Cerus Corp (CERS) 2004 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Cerus Corporation 2nd quarter financial results conference call. During the presentation all lines will be in a listen-only mode. Afterwards we conduct a question and answer session. At that time, if you have a question, please press the (1) followed by the (4) on your telephone. As a reminder this conference is being recorded Thursday July 29, 2004. I would now like to turn the call over to Miss Alexandra Santos [ph], please go ahead ma'am.

Thank you and good afternoon. Before introducing Claes Glassell, President and CEO of Cerus, I remind you that during this call we will be making forward-looking statements that involve risks and uncertainties, including statements about development, research, commercialization, finances and business prospects. Our actual results may differ materially from those also described due to factors that include but are not limited to those discussed in our most annual report and Form 10-K. To request copies of the 10-K, our press releases or financials, please call 925-288-6156, or find them on our website at www.cerus.com. I will now turn the call over to Claes.

Thanks Alex. Also joining me today are Greg Schafer, our CFO, and Larry Corash our Chief Medical Officer who will be available to answer questions after the call. When I joined the company three months ago, I saw a lot of opportunity at Cerus, with exciting programs in vaccines and blood safety. My objective as the new CEO is to help Cerus realize the potential of these two programs, position Cerus for growth and increase shareholder value. As such I have laid out 4 main strategic initiatives. Those are, 1) heighten the financial discipline, 2) accelerate the progress on the vaccine program, 3) improve the performance of our INTERCEPT assets and 4) improve the relationship with Baxter.

We have already made significant progress in each of these areas. To heighten our financial discipline we had reduced the burn rate by more than 50% while still advancing key activities. In addition we continue to pursue non-dilutive 3rd party funding. To accelerate progress on the vaccine programs, we have made the decision to increase our investment from about $7m to over $11m for the next 12 months. We also initiated work on an Anthrax vaccine, our first target in the infections disease platform, and secured outside funding for it. And have also set a target for filing an I&D by the end of 2005.

To improve the performance of the INTECEPT assets, we initiated a plan to advance the programs within appropriate financial constraint. And we're striving for a neutral or positive affect from INTERCEPT on our overall cash flow.

We've also entered into an agreement with BioOne to market and distribute INTERCEPT platelets in parts of Asia. To improve the relationship with Baxter we have had meetings with Baxter senior management on how best to realize the value of the INTERCEPT assets. We will continue to advance these key initiatives over the coming months. Now, I'd like to provide some details on our recent announcements and review our program status.

Today, Cerus and Baxter announced an agreement with BioOne, a Japanese company dedicated to improving the safety of blood products in Asia, to commercialize the INTERCEPT Blood System for platelets in major parts of the Asian market. This will provide a great platform to introduce INTERCEPT platelets to countries where there have been reported failures of nucleic acid tests to detect hepatitis and HIV in thousands of blood donations.

Cerus has already received a non-refundable, up front payment of $2.5m. Under the terms of the agreement, Cerus will receive an additional $7.5m after completion of independent appraisal and approval by BioOne shareholders of the agreement.

The agreement also provides for Cerus to receive lump sum payments and royalties on future product sales. In connection with this agreement, Cerus has also made an approximately $1.2 equity investment in BioOne. In our vaccine program, we have put together time and action plans to reach our objective to file an I&D by the end of 2005. For the FA2 [ph] vaccine, we had a joint committee meeting at Cerus with our partner, MedImmune to update the team in recent scientific progress and to prioritize activities going forward.

For the Mesothelin based vaccine, additional data has validated the antigen as an immune target in patients with pancreatic cancer, in the clinical study conducted by Dr. Elizabeth Jaffee, a professor of oncology and immunology at the Johns Hopkins University School of Medicine. Dr. Jaffee is an international recognized leader in the field of cancer vaccine development, and the results of her study will be published shortly.

As we previously announced, Cerus has licensed certain exclusive rights to Mesothelin from Johns Hopkins. Since our most recent call the vaccine groups have also generated additional promising data demonstrating the potency of Cerus' proprietary modified Listeria vaccine technology. Some of this data has been published in the July issue of the Journal of Immunology, and we expect additional data to be published in other peer reviewed journals.

We've also selected Anthrax as our 1st target for an infectious disease vaccine. Yesterday we announced the receipt of the grant from the National Institutes of Health to support the development of the vaccine. This prophylactic vaccine is based on our proprietary Helinx (r) technology. The recommended award is for approximately $3.8m of development funding, over a 3 year period. Cerus will receive approximately $1.4m for the first year of development.

And finally, to expedite our progress, we have also expanded the staff dedicated to the vaccine program. As we increase research and development in the vaccines program, the INTERCEPT Blood System remains a significant opportunity for Cerus and continues to support our commercialization efforts in Europe. The INTERCEPT Blood System for platelets is currently being commercialized in Europe with Baxter Healthcare leading distribution, sales and marketing.

Sales for the quarter were primarily driven by repeat purchases from [inaudible] in Spain, Italy, Belgium and Norway. As of June, the total number of transfusions performed using INTERCEPT platelets in Europe exceeded 7,000.

In the US we have completed one of the two steps agreed upon with the FDA for Helinx (r) regulatory review of platelets. We successfully completed the additional analysis of the Phase III data, and intend to use this analysis in our discussions with the FDA on the supplemental trials that have followed.

Also in the quarter we completed the last of the planned Phase III trials for plasma. The study indicated that the primary and secondary efficacy end points of the trial were met. The company is currently preparing the clinical trial report for submission into the FDA. As we previously announced, our filing date in Europe has been pushed out beyond the end of this year, and we cannot provide guidance about the revised filing date at this time.

In the Red Blood Cell program we are continuing our evaluation of the antibody formation, and in parallel investigating process changes that could prevent this from occurring. The results from the Phase III acute clinical trial are now being reviewed.

