory arthritis, all these patients were indeed RA patients.

Okay. Were any of them actually on anti-rheumatics currently?

Yes. They were on whatever regimens they were trying to be on before, so drugs like Methatrexate, but not anti-protein, anti-TNF alpha protein therapies.

Right. Did you happen to look at any biomarker data from that program, or are you planning on doing that?

Yes. We will look at all of that and our -- we have a number of other secondary in tertiary endpoints we’ll be looking at.

Okay. Okay. So could you give us kind of an idea of the developmental strategy for this program? I know you stated some, Stewart, that you’re looking to initiate another Phase trial, but can you give us an idea of the trial design and any kind of timelines there?

Well, as I’ve said, we’re still working on finalizing that. But as it appears right now, our next step is to do, as I’ve said, a study with patients who are on concurrent anti-TNF protein therapy who have residual disease in one or two major joints. And we will start at a dose that’s the next log higher, single administration. And this study, though, will be looking also at length -- duration of response. And we will look to when we need to give a second dose, if we need to give a second dose. So as you know, this first study was single administration; this next study will after a certain period which is still being determined, most likely around 12 weeks, we’ll look at giving a second dose to again be able to measure how long the response is sustained.

Right. Is it really well known why those patients are refractory? Is it due to poor [inaudible] or is just -- or are they just unresponsive to anti-TNF alpha therapy?

Well, they are responsive because as you know, RA is in many ways a systemic disease, but there are many theories about why certain joints aren’t responsive and it could be that they’re just so swollen and so jammed up that there’s no access. You know, we’re trying to figure that out when we move ahead. I think this study will be an important piece of data for us to be able to analyze that.

Right. Right. On your AIDS program, the 30 volunteers in the Indian trials -- India trial, have they been given -- or will they be given a second dose?

Not yet determined. IAVI is still looking at that. I think it’s a very good question.

So have you -- I’m jumping around a little bit. On the multi-component vaccine, any timelines there on when it’s going to get into the clinic?

Well, I think our next clinical milestone for the program will be -- actually, we have a number. But more than likely our next study will involve the AAV 1 stereotype and whether that is a multi component approach with AAV 1 or just a similar constructs to what we’re doing right now is still to be determined. But more than likely it will be fairly simple, looking at AAV 1’s expression capabilities before we move into multi component.

Right. Right. Okay. This next question is for Todd. I tend to recall that there was about $5.6 million available funding from IAVI in ’05. And so I see with your first half spend, you only have about $2 million left on that. So can we look for the second half as about $2 million total for that?

Yes. The way the trajectory or the funding this year comes as more of it was in the first half of the year. So the $5.6 million for the year is still the target and we’re more than halfway through it now.

Okay. Great. Thanks. Thank you both.

Thank you.

[operator instructions]

Great. Well, we very much appreciate everyone joining us this morning. Thank you.