Celldex Therapeutics Inc (CLDX) 2003 Q3 法說會逐字稿

Good morning.

My name is Shane, and I will be your conference facilitator today.

At this time, I would like to welcome everyone to the CuraGen third-quarter conference call 2003. (OPERATOR INSTRUCTIONS).

Mr. Aslan, you may begin your conference.

Good morning and welcome to CuraGen Corporation's third-quarter 2003 conference call.

Participating on this call is Dr. Jonathan Rothenberg, CuraGen's Chief Executive Officer, President and Chairman;

Timothy Shannon, Senior Vice President of Research and Development and Chief Medical Officer;

David Wurzer, Executive Vice President and Chief Financial Officer, and Christopher MacLeod, Executive Vice President.

This conference call is being webcast over the Internet and is available on CuraGen Website's at www.curagen.com, along with the presentation.

We will have a short presentation followed by Q&A, and I would like to encourage an active discussion.

I would like to bring your attention to CuraGen's Safe Harbor statement that can be found on slide one of today's presentation.

Please refer to form 10-K for fiscal year ended December 31, 2002 for a complete description of these risks.

I would now like to turn it over to Dr. Jonathan Rothenberg.

He will start with slide two titled, "CuraGen Value Proposition."

Thank you and good morning.

This has been a productive quarter for CuraGen.

I am going to give you an update on our pipeline and progress in the quarter.

Specifically we now have 20 protein antibody and small molecule therapeutics, which have been based on our leadership in the system biology and disease pathways moving forward in our pipeline.

This is a broad and diversified pipeline consisting of proteins, fully human monoclonal antibodies, and small molecules, all raised against targets that we discovered that underlie major unmet medical needs.

All of the projects we work on have well defined paths for clinical success.

Our efforts are focused where we feel we can generate the most value, where we have a good understanding of biology, where we have a good understanding of the intellectual property and where we feel we can move forward in a productive fashion.

We do have $358 million in cash and investments, which allow us to move our pipeline forward.

The next slide, titled "Priority Projects and Animal Validation and Beyond September 2003," highlights our progress.

We have been showing this slide each quarter, and I would like to point out new additions for this quarter.

This quarter we licensed in four additional fully human monoclonal antibodies that are now CuraGen's property to develop from our Abgenix collaboration.

In addition, shown in green are five more projects that we have added to our most advanced pipeline.

This pipeline is focused primarily on installation and oncology.

Underlying all of our projects is an understanding of disease where CuraGen has identified new intervention points and is now producing a (inaudible) drug and antibody drugs or a small molecule drug where appropriate and producing them against novel targets that underlie unmet medical needs where a mechanism has been demonstrated by others to be important in disease.

This is our way of having the maximum benefit from novelty while having a security of having a proven mechanism underlying a disease.

The next slide is titled, "CG53135 for Oral Mucositis."

These products -- and I am very excited to announce on this conference call that we have completed our first cohort dosing in man, and we feel we have been able to continue to differentiate our drug from other potential drugs that are in development.

Our drug works on both the epithelial , as well as the mesenchymal layers of the mucosa, and we feel this is important because you need to regenerate mucosa and work on the layers of cells that support the stem cells.

The next slide shows additional pure review publications on our leading products.

Our leading protein product is as I discussed CG53135 for oral mucositis, and we are excited about this project because of the important support of care has in the oncology market.

Many of you probably know that Zolfran is a supported care product that is now exceeding 1 billion in sales.

CuraGen's lead antibody project, CR002 for kidney information, continues to get strong recognition from the scientific community, as well as additional support from the clinical community as we gear up to bring this product into the clinic next year.

It is important to note that the activity of our first protein in animals and its progression and demand, the activity of our first fully human monoclonal antibody and multiple animal models and is progression to man next year continues to validate CuraGen's strategy of going after novel targets and proven mechanisms of disease to have the best chance of having success as we enter the clinic.

Next slide, please.

We have always been proud of our scientific heritage, and on this slide, titled "Exceptional Understanding of System Biology, Disease Pathways, Molecular Biology," we show a few clippings from a recent paper that CuraGen published in the proceedings of the National Academy of Sciences, which is really viewed as revolutionary in terms of understanding how drugs work and why they fail.

As many of you know, we have acquired our technology base first, to identify targets; second, to prioritize the best protein antibodies and small molecules to bring into the clinic, and now we are using that same technology base to make sure we have markers, biomarkers, in the clinic to make sure we get the right drug to the right patient and can quickly move our products through the clinic.

The next slide, titled "Development Milestones," focuses on our progress to date with CG53135 oral mucositis.

We have initiated Phase I and completed our first patient cohort.

We are on track to initiate Phase II next year for oral mucositis.

