Armata Pharmaceuticals, Inc. (ARMP) 2007 Q2 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Targeted Genetics second-quarter 2007 financial results conference call. Today's presenters are Stewart Parker, President and Chief Executive Officer of Targeted Genetics, and David Poston, Targeted Genetics' Chief Financial Officer. Ms. 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, August 7, 2007. I would now like to turn the conference over to Stewart Parker. Please go ahead, ma'am.

Thanks, Eric. Good morning and thank you very much for joining us today. 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. And 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 second quarter of 2007 which will be filed today.

During this morning's call, I will review the highlights of the second quarter and provide updates on our progress toward the key financial product and business development goals set for the second half of 2007. However, before speaking to our accomplishments of the past quarter or our plans for the rest of the year, I do want to take this opportunity to address the recent death of a patient in our ongoing Phase I/II trial of tgAAC94 in patients with inflammatory arthritis.

All of us here at Targeted Genetics are deeply, deeply saddened by this loss. And I want to reaffirm that the safety of the patients in our studies is always our paramount concern. Toward this end, we suspended dosing in the ongoing tgAAC94 trial and we're working closely with the FDA to identify the cause of this death. While our ability to communicate around this event is very limited by both patient privacy regulations and FDA regulations, we're committed to being as transparent as possible with respect to our activities prior to the patient's death and to sharing additional information as it becomes available.

So, briefly, in February 2007, this patient was enrolled into the clinical trial for tgAAC94 and received the first dose. The patient received a second dose of tgAAC94 on July 2. On July 10, the clinical investigator reported to Targeted Genetics that two patients at his site had flu-like symptoms. These are not uncommon events and were recorded as adverse events, AEs. The investigator advised that these adverse events were not related to study drug.

Consistent with FDA regulatory procedures and the study protocol, these adverse events were noted and will be reported to the FDA in the study's annual report. On July 13, Targeted Genetics was notified that this patient had been hospitalized -- that one of the patients had been hospitalized which is considered a serious adverse event. The investigator reported at this time that the SAE was unlikely related to study drug and the event was noted and held for submission in the annual report. The second patient's symptoms had by then resolved.

On July 17, the investigator notified us that the patient's condition was deteriorating and reiterated that the SAE was unrelated to study drug. Although this information did not trigger a reporting requirement to the FDA, we proactively notified the Chairman of our Independent Data Safety Monitoring Board, or DSMB, about the situation on July 18. On the 19th, we notified the full DSMB.

After a comprehensive analysis in concert with the DSMB, we decided that the timing between dosing of tgAAC94 and the onset of the patient's symptoms established at least a theoretical possibility that the events were related. As a result, we decided to report the SAE to the FDA as possibly related to study drug. Although FDA requirements are that SAEs possibly related to study drug must be reported within a week, we held a teleconference on July 20 with the FDA and the clinical investigator involved in this case within 24 hours of making the determination that the SAE was possibly related to drug.

The trial was officially put on hold and all study sites were notified. The official IND safety report was filed on July 23.

I would like to emphasize that this patient's course of illness is not consistent with our previous clinical experience of AAV-based product candidates in the more than 100 patients who have received tgAAC94 to date, nor is it consistent in the more than 300 patients that we've treated with the AAV platform in total. Additionally, although many of you are familiar with AAV biology, I would like to use this as an opportunity to reiterate that this naturally occurring virus has never been associated with any pathology in humans, which is a key attribute in our decision to use AAV-based vectors as a platform for developing novel therapies.

So, where do we go from here? Well, we're working very closely with the FDA to conduct an extensive evaluation to determine the cause of the patient's death. As part of this analysis, we will work to determine if the AAV vector or the TNF inhibitor that together comprise tgAAC94 contributed to the onset progression or fatality of this patient. Until this information is available, the current trial of tgAAC94 will remain on hold. At this time, we expect that clinical trials of our other AAV-based product candidates will continue as planned. We will share additional information with you as it becomes available and as is consistent with patient privacy regulations and FDA policy.

Now, to the extent we're able, we will address questions about this event during the Q&A session at the end of the call. So, at this time, I would like to turn to our other activities and accomplishments in the second quarter of this year.

We reported interim data from the Phase I/II trial of tgAAC94 in patients with inflammatory arthritis and we also completed initial enrollment for this study. Our clinical development program for tgAAC09, our vaccine against HIV/AIDS, continued as planned and we expect to report preliminary data from the ongoing Phase II trial of this product later this month at the 2007 AIDS Vaccine Conference.

In collaboration with the University College of London's Institute of Ophthalmology and Moorfields Eye Hospital, a Phase I/II clinical trial was initiated to test the use of an AAV vector to deliver RPE65 to treat a form of childhood blindness. We produced the vector used in this trial, which is being funded by the UK Department of Health. And this trial provides yet another example of how AAV vectors can be used to address a variety of hard to treat diseases or diseases with significant unmet need.