We made an advances in each of our key initiatives during the quarter. As we've streamlined the company to focus on activities critical to our future success, Cerus closed the quarter by strategically realigning its operations. The realignment reduces R&D as well as G&A expenses, while providing for increased development focus on our therapeutic vaccine programs and the opportunity to pursue key activities with the INTERCEPT Blood System.

I will now turn the call over the Greg to review the financials.

Thanks, Claes. Earlier today we announced a loss for the quarter of $0.53 per share. And this compares to the net loss of $0.97 for the comparable period in 2003. A restructuring charge of $2.5m is included in these results. Despite this charge, the per share loss narrowed from last year due to an increase in development revenue from the Armed Forces collaborative agreements, and reduced R&D investment in the Red Blood Cell program. Our cash balance at the end of June was $94.8m, compared with a $110m balance at the end of 2003. The June 30 balance does not include the up front payment we received in July as part of the BioOne agreement announced earlier today. Our cash use from operations for the 2nd quarter was approximately $4.5m. As we stated following our restructuring in June, we expect our annual cash used, excluding the one time expenses relating to the restructuring, to drop to approximately $12m-$15m going forward. We recorded $3.8m in revenue for the quarter, including approximately $3.2m of development revenue from work performed under our agreements with the US Armed Forces. The remaining $600,000 was grant funding and revenue from our collaborations, including funding from Baxter for INTERCEPT development.

$76,000 from the sale of the INTERCEPT Platelet System in Europe was recorded deferred revenue. We expect sales of the product to continue at this rate, or with modest growth until we make progress with one of the larger European countries.

Our R&D spending of $8.7m for the quarter was unchanged from last quarter. We expect our R&D expense to be significantly lower in the 2nd half of 2004, as a result of our restructuring, and we expect it to be in the range of $26m-$28m for the full year.

G&A expense was $2.9m for the quarter compared with $2.8m for the same period last year. Net interest expense for the quarter was $1.2m and included interest expense on the loan facility from Baxter. Under the terms of the loan facility with Baxter, no payments of principal or interest are due until 2008, but we have conservatively recorded the entire balance as a current liability due to Baxter's assertion that the principal and interest are currently due.

Now I'd like to turn it back to Claes for some concluding remarks, and then we'll take your questions.

Thanks Greg. Yesterday we announced that Greg will be stepping down as CFO and Bill Dawson will be joining Cerus in that capacity effective August 9. I would like to take this opportunity to thank Greg for his outstanding contributions and for over 7 years of dedicated service to the company. He will be missed and we wish him success in his future endeavors. We would also like to welcome Bill Dawson who will be a valuable addition to the Cerus team, and who has a distinguished record of demonstrated financial and business expertise. In conclusion, we believe this has been a very busy quarter, marked by progress in both programs. My first 3 months has reinforced my initial impression that Cerus has tremendous potential in both its programs and its employees.

With the strategic realignment and the reduction in expenses, we believe we have taken important steps to advance activities that create shareholder value, and to provide the financial flexibility for continued growth. Now I'd like to turn the call over for questions.

Thank you. Ladies and gentlemen if you'd like to register a question please press the (1) followed by the (4) on your telephone. You will hear a 3-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the (1) followed by the (3). If you are using a speakerphone please lift the handset before entering your request. As a reminder, to register your questions, please press the (1) followed by the (4) on your telephone. Our first question comes from the line of Noel Rand [ph] [inaudible] please go ahead with your question.

The question is, if 10 is the top number, where would you rank the Baxter relationship in your opinion at this time?

I would answer by saying that, if you had a partnership where you're being sued by your partner, I think it better be less than 10.

I would agree.

I don't want to get into more specifics than that.

Is it constructive? Or are people trying to put blame on certain individuals? Are you trying to create a solution, or are you still pressing the problem?

I think that the fact that we have just concluded this deal with BioOne, I think it's a very good proof that we do work together well with Baxter and we're both trying very hard to maximize the value of INTERCEPT together. So I think that's positive. I think the lawsuit is the biggest negative, and I find in my discussions with people from Baxter that we have a very good, professional and collaborative approach to the ongoing challenge of trying to make the most out of INTERCEPT.

Okay, thank you.

Ladies and gentlemen, as a reminder, to register your question, please press the (1) followed by the (4) on your telephone. Gentlemen there seem to be no further questions at this time.

In that case we'd like to say that we conclude by saying that we appreciate your support and I look forward to reporting our progress in the next quarterly call. Thank you.

Sir we do have a follow up question from the line of Noel Rand. Please go ahead with your question.

I don't mean to dominate the questions here by any means, but going to the availability of monies to do trials, when you look out onto the horizon, how much comfort can we get from you today, relative to monies available to go into some more trials on your various products?

Well, I think with the reduced cash burn rate that we have and the available funds, we believe that we have some funds available to take us into trials. It's only when we get to the point that we actually enter into those trials-there's a number of different areas where we can get into trials, that we would know exactly how much money would be needed, but I think we are funded right now for taking us at least into one or two trials. Does that answer your question?

Yes it does. What is your biggest challenge today?

I think that an improvement in the Baxter relationship is high up on the list.

What are you going to try to get out of this relationship? How far do you think you can take it?

Well, I think as I said before, I think it's in both Baxter's and our interest to create as much value as we can out of INTERCEPT, so to agree upon a pathway to make that happen, I think is going to be the top priority, and I think if at the same time we're able to come up to a resolution of the lawsuit that would result in them dropping the lawsuit, I think that would be very good as well.

Thank you.

Thanks.

Gentlemen there are no further questions at this time.

All right, well, thank you again, and we look forward to reporting next quarter in about 3 months time.

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