Cerus Corp (CERS) 2004 Q3 法說會逐字稿

Good day ladies and gentlemen. Welcome to your quarter 3 2004 Cerus earnings conference call. My name is Jean. I will be your conference coordinator. At this time, all lines are in a listen-only mode. (Operator Instructions). At this time, I would like to turn the call over to your host, Lainie Corten, Manager of Investor Relations and Corporate Communications. Ma'am, over to you.

Thank you and good afternoon. Before introducing Claes Glassell, President and Chief Executive Officer 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 suggested by forward-looking statements we will be making. I call your attention to the disclosure in our most recent quarterly report filed on Form 10-Q and the annual report on Form 10-K, in particular to the sections entitled Risk Factors.

To request copies of our SEC filings or our press releases, please call 925-288-6319 or find them on our Web site at Cerus.com. This call will be archived temporarily on our Web site and will not be updated during that time. I will now turn the call over to Claes.

Thank you Lainie. Here with me today are David Cook, our Vice President of Research and Development, and Bill Dawson, our Chief Financial Officer. Our Chief Medical Officer, Larry Corash, will also be available to answer questions after the call.

During our last conference in July, I announced that I had laid out 4 main strategic initiatives for Cerus that I believe are critical to realizing the potential of our development programs and increasing shareholder value.

2 of these initiatives were near-term actions related to our operations and 2 concerned our long-term strategies in the fields of blood safety and vaccines.

The near-term actions are first to increase our financial discipline, and second, to improve our relationship with Baxter. My third initiative was to apply a business discipline to commercialization of the INTERCEPT blood system. This initiative was based on my belief that there is unrealized commercial value in INTERCEPT.

Finally, my fourth initiative was to make our vaccine program the Company's top development priority, with the goal of advancing cancer therapy into the clinic. The rapid early progress achieved by our vaccine team, as well as the large market potential of these products, convinced me that these programs deserved this priority.

Today we will provide an update on our continuing progress in all of these areas.

Last quarter, I indicated that we had reduced our burn rate by more than 50 percent, and that we would continue to percent non-dilutive third party funding to strengthen our financial position.

In July, we announced the proceeds of a 3-year $3.8 million grant from the National Institutes of Health to support development of an anthrax vaccine using our proprietary Helinx technology. Since then, we have been awarded additional Department of Defense funding, and also received our expected upfront payment from BioOne, our INTERCEPT partner in Japan.

I believe that our success at bringing in new funds, combined with our lower spending rate, have put Cerus in a solid position to move forward in our development programs. Bill will elaborate further on our financial position later in the call.

Regarding our relationship with Baxter, senior management teams from both companies are reviewing methods to increase market acceptance of INTERCEPT. We're discussing all aspects of our relationship, including the loan dispute.

Our joint objective is to reach an agreement that maximizes our opportunities for regulatory and commercial success, particularly in Europe, while at the same time resolving our disagreement regarding the loan. Creating a solution which addresses all of these issues remains my highest priority.

Later in the call I will provide a more detailed update on INTERCEPT. But for now, I will turn the call over to David for an update on the vaccines program.

Thank you Claes. In September, we had a major publication for the cancer vaccines program, which appeared in the proceedings of the National Academy of Sciences. The paper describes the disciplined process we used to construct and select a proprietary listeria strain. This strain will be the platform for our therapeutic vaccine product.

In our paper, we demonstrated an increase in tolerability of greater than a thousand-fold when compared to unmodified listeria. Vaccination with the Cerus strain induced powerful therapeutic responses in tumor-bearing mice. This work demonstrates our ability to improve the safety of listeria without compromising its potency.

Importantly, we believe our listeria platform compares favorably to other cancer vaccine approaches evaluated using the same pre-clinical model. During the quarter, the vaccine team continued to make progress in both our listeria EphA2 development program, which is a collaboration with MedImmune, and in the listeria Mesothelin program in collaboration with Johns Hopkins.