Additionally, the first patient in the Phase I clinical trial of MYDICAR, the congestive heart failure product candidate developed through our collaboration with Celladon Corporation was dosed. MYDICAR uses an AAV vector to deliver the SERCA2a gene to the heart muscle of patients with congestive heart failure. Previous studies demonstrate that SERCA2a activity is decreased in heart tissue obtained from heart failure patients and that delivery of the SERCA2a gene can normalize contractility in animal models of heart failure.

Finally, we also expanded our portfolio of AAV-related intellectual property with the issuance of several additional patents, including patents covering proprietary manufacturing methods for our AAV-based product candidates as well as the use of AAV vectors to deliver and express inhibitory RNA constructs. We believe that these patents further strengthen our position as a partner of choice for any organization seeking to develop and commercialize novel AAV-based products.

We also strengthened our financial resources, raising 19.5 million through a private placement of Targeted Genetics' common stock. And at this point, I will turn the call over to David Poston, our Chief Financial Officer, who will discuss the impact of this financing on our overall financial picture and review financial results for the second quarter and provide guidance for the remainder of 2007. David?

Thanks to everyone for joining in this morning. I will start this morning's financial comments with a summary of our cash position. As those of you who follow us will remember, we started 2007 with $6.2 million in cash. Today, we are reporting that we have finished the first half with $26 million. At the end of the second quarter, we sold 6.7 million shares of our common stock in a private placement at an at market price of $2.905 per share for net proceeds of about $17.8 million. In addition, in connection with this financing, we issued warrants to purchase up to 6.7 million shares of our common stock at $3.25 per share.

Our June 2007 private placement is in addition to the $8.1 million we raised earlier this year in January from the sale of 2.2 million shares of our stock. And it brings our net capital raised this year to just short of $26 million.

Together, these capital infusions extend our cash horizons well into the second half of 2008. Based upon 2007 budgets and preliminary work plans for 2008, our current estimates of our cash horizon may vary depending on the timing of our clinical trial costs and the speed at which our partner projects and other self-funded efforts move forward.

This morning, we reported financial results for the second quarter and first half of 2007. We reported second-quarter revenue of $3 million, an increase from $1.4 million recorded in the second quarter of 2006. Revenue for the first half of 2007 was $4.7 million, up from 3.8 million for the first half of 2006.

Our net loss for the second quarter was $4.2 million or $0.31 per share compared to a loss of $27.9 million or $2.83 per share for the same period last year. Our net loss for the first half of 2007 was $8 million or $0.61 per share compared to a loss of $31.6 million or $3.37 per share for the first half of 2006. Our net loss for the second quarter and the first half of 2006 both included a $23.7 million goodwill impairment charge.

Revenue in the second quarter and first half of 2007 primarily reflects amounts earned under our NIAID-funded HIV/AIDS vaccine project and our congestive heart failure collaboration with Celladon. Together, these programs make up most of this year's revenue for both the quarter and the first half. And together, they drove our favorable year to year revenue comparisons for both periods as well. Last year's revenue primarily reflects amounts earned under the Celladon congestive heart failure collaboration and revenue from our HIV/AIDS vaccine project with the international AIDS vaccine initiative.

Research and development expenses for the second quarter of 2007 were $5.3 million compared to $3.7 million in the second quarter of 2006. R&D expenses increased to $9 million in the first half of 2007 compared to $7.4 million in the same period last year. Higher R&D expenses for 2007 primarily reflect higher clinical costs for inflammatory arthritis trial, higher activity in support of the NIAID-funded HIV/AIDS vaccine project and our continued efforts in support of our congestive heart failure collaboration, which Phase I clinical trials in the second quarter.

Despite our increased R&D activities in 2007, our G&A expenses in support of those activities remained consistent year to year for both the second quarter and the first half of 2007. G&A expenses for the second quarter were $1.6 million in both 2007 and 2006 and just over 3 million in the first half of both periods.

Restructured charges for the second quarter of 2007 was $442,000, relatively consistent with $363,000 of charges for the second quarter of 2006. For the first half of 2007, restructured charges were $626,000, down considerably compared to $1.4 million of charges for the first half of 2006, which included a $1 million first-quarter 2006 charge to account for changes in our assumptions with respect to our Bothell facility lease. While these charges affect our reported earnings, do keep in mind that they are non-cash.

As I mentioned in the introduction to our financial results, our P&L results this year are better than last year because in the second quarter of 2006, we wrote down the carrying value of our goodwill asset from $31.6 million to $7.9 million, resulting in a non-cash impairment of $23.7 million. This impairment was triggered by a decrease in our market capitalization to an amount lower than the carrying value of our net assets. There have been no additional impairment issues since the second quarter of 2006 and we continue to monitor goodwill in accordance with accounting guidance.

Next, I will discuss our cash performance and projection for 2007. For the first half of 2007, we're still modestly ahead of our cash plan and have used just short of $6 million to fund our operations, net of funding from our Celladon collaboration and our NIAID-funded HIV/AIDS vaccine project.

