BioCryst Pharmaceuticals Inc (BCRX) 2006 Q4 法說會逐字稿

Good day, everyone and welcome to the BioCryst Pharmaceuticals fourth quarter and year-end 2006 financial results conference call. Today's call is being recorded. Now at this time, I'd like to turn the call over to Jon Nugent, Vice President of Investor Relations. Please go ahead, sir.

Thank you very much. Good morning, and welcome. On today's call, Jon Stonehouse, BioCryst's newly appointed CEO will provide an update on Corporate Development; and Mike Darwin, the Company's CFO, will review financial results for the fourth quarter and year-ended December 31, 2006. Joining John and Mike today are Dr. Claude Bennett, BioCryst President and Chief Operating Officer; Dr. Jim Alexander, the Company's Senior Vice President for Clinical and Regulatory Affairs and Chief Medical Officer; and Randy Riggs, BioCryst's Senior Vice President, Corporate Development. Following the prepared statements, they will be happy to take questions. The call is scheduled to last for 20 minutes.

Before beginning, I will read a formal statement regarding the risk factors associated with today's call. Today's conference call will contain forward-looking statements regarding future events or the future financial performance of BioCryst. Such forward-looking statements may include predictions regarding current and proposed clinical trials with Fodosine, BCX 4202 and peramivir. The potential development of compounds not in clinical testing, our cash flow projections including the benefits of HHS funding of peramivir. These statements involve known and unknown risks, uncertainties and other factors that may cause the actual future events or actual future financial performance to be significantly different from those expressed or implied by the forward-looking statements.

Please refer to the section entitled Risk Factors in the documents that the Company files from time to time with the SEC. Specifically, you may refer to the Company's most recent Form 10-K, Form 10-Q, and Form 8-K, all of which are readily available on our website at www.BioCryst.com. These documents contain and identify additional information regarding important factors that could cause the actual results to differ from those contained in the forward-looking statements. Such information can typically be found in the sections marked risk factors or forward-looking statements. These statements reflects the company's views with respect to future events. BioCryst has no obligation to update or revise these statements. BioCryst cautions that you should not place undue reliance on these forward-looking statements. I would now like to turn the call over to Jon Stonehouse, CEO of BioCryst.

Thanks, John and thank you to everyone joining us today. I'm very excited to be assuming the CEO role at such an important time for BioCryst. Before updating you on Corporate Developments, I'd like to take a moment to express my appreciation to Charlie Bugg, Founder of BioCryst, my predecessor as CEO, and our current Chairman, for all his efforts over the past 20 years in building our Company. It was work performed in Charlie's lab that provided the basis for many of the products BioCryst is developing today. I, and everyone else at the BioCryst team, are committed to building on Charlie's vision and delivering the results of the promising science he helped create. So entering my fifth week on the job, I'm fully engaged in taking BioCryst to the next level.

First and foremost, we are moving our development compounds into advanced clinical trials that can demonstrate their potential. At the same time, we're continuing to develop new and innovative discovery candidates that we hope to eventually move into the clinic. The efforts of the past 12 plus months have led BioCryst to a new phase in the Company's growth. With our pipeline of three products in clinical development and a productive, efficient discovery engine, BioCryst is well poised to continue its logical evolution from a research based organization into a product development Company. As evidence of this progress, Fodosine and peramivir are moving into advanced clinical trials.

In the case of Fodosine, we've initiated a pivotal trial for the treatment of relapsed refractory T-cell leukemia in January 2007 and I can report that enrollment is under way and progressing. Under the terms of the agreement with our partner, Mundipharma, initiation of this pivotal trial triggers a $5 million milestone payment to BioCryst. As a reminder, the trial is being conducted under a special protocol assessment agreed to by the FDA and BioCryst. The FDA permits a sponsoring company to work with the agency to best design studies to be used in pursuit of the drug's marketing approval.