We've begun toxicology studies and other activities that are prerequisite for IND filings. We've also filed additional U.S. and international patents to protect our intellectual property.

In addition to making progress toward the clinic, we continue to evaluate additional applications of our technology in order to expand our pipeline of listeria-based immune therapy.

We have recently performed exciting experiments showing that listeria has a unique ability to stimulate immune responses in the liver. This opens the possibility of developing immunotherapies for a range of serious diseases, since the liver is the principal metastatic site of many cancers.

Cerus is working with collaborators at John Hopkins to evaluate this newly discovered characteristic of listeria, and to determine whether opportunities might exist to treat patients with cancer which has spread to the liver.

I will now turn the call back over to Claes.

Thank you David. Now I would like to give a brief update on our INTERCEPT program. Let me first discuss our recent deal with BioOne in Asia. Our work to support BioOne as they move towards commercialization of the INTERCEPT blood system for platelets in Japan and other Asian countries is a good example of how Cerus and Baxter are adding value to our INTERCEPT franchise.

Importantly, BioOne regards INTERCEPT as an important strategic business opportunity. We will continue to pursue alliances with motivated partners like BioOne who can help us bring these pathogen inactivation products to the global market.

In Europe, the Baxter sales and marketing team continues to make only modest progress in countries where the INTERCEPT blood system for platelets has been fully approved for sale. We have encountered challenges to commercial adoption. These include concerns from some national transfusion services, governmental agencies and health-care policy groups regarding efficacy, cost and risk benefit profiles.

As you know, this is a new technology for blood banks and a large purchasing decision for each customer. I would like to elaborate on some measures we believe can lead to increased market adoption.

First, I think that getting the products into the hands of our potential customers is critical. Running experience trials where the blood center can evaluate INTERCEPT prior to purchase (ph) should lower barriers to adoption.

I believe that historical efforts in this area have not been sufficiently supported. An important part of our dialog with Baxter concerns ensuring that an appropriate level of funding and focus and invested going forward.

Second, we believe the cost of adopting INTERCEPT can be partially offset by eliminating other procedures. Baxter and Cerus are working takes our educate customers on these economic benefits.

Third, we are expanding the safety profile by collecting post-marketing haemovigilance data. We intend to make this data available to our customers.

For our U.S. platelet application, an independent panel of experts has completed its report analyzing our Phase III SPRINT data. We believe this report is supportive of our application. We anticipate that Baxter will submit the report to the FDA shortly.

The size and scope of a possible additional clinical trial will be determined through discussions with the FDA. At that time, we will be in a better position to make decisions concerning the potential commercialization of INTERCEPT platelets in the U.S.

In our INTERCEPT plasma program, we are prioritizing European CE Mark filing ahead of further U.S. regulatory activities. We have completed 2 of 3 European in vitro experience studies required to support a CE Mark application. Data from these studies will be among 8 Cerus abstracts presented in early December at the American Society of Hematology meeting in San Diego.

In our red blood cell program, we have make progress in laboratory studies investigating process (ph) changes that might prevent the antibody formation that was seen in our Phase III chronic study. In addition, we have analyzed the clinical data collected in the acute and chronic studies prior to their termination. These results will also be presented in December at the ASH meeting.

Our evaluation of the modified S303 treatment process is ongoing, and we have defined key scientific milestones which we will be required to reach a decision regarding re-entering (ph) the clinic with INTERCEPT red cells. Now, Bill will give an update on this quarter's financial results.

The third quarter marked a transition for Cerus. We began to realize the effects of the restructuring announced in late June. We also brought our INTERCEPT spending into balance with available funding from Baxter, the U.S. Armed Forces and BioOne. Finally, we began to ramp-up our efforts in research and development of our vaccines program.

Revenue for the quarter ended September 30, 2004 was $3.5 million, up from 2.9 million recognized a year ago. More importantly, total expenses declined to 7.6 million for the quarter from 16 million last year, reflecting the effects of our restructuring.

