AstraZeneca PLC (AZN) 2004 Q2 法說會逐字稿

Ladies and gentlemen, good afternoon. Welcome to those of you here as you attend our presentation of the 2004 CAT interim results. And welcome also to those listening on the Web. I am Peter Chambre, CAT's Chief Executive. I'm delighted to be joined this afternoon by John Aston our Chief Financial Officer and Dr. David Glover our Chief Medical Officer. I am required to show you this equivalent disclaimer with relations to our statements on forward-looking events which I would be grateful if you would learn and inwardly digest it before we move to the presentation.

This presentation will cover the highlights, summary and then David will give you an update of our product candidate pipeline, and John will cover the Company's financial performance and current financial status and then we will be delighted to answer your questions from the floor here and also from the Web and the telephone.

It has been a six-month period of continued progress for CAT. The most important news probably today is the fact that I'm delighted to say that we have a date for the trial for our litigation with Abbott. You will recall that when we were put in a position where we had to commence legal proceedings against Abbott in November of 2003, we indicated at the time that our expectations for a trial will be somewhere between 12 and 18 months. We are very pleased to be able to say that the court has agreed to our request to the earliest possible date for the hearing of the trial. And the trial will take place almost exactly a year after the filing of proceedings.

Coming against a background when HUMIRA is doing phenomenally well. As you know, Abbott has recently once again upgraded its forecasts for the sales of the drug with their public expectations of $1.2 billion of revenue from RA alone in 2005. So the drug is doing extremely well. We are continuing to be extremely confident of our interpretation of the (indiscernible) is at stake here and determined to seek an outcome consistent with our view of the contract.

On the product development side it has been a further six months of steady progress. The Trabio trials are continuing. We are getting an update today on the status of the recruitments on the U.S. trial which we now anticipate will complete in the third quarter of 2004. As you know, a lot of work is going on with Genzyme on setting the strategy for our collaboration there, and we look forward to making the announcement there in the coming period. And we continue to anticipate a trial commencing for GC-1008 by the end of the year.

David will give you an update on the status of CAT-354 where we continue to be on schedule to commence Phase I clinical trials before the end of 2004 in the treatment of severe asthma. As you know CAT's focus is about developing a small number of core programs in which we have a substantial economic interest. Committing to development, committing to investing behind those and we're pleased also to be able to announce today a number of key appointments that can continue the Company's development towards that strategy.

Patrick Round (ph) joined us a week ago from Cell Tech. He was director of development at Cell Tech and joins David's team as Vice President of development, responsible for our product development activities. Dr. Patrick Round is (indiscernible) enormously to our clinical team. (indiscernible) has joined recently from AstraZeneca to head up information technology and infomatics, he was Vice President of research and development at AstraZeneca, and as Don Wilcox (ph) has been promoted to Vice President of intellectual property, reflecting the importance, the great importance of the creation and protection of intellectual property at CAT.

CAT continued its transition to a product based profitable biopharmaceutical company, appointments like these to strengthen our management team are critical to our future. As you know we cannot (ph) organize clinical trial data to coincide with financial results dates. So the news today is more significant in the licensed area. Two piece of important news, we are delighted to announce that Wyeth has taken forward MYO-029 an (indiscernible) antibiotic optimized (inaudible) by CAT and when that goes into clinic as we hope it will that will be the 7th of our licensed products in a clinic with a new partner and the first product to emerge from our relationship with Wyeth.

We are also announcing today that we have (indiscernible) to Genzyme the (indiscernible) license in addition to the (indiscernible) license drawn to (inaudible) earlier in the period. We are pleased that at the end of six months our cash and liquid resources are the same level as at the start of the financial year, reflecting our commitment to (indiscernible) management to finance resources and as you know we are giving new guidance for the financial year which John will cover in detail, reflecting both greater revenues from HUMIRA and also a reduction in our anticipated costs during the year.

With that, let me hand it over to David, and he will take you through the product candidate pipeline.

