施貴寶 (BMY) 2007 Q1 法說會逐字稿

Greetings, ladies and gentlemen, and welcome to the ZymoGenetics quarter one 2007 financial results conference call. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dr. Bruce L.A. Carter, President and Chief Executive Officer. Thank you, Dr. Carter, you may begin.

Good afternoon, everyone, and thank you for joining our first-quarter conference call.

The last quarter saw substantial continuing progress with all our clinical programs. We're also pleased with our Company's progress towards the much anticipated commercialization of recombinant human thrombin. With four proteins in active clinical development at ZymoGenetics and partner companies, we're well on track towards demonstrating the value of our largely innovative pipeline during the months and years ahead.

Nicolle Onetto, our Chief Medical Officer and Jim Johnson, our Chief Financial Officer, will provide further details for you regarding the results of our first quarter. Now, normally, Doug Williams, our Chief Scientific Officer, would be here and Mike Dwyer, our Head of Sales and Marketing would be here. But they are today out in Miami at the Morgan Stanley conference with John Calhoun. After Jim has spoken, we will be happy to take any questions you may have.

And of course, I need to remind you that we will be making forward-looking statements throughout this conference call and the statements are subject to significant risks and uncertainties and please look at our SEC filings for further information as to our best evaluation as to the risks of our business. And with that, I would like to turn over the microphone to call Nicolle.

Thank you, Bruce. Good afternoon, everyone. As you have just heard from Bruce's introduction, the first quarter of '07 was marked by important progress with all of our development programs.

Starting with recombinant thrombin, our focus during the first quarter was securing a [smooth] review of our DNA and continuing to build our commercial infrastructure.

From a regulatory point of view, we received confirmation that our BLA was accepted for review. In addition, all clinical sites and third-party organizations involved with thrombin have been preparing for potential pre-approval inspection by the FDA. We're looking forward to a successful result within the next few months.

I also want to remind you of an important development from the FDA that occurred during the first quarter. The agency removed the requirement for further clinical studies for recombinant thrombin used with a stray device. This will enable us to do have raised this proportion of the thrombin market roughly two years earlier than anticipated. We're very pleased with the agency position and we are convinced that this will support an even more successful launch of recombinant thrombin than initially anticipated.

In addition, to help educate and prepare the market, we have hired a team of medical science liaisons. Training has been completed at ZymoGenetics for the MSL and they are now deployed throughout the country. Bruce will give you even more detail in his concluding remarks on the building of our sales and marketing organization.

Now, let's move to the rest of our pipeline. Regarding Atacicept, our main progress has been the preparation of two studies that could lead to registration for patients with lupus. We're expecting feedback from the FDA and the EMEA and we're planning with Merck Serono to start actualizing these two worldwide studies in the second half of this year.

On the rheumatoid arthritis front, we are continuing enrollment in a Phase 2 trial with 330 patients who did not adequately respond to anti-TNF inhibitors. Merck Serono is continuing to open sites outside of the U.S. with the objective of completing a trial by the end of the year. We're also preparing a second Phase 2 in patients who have not yet been exposed to TNF inhibitors. This study should be initiated later this year.

Finally, [as far as] our Atacicept program in B-cell malignancies is concerned, the data from the Phase 1 trial in chronic lymphocytic leukemia were accepted for presentation at ASCO in Chicago this June.

With Interleukin 21, our clinical trials are also unfolding as anticipated. In renal cell carcinoma, our strategy to develop IL-21 in combination with tyrosine kinase inhibitors, the new standard of care for this disease. Our Phase I/II study in combination with Nexavar is ongoing. This should complete the dose escalation in the months to come and initiate the Phase II part later this year.

For melanoma, our partner, Novo Nordisk will report this result of the first stage of the Phase 2 study in first line melanoma at ASCO this June. Simultaneously, we're in the final stretch of initiating the separate Phase 2 melanoma study using higher dose level of IL-21 in collaboration with the National Cancer Institute of Canada.

Finally, for IL-21, we recently completed the dose escalation of the nonischemic combo trial in combination with Rituxan. We will continue testing the efficacy and safety of this combination in the extension phase in the months to come.

Now, interferon lambda. We're very interested in this candidate due to its potential to have anti-viral activity similar to interferon-alpha but fewer side effects. Our Phase 1a in healthy volunteers is enrolling as planned and should be completed in the second half of the year.

We're preparing a Phase 1b trial in patients with hepatitis C. This study will follow for an early read of anti-viral activity for interferon lambda as single agent and also in combination with Ribavirin. Both studies should give us an indication of whether we are indeed seeing less adverse events with interferon lambda than those expected with interferon alpha.

