Cerus Corp (CERS) 2005 Q4 法說會逐字稿

Welcome to the fourth quarter and year-end financial results for 2005 conference call. My name is Charlene, and I'll be your coordinator for today. We'll be facilitating a question-and-answer session toward the end of this conference. [OPERATOR INSTRUCTIONS] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to Ruey-Li Hwang, Associate Director of Investor Relations and Corporate Communications. Please proceed, ma'am.

Thank you. 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 quarterly report filed on our most recent form 10-Q and the annual report filed on form 10-K/A for the year ended December 31, 2004, and our soon-to-be filed form 10-K for the year ended December 31, 2005 including the sections entitled risk factors. To request copies of our SEC filings or our press releases, please call 925-288-6000 or find them on our website at Cerus.com. This call will be archived temporarily on our website and will not be updated during that time. I will now turn over the call to Claes.

Thank you, Ruey-Li. I'm here today with Bill Dawson, our Chief Financial Officer and David Cook, our Vice President of Research and Development. Also, Larry Corash, our Chief Medical Officer will also be on the line and available for questions. On this call, we would like to briefly mention our key accomplishments made in 2005 and cover the fourth quarter and year-end financial results. I would also like to expand upon our recent news announcing the gain of exclusive rights to INTERCEPT Blood Systems from Baxter, and what this means for Cerus.

At the beginning of 2005, we laid out some very ambitious goals in our conference call, and I'm happy to report today that all of those goals have been achieved. First, we favorably resolved the litigation with Baxter with a net gain to Cerus of $22.1 million. This also gave us greater involvement in the European marketing of INTERCEPT. Second, we filed a CE mark application at the year end for the European approval of the INTERCEPT Blood System for plasma. Third, also at the year end, we filed an IND for our lead immunotherapy candidate, CRS 100, a Listeria-based therapeutic designed to treat patients with cancer that has spread to the liver. A fourth goal was to make a decision whether to re-enter clinical trials for our red blood cell programs. We successfully developed a modified treatment process which appears to have eliminated immune reactivity, and we presented the results of this process to the FDA. Based on the outcome of that meeting, we announced our intention to move forward into the clinic. Finally, we met our projection of ending the year with more than $45 million in cash, and Bill will elaborate further on this in the financial section.

Last week, we announced that we gained exclusive rights to the INTERCEPT platelets and plasma systems from Baxter. These rights are worldwide, excluding certain Asian countries where rights have previously been licensed to BioOne Corporation. Together with the red blood cell system, which we gained last year, we now have full control over commercializing this important technology in blood safety. The challenge to commercialize INTERCEPT is now ours. For Baxter, INTERCEPT was only one among many competing priorities, and we believe it suffered from poor product positioning. We at Cerus have the expertise and availability to focus on INTERCEPT without any distractions. We will be able to present INTERCEPT's value proposition on its own merits, and we expect to improve sales in 2006.

Starting with our March quarter, we will report top line sales exclusively, and we will provide updates on additional metrics of market acceptance. More specifically, we believe pricing of INTERCEPT has been too high to gain a reasonable market penetration. With our improved economics under the recent Baxter agreement, we believe that we will be able to offer INTERCEPT at more attractive prices, allowing us to improve volumes while earning an acceptable margin. In addition to pricing, we can promote INTERCEPT across a wide range of collection platforms, including platelets derived from whole blood collections, which can make the treatment more cost-effective for blood centers. We still have important challenges ahead of us.

We received national approval of the platelet system in France last August. There are still several countries that need approval. Notably, Germany. The approval process there requires that blood centers obtain both local and national approval of blood components treated with INTERCEPT. Furthermore, reimbursement needs to be established country by country for pathogens in activated platelets. In order to expedite regulatory approvals and reimbursement decisions, we will be devoting Cerus’ resources to work with customers in an attempt to streamline these processes. While we have a long way to go, INTERCEPT is a establishing a toehold in the market. Over 25,000 INTERCEPT platelet units have been transfused since CE mark approval.

We have 15 blood banks across Europe as paying customers, who have adopted INTERCEPT without reimbursement. Their adoption is based on product benefits and value. Another dozen blood banks are conducting experience trials. We have found that experience trials are a useful way of promoting adoption of this new technology. More experience studies are planned for later this year. The platelet system is now in clinical use in ten countries, and while sales are low, they did double from 2004 to 2005. We have set up a European subsidiary located in the Netherlands. Our European employees will be responsible for sales and marketing with scientific, clinical, and regulatory support provided by our U.S. sales staff and augmented by Baxter during the transition period. Having just returned from Europe, I can tell you firsthand that the customers I visited all expressed their satisfaction with the product and their support of the transition to Cerus.