Thank you, Peter. Good afternoon, everybody. It's very difficult to orchestrate clinical trial news to come in exactly at the same time as financial results. So we take this opportunity today to bring you up-to-date on some developments that have occurred over the last few months with the pipeline. But to start by talking about the CAT pipeline. Five (indiscernible) candidates I think you probably all familiar with underpinned also by active research on separate and distinct molecular targets in our research laboratories. Let's talk a little bit about Trabio first of all.

Trabio as Peter said it is in Phase III clinical trials, and this slide summarizes the progress that we've made with those three clinical trials. The first one (inaudible) you can see the European center trial, we completed enrollments in that trial sometime ago, and we anticipate seeing the results at one year follow-up in that trial, the fourth quarter of this year. That is the same guidance as we have previously given.

More recently we completed enrollment in the international level of the clinical trial that is also double-blind against placebo, slightly larger in size (indiscernible) patients. The data from that trial after one year of follow-up will be out in the first quarter of 2005. Behind those two trials in our U.S. multi (indiscernible) trial that is not double-blind but single-blind and it is against (indiscernible). This is non pivotal from the point of view of both efficacy and safety but will provide supportive data. That trial is just over 70 percent enrolled and we expect to complete the patient enrollment during the summer.

We recently presented data at the ARVO, that is Association for Research and Vision and Opthomology Conference in Ft. Lauderdale. On slide 998 (ph) that you can see on this slide shows results of long-term follow-up from the FACO (ph) trabeculectomy trial, or the trial in which patients underwent combined glaucoma and cataract surgery (indiscernible) called 9903, if you want to refer back to previous notes.

(indiscernible) Slides shows what happened during extended period of follow-up; we've previously shown data for the first 12 months where you can see after 12 months here surgery is successful in (indiscernible) both the Trabio group shown in pink and the placebo group shown in green, but pressures were better in the Trabio group than placebo and those differences have persisted over time consistently that Trabio treated patients have lower pressure than placebos. And over a period of time the proportion of patients requiring to return to medication has been steadily rising, it has been higher on placebo than on CAT (indiscernible) throughout. These lower pressures here with Trabio are achieved despite less use of topical medication. No long-term safety issues were (indiscernible) in the trial.

We will turn now to CAT-192, this (indiscernible) and the subject of a Phase I todate clinical trial that we announce results of in February. The trial was conducted in UK, Sweden and USA and enrolled 45 patients with diffuse systemic sclerosis or scleroderma. The primary objective of the trial was safety, targeting pharmacokinetics of multiple dosing in this patient population and had a second objective of looking at the potential clinical outcomes, including the modified (indiscernible) skin score which measures extent and severity of the disease in the skin, along with the measurements which measure the hardness of the skin and certain exploratory biomarkers. We studied four doses, at 1 mg per kg, 5 mg per kg, 10 mg per kilogram and matching placebo, all given by intravenous infusion, against four doses at six-week intervals and followed the patients up for at least three months after the last dose. This is a small exploratory trial with approximately 10 or 11 patients in each group.

Looking now in terms of the results, in terms of the primary objectives CAT-192 which plans to be generally safe and well tolerated as previously announced, four deaths occurred during the course of the trial but they were all judged unrelated to treatment with CAT-192 by the independent drug safety monitoring board. The elimination of half-life of CAT 192 was pretty consistent across the three dosage groups but just over three weeks.

In terms of the secondary objectives we saw no clear results on dose response for those objectives in the terms of clinical outcome. This was really due to the incidence of both gender and disease duration on outcome. When I say gender what I mean is the male patients in the trial generally as it is being described have a worse outcome and fare less well, the males were not uniformly distributed between different dosage groups. Also the effect of disease relation impacted being able to see whether there was a response to CAT-192. Similar outcome was seen in terms of the biomarkers.

So where we are now with our partner, Genzyme, is summarized on this slide, with 192 we are continuing to analyze samples from the trial and planning what a future clinical trial would look like in conjunction with the experts, particularly those who participated in the trial with us. We are planning to submit the data from that trial to the ACR meeting and also to try and present it at the International Scleroderma Workshop which will be held in Cambridge in August.

