Cerus Corp (CERS) 2003 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the fourth quarter year end financial results conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. At that time, if you have a question, please press star, then the number one on your telephone. If you would like to withdraw your question, press the pound key. As a reminder, this conference is being recorded, January 29, 2004. I would now like to turn the conference over to Ms. Alexander Sanchez, of Cerus Corporation. Please go ahead, ma'am.

Thank you. And good afternoon. Before introducing Steve Isaacs, President and Chief Executive Officer of Cerus, I remind that you during this call we will be making forward-looking statements. That involve risks and uncertainties. Including statements about development, commercialization, finances, and business prospects. Our actual results may differ materially from those results described due to factors that include but are not limited to those discussed in our most recent annual report on form 10-K, and quarterly report on form 10-Q. To request copies of these documents our press releases or our financials please call 925-288-6156. Or find it on our web site at Cerus.com. I will now turn the call over to Steve.

Thanks, Alex. Joining me in the call today are Greg Schafer our Chief Financial Officer and Dr. Larry Corash, our Chief Medical Officer. I will begin with a general business and commercialization overview and Larry will go over our clinical and regulatory progress. Greg will then review our fourth quarter and year end financial results which were released earlier today. In closing I will speak to our plans going forward and we will then open the call for questions.

Since our last call, we've continued to make progress in our pathogen activation programs and have also made important strides with our vaccine pipelines. In today's call, I will review our announcements during the quarter, provide insights into what these events mean to the company, and share our progress and continued vision for moving the company forward. The Intercept blood system for platelets is being commercialized in Europe with Baxter health care in charge of distribution, sales and marketing. Product revenue for the quarter was primarily due to repeat sales from centers in Spain, Italy, Belgium and Norway. At the present time we believe France will be the next major country to adopt Intercept platelet,. Since the approval of the product in France which we announced last quarter, we've had discussions with the French regulatory authorities, focusing on completion of the required project, registration publication and the process for reimbursement. Assuming success in completing these tasks we will be in a position to generate our first sales in France. In Germany, local and regional blood centers continue their evaluations of Intercept, which we believe could lead to first sales in the country this year.

Overall, the European platelet market didn't mature as expected in 2003. And penetration is proven to be more challenging than initially anticipated. However, we believe the marketplace challenges can be overcome and that pathogen and activation will ultimately be widely adopted due to the continuing threat of emerging pathogens, which can be transmitted through blood, and the fundamental advantage of pathogen inactivation compared to testing. As we target the commercialization of Intercept platelets in the European market we continue to pursue the additional steps agreed upon with the FDA for U.S. regulatory review of platelets. While we are conducting the additional sprint analysis as agreed, we have not yet reached agreement with the FDA on the supplemental trial protocol. This has caused us to change our approach to the PMA submission which Larry will review in a few minutes. At the same time launch is under way in Europe, a demand for pathogen inactivation is emerging in Japan.

Last December, we participated in a symposium jointly hosted by the Japan blood transfusion society and the Japan ministry of health, labor, and welfare to discuss pathogen inactivation technology. Over 400 physicians and scientists attended this symposium, where physicians from the U.S. and Europe presented their experience with the Intercept blood system for platelets. In addition the Japan Red Cross and ministry of health are continuing their evaluation of the Intercept blood system for platelets at several different blood centers. Their motivation and time line for Intercept evaluation are fueled by reported failures of nucleic acid tests to detect hepatitis and HIV in blood donation. For Intercept plasma, we have completed enrollment in the phase three C trial. This concludes enrollment of our planned series of phase three trials for plasma, which have included studies of patients with congenital and acquired plasma deficiencies as well as TTP patients who were part of the phase three C trials. For the Intercept plasma European submission, our regulatory group is working diligently with Baxters to prepare a product dossier which includes clinical, preclinical, safety, quality, and manufacturing data to obtain European CE mark clearance for Intercept plasma.

We believe the environment in Europe favors the adoption of Intercept plasma and certain ministries of health in Europe already require that plasma collections be either quarantined or treated with a pathogen inactivation process. In the red blood cell program research continues on our S303 compound for pathogen inactivation. Our goal is to conduct a thorough evaluation of this technology before making a definitive decision about this program. We are also pleased to have recently received notice of a new grant from the department of defense for $5.5 million. This award, our third with DOD, continues to support development of Intercept, with the goal of improving the safety and availability of blood for transfusion for the U.S. Armed Forces. As our pathogen inactivation program for platelets and plasma reached the final stages in the regulatory process we've shifted research and development focus toward growth opportunities in vaccine. We have generated very exciting preclinical data on the potential of our vaccine technology to stimulate the immune system to target and attack cancer cells. This technology is based on listeria, a common bacterium that induces a potent innate immune response and can specifically activate the immune system against targets expressed by cancer cells. Cerus's approach is to combine our proprietary listeria strains with various cancer antigens to harness the power of the immune system to selectively attack malignant cells. Our efforts have led to an important collaboration with the Johns Hopkins university.

