Armata Pharmaceuticals, Inc. (ARMP) 2008 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Targeted Genetics' first quarter 2008 financial results conference call. Today's presenters are Stewart Parker, President and CEO 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 close the call with summary of milestones for the remainder of the year. Her comments will be followed by a financial update from Mr. Poston. The call will then be opened up to questions and answer 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. (OPERATOR INSTRUCTIONS). As a reminder this conference is being recorded this Wednesday morning, May 7, 2008.

I'd now like to turn the conference over to Stewart Parker, please go ahead, ma'am.

Thank you, Nicole. Good morning, everyone, 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 see our documents that we file from time to time with the SEC for information about risks that may affect the Company, including our Form 10-K for 2007 and our Form 10-Q which will be filed later today.

Well, this is indeed an exciting quarter for Targeted Genetics with two key data publications that further underscore the potential of gene therapy and of RNA Interference Technology in diseases with no currently available treatment. We also achieved a number of significant other milestones in alignment with our clinical and business goals in the first quarter.

Most recently, we announced our progress in the development of a therapeutic candidate to treat Leber's Congenital Amaurosis, or LCA. And I'm hoping that I'm sure you've heard about this area of work from one of the hundreds of broadcast viewings or news articles in the past week. But I will certainly take a few moments to provide some highlights.

In partnership with leading researchers from the University College London and Moorefields Hospital, we reported groundbreaking data demonstrating proof of principal in early clinical benefit of our product in LCA. LCA is an inherited retinal degenerative disease characterized by severe impairment of vision from birth and total blindness by the third decade of life. Targeted Genetics manufactured the Adeno-Associated Viral, or AAD vector, containing and RPE 65 coding sequence for this ongoing phase I/II clinical study and also collaborated on earlier preclinical studies that show that AAV mediated delivery of RPE 65 can improve and preserve vision.

The study is open label and being conducted at a single center. Data was presented from the early results of the treatment of three young adults between the ages of 17 and 23 years of age with early onset severe retinal dystrophy who administered subretinally a single injection of the AAV vector expressing RPE 65. The primary endpoint of this study was to determine whether gene therapy for retinol dystrophy caused by RPE 65 mutations was associated with any immediately obvious adverse events. And the secondary endpoint was whether efficacy could be achieved.

In each subject, the eye with the worst acuity was selected as a study eye. And the other was used as a control. We've seen no adverse events. And in one subject there was a consistent improvement in visual function as measured by visual responses and improvement in tests of visual mobility. It's believed that this subject who showed the objective response probably had less advanced retinal disease as baseline than the other two subjects.

It feels wonderful to have taken part in making a real difference in a young man's life and, in his own words, helped him to "definitely see better when it is getting dark or when it is badly lit".

Now, these preliminary findings were published in the New England Journal of Medicine online on April 27th. And the article was coauthored by Dr. James W.B. Bainbridge who is a study surgeon from Moorefields hospital, Professor Robin Ali of the University College London, and Dr. Barrie Carter, our Chief Scientific Officer here at Targeted Genetics, among others. These data were also presented at the Association for Research in Vision and Ophthalmology, ARVO, 2008 annual meeting last week in Ft. Lauderdale, Florida.

Based on these initial clinical results suggested that AAV based delivery of genes in the eye can be accomplished safely and offers hope of providing efficacy. We've already moved to treat younger children who have lost less visual function and therefore have the greatest chance of being positively impacted by the treatment.

Now, from a commercial standpoint, LCA represents a small patient population with just a few thousand patients. However, beyond the preliminary efficacy seen in this study, these findings also represent proof of concept for the use of AAV to treat other genetic diseases of the retina with larger patient populations. So we're working now to identify our next disease targets in this area. Finally, intellectual property filed around this program will potentially strengthen our position using AAV to treat retinal diseases in general.

Now, moving on to our Huntington's program, we're also very pleased to have recently acquired full exclusive rights to develop AAV vectors for the delivery of expressed RNAi to treat Huntington's Disease, or HD. We acquired those rights from Sirna Therapeutics, a wholly owned subsidiary of Merck & Company, a former collaborator on the program. Under the revised agreement, we're bringing the program in-house and we're able to collaborate directly with our academic collaborator, the University of Iowa, to expedite the program. This research is our primary proof of concept in expressed RNAi, which we believe presents multiple product opportunities to help patients who currently have little hope for treatment, such as those with HD.