With GC-1008 the program is ongoing, the preclinical stage, we have got ongoing safety studies, ongoing pharmacology studies; and as you are aware we are planning a Phase I study in idiopathic pulmonary fibrosis which we hope to start subject to FDA approval. (inaudible) with Genzyme we have other candidates in CAT-192 and GC-1008 and I think it is quite easy for you to forget that. The GC-1000 series contains a number of other potential candidates and we (indiscernible) Genzyme evaluating the opportunities to all our candidates in the future.

With CAT-354 this is a very potent antibody that neutralizes intubating thirteen (ph) but I believe the main use is likely to be in moderate to severe asthma and possibly chronic obstructive airway disease. This candidate was isolated from (indiscernible)but optimized using ribozome (ph) displays in our laboratories. The first candidate (indiscernible) clinical trial which was used in that technology. (indiscernible) candidates has been progressing extremely well through preclinical safety and toxicology testing and we are on well on track to initiate that Phase I clinical study before the end of the year and are already planning further clinical trials for 2005.

In terms of our license pipeline as Peter has already (indiscernible) there is a new addition to the list that we put at the bottom here which is MYO-029, an antibody that neutralizes GDF-8, that is licensed to Wyeth. GDF-8 is also known as myostatin and it still remains myostatin gives a clue as to its role -- Myo meaning muscle. Myostatin is associated with a number of muscle diseases and it is envisaged that MYO-029 may be used to treat muscle wasting diseases.

Wyeth has indicated they will do a briefing on this (indiscernible)and other candidates in their pipeline at a research analyst briefing on June 2nd. (indiscernible) five other programs including MYO-029 at preclinical stages. Now, the people we see at Abbott and (indiscernible) genome sciences have got these candidates for CAT in their pipeline, let me just illustrate to you how important these candidates are to those two companies.

To quote HGSI's letter to their shareholders at the 31st of March 2004, in 2004 and 2005 our primary focus will be advancing the clinical trials of our core pipeline comprised of five products in the two main core areas. Three of those five core products were created by CAT, and the fourth one ABthrax, that was isolated from CAT's antibody laboratories at Human Genome Sciences laboratories remains (indiscernible) developed subject to funding from the U.S. government. Human Genome Sciences are very reliant on the success of the products we've created for them.

In terms of Abbott, here you may expect (indiscernible) investor presentation given last month. On the left of the slide you can see ABT-874 that's the anti (indiscernible) antibody candidate we created for them. Very recently they have presented data on ABT-874 in Crohn's disease as suggested to Newsweek. Very promising data. They test that program as a mid to medium risk program. In the middle of the slide are the low risk late stage programs and you can see there are five programs with HUMIRA all in late stage clinical trials. In addition to HUMIRA being on the market for rheumatoid arthritis.

It is that sort of information that has made Abbott to describe HUMIRA as their pipeline in a product and (indiscernible) has already indicated in sales 2003 to 80 million dollars (ph) rising to more than 700 million this year and more than 1.2 billion in 2005. Seems almost every time Abbott speaks about the product they upgrade their sales expectations. That was a quick run through of the pipeline; now hand over to John Aston.

Thank you, David. Good afternoon. The first six months of the year as we start off with the P&L accounts. The loss for the six months was just under 18 million as compared with just under 19 million for the corresponding period last year. (indiscernible) significantly increased and I will give you the breakdown in a few moments but that's primarily due to the incidence of HUMIRA revenues. Direct costs reflect one off payments to the NRC (ph) in connection with the (indiscernible) settlements. (indiscernible) Development approximately static as compared with the similar period last year and general and administration more than increased there but that reflects a non-cash foreign exchange movement.

The analysis of turnover reflects payments from Abbott (indiscernible) HUMIRA, those are payments (indiscernible) under the contract, and that is in respect of HUMIRA sales for calendar year 2003. We also received revenues in license fees (indiscernible) milestones contract research fees. The pattern of R&D expenditure what we have given you earlier are the (indiscernible) the last three, six-month periods. (inaudible) extended development spend you will see that extended development spend in the last six months of 9.5 million represents an increasing proportion of the total and indeed has increased from 5.8 million in the corresponding period last year. To make up the balance of R&D expenditure the next most significant figure is on staff and related costs and we have established a cost in similar proportion to other costs.