As mentioned in the press release issued yesterday, we acquired certain exclusive rights to the novel cancer antigen (meslithenin) from Johns Hopkins. We are developing therapies that use (meslithenin) in combination with our proprietary listeria vaccine platform to potentially stimulate the patient's immune system to recognize and kill ovarian and pancreatic tumor cells, that display the (meslithenin) cancer antigen. Through this collaboration as well as others we plan to enhance our technology portfolio to compliment our promising cancer program, further strengthening pipeline of therapeutics. I will now turn the call over to Larry for a clinical and regulatory update.

Thanks, Steve. Transfusion of Intercept platelets in European clinical practice continued during this past quarter. Process validation studies proceeded in Germany, Austria, Spain and Belgium with the introduction into new centers. In collaboration with various European centers, we are initiating studies to evaluate the efficacy of Intercept platelets stored for up to seven days, to expand the transfusion experience in pediatric patients, and to demonstrate the effectiveness of the Intercept process to deal with bacterial contamination in comparison to bacterial testing. Recent data from the Belgium Red Cross and the Netherlands transfusion service demonstrated that bacterial contamination occurs as frequently as 1 in 100 platelet components. Based on the Belgian experience, with over 100,000 units tested, and the Netherlands experience, with two years of bacterial screening, prevention of bacterial contamination of platelet components has not yet been resolved by testing.

We continue to believe that the Intercept platelet system provides the most comprehensive solution for prevention of transfusion transmitted bacterial infections. Intercept platelets have been well received by clinicians prescribing the product. We are observing examples of Intercept pathogen inactivation, replacing bacterial cultures, CMB testing and gamma irradiation. Demonstrating the ability of the Intercept system to impact the economics of transfusion safety. We continue to believe that increased familiarity with Intercept platelets among the medical community will assist adoption. To this end, we initiated a post marketing surveillance study for patients treated with Intercept platelets to expand the database on the experience, with these platelets, in a broad patient population. This activity is consistent with the European emovigilance network that has been implemented for all transfused blood products in the European union. In December, we held the first meeting of our European hemovigilance advisory board that included leaders in transfusion medicine from both the United States and Europe. We have active centers in Italy, Belgium, Denmark, Norway, and Portugal who have submitted data on approximately 1,000 transfusions. As this experience increases, we anticipate publication of data to increase the level of information about the product. A major step forward last quarter was the approval of Intercept platelets by the French agency for sanitary safety of health care products. We are now planning our experience studys with the French blood transfusion service. This will provide an opportunity to expand exposure to Intercept platelets beyond the French centers in which we have conducted either clinical trials or process validation studies.

In the United States, we defined a two-step process regarding the clinical module of our PMA. After review with our external science advisory board, we submitted a supplemental clinical trial proposal to FDA. We have not yet come to agreement with the agency on trial design. Since the additional analysis of data, in the U.S. phase three trial, as requested by FDA, has potential to impact the choice of end points, emphasize of the supplemental trial, we have elected to complete the data analysis prior to finalizing the supplemental trial protocol. Our independent panel is approximately halfway through the data review. And we expect results by mid year. Once we have that information, we will be able to propose a final supplemental trial design. Last quarter, we were contacted by the Japan Red Cross to set up three centers for the evaluation of Intercept platelets. This request was driven by the recent reports of transfusion transmitted cases of HIV and hepatitis in Japan. Despite the use of nucleic acid testing since 1999. We installed the Intercept platelet system in the Tokyo, Aieachi, and Okeido Red Cross centers and they've started their studies.

During the quarter, representatives of the Japan ministry of health, labor and welfare, visited one of our European centers to observe the Intercept system for platelets in use. In December, we presented seven papers at the American society of hematology meeting. In addition, during the meeting, we conducted a round table on transfusion transmitted cytomegalovirus infections and the potential of the Intercept systems to prevent this infection. With European and American physicians, we hosted a meeting on the use of extra (caporial photophoresis) with amotosalen to treat graft versus host disease associated with stem cell transplants. The application of our technology to treat this severe medical complication of stem cell transplantation could further enhance the economic utility of the Intercept platform for platelets and plasma.

Turning to plasma, we enrolled our final patient in the last of the three planned studies in the plasma program. Plasma exchange for treatment of (thrombotic thrombosetic penic perpulae). While this study is not required for submission of the Intercept plasma CE mark application, it is a valuable supportive study. Shortly we will close this stuy and complete our data analysis. We continue to experience interest for Intercept plasma in Europe, driven by the complimentary effect of a common platform for treatments of plasma and platelets, and the requirement in many European countries for measures beyond testing to ensure the safety of plasma. Our in vitro study with the hematology service at University College Hospital in London to characterize the properties of Intercept plasma for plasma exchange therapy of TTP, was presented at the American society of hematology.