In April, our preclinical data characterized in the novel use of AAV vectors to deliver small interfering RNA, or SIRNA, for the treatment of HD were published in the proceedings of a National Academy of Sciences of the USA or PNAS. The goal in this research is to assess the use of interfering RNA to silence the mutant Huntington gene and thus reduce the level of the defective protein. This paper published findings that AAV RNAi vectors efficiently abrogate disease and in mouse models of Huntington's disease.

Moreover, the results supported a new approach to RNAi delivery that addresses delivery limitations of RNAi related to off target effects and the resulting nonspecific toxicity. These new AAV RNAi vectors embedded in synthetic micro RNA structures retain efficiency of delivery in biologic efficacy while having a greatly enhanced safety profile. We believe this new design concept is of great importance to the entire RNA therapeutic field. In general, we believe that the use of AAV vectors for the delivery of express RNAi has advantages over alternative RNAi delivery approaches due to AAV's proven long term expression capabilities stability, and safety profiles.

In the case of the Huntington's Program, we've identified and are currently identifying lead candidates and longer term preclinical studies which are necessary prior to moving forward into clinical studies.

In terms of other significant events this quarter, we continue to advance our lead product development program in inflammatory arthritis and the completed dosing of our tgAAC94 phase I/II trial in this period. The encouraging data that we've observed so far gives us the basis to finalize the protocols of our next studies which are planned to begin later this year or early 2009. In addition, we anticipate announcing data from the phase I/II trial at several major scientific conferences this year.

Before moving to our financials, I'll summarize our plans for our other product development programs in heart failure and our HIV AIDS vaccine program. In collaboration with Celladon, the heart failure programs continues to progress as Celladon enrolls patients in the Phase I/II trial of MYDICAR, the name of the product, which is a potentially groundbreaking therapy that is designed to improve contractility by increasing recycling of calcium in the heart at the cellular level. We expect initial clinical data from this program to be reported by Celladon in the second half of 2008.

And we continue evaluation of HIV AIDS vaccines in conjunction with our NIAID funded vaccine program. This AAV based HIV vaccine program is focused on developing a multi-component vaccine that will contain various antigens from different HIV strains. Preclinical testing using a prime dosed approach with multiple AAD stereotypes is currently ongoing.

So at this point, I turn the call over to Dave Poston who will review our financial results and provide an update on our financial position, also, outline our financial expectations for the rest of the year. David?

Thanks, Stewart. And thanks to everyone for joining in this morning. As Stewart has highlighted, we are off to a great start for 2008 from a product development and clinical data perspective. We are also on plan to achieve the financial goals we outlined during our yearend call.

This morning, we reported financial results for the first quarter ended March 31, 2008. We reported first quarter revenue of $2.5 million, compared to $1.7 million for the same quarter in 2007. Revenue for both periods consists primarily of research and development revenue earned under our NIAID funded HIV AIDS vaccines project and revenue generated by our heart failure collaboration with Celladon.

Research and Development expenses for the first quarter of 2008 were $3.9 million, compared to $3.7 million in the first quarter of 2007. The higher first quarter 2008 R&D expenses reflect higher outside costs for our NIAID funded subcontract as we work with our collaborators to advance our AAV I based HIV AIDS vaccine candidate into a Phase I multi-component trial currently expected to start in 2009. This increase was partially offset by lower clinical trial costs for our inflammatory arthritis program as we are wrapping up the Phase I/II clinical trial and evaluating next steps with this project.

Our general and administrative expenses for the first quarter of 2008 were $1.9 million, compared to $1.6 million for the first quarter of 2007. Substantially all of the increase year over year is for patent prosecution and issuance activities. As our patent portfolio matures, we expect to see swings in this component of G&A expense.

