BioCryst Pharmaceuticals Inc (BCRX) 2007 Q1 法說會逐字稿

Good day, everyone, and welcome to the BioCryst Pharmaceuticals first quarter 2007 financial results conference call. Today's call is being recorded. At this time I'd like to turn the call over to John Nugent, VP of Investor Relations. Please go ahead, sir.

Thank you very much. Good morning and welcome. On today's call, John Stonehouse, BioCryst's CEO, will provide an update on corporate development, and Mike Darwin, the Company's CFO, will review the financial results of the first quarter ended March 31, 2007. Joining John and Mike today are Dr. Claude Bennett, Vice President and Chief Operating Officer, Dr. Jim Alexander, the Company's Senior Vice President for Clinical and Regulatory Affairs and Chief Medical Officer, Dr. Phil Breitfeld, Executive Director of Oncology Development and Associate Chief Medical Officer, David McCullough, Vice President of Strategic Planning and Commercialization, Randy Riggs, BioCryst's Senior Vice President of Corporate Development, and Dr. Y. S. Babu, the Company's Vice President of Drug Discovery. Following the prepared statements, they will be happy to take questions. The call is scheduled to last for 30 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 of Fosodine, BCX-4208 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 sections marked "Risk Factors" or "Forward-Looking Statements." These statements reflect 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 thanks to everyone joining us today. Today's call is to discuss financial results for the first quarter of 2007, and to provide an update on our clinical and discovery programs. Let me start by addressing two events that occurred during the first quarter of 2007, which significantly impact our financial results going forward.

First, we were able to secure funding for our largest clinical program peramivir through a Department of Health and Human Services sponsored development contract. The $102.6 million contract award from HHS should give us the financial resources to continue clinical development in manufacturing of peramivir all the way to NDA filing. I can't emphasize enough how important this is for a small company like BioCryst. This gives us essentially $102.6 million of non-diluted financing for further development of peramivir, significantly offsetting what we anticipate to be large and expensive trials.

Additionally, we entered into a strategic partnership with Shionogi & Co. Ltd., which will allow us to move the clinical study of peramivir into Japan. The leading marketer of injectable and oral antibiotics in Japan, we believe Shionogi is the ideal partner for BioCryst in this territory.

Among their many strengths, Shionogi also possesses great formulation experience and capability, which we plan to leverage for the possible improvement of peramivir. Shionogi has worked to bring numerous other injectable products to market and we look forward to working with them on the development and marketing of peramivir in Japan.

Before reviewing all of our key programs in detail, I'd like to turn the call over to Mike Darwin, our CFO, who will provide an overview of our financial results for the first quarter of 2007. Mike?

Thanks, Jon. Our press release issued this morning provides a detailed explanation of our first quarter 2007 financial results. Let me summarize some of the main points. Our net loss for the quarter was 8.8 million, or $0.30 per share, compared to a net loss of 7.9 million, or $0.27 per share in the first quarter of 2006.

R&D expenses for the quarter were 16.2 million, compared to 8.0 million in the first quarter of 2006. 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 of the process for these two drug candidates. In addition, there has been an increase in headcount to support clinical development.

General and administrative expenses in the first quarter of 2007 were 2.4 million, compared to 1.5 million in the first quarter of 2006. The primary reason for this increase was an increase in the non-cash, share-based compensation over 2006 of approximately 0.6 million. The net change in our cash for the first quarter of 2007 was a reduction of 3.4 million from 46.2 million at the beginning of the quarter to 42.8 million at the end of the quarter. Our cash burn was offset by the 5 million event payment from Mundipharma during the quarter.

The initial payment of 14 million from Shionogi was received in April, so it will be reflected in our second quarter.

As stated in our fourth quarter financial results conference call earlier this year, we do believe it is important to note that although expenses associated with various projects and programs including the planned advanced development of Fodosine and peramivir will likely increase during the year, we believe that reimbursement for costs associated with peramivir will significantly reduce our cash needs.

We continue to caution that both our expenses and our net cash burn from operations are expected to vary quarter to quarter and one should look at the year in total and not extrapolate from an either unusually low or high burn quarter.

I'd now like to turn the call back to Jon Stonehouse.

Thanks, Mike. Now, I'd like to give you an update on where we are with our clinical programs and discovery pipeline. Let me start with peramivir and specifically the intramuscular formulation for use in the outpatient setting. We firmly believe that the IM formulation will be a meaningful addition into the influenza market. Doctors' office dosing ensures full compliance, giving peramivir a target profile of one injection and you're done. This coupled with the formulation's inherent ability to quickly enter the systemic circulation and quickly achieve high concentrations in the plasma blanketing the virus hits flu hard, and we believe will make peramivir an attractive therapeutic option.

