Celldex Therapeutics Inc (CLDX) 2002 Q4 法說會逐字稿

Good morning and welcome ladies and gentlemen, to the AVANT Immunotherapeutics fourth quarter and 2002 year end conference call.

At this time, I would like to inform you that this conference is being recorded and that all participants are on a listen only mode.

At the request of the company, we will open up the conference for question and answers after the presentation.

I will now turn the conference over to Dr. Una Ryan.

Thank you.

Good morning, ladies and gentlemen.

I'm Una Ryan and the President and CEO of AVANT Immunotherapeutics Incorporated.

With me on this call is Chip Catlin, AVANT's Chief Financial Officer.

I'd like to read a short prepared text before opening the call to questions.

I want to remind you that statements made during AVANT that are not historical facts may be forward looking statements that are subject to risks and uncertainties detailed in the company's filings with the Securities and Exchange Commission.

Actual results could differ materially from those expressed in any forward looking statements made by AVANT.

We announced in our press release today, AVANT's financial result for the fourth quarter and full year 2002.

AVANT reported a net loss of $3.5m or $.06 per share for the fourth quarter compared to a net loss of $6.9m or $.11 per share for the fourth quarter in 2001.

For the year ended December 31, 2002, AVANT reported a net loss of $13.8m or $.23 per share compared to a net loss of $22.8m or $.39 per share for the 12 months of 2001.

Outstanding shares at year end were approximately 60.5m shares.

At December 31, 2002, AVANT had cash and cash equivalents of $25.1m representing more than two years of cash on hand at our expected burn rate through 2004 and this includes project funding from the DOD contract.

The decrease in net loss in the fourth quarter of 2002 and for the 12-month period primarily reflects a decrease in operating expense compared to the same period in 2001.

The decrease in operating expense of $3.7m in the fourth quarter of 2002 and $6.8m in the 12-month period results primarily from a reduction in research and development expenses related to the company's terminated [inaudible] program and a decline in the number of clinical trials being conducted by AVANT.

A decrease in manufacturing costs as a result of delays in production run for our bacterial vaccines.

A decrease in personnel related expense and the elimination of goodwill amortization.

I want to emphasize strongly that AVANT is a company with a variety of late stage programs in chemical development, a majority of which is supported by major companies, governmental agencies or international health organizations.

As recently, we were extremely pleased have been awarded the DOD, Department of Defense and BBC contract for the development of an oral combination anthrax and plague vaccine since it provides non-diluted funding to the company.

Receipt of this contract means that AVANT should now have over two years of cash and cash equivalents on hand.

However, we're excited about using our vector vaccine technology in support of the country's bio-defense initiatives to develop advance vaccines that may offer significant advantages in terms of administration, safety, efficacy and storage of a current bio-defense vaccine.

With respect to our clinical development programs, we continue to advance 31, our novel therapeutic for cholesterol management with phase II clinical results expected in the fourth quarter of this year.

We are supporting this current trial on our own with the intent to partner study for further development and potential commercialization.

With our partner, Glaxo, Smith Kline(ph), we are developing a two dose oral Rotavirus Vaccine virus vaccine, Rotarix, that is expected to enter global late stage clinical studies in the second half of this year.

Finally, we are advancing the two lead products in our bacterial vaccine, CholeraGarde vaccine and Ty800, typhoid fever vaccine in the clinic while leveraging the cost of these trials through our partners.

I want to further emphasize that AVANT has assembled a broad and deep portfolio of technologies and intellectual property that give us a strong competitive position in the vaccine's arena.

With five of our vaccines in clinical development, our goal is to become a leading developer of innovative vaccines that address healthcare needs on a global basis.

In this regard, we have eventually completed the acquisition of VitriLife(ph), a new technology with the potential to reduce manufacturing costs and improve product stability, eliminating the need for vaccine refrigeration.

With this technology, and our cholera and salmonella vector delivery technologies, we can now develop a new generation of vaccines that have an ideal product profile.

Safe and effective, oral, single dose, rapidly protective and requiring no refrigeration.