Our net loss for the first quarter of 2008 was $3.4 million or $0.17 per common share, compared to a net loss of $3.8 million or $0.30 per share for the first quarter of last year. Our per share results for 2007 reflect the issuance of 2.2 million shares in January, 2007 and 6.7 million shares in June, 2007. We started 2008 with $16.4 million in cash and revenue expectations of $8 million to $9 million. We finished the first quarter of 2008 with $12.9 million of cash which places us on track for our planned full year 2008 cash burn in the range of $12 million to $14 million. This translates into a cash horizon that extends into 2009.

We continue to carefully manage the funds we raised last year and are currently focused on extending our cash horizon. Our financial plans are consistent with past years. We aim to raise additional capital through a combination of additional product development collaborations or strategic transactions, additional revenue through expanding to extending our current collaborations, sales of stock or placement of debt, and new initiatives to capitalize on our intellectual property, manufacturing capabilities, and product development expertise. We are committed to achieving our scientific, clinical, and financial milestones and will report progress on these fronts routinely through the rest of the year.

I will now turn the call back over to Stewart for a review of our strategic goals for 2008. Stewart?

Okay. Thanks, David. So our first goal is to continue the aggressive development of our pipeline. And our priorities in the clinic include the advancement of tgAAC94 as a therapy to treat inflammatory arthritis, and certainly the advancement of our partner programs, including the development of an HIV AIDS vaccine for the developing world-- developed world, and product candidates for the treatment of LCA, heart failure, and Huntington's disease.

Secondly, we're working to maximize the value of our manufacturing and development expertise in our intellectual properties. We continue to believe that our manufacturing capabilities in IP are premiere in the sector. And we're seeing increasing interest from our colleagues in the field in accessing these capabilities. We're working on a number of AAV manufacturing partnerships which could provide both short tem and longer term upside to the company. In certain cases, we may also pursue opportunities to license our technology and leverage our portfolio of AAV related IP assets to generate revenue and value for us and our shareholders.

Third, we plan to pursue additional product initiatives, particularly opportunities to exploit our leading IP position in expressed RNAi. AAV's attributes of safety and long term expression capability really make it a key system to overcome RNAi's issues with delivery, and we're currently evaluating a number of product opportunities in this area in addition to our program in HD.

So we look forward to updating you on our continued progress to meet these objectives and milestones throughout the year. We have a number of presentations at upcoming clinical meetings, and we'll look forward to presenting that information to you. And we really appreciate you all for your continued support. So at this point, we'll give you an opportunity to ask questions. Nicole?

Thank you. Ladies and gentlemen, at this time, we'll begin the question and answer session. (OPERATOR INSTRUCTIONS).

Our first question comes from the line of Ren Benjamin with Rodman & Renshaw. Please go ahead.

Good morning and congratulations on a great quarter.

Hi, Ren.

Couple of questions for you, maybe starting off with the LCA program. When is the next data update that we could expect from the program. You mentioned that you've started to enroll younger children. When might we see the next set of data from this program?

That's a very good question. So right now we're working with the investigators are University at College London and Moorefields to actually even revise the current protocol to potentially go up in dose and to go in even younger patients. We are treating, meanwhile, patients. We can go into patients as young as eight years old. And so I frankly am not sure what the next science venue for the update will be. We are-- we'll try to work on figuring that out. But I think it will definitely be at the next ARVO meeting but most likley before that. I wish I could give you more guidance on that, but I really don't have that right now.

And maybe this is a naive question, but is the trial still ongoing or is it going to be put on hold to be modified to enroll these younger patients?

No. We'll continue. I mean, again, if we could go into patients as young as eight, I think we should have a fair shot at having a result. So the current trial contemplates 12 patients. And I think our initial assessment was that it would take about another 12 months to complete from now. So whether we add more patients to get a more consistent efficacy effect or stop that trial and do another trial, it still has to be determined.

Okay. You mentioned next disease targets in the area. So two questions there, what sort of disease targets are you looking at or initially even thinking of exploring? And then the other question, I guess, more scientifically do you envision these types of therapeutics working in immune privileged areas like the eye or the brain? Is that how you are thinking about these products and developing these products going forward? Or, because it is Adeno-Associated Virus, it doesn't really matter that much?