In addition to T-cell leukemia, we and Mundipharma, our partner for the development in Europe, Asia and Australia, have continued to advance development of Fodosine for several treatments in several other hematologic malignancies including chronic lymphocytic leukemia and cutaneous T-cell lymphoma. With its targeted efficacy, and differentiated safety profile, we believe Fodosine may become an important alternative to currently marketed drugs and we believe with the help of Mundipharma, there's opportunities to move Fodosine forward in other indications.

In the case of peramivir, the Company recently announced the initiation of our Phase II trial to determine the safety and efficacy of an injectable form of the drug in patients with influenza. The trial is an important step forward in the Company's comprehensive development plan for peramivir. As Charlie Bugg reported in a conference call last month, the trial and the remaining development of peramivir are funded through a $102.6 million four-year contract award to BioCryst by the U.S. Department of Health and Human Services to develop peramivir for the treatment of seasonal and pandemic influenza. We're pleased to have this financial support from HHS to further strengthen pandemic preparedness and are dedicated to working together to address the annual threat of seasonal influenza as well as the potential health crisis of an avian flu pandemic.

To date, BioCryst is the only Company developing the novel anti-viral compound to have received such a contract, and we regard this as a significant award as validation of the need for an injectable agent to treat influenza. Under the terms of the contract, the Company will be reimbursed on a cost plus fixed fee basis for clinical manufacturing, clinical studies, manufacturing process validation, and other product approval requirements.

Apart from the usual timeliness associated with HHS reimbursement procedures, this contract will essentially remove peramivir from our current cost structure. We'll have the financial flexibility to continue development of this potentially valuable therapeutic in earnest while preserving the resources to further develop our other clinical and pre-clinical programs.

Rounding out our development pipeline is BCX 4208, our next generation PNP inhibitor. At the end of 2005, BioCryst entered into a collaboration with Roche to develop BCX 4208 in autoimmune diseases and transplant rejection, two indication areas with significant market potential. Their development and marketing resources along with their experience with drugs including CellCept makes Roche an ideal partner for this program. BioCryst and Roche are currently working to determine the optimal, clinical development path for BCX 4208 and we're optimistic that the product will advance into Phase II trials during 2007.

BioCryst's dynamic discovery engine is a productive, efficient, and integrated structure based drug design team located here in Birmingham. Our goal is to identify potent enzyme inhibitors that may become tomorrow's pharmaceuticals. Currently, we are evaluating candidates in several indications including hepatitis C and various infectious and autoimmune diseases. This will be the main source of our pipeline as other more advanced products progress through development. We're in the process of prioritizing which of these compounds will be brought fourth first and will provide updates as appropriate when new, potential products advance into clinical development.

The progress made in 2006 has set the stage for 2007 and beyond. As reported earlier this year, we've gotten off to a good start with the Department of Health and Human Services contract award and the initiation of two Phase II trials. In addition, we are committed and are diligently working to advance our pipeline, which we believe will build sustainable value for our shareholders. Now I'd like to turn the call over to Mike Darwin our CFO for a review of the financial results of the fourth quarter and entire year.

Thank you, Jon. Our press release issued this morning provides a detailed explanation of our fourth quarter and year-end 2006 financial results. Let me summarize some of the main points.

Our net loss for the quarter was $10.1 million or $0.34 per share, compared to a net loss of $7.2 million or $0.27 per share in the fourth quarter of 2005. During the quarter, we recognized $2.1 million of collaborative R&D revenue compared to $21,000 in the Fourth quarter of 2005. This increase was primarily due to the recognition of revenue related to the reimbursable expenses from our Mundipharma and Roche collaboration and the continuing amortization of the up front payments from those agreements. R&D expenses for the quarter were $11.2 million compared to $6 million in the fourth quarter 2005.

The increase in development spending is primarily attributable to the progress made in our clinical programs for both peramivir and Fodosine, and the cost related to the manufacturing and validation process for these two drug candidates. Specifically, as it relates to peramivir, expenses in that program have been impacted by the seasonality inherent in the development of the drug to treat influenza and the preparation necessary to enroll a large number of patients during the Northern Hemisphere's flu season. In addition, there's been an increase in headcount to support clinical development and an increase in professional fees, plus share based compensation expense of $0.5 million in the fourth quarter of 2006.

