Armata Pharmaceuticals, Inc. (ARMP) 2007 Q1 法說會逐字稿

Welcome to the Targeted Genetics 2007 results conference call. Today's presenters are Stewart Parker, President and CEO, of Targeted Genetics; and David Poston, Targeted Genetics, Chief Financial Officer. Mrs. Parker will open today's call with business and clinical highlights for the quarter, and her comments will be followed by a financial update from Mr. Poston. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded this Wednesday morning, May 9, 2007. I would now like to turn the conference over to Stewart Parker. Please go ahead, Ma'am.

Thanks. Good morning and thank you very much for joining us. Before we 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 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 do 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 recent Form 10-K for 2006 already on file and our Form 10-Q for the first quarter of 2007 which will be filed today.

So during this morning's call I plan to discuss the objectives we've already achieved in the first quarter as well as review the important financial, product, and business development goals that we've set out to achieve for the remainder of the year. Specifically, we made significant progress in our lead product development program in inflammatory arthritis. We advanced our partnered product development collaboration focused on HIV aids, congestive heart failure and Huntington's disease, we expanded our patent portfolio, and we completed a financing that strengthened our financial position. I will discuss these achievements with you this morning in greater detail and give you additional information on our plan for the remainder of 2007. You will also hear from David Poston, our Chief Financial Officer who will review our financial results for the first quarter of 2007 and provide guidance for the remainder of the year.

I'd like now to turn my discussion to our clinical and partnered programs starting with our lead product candidate, tgAAC94 for the treatment of inflammatory arthritis. In February we presented additional interim Phase I/II data summarizing the safety and efficacy measurements for the first 60 patients in this study from three dose cohorts. We continue to be very encouraged with the growing body of positive data which continues to provide evidence of the therapeutic potential for local administration of tgAAC94 to affected joints. We're also pleased by the rate of enrollment of the study and will update you once completion of initial enrollment is achieved.

In addition our abstracts containing additional Phase I/II data have been accepted for presentation at both the American Society of Genes Therapy meeting in Seattle and the European League Against Rheumatism Congress 2007, the ULR meeting in Barcelona, Spain, both meetings will be in June. Presentations at these important scientific meetings provide us with opportunities to analyze and present more complete data from this Phase I/II study and to gain additional insight toward our next clinical steps.

We also continue to move our clinical development plan forward for tgAAC09. Now, this AAV based vaccine candidate is designed for high-risk populations in developing nations to protect against the progression of HIV. The product is being developed in collaboration with the international AIDS vaccine, Children's Research Institute of Columbus and Children's Hospital of Philadelphia.

In February we announced the presentation of complete Phase I data from a study conducted in Europe and India. In this study, 80 healthy volunteers received a single intermuscular injection of tgAAC09, at different doses. Additionally, 21 of the 50 European volunteers received a booster vaccination of either tgAAC09 at the highest dose tested or placebo. The results presented demonstrate that vaccination with tgAAC09 appears to be safe and well tolerated and the product stimulated a modest immune response against GAG the principal HIV protein encoded by tgAAC09. HIV specific T cell responses were observed in 20% of participants receiving the highest dose of tgAAC09 tested to date, however antibody responses at both doses were not observed. Although the responses in the study are modest overall we're very encouraged to see such a strong participant response at this dose threshold.

Given the dose response relationship observed in this trial it's our hope that higher doses may enhance the vigor of the immune response elicited by tgAAC09. These data reinforce the favorable safety and tolerability profiles of tgAAC09 observed in clinical trials to date, and provide the rationale for evaluating the vaccine at higher doses and at multiple dosing intervals. Obviously a safe and effective vaccine is essential to controlling the global HIV AIDS pandemic and we believe that our HIV AIDS vaccine programs offer compelling humanitarian and commercial opportunities.

Another of our successful collaborations is with Celladon Corporation focused on the development of Gene-based therapies for congestive heart failure, CHF, a condition that is the leading cause of morbidity and mortality in the United States. Partnership is structured to develop a novel AAV based therapeutic agent, AAV 2/1, circa 2a that's delivered directly to the heart to improve the hearts ability to contract. Favorable safety and gene expression profiles of AAV may help to realize the clinical and commercial potential of gene-based CHF therapies. Given positive results from preclinical studies to date, this program is anticipated to move into human clinical studies in the very near future.

