BioCryst Pharmaceuticals Inc (BCRX) 2007 Q2 法說會逐字稿

Please stand by, we're about to begin. Good day, everyone, and welcome to the BioCryst Pharmaceuticals Second Quarter 2007 Financial Results Conference call. Today's call is being recorded. At this time, I would like to turn the call over to Jon Nugent, VP of Investor Relations. Please go ahead, sir.

Thank you very much, good morning and welcome.

On today's call, Jon Stonehouse, BioCryst's CEO, will provide an update on corporate development and Mike Darwin, the Company's CFO, will review financial results of the second quarter ended June 30, 2007. Joining Jon and Mike today are Dr. Claude Bennet, BioCryst's Chief Operating Officer, Dr. Jim Alexander, the Company's Senior Vice President for Clinical Development and Chief Medical Officer; Dr. Elliott Berger, the Company's Senior Vice President of Regulatory Affairs, David McCullough, Vice President, 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'll be happy to take your questions. The call is scheduled to last for 30 minutes. Before beginning, I'll read a formal statement regarding risk factors associated with today's call.

Today's conference call will contain forward-looking statements regarding future events for the future financial performance of BioCryst. Such forward-looking statements may include predictions regarding the expected closing of our announced financing, current and proposed clinical trials of Fodosine for CTCL, 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 of events or actual future of 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 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 at 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 section 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'd now like to turn the call over to Jon Stonehouse, President and CEO of BioCryst.

Thanks, Jon, and thanks to everyone for joining us today. As Jon said, today's call is to discuss our financial results for the second quarter of 2007 and to provide an update on our clinical and discovery programs. Let me start by addressing the financing that we announced earlier this week, which will positively impact our financial condition going forward.

This past Monday we announced the signing of a definitive agreement with a group of existing shareholders to raise $65.3 million in a private placement of approximately 8.3 million shares of common stock and warrants to purchase an additional approximately 3.2 million shares of common stock. The purchase price of the shares is $7.80 per share, which was the closing NASDAQ composite bid price for the Company's common stock, immediately preceding execution of the definitive agreements for the transaction and the exercise price for the warrant is $10.25. Investors in the financing will pay an additional purchase price equal to $0.12.5 for each share underlying the warrants.

Completing this offer gives us the financial flexibility to focus on the execution of our strategic plan, which lays out how the Company will work towards several points of value generation. We believe having this group of high quality, experienced investors participate in the offering is a vote of confidence in our plan and in the future of BioCryst.

Once the offering is closed, proceeds will be used to advance our cooperate strategy. Specifically, the achievement of concrete timelines and milestones associated with our programs, such as maximizing the overall development of Fodosine, advancing early stage compounds for our P&P and antiviral franchises, and the expansion of our resources needed to accomplish this goals. We are gratified by the strong support of these A-list investors and we commit that we will spend this money prudently to advance our portfolio.

Before reviewing the achievements of the quarter and providing updates on our key programs, I'd like to turn the call over to Mike Darwin, our CFO, who will provide an overview of our financial results for the second quarter of 2007. Mike?

Thanks, Jon. Our press release issued this morning provides a detailed explanation of our second quarter 2007 financial results. Let me summarize some of the main points.

Our net loss for the second quarter of 2007 was $7.0 million or $0.24 per share, compared to a net loss of $10.1 million, or $0.35 per share, in the second quarter of 2006. Our revenues for the quarter were $13.4 million, as compared to $1.6 million in the second quarter of 2006. The increase is primarily due to the revenue recognized from the contract with the U.S. Department of Health and Human Services for the development of peramivir and the ongoing amortization of the deferred revenue from our collaboration agreements.

R&D expenses for the quarter were $19.0 million, compared to $11.2 million in the second quarter of 2006. The increase in R&D expenses is primarily attributable to the costs related to the manufacturing of our lead drug candidates, peramivir and Fodosine, and costs related to animal studies surrounding our preclinical compounds. In addition, the personnel-related costs have increased, due to the rise in headcount to support the advanced development of our lead drug candidates.

G&A expenses for the quarter were $2.0 million, compared to $1.4 million in the second quarter of 2006. The primary reason for this increase was an increase in personnel-related costs related to the additional headcount, plus an increase in the non-cash share-based compensation expense for the quarter.

YTD 2007, our net loss was $15.8 million, or $0.54 per share, compared to a net loss of $18.0 million or $0.62 per share for the same period of 2006. Our YTD revenue through June 30, 2007 was $22.6 million, as compared to $2.3 million for the same period of 2006. As previously mentioned, the increase is primarily due to revenue recognized from the contract with HHS for the development of peramivir and the ongoing amortization of the deferred revenue from our collaboration agreements.