Net loss for the third quarter was $5.1 million or 23 cents a share, versus a loss of 14.2 million or 64 cents per share in last year's third quarter. For the 9 months ended September 30, 2004, revenue was 11 million, up from 6.1 million in the comparable period a year ago, largely explained by the substantial funding for our INTERCEPT plasma program in the first half of 2004 from the U.S. Armed Forces.

Total expenses declined to 33.4 million during the first 3 quarters of 2004 versus 51 million in the prior year. Net loss for the first 3 quarters of 2004 narrowed to 25.8 million or $1.17 per share, as compared to 48.1 million or $2.61 per share in the prior year. We ended the third quarter with 89.6 million in cash and short-term investments, down 5.2 million from our cash balance at the end of the June quarter.

The cash effects of our restructuring, in particular severance payments, are largely behind us now. So we would expect net cash flow during our fourth quarter to more closely reflect our reduced burn rate. I would reiterate our guidance toward an annual burn rate of between $12 and $15 million over the coming fiscal year.

I want to make a few other points with regard to cash balance and burn rate. First, we continue to carry the Baxter loan balance and accrued interest totaling 60.1 million on our balance sheet as current liability. If Baxter were to prevail in the suit against us, we would owe them additional default penalties of 2 million as of September 30.

Second, on October 14 we announced the receipt of a $7.5 million cash payment from BioOne. Later in October, we were awarded $5.9 million in development funding from the U.S. Armed Forces for our vaccines program, to be applied over the next 2 years. Both are indicative of the non-dilutive financing Claes referred to earlier.

And third, given our burn rate and funding received after the end of the third quarter, I would highlight the disclosure in the 10-Q we are filing concurrently with this call, which states that we now believe our cash resources are sufficient to fund operations through at least mid 2006, irrespective of how the Baxter loan dispute is resolved.

We remain committed to supporting our INTERCEPT programs in balance with available external funding, and to expanding the funding of our vaccine development efforts through both internal and non-dilutive financing sources. By doing so, we hope to maximize shareholder value in the future. And now I would turn the call back over to Claes for some concluding remarks.

Thank you Bill. In conclusion, this has been a productive quarter for Cerus, with forward progress on our 4 strategic initiatives. In addition, we are excited about the agreement with BioOne and what it means for INTERCEPT. We're also pleased about our continued progress with MedImmune and Johns Hopkins. We look forward to reporting our progress throughout the next quarter and on our next conference call. Now I would like to turn the call over for questions.

(Operator Instructions). Brett Rice (ph), Wachovia Securities.

Good afternoon gentlemen. Could you -- are you at liberty to shed any light on what is the (indiscernible) of the problem between Cerus and Baxter? And why has there not been progress on that lawsuit?

The background is that Cerus was lent (ph) money from Baxter. And Baxter felt that -- the collateral that was put up was actually future revenues for sales of the INTERCEPT platelets in Europe. And Baxter alleges that that collateral is not worth what it should have been worth, and therefore they want to collect the loan. And we disagree with that. That is the background.

As I mentioned in my statement, we are discussing the entire relationship with Baxter including the loan dispute. And of course our ambition and my priority is (sic) to try to get a resolution to all aspects of the relationship, including the loan dispute.

Right. Now since this dispute looms in the background, has this impacted on their ability to deal with you in other areas? Or are they able to -- one thing does not have anything to do with the other?

I don't think it has had an impact. We're working constructively together with them. And I think that as you can see, the transaction that be entered into with BioOne was a joint transaction between Baxter and Cerus. I think it is a good demonstration of the fact that we are able to work well together and keep the loan dispute as a separate item.

There are no further questions at this time.

Thank you all for listening today. And I hope you will join us again next quarter. Bye.

Ladies and gentlemen, thank you for us joining us on the conference call today.