In the U.S., we now have full regulatory responsibility for INTERCEPT. In the course of 2006, we expect to meet with the FDA to clarify the regulatory pathway for all three components. We've already announced our intentions to re-enter phase one clinical trials in red cells, and target enrolling our first patient in mid-2006. In addition, to support our initiatives in commercializing the INTERCEPT Blood System, we have established a Blood Safety Scientific Advisory Board. The board, comprised of recognized leaders in the fields of transfusion medicine, blood banking, hematology and pathology, is expected to provide valuable expertise and guidance to Cerus.

In addition to all that has been happening in INTERCEPT, equally important is our progress in our immunotherapy program which is a strategic focus for Cerus. I am pleased to report that we have received clearance from the FDA to proceed with our phase one clinical trial with CRS 100 in patients with liver metastatic cancers. David will elaborate further now on the progress of the immunotherapy program.

Thanks, Claes. I would like to take a few minutes to review our 2005 accomplishments in the area of immunotherapy, and then turn to the opportunities and challenges for 2006. In 2005, we had a number of successes. First, our work was published in Nature Medicine, describing our proprietary KBMA vaccine platform. This approach offers the potential to combine the potency of live vaccines with the safety of killed vaccines, and it represents a fundamentally new platform for developing vaccines using recombinant microbes. As further evidence of the scientific value -- validation of the KBMA approach, we were funded under a consortium led by the University of New Mexico to work on tularemia. One of the consortium's goals is to develop a KBMA tularemia vaccine. Cerus will receive 2.8 million over three years to support this research. Finally, as Claes already mentioned, at the end of the year, we filed an IND for CRS 100, a lead product for cancer immunotherapy designed to treat liver metastatic solid tumors. Earlier this month, we received clearance from the FDA to proceed with a phase one, dose escalation study of CRS 100. Regulatory clearance was obtained within the statutory 30-day time limit. The FDA's timely review of our application reflects the quality and comprehensive nature of the IND filing.

Early on in this program, we recognized that we would have to provide a comprehensive package, since we were proposing a first use of modified Listeria in patients. Importantly, as part of our preclinical studies presented to the FDA, we were able to document immune system activation in nonhuman primates that is similar to what we've observed in mice. As we turn toward the clinic with CRS 100, there are a number of challenges. We still require customary study site approvals before we can enroll our first patient, and we are currently working through this process.

One important challenge in 2006 will be to maintain adequate rates of patient enrollment. Our clinical protocol is quite selective, in order to ensure that we enroll patients who will be appropriate for both safety and immune activity evaluations. I want to remind you that the primary objective of phase one is to determine the safety profile of CRS 100. Secondarily, we will monitor for evidence of biological activity including immunological responses and show anti-tumor activity. Based on the design [inaudible], we expect to gain realtime data concerning both safety and biological activity of CRS 100.

I would now like to turn to CRS 207, our Listeria therapeutic engineered to induce T cell responses to Mesothelin. There is a strong synergy between CRS 200 and CRS 207 because both are based on the same proprietary Listeria strain. We intend to leverage CRS 100's preclinical safety package and human clinical trial data, when we file our IND for CRS 207. To maximize the value of the CRS 100 clinical data, we are targeting initiation of a clinical study with CRS 207 in 2007. We hope that the clinical experience with CRS 100 enables us to shorten the duration of a phase one study with CRS 207. In the remainder of this year, we're focusing on developing manufacturing methods and performing preclinical safety and pharmacology studies with CRS 207.

We are also devoting significant research efforts to optimizing our ability to target immune responses to Mesothelin and are evaluating a variety of therapeutic regimens in preclinical animal models. We continue to be encouraged by the emerging scientific and clinical data validating Mesothelin as a target for active immunotherapy of pancreatic and ovarian cancers, and we believe our intellectual property and licenses gives us a dominant position in this field.

Our KBMA platform has continued to advance since we first announced it last summer. This program is funded primarily based on grants from the National Institutes of Health to support research into prophylactic vaccines for potential bioweapons such as anthrax and tularemia. We also received some Department of Defense support. Our most recent accomplishment is to demonstrate the protection of mice from a lethal challenge with anthrax spores. I should point out that this mouse model is an early test of potency, and we are now connecting studies in more advanced animal models.