R&D expenses for the six months ended June 30, 2007 were $35.2 million, compared to $19.2 million for the same period of 2006. The increase in R&D expenses is primarily attributable to the costs related to manufacturing of peramivir and Fodosine, costs associated with the advancing of clinical programs for these drug candidates and an increase in personnel-related costs supporting the personnel required for the advanced development of our drug candidate, plus an increase in animal studies related to our preclinical compounds.

G&A expenses for the six months ended June 30, 2007 were $4.4 million, compared to $2.9 million for the same period of 2006. The primary reason for the increase was an increase in the non-cash, share-based compensation expense for the period of $0.9 million and other personnel-related costs related to increase in personnel, plus additional professional fees.

For the year, our cash, cash equivalents and investments has decreased from $46.2 million as of December 31, 2006, to $42.5 million as of June 30, 2007. Our gross cash burn for the year has been offset by the $14 million event payment from Shionogi that was received in April, the $5.0 million milestone payment, and the $4.8 million cost reimbursement received from Mundipharma.

As stated in our first 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 advance development of Fodosine and peramivir, will likely increase during the year, our cash need would be reduced due to expected reimbursements for costs associated with peramivir.

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. As indicated earlier, our YTD cash needs have been supplemented by approximately $24 million from our collaborative agreement and we don't expect such significant offsets through the remainder of the year. As a result, given that our average monthly burn rate in the first six months of this year was much lower than $3.0 million, one should expect the remaining six months will be correspondingly higher.

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

Thanks, Mike. Since the start of the second quarter, we set some very specific milestones and I'd like to take a moment to remind you what they are. First, start the Phase III program for peramivir IM by year-end, second, start the pivotal trial of Fodosine in patients with CTCL and third, work with Roche to move BCX-4208 into a Phase IIa trial in psoriasis.

Now I'd like to give you an update on where we are with these. In the Phase II IM study of peramivir, enrollment has picked up due to widespread influenza activity in the Southern Hemisphere. Our plan was to follow flu around the globe in order to complete this Phase II trial and the good news is we were prepared in time to catch the Southern Hemisphere flu season before it took off. Regarding the Phase III trial, significant planning has been underway since March. We're making good progress to be well positioned to enroll patients in an extensive Phase III program in the Northern Hemisphere this upcoming flu season.

Additionally, last month we announced that we have started the Phase II IV study in hospitalized patients. There's no antiviral currently approved for patients in this population. As a result, this trial will explore uncharted territory and is likely to enroll slower than the IM trial. However, we believe its worth pursuing, because over 200,000 people are hospitalized and 36,000 die each year in the U.S. alone from flu and its complications, so we're determined to push ahead with this trial.

Initiating the Phase III IX pivotal program and progressing the Phase II IV formulation are important, because we believe peramivir has the potential to be a unique therapy for flu. Once injected, peramivir quickly enters the bloodstream, achieving high concentrations. It blankets the virus and hits flu hard. This unique profile is why we're working so diligently to move these trials forward, with the ultimate goal of getting peramivir to market.

Moving on to Fodosine, the goal here is to initiate the pivotal trial in CTCL during the third quarter, so let me give you an update on that program. We had a successful SPA interaction with the FDA and received a Letter of Agreement. The timely receipt of this SPA reinforces that CTCL is our fastest path forward to market for Fodosine. A number of clinical sites have been activated and are ready to enroll patients. We remain confident that we will enroll the first patient during this quarter.

We are moving aggressively on this trial because we believe this compound has real potential in hematologic malignancy. We're pursuing a once-a-day dosing plan and based on encouraging interim results we've seen from the Phase I/II studies, the drug appears thus far to be effective and well tolerated in patients with CTCL. We also have plans to expand our clinical trials beyond advanced-stage CTCL in order to have the opportunity to make Fodosine more available to patients and maximize its value. Detail of these plans will be shared at a later date.

In our BCX-4208 program with Roche, the objective was initiating the Phase IIa trial in patients with psoriasis and we announced the start of that trial in mid-July. 4208 is a next generation PNP inhibitor and has the potential to be a first in class treatment for autoimmune diseases. If we're successful in developing 4208 on psoriasis, there's the potential for use in other autoimmune disorders.

Beyond furthering the development of our late-stage potential products, we're also continuing to work on our early-stage compounds. Based on our strategy, we prioritized our early-stage candidates. We are looking at a set of additional PNP inhibitors separate from 4208 and doing early exploratory work in the areas of autoimmune diseases, gout and HIV. It's important to note we retain the worldwide commercial rights to this set of specific PNP inhibitors.

In addition, we're pursuing preclinical work in hepatitis C and have selected what we believe is the best compound to move forward. Through the prioritization process, we've selected a new compound that has unique characteristics and potential advantages over BCX-4678. There's a need for a new therapeutic to treat hepatitis C and we're going to work diligently to determine if this new compound meets the requirements to move into clinical trials. We plan to share more detail on both our advanced and early-stage compounds in an R&D day to be scheduled later this year.