General and administrative expenses were $1.6 million which includes a share based compensation of approximately $0.6 million and the fourth quarter 2005, G&A expenses totaled approximately $1.5 million. Excluding the share based compensation from the 2006 G&A expenses, the 2005 G&A expenses were higher due to professional fees and other personnel costs. Our net loss for the 12 months ended December 31, 2006, was $43.6 million compared to $26.1 million in the same period last year. Our revenue was $6.2 million for the year compared to $0.2 million in 2005. R&D expenses were $47.1 million in 2006 compared to $23.6 million in 2005, and our G&A expenses were $6.1 million and $3.7 million in 2006 and 2005 respectively.

The reasons for the changes in R&D revenue and expenses for the 12 month period were essentially the same as those discussed earlier for the comparable quarterly changes including share based compensation expense of $1.5 million charged to R&D during 2006. G&A expenses were higher in 2006 primarily due to share based compensation expense of $1.8 million, and increases in personnel related cost and professional fees.

Looking forward, we believe the $102.6 million full year contract awarded to BioCryst by HHS will have a significant positive impact on our financial position. Our projected net cash burn rate from operations for 2007 is expected to decline to an average of approximately $3 million per month and is currently projected to be even lower in 2008. With the collection of our 2006 receivables and our projected reimbursement of the cost from our collaborators and HHS, we believe that our cash flows will be sufficient to meet our projected working capital and other cash requirements for at least the next 12 months. These projections are based on our projected operating expenses and projected cash flows from HHS and our partners.

We do believe it is important to note the following--Although expenses associated with various projects and programs, including the advanced development of Fodosine, will likely increase during the year, we believe that reimbursement for costs associated with peramivir will significantly reduce our cash needs. We do caution that both our expenses and our net cash burned from operations are expected to vary quarter to quarter and one should look at the year in total and not extrapolate from either an unusually low or high burn quarter. This is primarily due to the seasonal nature of influenza clinical studies and the fact that payments from HHS for costs associated with the peramivir are paid in arrears.

Suffice it to say, that our contracts from HHS has a significant impact on our current and future financial positions. In cooperation with our Board of Directors, we will continue to assess a variety of financial options including strategic corporate partnering to protect the best interest of our shareholders. I'd now like to turn the call back to Jon Stonehouse.

Thanks, Mike. So, in summary, BioCryst is evolving into a product development company. 2006 was a year in which we simultaneously advanced three compounds to the point where each is entering or approaching late stage clinical trials. In 2007, we're focused on continuing to diligently move these compounds toward registration while at the same time, building our clinical development capability. We'll be able to achieve these goals while reducing our net burn rate as a result of the support from the Department of Health and Human Services contract award, as well as through the continued support of our partners Roche and Mundipharma. Operator, we're ready to take questions now.

Thank you. [OPERATOR INSTRUCTIONS] We'll take our first question from Vinny Jindal with ThinkEquity.

Hi, Jon.

Hi, Vinny.

I have just a couple quick questions on the development for Fodosine. So, first, is there any data that we can expect this year for Fodosine and any of the indications but particularly in CLL?

This is Jim Alexander, Vinny. As Jon said, we just announced the trial initiation for Fodosine for T-cell leukemia just a few weeks ago, so it's really premature to say at this point how long the trial will take or when any data might be available.

All right and I was curious from, for instance your ongoing single center study at M.D. Anderson in CLL if we might see data from that this year?

Well, we've completed the valuation of a small number of patients and we're now evaluating the results in conjunction with Mundipharma to determine the strategy going forward so I'm unable to project when we would have additional information.

Okay, and then on your, what you had just mentioned, having gotten the trial up and running now for T-cell ALL, can you give us a sense of when we expect the trial for CTCL to be up and then maybe just walk us through your expected enrollment period and when you think the enrollment will be done for those trials?