Our challenge for the KBMA platform is to define commercial therapeutic opportunities in the area of chronic infectious disease. This will be a major objective for Cerus in 2006. Now, I would like to turn the call over to Bill.

Thanks, David. Revenues for the fourth quarter were $5.6 million, up from 3.0 million for the fourth quarter of 2004, primarily due to amounts recognized in the current period from the amortization of past up-front payments from BioOne Corporation and Medimmune for which revenue recognition was deferred, as well as from higher funding from the U.S. Armed Forces.

Total operating expenses for the fourth quarter of 2005 were $9 million, up from 7.3 for the same period in 2004, due primarily to increased preclinical activities associated with our immunotherapy programs. Net loss for the fourth quarter of 2005 was $3.9 million or $0.17 per share compared to a net loss of $5.4 million or $0.24 per share for the fourth quarter of 2004. The lower net loss in the current period reflects both increased third party funding for research and development programs and a significant reduction in interest expense as a result of the February 2005 settlement of the loan dispute with Baxter Capital, offset somewhat by increased operating expenses.

For the 12 months ended December 31st, 2005, total revenues were $24.4 million compared to 13.1 million for the same period in 2004. Net income was 13.1 million or $0.55 per diluted share for the 12 months ended December 31, 2005 compared to a net loss of 31.2 million or $1.41 per share for that same period in 2004. Net income for the 12-month period in 2005 includes a one-time gain of $22.1 million recognized in February 2005 as a result of the loan settlement. At the end of December 31, 2005, the company had cash, cash equivalents, and short term investments of $45.8 million.

For 2006, we anticipate a cash burn from operations in the range of 25 to $27 million. The increase in burn from 2005 is attributable to our taking on responsibilities for commercializing the INTERCEPT Blood System in Europe and increased investment in our immunotherapy and red blood cell programs. Now, I'll turn the call back over to Claes for some concluding remarks.

Thank you, Bill. 2005 was a year of solid achievements for Cerus. We wouldn't have been able to accomplish this if it were not for all of our dedicated employees who worked so hard to make it happen. I'm very proud to have such talented colleagues working alongside me. We have a strong team in place, and I believe the company will be able to continue advancing our programs and meet the challenges that lie ahead. In 2006, we hope to report on the following events.

Enrollment of our first patient in the CRS 100 phase one trial in the second quarter. Enrollment of our first patient in our red blood cell phase one trial by midyear. Verification of the U.S. regulatory pathway for INTERCEPT during the second half of the year. Completion of red blood cell phase one trials in the fourth quarter. Plasma CE mark approval by year end. And selection of a commercial target for our infectious disease program. In addition, in the course of the year, we expect to update you on our plans concerning future red blood cell product development, on entering clinical data for CRS 100, and on commercial progress from INTERCEPT in Europe. Now, I would be happy to respond to questions.

[OPERATOR INSTRUCTIONS] Your first question comes from the line of Ira Sochet from Sochet and Company. Please proceed.

Hi, Claes.

Hi, Ira, How are you?

All right. Congratulations on the acceptance of CR -- of your IND or NDA on CRS 100.

Thank you.

Can you give us kind of a -- what the balance sheet looks like? Have you received your money from Baxter?

Yes, we have. We have also repaid the loan to Baxter. But Bill can probably walk you through where we stand right now.

As we said at the beginning of last week, Ira, we will recognize gains in excess of $6.5 million during that -- during 2006 as a consequence of the renegotiation with Baxter and those gains are all cash gains as opposed to noncash.

Right. In other words, at this -- as of today, how much cash does Cerus have?

We're not disclosing that other than that we received 6.5 million and paid back less than that to Baxter.

Ok. All right. And the cash burn of 25 to 27 million is -- , in other words, that's separate. That's what you're going to burn, so if you actually have a little more money than 45.8 million now, that's going to be the new balance.

Correct.

Ok. Thank you.

Thanks.

[OPERATOR INSTRUCTIONS] I would now like to turn the call back over to Mr. Bill Dawson. Please proceed, sir.

I'll turn it to Claes. He can --

Thank you, all for listening and for participating today. We greatly appreciate your interest and support for Cerus. This concludes our call for this quarter, and I hope you will join us again when we report our results from the first quarter 2006. Thank you.

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