So we have a lot going on here and important milestones to achieve in the months to come. Our experienced and dedicated team in drug development is working hard to meet all our goals.

This completes my update on our product candidates and I will now turn the microphone over to Jim for a discussion of our first-quarter financial results.

Thanks, Nicolle. Hello, everyone. From a financial perspective, our reported results were better than expected. Our net loss of $0.49 per share was less than Wall Street consensus estimates and was also below the low end of the range of estimates.

Our first-quarter revenues were $5.2 million compared to $7.4 million a year ago and the decrease can be attributed to reduced option fee revenue as was expected. Our option and license agreement with Novo Nordisk expired in November of last year, and it had provided about $1.9 million of revenue per quarter over its six-year term.

Research and development expense totaled $29.8 million for the quarter, which was about $3 million less than the corresponding period in 2006. The decrease stems from lower costs in 2007 for our recombinant thrombin development program after we filed our BLA in December of 2006. There were two primary factors driving this trend. One, we had significant Phase III clinical trial costs in early 2006; and two, our 2006 manufacturing related costs were timed earlier in the year. We continue to expect significant thrombin commercial product manufacturing costs this year, which will be expensed as R&D to the extent they are incurred prior to FDA approval.

General and administrative expense for the quarter increased to $9.7 million compared to $7.8 million in first quarter of 2006. Most of the increase was driven by preparation for the launch of recombinant thrombin later this year. G&A expense will continue to increase on a quarterly basis throughout the remainder of this year as we hire our sales force and carry out various marketing activities in support of the recombinant thrombin launch.

We recorded $5.5 million of stock-based compensation expense in total for the quarter. $3.6 million of this was reflected as R&D and $1.9 million was included in G&A expense.

Our financial outlook for the full year hasn't changed since we provided guidance to you in February. We are still anticipating a net loss for the year in the range of $2.20 to $2.50 per share and net cash usage in the range of 130 to $150 million. As a reminder, these amounts exclude any cash inflow and revenue effect that would come from U.S. sales of recombinant thrombin and also the completion of an ex-U.S. thrombin partnership.

We have continued to maintain a strong balance sheet. We ended the first quarter with about $224 million in cash and investments and no debt. With this cash balance and what we expect to bring in from a thrombin partnership, we should have sufficient cash to take us well into 2009.

That concludes my comments on financial results so now I will turn things back over to Bruce for some closing remarks.

Thank you, Jim. As many of you know, our Phase 3 recombinant thrombin trial was conducted rapidly and very professionally, and we were blessed with good results. As Nicolle pointed out, the FDA is actively processing our application. We're getting strong candidates as we build out our commercial arm, and we're currently recruiting regional sales directors. Applicants are coming from well-known major pharmaceutical companies that sell into the operating theater in hospitals we will be targeting. We're very excited by the prospect of building an experienced sales force in the United States and have an ever-increasing view that we will be successful.

What of the rest of the world? We are discussing a license for the rest of the world with several major companies and I remind you that we anticipate completing a partnership deal by the time we launch our products in the United States. We will of course update you once we have completed and signed such an agreement. And we are now ready to take your questions.

(OPERATOR INSTRUCTIONS). [Han Lee], Stanford Group.

Thank you for taking my questions. While we're waiting for the FDA decision for thrombin, are we going to see the Phase 3 results published somewhere?

Yes. The publication --

Is imminent.

Is imminent. And I -- when is it?

(spoken in French).

It will be published in a major medical journal.

In the journal of the American College of Surgeons.

Oh, okay. When should we expect that the publication to come out?

Yes, it depends of publication. [Basically] it got accepted for publication and now it depends on the journal about when it's going to be published but it could be very soon.

Okay. Sometime in the summer I would say?

Yes, it was accepted without any changes.

Okay. My second question is related to [ACK-EIG]. I know you mentioned you're going to start two Phase II studies in the second half. Can you give us like a scope of the studies?

Okay, I think I'm going to ask Nicolle to answer that.

As I told you, we are in the final discussion with the FDA and the EMEA regarding these two protocols. So we cannot give you all the specifics now since we need to finalize the design. That is the general guidance that we will have one study in general lupus and one study for posting on an organ-specific manifestation of lupus. The general lupus study will be bigger because of the type of end point. You need more patients than the organ-specific study.

I assume these studies are BLA-enabling studies.

They are.

[Registration] enabling studies.

You know, it's our current discussion with the regulatory agencies.

John Watkins, Banc of America Securities.