Well, for CTCL, we have not started the trial yet and we're working with the FDA to really agree on the trial design, and we have continued our interaction with investigators in preparing for it, so it's really premature for me to say anything other than we will move as fast as possible to initiate the CTCL trial and looking forward to doing that some time in 2007.

Yes, and then enrollment for the T-cell ALL trial? Do you expect that to be 18 to 24 months or maybe less than that? Just kind of wondering what the update might be there?

Well, just as we previously have mentioned, we will plan to enroll 100 patients in that T-cell leukemia trial. This is a number that was agreed with the FDA. We're actively bringing sites online and we're of course hopeful that we will enroll that trial as soon as possible, but I don't have any further information right now.

Okay, fair enough and then on the hep C program that Jon mentioned, what's the update there in terms of when we could expect possibly a drug to enter the clinic or get an update on the development plans there?

So, with hepatitis C in particular, we're looking at all of the pre-clinical candidates and there's 4678 and there are other interesting compounds behind 4678 in hepatitis C. In addition to that we've got some other promising compounds in other indication areas so one of the things we're currently working on is evaluating and prioritizing what are the most attractive compounds and which ones we should bring forth into the clinic, and we haven't made those decisions yet.

Okay, got you. And then for peramivir? Just really quick was curious to know, this year's flu season would yield sufficient data to have peramivir Phase II data this year and then also, was curious to find out from your perspective what you think the next sort of catalyst in that program are. Is it having other governments such as the Korean Government who signed on for peramivir express an interest and want to license the drug, or is it possibly stockpiling? What are the next financial events for peramivir.

So as we've said, we've initiated the IM trial and we're actively screening and recruiting patients, but it's difficult to predict how quickly that study will enroll because a lot of it depends on how severe the flu season is, but we're also willing and preparing to move to the Southern Hemisphere as we've mentioned before and Jim's team is working with the CRO to identify sites and can get those sites up and running so that in the event we need to we can move to the southern hemisphere to continue enrollment. I forgot the second part of your question?

It was generally, what do you expect based on the maturity of the various conversations you're having around peramivir, what the next kind of catalyst might be in that program. Are you expecting, for example, more governments to sign on for potential end licensing of the drug, through the course of this year? Are you expecting possibly our government to be interested in stockpiling? What do you think the next steps are for peramivir?

That's difficult to predict. A lot of that has to do with how concerned are government officials around pandemic, and so I think our strategy is very focused on moving this clinical development plan we have in place as quickly as we possibly can, getting data from the Phase II trial, having a discussion with the FDA at end of Phase II and then figuring out what steps we take from there. In the event that governments come to us and there's interest in our drug, we're very open to having those discussions. We've had dialogue with WHO and others, but there are no concrete plans at this point in time.

Got you. Thanks for taking the questions, guys.

No problem, Vinny. Thanks.

Our next question comes from Joseph Schwartz with Leerink and Swann.

Good morning, thanks for taking the call. Most of my questions have been answered, but I was curious if you could provide us with some more details of the peramivir study in terms of the number of patient centers, doses tested, any [palling] assumptions and randomization? And is the focus right now, is that likely to stay on the IM Form, or what other prospects for the IV formulation? Thank you.

Yes, this is Jim Alexander again. As we've announced, we initiated the IM study a couple weeks ago. That trial is a typical Phase II trial. It evaluates two doses of peramivir, and as you might see on the clintrials.gov website, we are targeting 300 subjects to be treated and evaluated, so that answers the question about the IM.

But we're also very excited about the IV program going forward at the same time because we realize that intravenous treatment is something that most of the experts are saying they would like to see, so keep in mind that we're progressing both of these programs simultaneously under the HHS contract. The IV program is well moving toward initiation but we will announce when that happens, but it's the same drug, but two different formulations.

Great. Thanks a lot, Jim.

Yes.