In addition, we have published on a number of potent biological assays and animal models for CG53135 and are on track for additional limitations and next year.

I hope you take the opportunity on this call to ask Timothy Shannon, our Chief Medical Officer, more about CG5315 -- why it is differentiated from other products, why we feel it has been derisked in terms of strategy and some of the other indications that we think it will have potentially.

In addition on this slide, we show that CR002, our first antibody, our first fully human monoclonal antibody, is on track for Phase I initiation, and the new four antibodies that we have licensed really supports CuraGen's belief in its antibody pipeline.

You will also be seeing additional preclinical candidates and publications around them.

Our milestones are focused on our pipeline.

The next slide is titled, "Progress at 454 Life Sciences." 454 Life Sciences is CuraGen's majority-owned subsidiary.

This quarter we extended our percentage ownership in 454 Life Sciences to 65 percent, and this was because of tremendous progress 454 Life Sciences has made. 454 Life Sciences is focused on making instrumentation and consumables for an emerging market in cold genome sequencing, important for pharmaceutical, agricultural and industrial markets.

And on this slide, we show a recent article that ran in the New York Times around 454 and the first submission to a public database of the sequence, of the whole sequence of the viruses, done by a new method since 1977.

The world's sequencing method give us the host human genome, but it costs $2.5 billion and took 12 years.

Everybody knows we need a new technology, and 454 is positioned to supply this new generation of technology.

This new generation of technology that Richard Gibbs, an adviser for 454, Director of Baylor Genome Center was quoted as saying, this is a real threshold moment, and this is going to be big.

We are excited by the progress at 454, which is shown clearly in the next slide, which shows that 454's ability to sequence genomes and the value that it is able to create for the scientific community as well as investors in CuraGen and 454 is progressing at an exponential rate.

Traditionally this has been called a obeying Moore's Law, and the title of the slide is titled, "454 Life Sciences Technology Obeying Moore's Law."

What I would like to demonstrate is, well, the New York Times article highlighted that we have sequenced the first virus in 20 years by a new method and a method that was inherently scalable, a method that someday will be in your doctor's office or in a major testing center besides the MRI machine.

What we have shown now when we presented at GSAC , which is the major conference for genome sequencing, is that we now can sequence whole bacterial genomes.

If you draw a graph from the start of 454, through its sequencing of its first virus, to the sequencing of bacteria, you can see that we are on a slope to be able to sequence human genomes in the not to distant future.

We believe 454 has immediate potential selling instrumentation for the viral and bacterial areas which are exploding as emerging pathogens become more important to healthcare, as understanding of genomes becomes more important to industrial processes, and we look forward to some day being next to that MRI machine, which is now doing 60 million MRIs in sequencing in human genomes.

The next slide is a summary slide with our key messages titled, "Key Messages."

First, our unique differentiator.

A deep pipeline of 20 plus products based on leadership and the understanding of system biology, disease pathways and biomarkers.

We have a pipeline approaching and fully human monoclonal antibody therapeutics and oncology and inflammation based on novel genes playing a role in proven mechanisms underlying disease.

We have a pipeline of oral available small molecules drugs in our Bayer collaboration directed against obesity and diabetes, an areas that now exceeds smoking as a drain on the U.S.

Healthcare system.

And we have the team in place and the financial resources to realize the potential of our deep pipeline.

Finally, our strategic (technical difficulty) in 454 and the significant progress 454 Life Sciences has made to date makes us believe that we will have the financial stepping stone in addition to our cash resources to get CuraGen across the finish line with an exciting pipeline of products that meet unmet needs.

I would like to thank everybody for believing in CuraGen, supporting us, and I will turn it over to Fred Aslan to direct Q&A.

Before we do that, I would like to turn it over to Dave Wurzer, who will make a few comments about our finances.

Good morning everyone.

Thank you for your participation in today's call.

The third quarter 2003 collaborative revenues were approximately $800,000 as we focused primarily during the quarter on our pipeline.

Our operating expenses decreased from second-quarter and prior year third-quarter operating income as we importantly reduced our workforce, yet continue to invest in our pipeline and in 454 Life Sciences technology development.

Income tax benefit booked in the third quarter, which was rather unique, reflected the passage of the state of Connecticut's reinstatement of an R&D tax credit refund program in August 2003.

Turning to cash, as Jonathan stated, we have 358 million in consolidated cash and investments at September 30th, 2003.

Our cash burn for the quarter was just over $20 million including importantly 3.5 million in operating cash burn for 454 Corporation.

We believe our cash flow burn for the full year, which was previously disclosed in guidance given in July at $80 to $85 million for 2003, is appropriate at this point in time.

We believe we should show additional visibility on 454 as it is becoming significant to CuraGen.