In planning our budget for 2003, we have focused our resources on completing the 31, Phase II trial and meeting our obligations under the DOD/DBC contract for an oral anthrax and plague vaccine.

At the same time we will advance our time, we will advance our CholeraGarde and Ty800 – typhoid fever vaccine in the clinic by leveraging the cost of these trials through our partners, the International Vaccine Institute funded by the Gates foundation and the NAIAD of the National Institute of Health.

We have evaluated all of our planned activities for 2003 and this process is continuing.

We are currently projecting a cash burn rate of $11m to $14m for 2003.

And a year end cash balance of approximately $12m to $13m.

Earlier this morning, I presented an update of the company's programs at the fifth annual Bio-CEO and Investor Conference here in New York City.

The live audio web cast presentation with slides should be available shortly at the investor information section of AVANT's website www.AVANTIMMUO.com.

I want to remind you again, that this press release and the presentation earlier this morning contains forward-looking statements which are subject to a variety of risk and uncertainties and other factors that could cause actual results to differ materially from those expressed in any such forward looking statements.

This is the end of my prepared statement.

And we now welcome your questions.

That you.

The question and answer session will begin at this time.

If you are using a speakerphone, please pick up the hand set before pressing any numbers.

Should you have a question, please press star, 1 on your push but on telephone.

If you wish to withdraw your question please press star, 2.

Your question will be taken in the order that it is received.

Please stand by for our first question.

Thank you.

Our first question comes from David Miller.

Please state your question.

Hi, this is David Miller from Biotech Monthly.

Good morning.

Do you have plans to raise capital to try to speed up your clinical trials or are you primarily looking to find partners to reach that goal?

We want to keep a balance between partnered products and those that we wholly owned.

What we have done up to now in this difficult financing environment is find partners who are development partners who do not cause us to do diluted financings.

Who do not cause us to lose rights and who, in fact, underwrite our burn.

So at present, we could continue without slowing any of our clinical development programs using these kind of mechanisms.

At present, we wholly own our 31 program and we wholly own the bacterial vaccines program for travelers and for the developing world.

So I think the answer is we know how to raise cash, we've done it many times before, but we won't do it at these prices.

If things improve we certainly would.

And it is part of our business plan to do partnerships at the point where AVANT has added as much value as AVANT can add.

We believe that is usually at the end of Phase II.

So, I expect that following Phase II results we will look for a partner for Phase III launch and distribution.

That following Phase II of our cholera program we are certainly willing to talk to partners and at that point if -- when we understand if the markets are going to improve or not, I think we would entertain finding ways to accelerate development in the U.S., but right now we haven't had to slow any of our programs and we won't have to go out to the capital market to do a dilutive financing.

When do you think you're going to be in the clinic for the Ty800 trial?

I'm hoping this year, in 2003.

But it is actually up to the National Institute of Health at this point to initiate that trial.

The sites are lined up.

They are now responsible for manufacturing and it will be a question of when they have clinical grade material to get into that trial.

Okay.

You mentioned the oral vaccine and some of the other things you're doing for the Department of Defense and their subcontractors.

When do you think we're going to see studies or trial or more development on those products?

You already are.

We put out a press release at the end of last year, I believe November, announcing the initiation of a Phase I trial for the new generation anthrax vaccine that is just anthrax and that is an injectable.

But you have given me the opportunity to say that we are the furthest ahead of any of the new generation anthrax vaccines.

So we are in the clinic.

We expect that our 12-month milestones and we have several significant clinical happenings in 2003, will include the completion of that Phase I trial.

That we want to keep ahead of everybody else in this area, but again, it is the DOD and DBC who kind of pull the strings on that but so far, so good.

On the oral anthrax and plague, our second and most recently announced program with the DOD we were not planning to be in the clinic in the next two years.

It is our plan to do the preclinical work and to get ready for manufacturing over the next two years.

And then move forward with that one.

Of course, the risks decrease substantially as we also move forward with our plain cholera vaccine because, as you know, the combination oral anthrax and plague is really based on the cholera technology.

