Cerus Corp (CERS) 2005 Q1 法說會逐字稿

Good day, ladies and gentlemen and welcome to the quarter one 2005 Cerus Corporations earnings conference call. My name is Audrey and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question and answer session towards the end of this conference. If at any time during the call you require assistance, press star followed by 0 and an operator will be happy to assist you. As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today's call, Ms. Lainie Corten. Ms. Corten, you may proceed, ma'am.

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, regulatory progress, 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 SEC filings, in particular our most recent annual report filed on form 10K/A for the year ended December 31, 2005. Including the section entitled "Risk Factors." To request copies of our SEC filings or our press releases, please call 925-288-6319 or find them on our website at www.cerus.com. This call will be archived temporarily on our website and will not be updated during that time. I will now turn the call over to Claes.

Thank you, Lainie. I'm here today with David Cook, our Vice President of Research and Development and also our Chief Financial Officer, Bill Dawson.

In the last quarter, we made significant progress in our development programs and in our relationships with partners. The new INTERCEPT agreement with Baxter has given us greater control over the future of our Blood Safety programs and simultaneously removed the financial uncertainty that was associated with the Baxter loan dispute.

In addition, we announced a new Immunotherapy program and the signing of a letter of intent to enter a second commercialization agreement for INTERCEPT with BioOne. We succeeded in establishing a firm foundation for our future growth and I'd like to spend a few minutes sharing our vision for Cerus through the end of 2005 and beyond.

We believe that our Listeria Immunotherapy platform offers significant advantages over existing approaches and that our platform will allow us to establish a leadership position in the field of Cancer Immunotherapy. To support this long-term goal, we are aiming to file an IND by year-end for CRS-100, a Listeria-based therapeutic designed to treat Colorectal Cancer that has spread to the liver.

CRS-100 was selected as our first candidate to enter the clinic for three reasons. First, and most importantly, CRS-100 would address a major unmet need in Colorectal Cancer patients. Second, its mechanism of action, which triggers both innate and adaptive immunity, is uniquely suited to address liver-specific disease. Finally, we have generated potent anti-tumor responses in animal studies. Most of the manufacturing methods, preclinical data, and patient experience associated with CRS-100 will be applicable to our later Listeria products that incorporate tumor-specific antigens.

We currently have three Listeria-based Immunotherapy programs in development, all of which are expected to be in the clinic in 2006. We will look to expand our Immunotherapy programs through partnering and by pursuing propriety and public-domain antigens for internal development.

With regard to Blood Safety, we continue to believe that Pathogen Inactivation will play an important role in providing increased levels of safety for transfusion recipients. In order to advance our INTERCEPT Blood System programs while maintaining a disciplined approach to spending, we will be focusing on the products and geographies that we believe offer the greatest near-term opportunity for value creation.

In 2005, our four INTERCEPT priorities will be: One, collaborating with Baxter under our new agreement to increase market acceptance of platelets in Europe. Two, also with Baxter, submitting a European CE Mark application for plasma. Three, completing a definitive agreement with BioOne for commercialization of plasma in Asia. And four, initiating discussions with the FDA regarding the design of potential red blood cells trials using the modified S-303 treatment process.

Completing these four goals will enable us to make progress in the European and Asian markets most favorable for adoption of platelets and plasma, and would position us to make informed decisions regarding the future direction of the red blood cell program.

I'd like give you an update on our experience working with Baxter under the new agreement. We're pleased to see increasing in activity surrounding European commercialization. I want to remind you that 2005 will be a year to build customer relationships that we expect will lead to increased future INTERCEPT sales. Within the new partnership framework, we're taking an active role in reviewing all aspects of the program. We are evaluating marketing and selling activities and regulatory approaches within key countries, and we're working with customers to define the value proposition based on experience that is in individual blood centers.

I recently made a trip to visit our partner, BioOne, in Japan and China and I'd like to comment on a couple of things that impressed me during my visit. First and foremost, BioOne has made considerable progress on commercializing pathogen inactivated platelets in the relatively short time since our partnership was formed. They have established a close working relationship with the Japan Red Cross, which, under a directive from the Ministry of Health, is actively evaluating Pathogen Inactivation for both platelets and plasma. BioOne has begun to work with regulatory authorities in other Asian countries and also to identify customers that are interested in Pathogen Inactivation.