We initiated the Phase II trial of the IM formulation in January of this year, and although this season has been mild and is coming to an end, enrollment continues to be open in the northern hemisphere. As the northern hemisphere flu season winds down, we are actively preparing to enroll patients at trial sites in Southeast Asia and in the southern hemisphere, where the flu season hasn't yet begun.

Assuming a normal flu season in these territories leading to completion of this study, and assuming the results of the study are positive, we plan to initiate the Phase III clinical trial in the fourth quarter of this year, and preparation for the trial is already well underway.

In addition to the IM, we're continuing to move forward with the intravenous formulation, which we believe hold particular promise for hospitalized patients for whom there is currently no approved therapy. As a reminder, over 200,000 Americans are hospitalized every year due to flu and its complications, with approximately 36,000 deaths annually. Because there is currently no approved therapy for influenza in the hospital, we are breaking new ground with this study and have worked closely with the FDA to develop the trial protocol.

Although this process resulted in our initiating the study later than originally planned, we are preparing to continue this trial in the southern hemisphere, and those preparations are also well underway.

Beyond peramivir, we continue to make progress with our other late-stage development programs, specifically our PNP franchise and its lead compounds, Fodosine and BCX-4208. In regards to Fodosine, last month the Company made a decision to put the T-cell ALL trial on voluntary hold to investigate particulates that were found in some of the batches of IV formulation. Due to this delay, it now seems unlikely that the T-cell ALL indication will be an indication that's first to market. This taken in the context of CTCL's larger patient population, which we are hopeful will lead to a faster patient recruitment, led us to shift the Company's strategy to focus on CTCL as our lead indication for Fodosine.

In March we submitted a draft protocol to the FDA for evaluation of oral Fodosine and CTCL under an SPA. In the past week we received comments from the FDA on the draft protocol, and based on our review of those comments we fully expect to initiate the trial during the third quarter of this year. In a moment, Jim Alexander will provide more details on our development of Fodosine in CTCL.

Adding to our PNP franchise is BCX-4208, our next-generation compound partnered with Roche for the use in autoimmune indications and transplant rejection. We believe BCX-4208 has blockbuster potential due to the chronic nature of these indications. During the quarter we participated in an end of Phase I meeting with Roche and the FDA to discuss further development of 4208. During that meeting, agreement was reached on moving forward with a Phase IIa trial in the treatment of patients with psoriasis. Sites are actively being recruited and the protocol has been designed and is being reviewed by the IRB. Our expectation is that the first patient will be enrolled in the third quarter of this year.

Now, I'd like to ask our Chief Medical Officer, Jim Alexander, to provide additional insight into these trials. Jim?

Thanks, Jon. I'd first like to say how pleased we are that Dr. Phil Breitfeld has joined BioCryst as Executive Director for Oncology Development. Phil is a pediatric oncologist by training, and before joining the industry several years ago, he had a distinguished record as an academician and a clinical investigator, and was a collaborator in many oncology trials as a member of the Children's Oncology Group. Phil has assumed primary medial and program leadership for Fodosine and is with us on this call today.

As Jon just mentioned, we recently announced our plans to initiate a trial to evaluate oral Fodosine in the treatment of cutaneous T-cell lymphoma. To that end, in the past several weeks we have had discussions with the Division of Oncology Drug Products at FDA, and as part of the FDA process, we recently received written comments regarding our proposed pivotal protocol. This protocol is designed as a single arm trial of oral Fodosine in a population of patients that have been shown to be refractory to previous systemic therapies. Based on the continuing promising interim results of our open-label Phase II study that's been ongoing over the past 18 to 24 months, we are firmly convinced of the efficacy and safety of Fodosine in this patient population, and we're very eager to start this next study, which we believe will satisfy the requirements for pivotal registrational trial.

We are responding to the comments of the FDA and believe that we're on track to initiate patient enrollment in the third quarter of this year.

Next, I'd like to expand on what Jon said regarding peramivir development for influenza. Since the last update, there has been continued acceleration of activity on many fronts in our peramivir development program for both the intramuscular as well as the intravenous formulation. We began the northern hemisphere part of our Phase II intramuscular trial in January. Due to the relatively light influenza season in the northern hemisphere this year, we've not yet met target enrollment in the Phase II intramuscular trial. We had anticipated this possibility and I've always assumed that we might need to continue the trial in the southern hemisphere and in Asia, where the flu seasons began later.