In terms of cash flow, as Peter said at the outset, we ended the period with 108 million pounds in the bank which is approximately the same as the cash that was in the bank at the beginning of the period. That is to reflect the (indiscernible) just over 14 million and (indiscernible) some financing substantially the majority of that was the inspection by Genzyme in the second, the second (indiscernible) subscription in October.

Because of the slightly greater than expected revenues and also the lower than anticipated costs, which is primarily a result of what's happening on the Genzyme program, we are revising the guidance on the cash outflow before financing for the year. In November we said that we expected that figure to be up to 40 million for the year. We are now revising that guidance to say that we expect the figure to be now less than 35 million, which after financing would result in a net cash outflow of up to 21 million.

That concludes the formal presentation. We would be delighted now to take your questions from the audience here and also over the phone lines.

Operator, when you are handed the (indiscernible) if you could give both your name and the Company you represent so that these people in the room who do not have the advantage of looking at you can know who you are. With that let me (indiscernible) your questions.

(OPERATOR INSTRUCTIONS)

(inaudible question - microphone inaccessible)

We have no comment, to that particular program. (inaudible) I didn't highlight the pink on my slide.

(inaudible question - microphone inaccessible)

We have worked with HGSI on this particular target but that candidate is not ours.

(inaudible question - microphone inaccessible)

Again, I am not going to go into details on specific issues that we have been asked to provide additional data prior to starting clinical trials and we are doing that.

(inaudible question - microphone inaccessible)

There are (inaudible) discussions underway and there is still a degree of research being done. Those discussions have been going on for a substantial period. If you look back at your place from our recent announcements those discussions are still active, and we are hopeful that they will produce a significant new collaboration.

(inaudible question - microphone inaccessible)

Yes, if you constructively look at the license fee line in the revenue breakdown that John showed, the license fee -- the (indiscernible) research funding, the contract research funding (indiscernible) has reduced, and that reflects the ending less a year ago of the collaboration, the active part of the collaboration in research with HGS, and also as we announced in our first-quarter results the ending of the active research program with Wyeth whereupon they then took a (indiscernible) license. So the overall contract research fees are going down. We are hopeful, as I say, that the discussions with Pfizer will produce a new agreement.

Can I just comment on David said, HGSI has not made it public yet, the source of their (indiscernible) antibody. We therefore cannot comment.

(inaudible question - microphone inaccessible)

John has been writing furiously so he will remind us of the questions we get, (indiscernible) hopefully then get the answer to one question in (inaudible). With respect to the timetable to trial the judge has decided that he believes that the parties can be ready for trial commencing November 22, as we said. There is no absolute guarantee that the parties will be ready. The judges made clear that he wishes that to be the case. We intend to be ready for trial on that date, and we confidently expect and hope that Abbott will be, too, but we cannot guarantee that the trial will take place on that date.

(inaudible question - microphone inaccessible)

I don't know. With respect to the second question, the information we have from Abbott is no better than yours on that. We do not have any other information apart from the news you've got that they may commence Phase III trials by the end of this year. $35 to 40 million range, yes. I think your question was it is a lot for a company of our size -- I think you have to measure it with respect to what we are doing, we are comfortable that we are spending money in sensible places. We are also very aware that we have to look at that level of cash burn on an ongoing basis to make sure that they A, we are not spending more than we can afford to spend at any particular time and B, that we are spending money we believe productively spent.

The final question I think was on Pfizer. The approximate level of activity its around the order of 1.5 to 2 million dollars a year at the moment, it has been greater in the past but as you know about a year ago the level of activity was scaled-down when the contract was extended.

Can I add one additional piece of information with respect to the level of cash. One of the changes that you see going on within CAT is that while the level of loss (indiscernible) the level of cash burn has been maintained across the last three and a half years; the level of investment in external development behind our clinical programs and our core product development programs is increasing. So in the first half of last year I think it was 5.9 million pounds; in the first half of this year we (indiscernible) is the same, it was 9.5 million pounds. So the money as John says is being prudently spent but prudently spent against our core priorities and that trend I think will continue.

Can we take a question from the telephone, please?