Our next question comes from Ren Benjamin, Rodman & Renshaw.

Good morning, everyone. A couple of quick questions. One regarding the Roche program. Clearly, you guys are jointly developing this. I wanted to see if you can give us some more insight as to how that program is going and when you guys feel the program will advance into Phase II trials?

I think as we said in the prepared statement, Roche is very enthusiastic about this compound. We're working closely with them to come up with the right clinical strategy for this drug, and I don't want to get into specific timing but we expect that at some point during the course of 2007 it will move into Phase II trial.

Okay. And then one question for Mike, who has been left out of these questions. The R&D number I think went down quite a bit from last quarter, and was wondering what happened there? What was the reason for either the slightly abnormally high number in third quarter or the lower number in the fourth quarter, and should we expect that sort of going forward?

Well, I think clearly, as I indicated when I went through our script that theres going to be significant variability from quarter to quarter in our expenses and our cash burn and I think that's a good example of that. So in the third quarter, we were conducting multiple Phase I trials for the peramivir and a lot of the manufacturing as well and so a lot of it just has to do with the timing of when certain things get complete and when expenses need to be accrued and so forth, and so I think that's the major explanation for that.

Yes, I don't think you should draw a conclusion that R&D expenses are going down over time. We're moving into more advanced clinical trials which require more resources. As I said before, we're building up our own clinical development capability.

I mean, a year ago, we had Claude Bennett and another person managing a bunch of CRO's. Today we've got Jim Alexander and a team of eight people and RTP that are very much diligently working with and monitoring the CRO's and driving the clinical development plan so you shouldn't conclude that the R&D expenses are going to go down. That being said, we also have this HHS contract award and reimbursement for Cost Plus on the peramivir program. So, that's why we say the net burn will go down from previous quarters.

Got you. And I may have missed this, I jumped on the call a little late. I may have missed this in the prepared comments but can you give us the guidance or did you provide any guidance for 2007 regarding cash burn?

Yes. We indicated that it was going to be declining to an average of $3 million per month over the course of 2007, but again, it's going to vary significantly from quarter to quarter depending on the timing of reimbursements from HHS which we'll bill in arrears and the timing of receipts from other partners, the money that's coming up from Mundipharma and so forth so it's really going to be extremely variable from quarter to quarter so we've given guidance for the entire year at an average of $3 million per month and we expect it to reduce even more significantly in '08.

So you shouldn't extrapolate quarter to quarter for the whole year, because there may be an unusually low quarter or an unusually high, but the average over the quarter should be about, a net burn rate of about $3 million per month.

Got it. And then one final question just following off Vinny's. Regarding the hep C program, you mentioned you have a lot of candidates and you're looking at it. I'm going to try my best here to pin you down to a time point here. When do you think that that program, which I thought was the next most advanced program that was going to enter the clinic, when do you think that might actually enter the clinic?

Yes, we had given guidance before that we thought we would get an IND filed by the end of 2006 and obviously that didn't happen. I think it's largely due to the number of good pre-clinical candidates that we have and part of that, as I said before, is back-ups in hep C and other areas, and so we just need to take the time to do that analysis and make sure that we're bringing the best compound forward and we'll do that as quickly as possible and once we're prepared to do that we'll let you know.

Great. Thank you very much.

You're welcome.

We'll take our next question from Katherine Kim with BioCryst.

Hi. So, my first question is for Fodosine and T-cell ALL, you've said previously that the number of sites is about 75 to 100 so just wondering if that's still your target and if you can just give us a status of how many sites are currently up and running?

Well, I can't give you the status of the number of sites but I can tell you that we're actively bringing them online and the number you mentioned, 75 to 100 is still our target. The reason is that the T-cell Leukemia is a rare disease to begin with and then our protocol is only meant to enroll patients that have failed other treatments and so it's going to be an enrollment that goes not in a speedy fashion, but we're, that's why we're getting as many sites up and going as we can.