In the past two weeks our clinical teams have had investigator meetings in Hong Kong and in South Africa, and a meeting for investigators in Australia and New Zealand is planned for next week. We have identified over 50 experienced sites in these countries and are primed to complete study enrollment in those countries. Our visits to these countries in the past few weeks have confirmed that widespread influenza activity is not yet present to any degree in these countries, indicating that we will have sites initiated in time to enroll the needed number of subjects.

We are diligently working to complete the Phase II trial, so that assuming positive results we can move forward with our plans to indicate our Phase III studies of intramuscular peramivir later this year.

As regards the intravenous peramivir program, due to the complexity of our Phase II study protocol to evaluate peramivir given intravenously in hospitalized patients, we were later than we had planned in getting sites in the U.S. and Canada ready to enroll subjects. Therefore, we are currently activating an estimated 27 sites in the southern hemisphere, Hong Kong and Singapore, for the conduct of this important trial.

In closing, we are pleased to also see the results of a second study showing the effectiveness of peramivir in an animal model of H5 influenza infection. These results were reported last week by researchers at St. Jude's Children's Research Hospital. This study showed 100% survival with eight days of peramivir single dose treatment in mice, and importantly no genetic mutations of the virus were found that might confer resistance to peramivir.

We are now looking forward to June and the Options for Control of the Influenza Meeting in Toronto, where the safety had pharmacokinetic data from two of our IM Phase I volunteer studies will be highlighted in a poster session.

Now, I'd like to turn the call back over to Jon Stonehouse. Jon?

Thanks, Jim. Moving beyond our clinical programs, BioCryst also has a robust discovery engine and pre-clinical pipeline. As we reported earlier this year, we are currently in the process of reviewing and prioritizing the number of PNP inhibitors and infectious disease preclinical candidates that have emerged from our productive discovery engine. While we are not yet ready to provide details on the specific compounds, I'd like to take this opportunity to share an overview of the broader areas in which we are working.

Building on the encouraging momentum in our Fodosine and BCX-4208 programs, we are evaluating several compounds from our PNP franchise to determine which to bring forward first. We believe this area presents significant potential for BioCryst due to the broad application in additional autoimmune indications addressing both large and small markets, as well as select indications outside of autoimmune disease such as gout and HIV.

Our goal is to fully exploit existing PNP inhibitors and in parallel move forward the next generation of PNP inhibitors. The upcoming milestones that are important in this area are demonstrating safety and efficacy in an autoimmune indication for BCX-4208, and at the same time having the next generation PNP inhibitors ready to go in clinical trials.

Building on the encouraging base we have with peramivir, we are reviewing and seeking to advance other opportunities in our antiviral franchise. Leading this line of potential products are two promising compounds we are developing for the treatment of hepatitis C. In addition to our lead candidate in this area, BCX-4678, we are studying a follow-on compound which may have a more attractive product profile. Hepatitic C is a huge market that is still largely unsatisfied, and we believe the nucleoside analogues we are advancing have tremendous potential.

We are also evaluating a candidate for the treatment of parainfluenza, a virus that can result in serious and life-threatening infection. Along with respiratory syncytial virus, or RSV, paraflu is one of the leading causes of pediatric hospital admissions among those with viral respiratory infections. There are currently no drugs approved to treat paraflu virus, and we believe the treatment of paraflu would complement peramivir and a hepatitic C treatment in the hospital market, making a potential paraflu program very attractive to BioCryst as we seek to expand our antiviral franchise.

As I mentioned earlier, we have a productive discovery engine that is moving forward a number of interesting pre-clinical candidates. Our job now is to determine which of these has the potential to bring the greatest value and what resources are going to be necessary to move them forward. To help us with that, we've further strengthened our management team with the addition of David McCullough as Vice President of Strategic Planning and Commercialization. David brings a wealth of experience in life sciences business analysis, product marketing and pharmaceutical sales. David's expertise will be essential as we work to advance key product candidates, like Fodosine and peramivir, towards registration launch and as we make decisions on which new compounds to move into clinical trials to refresh our pipeline.

So, in summary, we've taken some important steps forward in the first quarter. We secured resources for our largest clinical program and therefore we expect to be able to fully develop peramivir while retaining the majority of commercial rights to the compound. We continue to advance our clinical development programs. Even with the delay of the T-cell ALL trial in a mild flu season, we are planning to be in a position by the end of this year to have a Fodosine pivotal trial well underway in CTCL, a potential blockbuster compound BCX-4208 in a Phase II trial in psoriasis, data from our peramivir Phase II IM trial and, assuming positive results, initiation of the pivotal Phase III.