Can you speak up, please?

(ph) This is Sam Eisele at (indiscernible). My question has to do with payments that might be due from Abbott. For the moment I guess you're getting paid one or two percent royalty, and do you think you might be due three or four or five. In the event that the court case goes in your favor, that there are unpaid historical royalties, how do those get paid? If you know? In other words would there be a bolus, a big lump paid all at once upon a decision? Will it have to wait for an appeal? Are there any penalties involved? Is there an interest rate or whatever? In any case the bright idea is, if you win, how do you get a big lump of money?

I think for the benefit of people in the room the question was in the event that we are successful in the Abbott court case, how do retrospective under payments of royalty get made up. I think the answer to that is that the method of payment from back royalties will be one of the things that the court will determine. We would hope that we get repaid those amounts relatively quickly. And as you might expect a lot of our claim is for interest on (indiscernible) either to unpaid which would then require to be paid, but ultimately it will be the court's decision.

Again to repeat are there any penalties involved?

There are none known.

(inaudible)

-- the question in reverse order. The CAT-192 are separate candidates with separate development paths, so the delay with starting trials with 1008 and 192 are unrelated and neither impacts decisions related to the other (inaudible). dispute with haven't read relay specifically to the royalties on HUMIRA. We can't and visage a circumstance in which the court decides as we anticipate in our favor all HUMIRA and then Abbott goes onto dispute the royalties that no current dispute with respect to 874 because there is no royalties.

(inaudible)

We have not heard anything, we hear rumors, but so do you probably.

(inaudible)

(inaudible) relates specifically to the royalties (inaudible). But we cannot envisage the circumstance in which the court decides as we anticipate in our favor, on HUMIRA. And then Abbott goes on to dispute royalties that they pay us on 874. But there is no current dispute with respect to 874 because no other royalties (indiscernible) 874.

(inaudible)

Deal with the CAPEX first. I think it was fairly low, as you know, 600,000 in the period. I think that the bulk of that would have been facility and infrastructure related spending, and we are expecting I think the guidance we gave for CAPEX (inaudible) up to one and a half-million. There is no single large item that we are expecting in the current year. And the second question?

(inaudible)

(inaudible) expected to be. We gave clear indication at the last results announcement that we expect to complete Phase III trials if we get results that we anticipate and hope for which are positive results for Trabio, we can give you how much is valuable property on our hands and that we would seek to conclude marketing arrangements thereafter. That is still our expectation. And for completeness, yes, we are still comfortable with 2000 (indiscernible) at which the (indiscernible) would become profitable. A question from the telephone.

Alex Little.

Alex Hittle at A. G. Edwards. (inaudible) keep hammering here on the litigation, is the ruling -- first, when would the ruling actually come down from the high court? The trial you say would run three weeks; does the ruling follow immediately or does the judge excuse (ph) himself and take some time to think about it and then issue a ruling?

What the order contains is both a start date between the second and anticipated duration. The order that the judge has made does not anticipate when he will make his ruling, and therefore we cannot give you any guidance as to that.

Do you have any notion what the custom is?

(inaudible)

Did you hear that, Alex?

Unfortunately I couldn't hear that.

I said Alex, the reason that it is not precedent (inaudible) reserve judgment and also where they have ruled immediately at the conclusion of the case.

That's helpful. And then in addition is there anything after the appeal under the UK system or will this judgment be the conclusion?

We are advised that there is the opportunity to appeal it, and we are advised just as we were advised that the procedure from filing to the initial trial would take 12 to 18 months and we (indiscernible) 12, we are advised that an appeal could take anything up to 9 months should (indiscernible).

What body would be appealed to?

The appeal court in the UK, which is a higher court than the high court in London.

Okay, and then just a final cleanup question on your press release where you referred to quarters in the press release, are those calendar quarters (technical difficulty)?

Yes, they are calendar quarters.

Calendar quarters.

Presumably with respect to future dates and events, yes, they are calendar quarters.

Very good. Thank you.

If there are no more questions from the floor and no more questions from the phone, (inaudible) via Infomet, and we look forward to talking to you again in the future. Many thanks.