We wanted to disclose that we believe 454's burn will be approximately $15 million (technical difficulty) 2003.

Finally, we are currently working through the budget process for 2004.

Therefore, detailed guidance on our financial expectations for 2004 will be provided in conjunction with the release of our fourth-quarter 2003 results.

With that, Fred, I believe we are ready to take questions.

At this point, we would like to take questions

(OPERATOR INSTRUCTIONS).

Ahktar Samad, Bear Stearns.

This is John Tonkin here.

Firstly, I wondered if you could tell us more about the targets and possible indications for the four new antibodies that you licensed from the Abgenix collaboration?

These are four targets we have had an interest in for a long time and were actually ones that we had preselected in this collaboration that would come out to us.

They are all targets in oncology, and they work across four different targets within the mechanisms of proliferation and/or angiogenesis.

They are all in animal models now, so that we are hopeful that we will be able to develop some compelling animal data with those antibodies in the near future.

Based on the Board validation at the moment, how long does the process then take to get into IND filing status?

It is a little bit variable, but we will try to get those into IND filings in 2005.

Just in terms of 53135, do you have any thoughts at this stage as to what forum you would present the Phase I data or whether that would just be by press release?

It depends on the timing of when we are able to complete that study, relative to where we could present it in scientific forums.

If there is not one readily available at that time, we would communicate it via press release.

In terms of the Phase II initiation, is that likely to be a first half of the year event, or is it more likely to be in the second half of the stage?

Again, it is hard to say precisely because it is depends on how it proceeds and what we encounter.

I think a rough estimate would be mid to late year.

It is unlikely that we would be able to start in the first part of the year, but there is a chance.

But it is more likely to be mid to end year.

In terms of the second IND filings for 53135, is that still likely to be IBD, and I would be interested in what other indications you're looking at?

Yes.

Again IBD is a likely possible indication still.

So one we are still pursuing, and we have a lot of good preclinical data to support.

We are also looking at other indications within the realm of supportive care oncology and oral mucositis, specifically looking at its real potential in bone marrow transplantation.

So that is something we are considering as well.

Just finally, can you give us a quick update on the Bayer collaboration and when we should expect to see some news coming from that?

It has been an extreme collaboration to date.

We have screened 31 targets, and usually when they screen targets, they screen them against 500,000 potential molecules.

There are now six sets of molecules that show exciting activity either in cells or in animals, and they are sets of molecules because sets you will be developing a lead to bring in the clinic.

These are exciting molecules that work on a number of mechanisms that underlie obesity and diabetes, and we will be showing additional progress over the next few quarters.

But it has been an exceptionally productive collaboration, a collaboration based on a real understanding of obesity and diabetes, and the collaboration that has led to a large set of molecules each directed against a different target underlying an important mechanism of obesity and diabetes.

Tim, do you want to focus a little bit more on some of those mechanisms if you would to give a little bit more clarity on this program?

Yes.

In diabetes, again, the collaboration focuses primarily on the role of insulin, both in terms of secretion and insulin sensitivity.

And then in obesity, it looks at a number of different mechanisms ranging from society or regulation of appetite to (technical difficulty) energy of metabolism or how quickly we burn metabolism, so it looks all things in the spectrum.

Derek Winger, Jefferies & Co.

Could you give me the depreciation and amortization levels for the third-quarter?

Also, the capital expenditures for the third-quarter and the outlook for this year and next if you have that for capital expenditures?

And then, are there balance sheet items available?

Okay.

The balance sheet items we provided on the press release are in there consistent with past quarters -- the cash and the working capital and total assets, etc..

To your specific questions, we will be providing that level of detailed guidance in our form 10-Q filing; however, we gave you prior guidance as it related to quarterly depreciation and amortization being approximately 2 million a quarter, 8 million for the full year, and that is consistent with where we landed in the third quarter.

As it relates to capital expenditures, I believe we previously gave you full year guidance on the order of $10 to $11 million.

We are tracking in that direction.

As it relates to 2004 detailed guidance, again we will be able to provide that on our next conference call.

Okay.

Thank you.

(OPERATOR INSTRUCTIONS).

At this time, there are no further questions.

Mr. Aslan, do you have any closing remarks?

I would like to turn it over to Dr. Jonathan Rothenberg.

Thank you, Fred, and thanks to management for a very productive quarter.

I want to thank our investor base and our employee base for continued support, and we are excited that this quarter we have completed our first cohort in man.

We are on track for our second IND next year with our first fully human monoclonal antibody, and our pipeline is maturing exceptionally well with the addition of four fully human monoclonal licenses in the monoclonal antibodies against our targets.

So thank you for the participation, and thanks for the continued support.

This concludes today's CuraGen conference call.

You may now disconnect.