Well, I think those are good questions. Taking the second question first, certainly the immuno-privilege site confers some benefit. And I think also they are sites where you prefer not to have frequent administration of drugs, obviously in the CNS and certainly even in the eye. So I think those attributes together make AAV a very good tool for addressing diseases in the brain and in the eye. In terms of what other retinal diseases we're looking at, I think the safety profile we're establishing by intraretinal delivery is a safety profile that we can transfer and build on for other diseases. So there certainly is a scenario that would allow us to expedite trials into other genetic diseases involving the retina. It's a little early to say that for sure, but we think that's a potential. So we're really just trying to work with our consultants and our academic investigators to pick targets that we can move into clinical trials in a fairly rapid time point.

Moving onto what I think could be a very impressive or important platform technology, the use of AAV in delivering the SIRNA. Clearly, SIRNA is gaining quite a lot of popularity and a lot of companies are developing therapeutics using SIRNA. Are you in talks with the other players that are remaining? I mean clearly you got these rights back from Merck once they acquired Sirna, but there are a lot of other players that are out there that need to overcome some of these challenges. Are you in talks with them and do you envision any sort of a partnership with any of those players this year or in the future? And then also, this program, how are you developing it going forward as a platform? Are you exploring it with other SIRNA targets or just sticking mainly with Huntington's?

I think that's an excellent question once again. But you know targeting, we're not really an RNAi company in the sense that we don't have internal capabilities for identifying targets and for those types of constructs. So yes indeed, our strategy really is to pursue this and exploit this IP position through partnering. So we are having a number of discussions. We're excited about the HD program and now owning that in full, because we think that we can really accelerate that program working directly with the University of Iowa. But beyond that, our strategy really is to show that this works and that this is real and then leverage that through partnerships into additional revenue generating opportunities. So we know what we are and we know what we're not. I think it makes sense to build on those strengths and really try to leverage this through partnering.

And so just as a follow up to that, when might we see sort of more data from this program, even preclinical?

Certainly, preclinical in the second half of the year is contemplated. So we're in these preclinical studies right now. Because we're going into the brain, we need to make sure that from a long term talk's perspective that we're not seeing anything untoward. So we do anticipate additional updates in the preclinical area in the second half of the year.

Okay. Thank you very much.

Our next question comes from the line of Joe Pantginis with Canaccord Adams. Please go ahead.

Hi, guys. Good morning. Couple-- just actually just a follow up question on LCA. You actually had some very promising data, obviously, and it's being published in a great journal. Can you give a little more color as to the potential commercial opportunity and why-- I mean it seems relatively intuitive, but would love to here it-- why going into younger patients would be better based on the stage of disease?

Okay. So this is a degenerative disease and it results from a lack of the RPE 65 gene, so that really regulates growth and function of rods and cones, particularly cones-- excuse me, particularly rods rather. So these patients start to degenerate as soon as they're born. They're basically usually born with significant night blindness and then ultimately their disease degenerates further. So that just is indicative of the need to get in as early as possible to prevent the onset of the degenerative process. So I think you're right. It's pretty self explanatory. So and then we obviously have to build a safety profile first before we go into younger and younger people.

In terms of commercial opportunities, this is one we're really evaluating right now. It's certainly an orphan disease. We can get orphan drug status. But it's a small population and we're really just getting our ducks in a row to talk with the regulatory groups. As you know the trial that we're involved with right now is being conducted in the UK. We don't have US trials going now. There is a population in the US, so we're really just trying to figure out if it makes sense to try to move ahead with this as a commercial product which there is a scenario for which we could move fairly quickly on or whether we just use this as a proof of concept and then build to other diseases that have, that are still frankly orphan diseases but have more substantive patient populations, so really in the middle of that. One scenario is we really push ahead and try to commercialize this and build on the data we have so far, probably expand this clinical trial to include more patients and then talk with regulatory authorities and other (indiscernible) to use this as a building point but to really move to other genetic diseases. So lots of decisions coming up on that.

Super. Thanks a lot.

Thank you.

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 joining us and we really look forward to speaking with you and updating you in the coming weeks. So thanks.

Ladies and gentlemen, thank you for participating in today's conference 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.