We are encouraged by the progress we continue to see in our productive discovery engine. We have a number of interesting candidates for attractive markets, and expect to share more specifics on the compounds later this year.

And, lastly, we're enhancing the skill base of our team to meet the needs of our evolving business. So, when you total it all up, we think there's a lot to be excited about when you look at what we have and where we're headed. Thank you.

Operator, I think we're ready for questions.

Thank you, Sir. (OPERATOR INSTRUCTIONS) We'll go first to Vinny Jindal with ThinkEquity.

Hey, guys. Thanks for taking my question. I have one question and a follow-up. My first question will be related to the Company's finances. You mentioned on the last quarterly call that you expect expenditures to be sort of lumped throughout the year. I was wondering if you could give us any guidance on how that's going to manifest this year and especially how that's influenced by the [inaudible] from HHS and what your cash burn is for the year?

All right, Vinny, this is Mike. Our guidance from the last conference call has not changed. As we stated on that call, we indicated that our expenses and our cash burn will be lumpy during the period and the best thing to do will be to look to the whole year on average where we predicted $3 million per month burn rate. We knew that this first quarter would be kind of low with the receipt of the Mundi payment for the initiation of the Phase II trial and reimbursement of expenses that they paid in this quarter 2006 expenses.

And, I think, Vinny, the second quarter could be low as well because of the payment from Shionogi. So, that kind of leads you to the fourth quarter may be higher, right?

Gotcha. And then to ask a follow-up question, with Shionogi and with peramivir, what are going to be their responsibilities and how far along are they in oral formulation of peramivir right now?

So, the responsibilities are the territory of Japan, and that's their focus, is to move that product forward in Japan and get it on the market and market it in Japan. As I said in the prepared statements, one of the things that makes them really attractive beyond that is their formulation capability and, in particular, in injectables. And so we're really working closely with them right now to find improved versions of injectable forms of peramivir.

With regard to oral formulations, we're looking at a number of different options. We've announced the relationship with Skolar and some others that we've got going, but we're not going to go into any more detail on that.

Gotcha. Fair enough. And if I could actually cheat and ask one last question. What do you guys expect to be the timing of any sort of an offering to the market to increase cash reserves?

I think the Shionogi upfront payment and HHS contract award give us a lot of flexibility. But we're in regular dialogue with our Board on what are the best options and we're reviewing those options on a regular basis. So, beyond that we can't give you any more detail.

Fair enough. Thanks a lot.

(OPERATOR INSTRUCTIONS) We go next to Joseph Schwartz with Leerink Swann.

Good morning and congratulations on all the progress. I wanted to ask, first of all, on the CTCL SPA strategy. It's encouraging that you anticipate that study starting before the third quarter is over. I was wondering if you could just give us some insight into what the -- since this is a completely different disease, what the response rate hurdle and number of patients and number of sites that you're targeting, what those types of assumptions might be?

This is Jim Alexander. It is a completely different chronic -- more or less chronic disease, CTCL. We have, as we mentioned in the prepared comments, we received some comments from FDA just in the past week that we're working very hard to incorporate in our protocol. I would say those comments were not -- should not be considered substantial, and so we're very confident that we can very quickly incorporate those into the protocol. We think it's a strength in the protocol, and we'll be able to send that back to the FDA within about a week.

We're not prepared to comment on the number of subjects because it's an item for discussion with the FDA, but we are going to resubmit the protocol very shortly.

This trial will involve multiple sites in the U.S. Many of the sites that we've worked with over the past several years in CTCL, who know the drug very well and in whom we have confidence that they will conduct the protocol to very great degree with accuracy. We'll also be expanding the protocol to other sites in the U.S. and also outside the U.S.

So, as we mentioned, we are excited we are making progress in this regard and fully expect to have every chance to enroll subjects in the third quarter of this year.

Just to add on to what Jim said, I think the sense that we're getting from investigators that have worked with Fodosine and CTCL, there's a lot of enthusiasm for the compound. You couple that with the fact that there are more patients available for CTCL trial gives us the expectation that we'll be able to enroll this trial fairly quickly. In particular, much faster than T-cell ALL. And that's why we're absolutely planning to start this trial in the third quarter of this year.

I think beyond this trial, we're going to continue to look at ways to enhance Fodosine in CTCL and the trials associated with that. And then, of course, other hematologic malignancies, so that we can maximize the value of Fodosine.

Sounds great. Just for my follow-up question, I wanted to ask on peramivir. In terms of the IV studies, since you mentioned that you're sort of blazing new territory, I was wondering if you could talk about the endpoint in the study and how many patients might be targeted, and if there is an interim analysis at any point?