In order to achieve our goals, we continued to build up the management team with the recent addition of Stuart Grant as CFO and Dr. Elliott Berger as our Senior Vice President of Regulatory Affairs. We're moving the Company to the next level and that will require new skill sets and experience.

In the case of Stuart, his extensive experience with an established top tier biotechnology company, coupled with his financial strength and experience, will add significantly to the senior management team as we move products towards commercialization. In the case of Elliott, his distinguished regulatory affairs credentials will be invaluable at this key time when our pipeline is most promising. We're fortunate to have recruited an experienced regulatory professional who's filed more than 10 successful NDAs.

So, in summary, the Company is now properly capitalized to execute on our strategic plan. We continue to build on our team and we're focused on delivering results. The goal of all of this is to lead to getting products to patients, to improve their quality of life while also creating greater shareholder value.

Operator, we're ready to take questions.

Absolutely. (OPERATOR INSTRUCTIONS) And we'll take our first question from Chris Holterhoff at ThinkEquity. Please go ahead.

Hey, good morning guys.

Good morning.

Can you remind us again the total size of the ongoing Phase II study of IM peramivir, the total patient size?

Yes. This is Jim Alexander. The study is designed to enroll 300 subjects.

Okay and is there a certain threshold of patients that you would need in order to take the potential interim look sometime before the end of the year?

We are encouraged by the pick up in enrollment that we've seen in the past several weeks and so we are proceeding to continue enrollment toward that target of 300.

Okay, thanks, and then just on the hep C compound, you mentioned that there's some improvements on the new compound you chose relative to 4578. Are you in a position now to expand a little bit more on those improvements?

No. It's way too early and we're in the early stages of working through this, so we don't want to comment on it at this time.

Okay. Thanks for taking my questions.

You're welcome, Chris.

And we'll go next to Joseph Schwartz at Leerink Swann & Co. Please go ahead.

Hi. My two questions are, first, on the Phase III program for IM peramivir. How many centers will you be targeting for that and do you think that they'll be enough to find the number of patients that you need to get in that trial in a single flu season?

Yes, we are -- our goal is to start the trials, to start the program later this year. It'll be an extensive program. I can't give you an exact number of sites, but we'll have sites in the Northern Hemisphere, both in the U.S. and in Europe, and we're confident that we'll have enough investigators active to get the right number of subjects.

Yes, Joe, I think one of the things that we've learned is be ready, when the flu season hits, with the sites being up and get as many sites as you can, because you can't predict the flu season, so that's our goal.

Right and as far as the Phase II trial goes, when might we see data from that in the IM setting?

Well, that's -- it's difficult to predict. I'd say we're encouraged by the recent pick up in enrollment, but we just can predict when we'll have the study finished.

And as far as the hepatitis C compound goes, is it a non-nuc or a nucleoside polymerase inhibitor and what was 4678, if you could remind us?

The new compound is a nucleoside [amyloid] and also 4670 is a nucleoside (inaudible - heavily accented language).

Okay, great. Thanks very much.

(OPERATOR INSTRUCTIONS) We'll go next to Ren Benjamin at Rodman & Renshaw.

Hi, good morning guys and congrats on a very good quarter and on executing on all of your milestones.

Yes, thanks, Ren.

A couple of questions. One is regarding peramivir. I guess the main question that comes to mind is do you guys -- wouldn't you need to the Phase II data, either from IM, or, well, further from the IM trial that's ongoing right now, before starting the Phase III, so that you have the right calculations made for the statistics? And if that's the case, wouldn't you expect that data, then, by before the end of this year when you start the Phase III? Or are you guys thinking about this differently?

Well, I can say that we're -- it's our intention, again, to start the Phase III during the season that starts later this year, the 2007-2008 season and we're making many preparations on all fronts to be ready ahead of time to do that and we're actually doing those things now. We've been, as Jon said, working on it actually since March.

We are in conversations with many regulatory agencies around the world, including, of course, the U.S. as well as in Europe and so we are working toward that goal and at this point in time, our main focus right now is to finish this Phase II study as soon as possible and we'll just have to go from there.

Yes, Ren, I think the two variables on this one are the rate at which you're enrolling the Phase II and what the regulatory agencies agree to and we can't predict either one of those. So I think our position is very clear. We want to start this Phase III in this flu season because we're prepared to do so and we've got -- we're preparing for a large number of sites to be up and ready and that'll give us the best shot, even in a mild flu season, of getting a lot of patients.

Right. So I understand that and it seems, and if I'm reading you right, you want to make sure that the trial is up and running. But, I guess, does this mean, then, that you can modify or you plan on modifying the analysis of the Phase III trial results once you get the Phase II trial data?