Right.

We get quite a bit of comfort in terms of safety and desirable Titus(ph).

Okay.

A clarification question.

You said that you are -- you're not slowing down your clinical trials but in the press release you mention the spending on clinical trials will be reduced.

Can you explain the difference between those two statements?

Yes, you have pinpointed exactly.

We at AVANT have taken cholera and typhoid fever off our own burn but we weren't willing to do that at the price not having them move forward in the clinic because, as you know, everything to date suggests those are going to be very, very useful vaccines.

So we're delighted that the IBI on the one hand is funding the trials for us in Bangladesh.

And that the NIH has agreed to do the same thing in the U.S. with the Ty800 program.

That's how we get what seems like a contradiction.

No expense to AVANT but the programs moving forward.

Just to point out, we don't have to give up rights to either of those development partners.

Great, well thank you very much for answering my questions.

You're welcome.

Thank you.

Our next question comes from Dan Isaacs.

Please state your question.

Good morning, doctor.

I'm a private investor and I've been a shareholder in AVANT for nearly 10 years now and I've become extremely frustrated as many of my shareholders have with the lack of public relations on the part of the company.

Despite the tremendous opportunities that our technologies have, there's a total of three analysts that cover this company and I'd like to know what's going to be done to address that problem?

Well, first, let me distinguish between public relations and analyst coverage.

I'm sorry you're frustrated.

I am at a big bio meeting now and I am stuck stopped in the corridor all the time with people envious of our PR position.

I've been kidded about how much I or AVANT have been in the news lately.

So I don't think you can be meaning PR.

We, too, are frustrated as you are, however, about the poor analyst coverage.

I think there are two contributing factors here.

One is the sell side financially of the financial markets is in disarray, as you know.

Many analysts have left, most of them have moved from their former banks.

And so the whole community of analysts is in disarray or certainly the good ones.

And I think in addition, the question I got from the previous caller that we are not planning to do an offering at the moment, even though there is a Chinese war, you know business is business, we have in fact, not been able to pull in new analysts.

We're working very hard on it.

On this visit to New York City we will be meeting with potential analysts but I would probably echo that we are frustrated there, too.

But we actually are very pleased with our public relations effort.

But more substantial than most companies of our size.

Well what specific type of public relations, doctor?

I know you get local press up in Massachusetts and some of the trade publications.

But one would think with the opportunities that we have with particularly for the CETi-1 and the bio-defense vaccines that AVANT would be all over the newspapers.

I think it has been.

I don't know what's the local newspaper for you.

The "New York Times" might be one and CNN financial might be another and we do expect a PBS show on our vaccine.

But by large I think we've been extremely well covered by Rooters(ph), Bloomberg, most of the wire services.

If you know people we should talk to in your local paper, we're happy to do so.

One just last follow-up.

How do we explain the low volume of shares in AVANT and the fact it really stays barely above a dollar without any type of movement not withstanding the advancements that are being made.

Obviously, I believe in your technology, I wouldn't have been a shareholder so long.

It actually is quite high for a company of our market size.

We traded 10m shares the day that we announced the DOD contract.

Right.

We traded 24m when we announced the previous one.

And we are running in the hundred thousand range on many days.

So I know it's low but we're actually trade more.

We are more liquid than many companies.

And it's a difficult thing to say.

What the company can do is make progress and that we do.

And we announce our progress.

It is you, the stockholders and the traders who actually affect the stock price.

There's very little the company can do that is legal there.

And, so we just simply try to put out good news and make progress and I don't want to tell you that I'm happy with the stock price either.

Thank you, doctor.

You're welcome.

Thank you, ladies and gentlemen, as a reminder, should you have a question, please press star one at this time.

Thank you.

Our next question comes from Robert Urtzi(ph).

Robert Urtzi, a private investor.

I have a question regarding the DOD subcontract.

Who will own the intellectual patent rights to the anthrax and plague combination vaccine?