Moving to our collaboration with Sirna therapeutics, which was purchased by Merck last year, we're pursuing a new class of AAV, RNAI based therapies for Huntington's disease. Scientific viability of gene silencing as a therapeutic modality continues to gain credibility among pharmaceutical companies as well as on Wall Street. However, a key hurdle to translating the scientific around sIRNA technology into therapeutic candidates has been stable delivery to target tissue. We believe that the use of AAV factors to express DNA sequences encoding therapeutic sIRNA may overcome this hurdle. Preclinical studies to select a lead AAV, HD, sIRNA clinical candidate are ongoing and the program is anticipated to enter human clinical studies in 2008.

So I will close my summary for the quarter by highlighting that we continue to strengthen our AAV leadership position with the issuance of a patent exclusively licensed from the University of Pennsylvania that provides broad coverage for our AAV type 1 vector platform. Our previously issued AAV1 patents covered pseudo typed vectors with capsids derived from AAV1 with or without the AAV1 ITR sequences. The newly issued patent covers development of an AAV1 serotype specific vector that contains both the AAV 1 capsid and the AAV1 ITR sequences. This field of IP is important because vectors having AAV1 capsids have been shown to have much higher transduction efficiencies than vectors based on other serotypes. Consequently numerous players in the AAV field are moving toward the use of AAV1 vectors. Our AAV1 manufacturing competence and IP are the foundation of our ability to attract corporate and academic partners and we expect numerous additional patents in this area to issue as well during 2007. I will now ask David Poston to discuss our first quarter 2007 financial results, then I will close our call with a summary of our strategic focus for the remainder of 2007 before we open the call up to questions. David.

Thanks, Stewart, and thanks to everyone for joining in this morning. I will start this morning's financial comments with a summary of our cash position. We ended 2006 with cash and cash equivalents of $6.2 million. Then in January of this year we added $8.1 million in net proceeds from our placement of stock and warrants. So we started the year with $14.3 million.

During the first quarter of 2007, our net cash burn was $3 million, placing us on track for our estimated cash burn range of 13 to $16 million for the full year of 2007. And as a result, our quarter end cash balances are at $11.3 million. We believe that our current cash balances, combined with the predicted funding from our collaborative partners, are sufficient to fund our planned operations including our clinical trials into the fourth quarter of this year.

Collaborations continue to play an important part in funding our operations, leveraging our product development and manufacturing infrastructure, and building the value of our business through our interest in downstream product revenues, milestones, and royalties. Total first quarter revenue from our collaborations was $1.7 million. Earlier this morning we announced our first quarter 2007 financial results, which included a net loss of $3.8 million or $0.30 per common share, compared to a $3.7 million loss or $0.42 per share for the first quarter last year.

Our revenue for the first quarter of 2007 was $1.7 million, compared to 2.4 million of revenue for the first quarter of 2006. Revenue for 2007 primarily reflects development activities under our congestive heart failure collaboration with Celladon Corporation and collaborative revenue from the HIV AIDS, NIAID funded subcontract as we prepare to initiate manufacturing of vector starting this quarter. Last year's first quarter 2006 revenue was higher than this year's revenue and consisted of both development and manufacturing efforts in support of the Celladon congestive heart failure program and higher levels of activity on our HIV AIDS collaboration with the International AIDS Vaccine Initiative.

Our operating expenses for the first quarter of 2007 decreased to $5.4 million, down when compared to $6.2 million in the first quarter of 2006. Research and development expenses were flat year to year at $3.7 million, and general and administrative expenses increased slightly to $1.6 million in the first quarter of 2007 compared to $1.5 million in the first quarter last year. R&D costs increased due to higher clinical trial activity in our inflammatory arthritis program, including higher numbers of enrolled subjects. This cost increase was mostly offset by lower activity related to our HIV AIDS vaccine collaboration with the International AIDS Vaccine Initiative as a result of that project's current clinical testing emphasis. The modest increase in first quarter 2007 G&A expense reflects higher patents and compensation expenses offset somewhat by lower audit fees.

For the remainder of 2007 we will continue to focus our resources on generating data from our arthritis program, generating revenue from our HIV AIDS, and congestive heart failure projects, exploiting our patent portfolio including our early patent positions and expressed RNAI and raising additional capital to extend our cash horizon. Our plan is to pursue additional capital through a combination of sales of stock or placement of debt, initiatives to leverage our manufacturing capabilities and development infrastructure expertise, additional funding through expanding or extending our current collaboration, and additional new product development collaborations or strategic M&A transactions. We also are continuously monitoring our cost structure for reductions to our ongoing operating expenses.

Extending our cash horizon depends not on the accomplishment of one of these objectives but rather a combination of these efforts. We are committed to achieving our scientific, clinical, and financial milestones and will report progress on these fronts in upcoming updates. I will now turn the call back to Stewart who will highlight some of our program plans moving through the rest of the year. Stewart.