That's really -- you're thinking way ahead. But we're unable to speculate about what could happen after the Phase II trial is over.

Okay, so then let me ask it another way. Doesn't the FDA need the plan, statistical and otherwise, in order to give us the go-ahead to start the Phase III or am I thinking about it wrong?

Well, I'm not going to speak for the FDA. I can't speak for the FDA. So I can't answer your question.

But I think the bottom line is clearly we're going to follow all the regulatory processes to be in a position to start the trial and we're having dialog with these regulatory agencies and we're enrolling in the Phase II. And I know you want the answer of tell me which way is it going to go here, but I can't give you that, at this point in time, because there're variables on the regulatory side and there're variables on the trial enrollment.

Okay. How long -- so obviously you've thought, at least since March, about this trial. How bit and how long do you think that trial will last?

Well, it's a Phase III program. If you're talking about the Phase III program, that has to treat a sufficient number of subjects to meet all the safety exposure guidelines that are out there under ICH and so forth, so you know it's got to be at least 1,000 patients.

The question is how quickly can 1,000 patients be treated in an influenza season? It has to do with the number of sites, the severity of the flu season, being at the right place at the right time, and as Jon says, we are confident that we have a head start. And so it's hard to predict, but our goal is to complete the Phase III program in the next one flu season that starts later this year and extends, at least in the Northern Hemisphere, through perhaps April or May.

Okay and how long is the follow-up, Jim?

The studies we're planning are very similar in design and again, these studies have not been officially approved by regulatory agencies, but it's very similar in design to our Phase II study, which involves a single day's treatment of peramivir with at least two weeks of follow-up.

Sure. Okay.

Yes and Ren, let me just put one caveat on that and that is in the event it's a really mild flu season, we'll continue as we did with the Phase II, to follow flu around the globe until we finish the Phase III program.

Sure, no, that makes sense. Moving onto Fodosine, what exactly is Mundipharma doing right now and obviously you're in talks with them and so what are their plans sort of going forward and what sort of milestones may be triggered, say, within the next 12 months?

That might be a two-part question and I'll take the clinical part. Mundipharma are aggressively pursuing the potential of Fodosine in both T cell and B cell lymphocytic malignancies in their territory and some of what they're doing is independent of the BioCryst efforts and some is very complimentary of what we're doing in our territory. So just to reassure you that we are still working very closely together with Mundipharma, but I can't really discuss the details of what they're doing past that.

And this is Randy Riggs, with respect to the other question on what milestones do you expect to reach, basically the next milestone, and we have this in the filings too, is when Fodosine is approved.

Okay, great and then regarding, I guess, the pivotal CTCL trial, obviously so you mentioned you have an SPA agreement and I think prior to this conference call you've mentioned that the trial will enroll about 100 patients or so. Have you given any more specifics regarding the statistical assumptions? What sort of improvement you are looking to see, from an objective response point of view our duration point of view?

We haven't given any guidance on that, Ren, at this point.

Okay. Have you given any guidance or can you give some guidance as to how long this trial may last?

Afraid not. It's a large trial. It's, as you say, at least 100 patients and we do have sites that are actively up and ready to enroll patients, but until we get to the end of the trial we won't have that information.

Yes, I'd say, Ren, we remain real encouraged by this Phase I/II study and the results from that trial and clearly, that's what has led us to go into a pivotal Phase IIb.

Right and I guess and also in this protocol you mentioned that the CTCL patients they must have failed at least three systematic therapies. Is that correct and do you specifically which therapies they must have failed?

We -- the protocol specifically specifies that that they have to have failed Targretin if they've tried to take Targretin or can tolerate it, but past that, you're very correct on the design.

Unfortunately, ladies and gentlemen, this does conclude the time that we have allotted for QA today. At this time, I'd like to turn the conference back over to Mr. Stonehouse for any additional or closing remarks.

Thanks. I guess what I'd like to close with is it's been just over seven months since I started with BioCryst and from the very beginning I've always believed that there are really valuable assets in BioCryst and I continue to believe very strongly in that.

To be honest, when I first started out I think the open question in my mind was can we deliver and while we still have a long way to go and we have a lot to prove, I'm becoming increasingly impressed and confident that the employees of BioCryst will deliver. Whether its people that have been with this Company for years or people that have been with this Company for months, I'm seeing a new energy, focus, commitment, and sense of urgency to make things happen and get things done.

So I'd just like to take this opportunity to thank all of the employees of BioCryst for their dedication, their hard work, and the results achieved thus far and I look forward to even better things to come in the future. Thank you and thanks for you interest in BioCryst.

This does conclude today's presentation. We thank everyone for their participation. You may disconnect your lines at any time.

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