Will it be the DOD or DynPort(ph) or AVANT?

Yes, it's a good question.

AVANT owns the rights to the technology platforms and the manufacturing processes that I described this morning and will shortly be on our website.

So we own the patents that underpin this technology.

Any time you do a deal with the Department of Defense, the Department of Defense owns the rights to -- to that intellectual property you've licensed to them.

So for a combination anthrax and plague vaccine and only for that use, by the military, the Department of Defense owns the rights but they do not in any way infringe upon, impinge upon or reduce our rights in the technology for other uses.

So it doesn't affect our ability to do deals, to progress these programs forward to product in our other three business areas, which is food safety, vaccines for the developing world, and vaccines for travelers’ protection.

Follow-up question on the second generation injectable anthrax vaccine, that vaccine started Phase I in November.

When do you expect that Phase I to end?

I expect it to end this year in 2003.

I expect that the results, as Always, will have to be put together and DBC will have to go back to the FDA and to similar agencies for the military to get permission to move to the next step.

We do expect the trial to be completed.

Another question on intellectual rights.

AVANT eventually received in collaboration with Chyron(ph) and another institution a patent on an HIV antibody.

I was wondering what the plans are, if any, for that antibody?

I think you may have us mistaken with someone else.

We do not have such a deal.

We do have a program for HIV which will be developed with Walter Reed or with the U.S.

Army using our Therapore technology but at present I'm not aware of a deal with Chyron.

For the Therapore HIV Vaccine, when do you expect to go into the clinic with that particular vaccine?

We do expect that it should enter the clinic this year.

This one got delayed.

It was due to go into the clinic in 2001 and if you remember what our Therapore technology is, it's based on anthrax, PA and LS two components, protein components of anthrax.

I'm sure you'll understand that we and the U.S. government thought that the priority was actually to reclaim that clinical material for the anthrax program.

So we purposely delayed the HIV clinical trials in order to get the anthrax trials started.

But the material will be replaced and we will go back to the original deal of the U.S.

Army progressing forward.

Thank you very much.

Congratulations again on a great quarter.

Thank you.

Bye-bye.

Bye.

Thank you, our next question comes from Chan Davis.

Hi, congratulations on a good quarter.

I have a couple of questions.

First, you said CETi-1, you completed in 2002 and you expect the results in the fourth quarter of 2003.

I'm sorry I came in towards the begin of the call.

So I missed the first question.

If I repeat anything, I apologize.

I want to know what takes place between the completion of the enrollment and the fourth quarter of 2003 that needs to get done in order for the results to …. ?

Yes that's a very good question because it gives me a chance to explain the trial.

The trial design was as follows.

We had four doses and each patient got an initial dose and two boosters a month apart and then a booster at six months because, again, you will remember that CETi is going to be for twice yearly administration, every six months.

So we completed enrollment when we bring all of the patients into the study and we complete treatment when we have given the six-month dose.

Following that, we have another six months of follow-up to -- and a lot of testing --

When in 2002, was the enrollment completed?

I can't remember.

In the third or fourth quarter.

Okay.

Now we have, I can even give you a slight update, we have completed all of the dosing phases and we're in the six-month follow-up and following getting the last clinical samples we have two our three months of measurement, statistical checking, one has to do these things extremely rigorously and independently.

We are very, very careful and so are our CROs so those are the sets of activities that will occur and should be completed in October.

October.

Is there a chance of CETi-1 that if you don't find, let's say, a good enough deal or a partnership that you do have the wear with all to start a Phase III or sit too expensive?

No, I think I can answer that one.

Again you need to hear me very clearly on it.

If the results are such that we believe we can continue to add value, for example, make minor changes to the dosing, either the concentration or the frequency, I believe we could go to new trials that would add value and we would do that.

What I think we cannot do, and it's not just a question of financial resources, is take it all away through to launch.

Firstly, the Phase IIIs are very expensive but, secondly, I believe that the company that markets the product needs to design the Phase IIIs so that you address in the Phase III the points that you want on the label when you sell it.