I was wondering if you could give some color on the interferon lambda Phase 1 trials and what they would look like. Would they be the typical 14-day trials or would you look to do something a little longer? And also what sort of animal tox data do you have in hand already?

I'm going to ask Nicolle to answer that question. But just by way of introduction, interferon lambda is one of the proteins that we identified in our genomics program. It has a completely different receptor to interferon alpha. Nevertheless, the single inside cell turns out to be the same as interferon alpha, which offers the prospect of having the same anti-viral activity as alpha interferon.

Alpha interferon, as you know, is considered to be likely a mainstay of hepatitis C treatment for many years to come. And as you also know, one of the drawbacks is it is -- has side effects that cause people to sort of decline to continue treatment. It is likely that that may have something to do with the association that there are receptors in many organs and tissues of the body for alpha interferon.

In contrast, interferon lambda is much more restricted in its localization in the body, being found in the liver and the lung predominantly. And for that reason, we're testing it in the hope that what we can see is that we have the anti-viral activity of alpha interferon without the side effects. And with that, I will ask Nicolle to tell you the detail of what we're doing.

We're currently doing the single dose escalation in healthy volunteers, so it's one dose and after that we are evaluating the PK and some PD markers for interferon lambda. Objective of this study is to really help us select the dose levels for our next study in patients. So like that, we're sure we're beginning in patients with a pharmacologically active dose and this will speed up our program.

As far as the Phase 1b, we have not yet completely finalized the design and are also going to be in discussion with the FDA. But I think the general principle in drug development for anti-viral is that with a relatively short study between one month and three months, we are able to see early signs of anti-viral activity, which will be of course the main objective of our Phase 1b as well as dose optimization.

Lucy Lu, Citigroup.

Actually, you mentioned today at an investor conference that you potentially will have to do some kind of Phase IV post-marking study. I'm just wondering why do you think FDA will ask you to do post -- Phase IV post-marking studies for rhThrombin?

I think that Mike Dwyer spoke generically off of the top of his head. We have no reason to suppose that recombinant thrombin would have any other treatment necessary to anybody else. I think that what he was talking about is that we will be doing a 3b study, in which we try to demonstrate the outcome of developing antibodies to bovine thrombin.

And if you were to do that study, actually he mentioned there may be additional costs. What would be the scope of a study like that and the number of patients and size of the trial. How much money would it cost?

Do you want to answer how many patients we think we would use?

Yes. I mean, this study would be approximately 200 patients and we have some separate sized recalculation depending of some results. But it approximately runs 200, maximum 300 patients.

Okay. And then my last question is, you said the FDA has had questions in their review. What type of questions are they asking? Any color you could give us, that would be great. Thanks you very much.

There is nothing that is of concern in the question we have received from the FDA, and I'm sure you will understand that we're not commenting in detail on FDA interaction during the BLA review, but there is nothing of concern.

I think one of the things we are really pleased about in the questions was the questions are very, very good questions. And we would always prefer to be dealing with a professional than an amateur. It's very nice that we're getting a very professional review and we like the questions very much.

Okay thank you.

Al Rauch, A.G. Edwards.

I have two. One has to deal with thrombin and if you have any clarity in terms of developing thrombin for ex-U.S. markets. And the second one has to do with developing a pivotal trial in lupus with Atacicept. Am I understanding that right that the FDA has bought into you running the pivotal trial, you are just working out the details now?

I will let Nicolle talk about Atacicept. But as I said earlier, or perhaps Nicolle said it, we intend to commercialize recombinant thrombin in the United States and we are currently discussing with potential partners the commercialization of recombinant thrombin outside the United States. Now, I will ask Nicolle to comment on our discussions with the EMEA and the FDA.

We already have had discussion with the agency in the U.S. and outside of the U.S. regarding our Atacicept program. And we're comfortable with the general direction in our program and to the fact that the study that we're proposing could support registration and we're just now, as I said, in the final negotiation with them about very detailed and specific protocols.

Well, with thrombin, will you need to run any additional clinical trials to support registration in Europe?

You know, we can't say we know the answer to that. What we can say is that, some of our partners are increasingly comfortable that we could, with a different formatting, submit our BLA to the EMEA. But that's based on our partner's view.

(OPERATOR INSTRUCTIONS). Dr. Carter, there are no questions in the queue at this time. Do you have any closing comments?

Well I would like to thank people for joining the call. And I would also encourage you to listen to the Morgan Stanley conference call, which Doug and Mike took this morning, where they were asked a number of very pertinent and interesting questions. But we thank you for your continuing interest in ZymoGenetics. And we wish you a good afternoon, a good morning, or a good evening, depending where you are.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.