Looking forward to full year results, as of the end of the first half of 2007, we're on track with our full year revenue forecasts of up to $10 million from our partnered programs. And we're maintaining our guidance for an estimated 2007 burn rate in the range of $13 million to $16 million. Our plan going forward is to resolve the clinical hold issues that Stewart spoke to at the beginning of today's call. And based on the results of the analyses, we hope to move forward in an appropriate way with our product development and clinical development. We're closely monitoring our financial position during this time when there is the uncertainty generated by the SAE and our projections may change depending on the results of the investigations related to the clinical hold.

We also continue to focus our financial attention on carefully stewarding the funds we have raised and on extending our cash horizon through pursuing initiatives to build our pipeline; by leveraging our manufacturing capabilities and product development infrastructure; new product development collaborations or strategic transactions; sales of stock or placement of debt; and expansion or extension of our current collaboration.

At this point, I will turn the call back over to Stewart, who will highlight some of our program plans moving through the rest of the year. Stewart?

So we have several important objectives to achieve between now and the end of 2007. Obviously, our primary goal right now is to continue working with the FDA to understand the events of the patient death and to identify a path to ultimately restart the Phase I/II trial of tgAAC94.

To back up the clinical development of tgAAC09, our HIV/AIDS vaccine, continues as planned. And we expect to report data from an ongoing Phase II trial later this month. We will also continue research and evaluation of AAV-based AIDS vaccine candidates for use against strains of HIV most prevalent in the developing world. And this work is being funded -- excuse me, developed world -- this work is being funded by a grant from the NIH.

We will also maintain our manufacturing activities around our partnered programs in congestive heart failure and Huntington's disease. Each of these programs is exploring wholly new approaches to treating diseases that are underserved by current treatments. Presentation of clinical data from the Phase I trial of MYDICAR and preclinical data from our Huntington's disease program should provide additional insight into the clinical potential of these very innovative therapeutic candidates. In addition to their inherent product opportunities, each of these collaborations validates the broad utility of AAV vectors in a variety of disease indications. We anticipate that continued progress in our current partnered programs could certainly create additional collaborative opportunities with other leading-edge biotechnology and pharmaceutical companies.

The issuance of an US patent related to the use of AAV vectors to express inhibitory RNA constructs enhances our assets in the exciting and burgeoning field of RNAi. In the months ahead, we will continue seeking ways to create value from our investment and expertise in this very exciting area.

We will also maintain a critical eye on spending, investing in those programs that have the greatest near-term potential, while managing our financial resources so as to extend our cash horizon.

So, in closing, I want to reiterate that we believe strongly in the potential of our technologies and product development programs. Meeting the needs of patients underserved by available therapies has never been an easy task, but those needs continue to be great and merit our commitment to work through the challenges of the drug development process and certainly to learn enough from any step back that we can take two steps forward.

Everyone at Targeted Genetics shares that commitment. And we thank you all for your continued support and are working hard to overcome the current hurdles and continuing to advance the treatment of serious diseases.

So, at this point, we will give you an opportunity to ask questions. I would like to iterate that because of patient confidentiality and clinical trial confidentiality, we're very limited in terms of what we can add to the current discussion on the SAE. Eric?

(Operator Instructions). David Miller, Biotech Stock Research.

Can you tell us when we might know or do you know yet whether the patient death was caused by the vector itself, the immune reaction to the Vector itself or something unique to the immunogenicity of this particular package?

Well, we can't tell you anything about -- I can't really answer that question until we continue to work through the FDA process to analyze the data. So, we're hoping -- we have daily phone calls with the FDA. We're hoping to get clarity on when we can answer the question. Again, David, the clinical experience this patient has undergone is nothing that we've seen in any preclinical or clinical studies.

And across all of your different studies that you've run over the years, how many patients approximately have been dosed with AAV vector?

Around 300 patients.

Moving to tgAAC09, you mentioned that we're going to have Phase II trial data soon. Can you talk to me a little bit about what that data -- not the data itself but is it safety data or is there going to be any efficacy data?

No, this is a Phase II that has been conducted in sub-Saharan Africa. And the data will be safety and also immunological measurements -- what type of responses are we seeing in terms of antibody or T-cell responses to the vaccine -- so early data related to immune response to the vaccine.

And this particular -- was this multi-dose or single-dose?

This is two doses. So there is a dose and then a boost.

And finally, when do you think that the new HIV drug dealing with strains that are in the developed world is going to be in Phase I trials?

Well, we have some more preclinical studies to do related to that program. So, I think this will be a 2000 -- probably an early first half of 2009 timeline.

John Hudson, Private Investor.

I've got a question on the SAE with the unfortunate patient's death. I wonder if you know if an autopsy has been performed. And if it has, will you get the results once the analysis is completed?

We believe an autopsy has been done. We have not seen any results from that yet and we're still working with the FDA to be able to pursue that and to be able to look at the data.

(Operator Instructions). Ladies and gentlemen, it looks like we have no more questions at this time.

Thank you very much again for participating in our call. Obviously, our primary goal is to resolve this current hurdle that is in front of us and we will certainly update as we can to you all. And meanwhile, we have a number of important clinical business development and financial -- management milestones ahead that we're working very hard to accomplish. So, thank you very much again for your attention.

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.