So for both of those reasons, we believe that we would like a partner and the partner that's going to do sales and marketing to conduct the pivotal Phase IIIs but I don't rule out that we might do either further Phase IIs or early Phase IIIs that might improve the product.

We have no plan to do it.

We have no need to do it at the moment but I don't rule that out and I think it would be the intelligent way to proceed but we won't do the final pivotal Phase III.

So you do something like a Phase IIB to show greater efficacy?

I could do that.

I don't want to signal to the street that we're planning to do it but we're not.

But it's an option.

I think it's a very intelligent question and I don't rule it out at all.

It would be the smart thing for AVANT to do.

In terms of the Rotavirus with Glaxo, Smith Kline(ph), that product.

You said, you'll initiate in the second half of 2003.

Can you elaborate on the timeline and how many patients might be on the trial?

Yes I can on some but not all of your questions.

We expect those trials to start in 2003.

Glaxo's website puts that in the third quarter and we never disagree with Glaxo, Smith Kline.

That's how it's scheduled at present.

I do know there are several trials and in the aggregate that will be 60,000 babies, so we will be treating just infants, a very large number of them and the trial sites will be in Latin America and Asia rather than in U.S.

I think it depends a little bit when they start and whether they are in the Northern or Southern hemisphere because, as you know, rotavirus is seasonal; fall to spring in the Northern hemisphere and the opposite in the South.

But I believe that if done aggressively the trials could take no more than a year and I will again stick with Glaxo's timing.

They are scheduling this for a launch in 2005.

Can you review quickly the terms of the partnership with Glaxo.

Everything except royalty rates which we redact from our Edgar filings so the terms were that we were to take it through a successful, and that was defined and bid, Phase II, and that upon a successful Phase II and acceptance of a manufacturing line by the FDA it would be entirely financed by Glaxo.

We have passed both those milestones so it is entirely in their financial hands.

The terms that we had an aggregate of about $8.5m in milestones and we have the bulk of that still to come and following the milestones which will end at the time of sales beginning, we then received what for a vaccine is a nice royalty schedule.

It ramps from the high single digits to low double digits and that's the only information we've given out and we're consistent.

Okay.

Thank you for your patience.

Also, one final question is just you also stated that you may receive excess -- I'm just quoting from the press release, of $8m over a two-year period and with regards to the Department of Defense, when you say you may receive, I just wanted to know if you can elaborate on what hurdles you have to overcome.

Yes, I can.

A good question from a carefully worded press release.

The amount of money available to AVANT in that time period is in excess of $8m.

But this is what the government Calls, the military calls a time and materials contract.

So we have to perform at the speed that we projected we would perform in order to get the money.

Now, it's possible we could go faster or we could go more slowly.

It's possibly we could miss a milestone so we wanted to be very careful to say if all goes well we would expect to get in excess of $8m and that if we have a blow-up one place or another it may be quite possible the balance is out by the end of two years but we haven't had $8m dumped on our lap and been told to go play.

We have put out a very carefully scheduled work plan and we will move along it and we will be paid as we do.

Okay.

Thank you very much.

You're welcome.

If there are no further questions, I will turn the conference back to Dr. Ryan to conclude.

Well, it is always a pleasure to talk and to listen to your questions.

I thank you those callers who referred to our very good quarter.

We are pleased with it, too.

We believe that the final announcement of our DOD contract for an oral anthrax and plague vaccine really validates our bacterial vaccine technology.

And explains, I think, clearly to the street the great value in our recent acquisitions.

And most recently being the acquisition of VitriLife to give us refrigeration free vaccines.

We believe that we have a lot of important clinical results coming out over 2003 and we look forward to telling you about them at the next quarterly earning and we will keep the press releases and publicity going alongside our achievements.

Thank you very much.

Ladies and gentlemen, if you wish to access the replay for this call, you may do so by dialing 1-800-428-6051 or 973-709-2089 with an ID number of 286493.

This concludes our conference for today.

Thank you all for participating and have a nice day.

All parties may now disconnect.