This coming quarter, we are targeting initiation of in vitro processing studys with several European blood centers as part of our planned CE mark submission for Intercept plasma in the last quarter of this year. As announced in the third quarter, Baxter and Cerus voluntarily halted the clinical trials with S303 treated red cells, after 2 of 160 patients had positive cross matches to S303 treated red cells. We are continuing follow-up of these patients and thus far, have identified no adverse health effects in any patients. Cerus and Baxter scientists formed a task force to conduct experiments to elucidate the potential mechanisms of antibody development. Using the same sensitive tests that detected the positive cross match in our phase three clinical trial, we re-examined archived serum samples from healthy subjects who received multiple exposures to S303 treated red cells, in phase one, and phase two studies. We confirmed that none of these subjects had detectable antibodies to S303 treated red cells. To search for additional evidence of immune responses, to S303 treated red cells, we retrieved archival serum samples from the preclinical studies in dogs transfused multiple times with S303 treated red cells. Our earlier studys had demonstrated no evidence of red cell destruction after multiple exposures to S303 treated red cells. We retested serum samples from these dogs using the same assay as used in the phase three clinical trial. These tests showed no evidence of S303 dependent antibodies in the samples from these dogs. These data are a step in the process to interpret the significance of our observations in the red cell phase three clinical trial and are useful in developing the model to be used to examine the potential changes to the S303 treatment process.

During the quarter, we developed immunologic reagents and a hyper immune animal model to explore further the potential mechanisms that may have led to the formation of S303 antibodys in the two patients. Work will commence this quarter with this model to define potential mechanisms of S303 dependent antibody formation. The Cerus vaccines group has continued their work in the development of a novel platform for effective therapeutic and prophylactic vaccines.

This program has two objectives. Firstly, to develop therapeutic vaccines for treatment of cancers that currently have limited therapeutic options and secondly, to develop new vaccines against infectious diseases for which current vaccines are poorly effective and have inadequate safety margins. Cerus scientists have submitted two abstracts to the American association for cancer research. One reports on the development of a vaccine directed against the novel cancer antigen and the other describes a novel platform that combines the use of a unique means to present tumor antigens with added safety through the use of our Helinx technology to obtain the potency of a live vaccine but with the safety of a killed vaccine. Work with the platform for presenting tumor antigens has progressed and served as the impetus for licensing another important cancer antigen (meusothilen). This antigen is overexpressed in pancreatic and ovarian cancers and preliminary data confirm it is a potent target for stimulating an anticancer immune response.

This work will be conducted through our collaboration with cancer immunologists at the Johns Hopkins university. We believe that work with these tumor antigens and the Cerus antigen presentation platform will form the basis for the development of both therapeutic cancer vaccines, and novel vaccines against infectious agents including those with bio-terrorism potential for which current vaccines are unavailable or poorly effective. Our cancer vaccines group has filed a series of patent applications around this technology, and licensed other technology to enable further work in the field. With respect to cellular immunotherapy in vaccines our collaborative trial with the national marrow donor program for matched unrelated marrow transplantation has started enrollment. This program is fully funded by the department of defense resources. In addition we received funding under an NIH program to support studies of Helinx technology for treatment of chronic (INAUDIBLE) disease. This is a serious complication arising in 30% of related stem cell transplants that are matched. And 70% of unrelated matched transplants. Lastly, our collaborative trial of a cellular vaccine against the Epstein-Barr virus prepared with Helinx inactivation technology to ensure safety continues enrollment at Johns Hopkins university. Now, Greg will review the financial results for the quarter.

Thanks, Larry. Our fourth quarter results were in line with our expectations with a net loss for the quarter of 46 cents, giving us a net loss for the year of $3.01. This compares with losses of 99 cents and $3.61 for the comparable periods of 2002. Our cash balance at the end of the year was $110 million. Compared with $64.3 million at the end of 2002. The increase includes $50 million drawn from the Baxter revolving loan facility in January of 2003. Our cash use from operations for the fourth quarter was approximately $13.1 million . And we expect our current cash balance to be sufficient to support our planned development activities for the next 24-36 months. We recorded $3.5 million in revenue for the quarter.