Well, the others, as we mentioned, this is a study that is unlike any previously done. In fact, there hasn't been a study of intravenous treatment for influenza in hospitalized patients. And so the endpoint was worked out over some time with FDA. It's a clinical stability endpoint that provides, we think, the chance of showing good evidence of effect of the drug.

The number of subjects is not exactly set, because we've projected that we will enroll as many as we can as fast as we can in the sites that I've mentioned. And once we get to a certain number of the target enrollment, interim analysis or an interim look at the data will be done with FDA approval to see if the endpoint is performing in a useful manner. And so in that sense it's somewhat of an exploratory program. But, again, we have a lot of excitement about it from the investigators who want to conduct the study. And as I mentioned, we're opening sites this summer in the southern hemisphere, Southeast Asia, and we'll be working very hard to get the enrollment going.

At the same time we have sites open in the U.S., but we just got them open too late to really have much enrollment, or any at all, actually, in the last few months.

Sounds good. I will jump in the queue. Thanks very much.

And we'll take a follow-up question from Vinny Jindal with ThinkEquity.

Hey, guys, just a follow-up topic of SG&A [inaudible] and I was just curious if that's affected at all your negotiations or are you still very confident that the process that you began some time ago will complete without any sort of [inaudible]?

Well, we did announce last time we submitted the protocol under a special protocol assessment, and we felt that was the appropriate thing to do at the time and we still think that's a good action to take in this indication, so we're confident that we are. As I mentioned, we're answering the few questions that we got from the FDA and the process -- we'll stay within the FDA process and we're confident that we can complete that successfully.

Okay. And [inaudible] for you guys no difference in the FDA's willingness to make sure this process is taken to completion?

Yeah, I think what we said before is we receive their comments, right, and after reviewing those comments, we don't see any major show-stoppers based on that. And so we plan to start this trial in the third quarter, and I think that's the key message that we want to leave you with, is we plan to start this CTCL trial in the third quarter this year.

Got you. And then extrapolating timelines for peramivir, it sounds like we will also have at least a first look hopefully at the Phase II IM data for peramivir in the third quarter as well, right?

Yeah, our goal is to complete the trial in Southeast Asia and the southern hemisphere with the ultimate goal of starting the Phase III in the fourth quarter.

Gotcha. Thank you for clarifying this timeline.

And at this time we have no further questions. I'd like to turn the call back to Jon Stonehouse for any additional or closing comments.

Thanks. Clearly, the questions are -- in past calls that we've had, the questions have been focused around Fodosine and peramivir because those are our most advanced compounds. But one of the questions I didn't get and I'd like to answer is, what do you see as the value drivers of BioCryst?

Clearly, Fodosine and peramivir are big value drivers, there's no doubt about it. It takes a big chunk of our focus and energy, and we are committed to driving these forward and getting them across the finish line. They are our most advanced compounds. They have the near-term revenue generating potential. And while there are different views on that potential, we're pretty confident that it's significant. I mean, if you just look at peramivir, there are three markets we're going after, right, the stockpiling, the outpatient setting, and the hospital. And that's significant.

And then you look at Fodosine, you've got CTCL with the protocol we've submitted. There are other things we can do within CTCL, and then there are other hematologic malignancies.

So, just those two things combined, peramivir and Fodosine, create pretty significant value and are big value drivers for BioCryst. I think that's fairly well recognized in the market.

But what I don't think is so well recognized is the value behind these two compounds. Granted, they're not as advanced, but I think it's important to point out that we really believe there are some untapped value here and some great potential, starting with PNP franchise. Putting 4208 into a Phase II psoriasis trial is very important for BioCryst. And if we can demonstrate that it works in one autoimmune indication, it's likely that it's going to work in others.

As I said earlier, we've got follow-on compounds to exploit in autoimmune indications both big and small, and other indication areas. So, there are a lot of different areas in many places where we can capture value with our PNP franchise.

Then you layer on top of that a hepatitis C compound a paraflu compound that we believe maybe people don't understand so well, but over time we'll share more information. But it has some significant potential, and all of a sudden you have a pretty full pipeline at BioCryst over the next few years with some very interesting compounds. And a very full pipeline is something that every company is striving for, whether you're a smaller company, like BioCryst, or a bigger pharma company. Everybody's looking for a full pipeline.

So, what we're doing is basically noses to the grindstone and executing to move these things forward. And over the course of the year we'll share further progress in more detail with the hope that it's going to be come clear to more people that there are more than just two value drivers at BioCryst.

Thank you very much and thank you for your interest in BioCryst.

That does conclude today's call. Again, thank you for your participation. Have a good day.