BioOne is singularly focused on bringing Pathogen Inactivation to Asia. In Japan, the clear market need has enabled BioOne to assemble a qualified management team and to raise money from a premiere group of investors. In addition, BioOne has substantial knowledge and contacts within the region. We are very pleased to have BioOne as a partner to INTERCEPT.

Finally, I want to reiterate that we are maintaining our focus on financial discipline, including our 2005 goal of ending the year with in excess of $45 million in cash. In addition to careful control over our spending, we continue to pursue non-dilutive sources of new funds, including new partnerships and grants. Later in the call, Bill will review our first quarter financials, which demonstrate our progress in achieving these targets.

Now I'd like to turn the call over to David Cook, our Vice President of Research and Development.

David Cook, Ph.D.: Thanks, Claes. I'd like to provide an update on recent R&D progress on Immunotherapy and Blood Safety.

An important scientific accomplishment in the last quarter has been the elucidation of the mechanism of CRS-100 for treating metastatic disease in the liver. CRS-100 is a proprietary strain of Listeria which is designed to be active without the inclusion of specific tumor antigens. We've shown that CRS-100 is taken up by macrophages in the liver, initiating a potent innate immune response. Using transgenic mice, we have begun to define the multiple downstream pathways activated by CRS-100 in order to recruit innate immune cells to the liver. Importantly, activated NK cells cause tumor destruction, and fragments of the tumor are then picked up by dendritic cells and presented to the adaptive immune system. This creates a long-term antigen specific memory response to the tumor as shown in our animal studies.

In our program for colon cancer metastisized to the liver, achieving our goal of a year-end IND filing for CRS-100 involves three major tasks. The first is scaling up production to support both toxicology testing and the initial clinical studies. I'm happy to report that we successfully completed our first manufacturing run for CRS-100. Next, we will need to complete a series of toxicology studies to support the IND application. We've already conducted single-dose studies in mice and nonhuman primates. We next plan to conduct multi-dose toxicology studies. Finally, we are planning to hold a pre-IND meeting with FDA in Q3. To support this, we are now developing a Phase I clinical protocol with investigators at Johns Hopkins.

We also continue to make progress in our other Immunotherapy programs, MEDI 543 in collaboration with MedImmune and CRS-207 for pancreatic and ovarian cancer in collaboration with Johns Hopkins.

For both of these programs, in which our Listeria is engineered to express specific tumor antigens, a critical step is generation of candidate vaccine strains. Careful screening of these candidate strains with a focus on immune response and anti-tumor activity will lead to selection of optimized strains for clinical trials. In the last quarter, we delivered a panel of Listeria-EphA2 candidates to MedImmune so that they can select a strain and complete pre-clinical development of MEDI 543. We also began our own evaluation of a panel of Listeria-Mesothelin candidates which will lead to selection of an optimal strain for CRS-207.

We continue to invest aggressively in our Immunotherapy intellectual property estate. This past quarter, we achieved an important expansion of our intellectual property rights for Mesothelin, which we believe has great value as a target antigen for Immunotherapy. We extended our exclusive field to encompass all therapeutic and prophylactic uses covered by the Johns Hopkins Mesothelin patents.

Other R&D achievements were highlighted in recent publications at the annual meeting of the American Association for Cancer Research. In the first presentation, we described the construction of our Listeria-Mesothelin strains. We demonstrated their therapeutic anti-tumor efficacy and ability to markedly increase survival in the mouse model. This presentation also included data from our single-dose toxicology studies, where Listeria were delivered safely to non-human primates by two routes of administration.

The second presentation showed in an animal model that our Listeria-based vaccines are able to stimulate and boost antigen-specific immune responses, even in the presence of pre-existing immunity to Listeria. These data distinguish the Cerus platform from conventional biological vectors, including commonly-used viral vectors, which typically lose their efficacy once vector-specific immune responses are initiated. Both of these presentations are available on our website.