Okay, thanks, David. So we're off to a good start in the first quarter but we obviously realize that we have a lot of work ahead of us. We're very intently working toward a number of important clinical, business development, and financial management milestones. I will end today's call with an overview of our primary area of focus for the remainder of 2007. We'll continue to aggressively pursue development of our inflammatory arthritis program. We continue to be very excited about the growing body of human data generated in the advancement of tgAAC94, as a therapy to treat inflammatory arthritis.

During the remainder of the year we also plan to continue to deliver on the current partnered opportunities. Our product development collaborations focus on HIV AIDS, congestive heart failure, and Huntington's disease are advancing nicely, and are anticipated to generate important clinical and preclinical data in 2007. These collaborations serve to further validate the broad applicability of AAV in multiple disease settings and provide important revenue to the Company. They also allow us really to monetize our earlier investment in AAV scale-up, manufacturing, and product development.

We'll explore monetization of our RNAI assets, we believe that expressed RNAI has certain significant advantages over other RNAI approaches related to stability and delivery and we intend to find ways through partnership and other vehicles to exploit our early intellectual property in this area. We also will seek additional product opportunities. We intend to pursue additional opportunities in therapeutic areas of interest that are complementary to ours in the context of mergers and acquisition as well as product end licensing. We're also pursuing opportunities to further leverage our investment in AAV manufacturing and scale-up through additional product collaborations.

Now we recognize that expanding our product opportunities necessitates expanding the body of data supporting the utility of our platform in a variety of disease indications and target tissues. Collaborating with academic research is a cost effective way to generate proof of concept data for additional commercial opportunities without distracting us from our focus on our current portfolio of product candidates. As an example of this approach and action we announced last week that researchers at University College London and Moorefield's Eye Hospital have initiated a Phase I/II trial of an AAV based approach to treating childhood blindness. Results from this study are expected to further our understanding of AAV-based gene delivery to the eye and provide data supporting the use of AAV-based therapies in treating ophthalmic indications.

As another important goal we'll continue to closely scrutinize our cash and take advantage of every opportunity to extend our runway. As we outlined above, these steps include equity raises, partnerships, grants, and other means of financing that will extend our cash horizon. Now before we close I'd like to take this opportunity to let you know that we'll be presenting on May 14, at Rodman & Renshaw's 4th annual Global Healthcare Conference in Monaco. Our presentation will be webcast live and also archived on our website. In addition, we're holding our annual shareholders meeting on May 17, in Seattle. You are obviously welcome to join us. So in closing I want to thank you all for your continued support and for your time this morning and at this point we will be very happy to answer any questions you might have. Joshua.

Thank you. (OPERATOR INSTRUCTIONS) Our first question comes from the line of Bino Pathiparampil from Thomas Weisel.

Good morning.

Good morning.

I was just wondering, just looking for some more update on the HIV study, the Phase II study that is going on in Africa, I suppose. So is it on track? If I remember correctly, the last update was that we can see some data from that towards the top of this year.

Yes, that is a 180-volunteer study that's being conducted in Africa, and we are planning to present with (Iyavi) clinical data from that study in August at the AIDS conference. So you will see that data fairly soon.

Okay. So assuming that will be a good data, I mean, it achieves its end points, further from there how would it typically go? Would you go into a Phase III, or do we need more Phase II studies before you can finalize on something?

That's a very good question. I think it's hard to answer without knowing the degree of robustness of the response to the vaccine, so we have a number of alternative approaches and routes that we'll be looking at. We also, I believe you know have a very complementary program funded by the NIH for development of vaccines for developed world, and are really trying to marry those two programs together in terms of strategy for next step. So we'll be, as we generate the data, looking at those plans.

Okay. One more question on tgAAC94. The interim data that is going to be presented in June, would it it be in similar lines as the data -- the Phase I data already available? Same kind of end points, or is there anything more that will be available on that?

Well, it will be predominantly safety, and then an extension of the data that you've seen so far, related to the reduction in signs and symptoms of disease.

Okay. Thank you.

Sure.

Thank you. (OPERATOR INSTRUCTIONS) Ladies and gentlemen, it looks like we have no more questions at this time.

Okay. Well, again, thank you very much for your attention, and we look forward to updating you. Obviously we have a number of important milestones ahead, a lot of work ahead, but we very much appreciate your support and look forward to updating you in the near future.

Ladies and gentlemen, thank you for participating in today's conference call with Targeted Genetics. This presentation will be archived and can be accessed at www.targetedgenetics.com. Thanks again for joining today's presentation. You may now disconnect.