Additionally, $40,000 from the sale of Intercept platelet system in Europe was recorded as deferred revenue. Approximately $2.9 million of development revenue for the quarter was derived from work performed under our agreements with the U.S. Armed Forces. Looking forward, into 2004, we expect to record approximately $8 million under our collaboration agreements with the Armed Forces. Our R&D spending of $9.6 million for the quarter was a decrease of approximately 30% over last quarter, due primarily to the cessation of the red blood cell trials and the wind down of related activities at Baxter and Cerus. We expect R&D spending to continue to decrease over the next two quarters and expect our total R&D spending for 2004 to be in the range of $30-35 million as we indicated last quarter. G&A expenses $2.9 million for the quarter. And $11 million for the year. And we expect our G&A expense in 2004 to be in the same range. Net interest expense for the quarter is $1.1 million. And included interest expense in the loan facility from Baxter. Recall that under the terms of the loan facility with Baxter, no payments of principal or interest are due until 2008 but we have recorded the entire balance under current liabilities as a conservative measure due to Baxter's assertion that the principal and interest are currently due. Now I would like to turn it back to Steve for some concluding remarks and then we will take your questions.

Thanks, Greg. Looking ahead in 2004, our number one priority is to support market penetration with Intercept platelets in Europe. We consider this milestone critical to the ultimate success of the Intercept program. While we realize it will take time for Baxter to achieve significant market penetration, we are confident of ultimate commercial success. As Larry discussed, we will also be taking the sequential approach toward gaining U.S. approval for Intercept platelets. The additional sprint data analysis is expected to be completed mid year. Assuming a positive outcome, we intend to use this data to negotiate with the FDA on the supplemental trial protocol.

In addition, we expect the European experience with the product including post marketing surveillance information, to be helpful during these discussions. For the Intercept plasma system, the current plan is unchanged. Targeting a regulatory submission in 2004 in Europe, followed by the submission of a PME application. As Larry mentioned for the red blood cell program we are continuing our evaluation of the antibody issue and simultaneously investigating process changes that could prevent antibody formation from occurring. Success in this area is key to moving forward with the S303 base red cell program. While it is our priority and increasingly important part of our business for the future will be our growing pipeline of therapeutics and vaccines for cancer and infectious disease. Over the course of the year, we will be pursuing additional opportunities to expand the applications of our pipeline.

At the same time, we will be pursuing corporate partner collaboration which can be leveraged to provide development funding and potentially accelerate our pipeline success. In conclusion, we expect 2004 to be a dynamic year, as we seek to support improved Intercept platelet uptake in Europe and prepare for potential European commercial blowout of plasma in 2005. We believe our pipeline represents an exciting opportunity, and expect our scientific and development strength to result in positive developments over the course of the year. Lastly, we intend to maintain our strong relationships with the department of defense, and expect additional grants to support both the pathogen inactivation and vaccine program. I will now open the call to questions.

Thank you. Ladies and gentlemen, if you would like to register a question, please press star, then the number one on your telephone. If your question has been answered, and you would like to withdraw your registration, please press the pound key. If you are using a speaker phone, please lift your hand set before entering your request. One moment, please, for the first question. Our first question comes from the line of Glenn Reicin with Morgan Stanley.

Hi, Steve.

Hi.

A couple of questions. Given the fact you're in negotiations still with the FDA on platelets, is a late '06, U.S. commercialization still achieveable?

Well, Glenn, as we said what we're doing is we're completing the reanalysis and we're looking to get that done mid year, and then basically what we will do from there is put the protocol together based on that analysis and submit it to the FDA, and then they will cycle back to us with their comments, and then we will go forward from there. So it makes it difficult to pin down a specific time.

At this point, what is your best guess?

Well, you know, I can tell you what I know. And what I know is that we're proceeding aggressively with the reanalysis, basically we're on target to have that come back mid year, and once that is in hand, we feel we are going to be able to have a very productive discussion with the FDA on the protocol. And we think it is smart to do it that way because we think basically the result of that in terms of end points and trial size will be more favorable and that will give us the most rapid path to getting this product through.

And then on plasma, you said C mark in '04. Can we also assume the PMA will be filed in '04?

The PMA will follow the CE mark application. Basically we want to get the CE mark in first. And we are also keeping an eye on how the platelet process goes in the United States as well. So they will not be simultaneous. They will be consecutive.

How much time do you need between the two?

That is again is, you know, it is not really dependent on the development part of the process. It is more the regulatory part. And again, we want to keep our eye on progress in the platelet program and then we will look at plasma once we get clarity there.

And then finally, given the turmoil at Baxter, are they re-evaluating this whole program?

Well, I talked to the president of transfusion therapies immediately after the announcement about Harry Kramer resigning, and basically was assured that, you know, our projects were on track, and moving forward, and they had every intention of, you know, continuing with the plan that we've developed, for 2004 and beyond.

Thank you.

Ladies and gentlemen, as a reminder, to register for a question, press star, then the number one. Mr. Isaac, there are no further questions at this time. I will now turn the call back to you. Please continue with your presentation or closing remarks.

Okay. I just want to thank everybody for participating in the call. And we look forward to talking to you again in April. Thank you very much.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation. And ask that you please disconnect your line.