Turning now to our INTERCEPT program, we've made both regulatory and R&D progress in several areas. This past quarter, Baxter submitted our supplemental Phase III SPRINT trial analysis to the FDA, which is a critical step in determining what additional clinical studies might be required for the platelet system before we can obtain approval in the United States. We also made progress in the preparation of our CE Mark application for the plasma system including a productive meeting with regulatory authorities in Europe and we continue to target a goal of year-end filing.

For the red blood cell program, we are encouraged by data generated using the modified S-303 treatment process that we announced in December of last year. We will be presenting some new data at the International Society of Blood Transfusion meeting in July which supports the use of the modified process. As Claes mentioned earlier, we anticipate initiating discussions with the FDA later this year regarding the potential design of clinical trials to evaluate the modified process.

In the first quarter, we made progress toward this goal by submitting the clinical trial report for the halted Phase III clinical trial in acute patients, which used the original S-303 treatment process. Prior to meeting with the FDA, we also plan to complete and submit a similar report for the Phase III chronic trial, which also used the original process. We will then plan to present several additional preclinical studies characterizing the modified S-303 process. As we indicated in our last conference call, we would likely need to conduct early phase trials with the modified process before starting a Phase III red cell study.

I will now turn the call over to Bill Dawson, our Chief Financial Officer, for a discussion of our first quarter financial results.

Thanks, David. Revenue for the first quarter of 2005 was $6.4 million, up from $3.6 million for the first quarter of 2004, due to increases in funding for Immunotherapy R&D from the U.S. Armed Forces and amounts recognized this quarter from the deferral of up-front payments received last year from both MedImmune and BioOne.

Total operating expenses for the first quarter of 2005 were $7.5 million, down from $11.7 million for the same period in 2004, primarily due to the effects of the strategic realignment implemented in June, 2004.

Loss from operations for the first quarter of 2005 narrowed to $1.1 million from $8.1 million in the first quarter of 2004, as a result both of increased funding for research and development programs and reduced operating expenses. As compared to the immediately proceeding quarter, operating loss declined from $4.4 million the fourth quarter of 2004.

Net income for the first quarter of 2005 was $21.4 million or $0.92 per diluted share compared to a loss of $9.2 million or $0.42 per share for the first quarter of 2004. Net income in the current period included a one-time nonoperating gain of $22.1 million recognized in connection with the restructured loan agreement with Baxter announced in February, 2005.

At March 31, 2005, we had cash, cash equivalents, and short-term investments of $55.9 million, down from $95.3 million at year-end.

Our cash balance at the end of March reflected the payment of $34.5 million to Baxter in February, in connection with the loan settlement, as well as the use of $4.7 million in operations, of which $2.3 million related to bonuses earned based on achievement of last year's corporate objectives and annual insurance premiums that were paid during the quarter. As Claes said earlier, we are maintaining our goal of ending the year with an excess of $45 million in cash.

I am also pleased that we recently completed documentation and testing of our internal controls, under section 404(c) of Sarbanes-Oxley and no material weaknesses were observed. I will turn the call back over to Claes for some concluding remarks.

Thank you, Bill. All of the advances made during the last quarter reinforce our feeling that Cerus is truly gaining momentum. We have a vision for what we would like to achieve, and we can see continuous progress toward these goals.

To better share this vision with you, we recently launched a redesigned Cerus.com website. We've changed the structure of this site to reflect our expansion into the areas of cancer and infectious disease, and we've added a substantial amount of information about our newer technologies. I hope you will be able to spend some time exploring the new website and that you will continue to visit in order to follow our progress.

In addition, we will hold our annual meeting on June 6th, and we certainly welcome your attendance.

Now, I'd like to turn the call over for questions.

[ OPERATOR INSTRUCTIONS ]

Mr. Claes, there are no questions in the queue at this time, sir.

Okay, then, I'd like to thank you for your attention and say that this concludes our call for the quarter and we hope that you will plan to join us again when we report results from the second quarter of 2005. Thank you.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes your presentation. You may now disconnect. Good day.