And I know that in previous, in your previous Phase II trial that there was, that the CR rate actually kind of fell a little bit just because you had their refractory patients specifically nelarabine refractory patients, so in your current trial, are you still going to enroll those patients?

The current trial does include patients that have failed on nelarabine.

They do?

Yes.

And then for the CTCL indication, when do you expect to have an update on the strategy for the type of trial that you're going to run?

We haven't committed to talking about the strategy of the trial yet. We're in active discussions with the FDA around what it will take to produce a trial that's got pivotal data, so when we're able to initiate that trial will be the time you'd expect to see some details about it.

So when do you expect to have details about it? Will it be some time this year or first half?

Well, we've said that we plan to initiate the trial some time in 2007. It's not completely in our hands. We are talking with the FDA, so we will have to just -- you just have to stay tuned and when we have the announcement of our initiation, there will be more information.

Okay, and then in terms of the status of Fodosine in other indications, specifically by Mundipharma, can you give us the status on that?

Well, Mundipharma has been our partner over the past year or so and we've had very good interactions with them and I feel that we're in a joint development here where we're sharing the information that we've gained and they're actively pursuing some of the other indications, for example, CLL in Europe and some of the B-cell indications as well. So you'll just have to understand that it's a joint development and we will plan to present data, hopefully at some of the upcoming meetings this year on the progress.

And this is specifically Mundipharma data or is it from you guys, the data that you're expecting to present?

It will be collaborative. It will be collaborative data that we present together.

Okay, and then, hello?

That will be our plan.

Okay. And then my last question is on peramivir, the trial for the IM that you just started, is that going to be a single dose of peramivir in the patient?

No. It's two doses of peramivir being evaluated. It's typical Phase II trial with two doses.

No, I mean, what I meant I'm sorry--.

Oh.

What I meant was is it a single injection per patient?

Yes.

Okay. Thank you very much.

Katherine, can you just identify who you're with?

Oh, Unterberg, Towbin.

Okay.

I remember they said BioCryst so that was a mistake, obviously.

Thank you.

And we'll take our next question from Douglas Chow.

Hi. Just regarding the IM trial with peramivir, how is the efficacy measured in that trial?

The efficacy is measured in two ways, clinical efficacy and virologic efficacy.

Okay, so in terms of symptoms?

Yes, the clinical would be symptoms.

I see. Is it using a specific instrument?

Yes. It's the same instrument that was used in the oseltamivir studies several years ago.

Oh, I see. And just regarding the potential milestones payments in '07, are you expecting any additional from Mundipharma?

So we just announced the 45 million milestone for the start of the T-cell ALL. To predict into the future what other milestones we're going to get is just something that we're not able to do.

Okay, great. Thanks a lot.

It appears there are no further questions at this time. Mr. Stonehouse, I'd like to turn the conference back over to you for any additional or closing remarks.

Yes, I think I'd like to say a couple things. One, I think it's important, these were great questions and getting to very specifics around the trials, but I think it's very important as you look at BioCryst to step back and look at the Company in total.

First off, we've got a pretty full pipeline for a Company our size. We've got Fodosine in advanced clinical trials, peramivir in Phase II clinical trials and then our relationship with Roche with 4208, moving into Phase II trials later this year, so, full pipeline.

In addition, we've got resources from a number of different sources. HHS funding for the peramivir development program, which is very significant, and then our partners, Roche for 4208 and Mundipharma for the development of Fodosine in Europe and some reimbursement of costs in North America, so not a heavy burden on BioCryst from a resource perspective.

And then the next point is we've retained, with these resources from other parties, we still retained significant rights to our product. Fodosine in North America, peramivir pretty much in all major markets, and then co-promotion opportunities with Roche for 4208.

And then lastly, we've got the discovery engine that can continue. It's been productive and successful in putting these compounds into the pipeline and we'll continue to be productive in putting products into the pipeline in the future.

So when you look at this in total, it's not many companies I think have the kinds of assets that BioCryst has. So thank you very much for your participation today, and your questions, and have a good day.