使用警語:中文譯文來源為 Google 翻譯,僅供參考,實際內容請以英文原文為主
Operator
Good afternoon.
My name is Kelly and I will be your conference facilitator today.
At this time, I would like to welcome everyone to the CuraGen first quarter conference call.
All lines have been placed on mute to prevent any background noise.
After the speakers' remarks, there will be a question and answer period. [Operator Instructions] Thank you, Mr. Aslan, you may begin your conference.
Dr. Fred Aslan - Director, Corporate Strategy
Welcome to CuraGen's first quarter 2004 conference call.
Participating on this call is Dr. Dr. Jonathan Rothberg, CuraGen's Chief Executive Officer, President and Chairman;
Dr. Timothy Shannon, Executive Vice President of Research & Development and Chief Medical Officer;
David Wurzer, Executive Vice President and Chief Financial Officer; and Christopher McLeod, Executive Vice President.
This conference call is being webcast over the Internet and is available on CuraGen's website, at www.curagen.com along with the presentation.
We will have a short presentation, followed by Q&A.
I would like to encourage an active discussion.
Certain remarks that we may make about future expectations, plans and prospects for CuraGen during this call constitute forward looking statements for purposes of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995.
Our actual results may differ materially from those indicated by these forward looking statements as a result of various important factors including those that are discussed in our annual report on form 10-K which was filed with the SEC on March 11, 2004.
I would now like to turn it over to Dr. Jonathan Rothberg.
He will start with Slide 2, titled "CuraGen Value Proposition".
Dr. Jonathan Rothberg - CEO, President and Chairman
Good morning and thanks for joining us.
CuraGen has a deep pipeline of products based on our leadership in the understanding of systemsology (ph) and disease pathways.
This pipeline is both broad and diversified.
It includes protein therapeutics, fully human antibody and orally available small molecules.
We are developing products for cancer, inflammatory diseases and obesity and diabetes.
Our efforts are focused where we can create the most value for our shareholders and have the greatest impact on unmet medical needs.
Our targets have been systematically chosen from 500 unique and novel targets from the human genome.
We have strong science and a biology foundation behind the targets that we choose to move forward.
We try to focus on those targets that have a well-defined path for clinical success and a strong IP position.
Currently, we have $408 million in cash and investment to enable this focus on our pipeline.
As we are focused on our pipeline, I will turn over the presentation to Dr. Tim Shannon, who will describe our clinical and pre-clinical success.
Dr. Timothy Shannon - EVP of R&D, CMO
Thanks, Jonathan.
I'll begin with Slide 3 which has the header "Advance in our Pipeline" on it.
This slide represents the most advanced products in our portfolio, where we are currently extending about 85 to 90 percent of our energy.
The lead product noted there is CG53135 also known as FGF20.
It is in Phase I and we plan to enter Phase II with that protein later this year.
I'll give you an update on 53135 in subsequent slides.
Our next product is 02 and we plan to initiate Phase I trials with this monoclonal antibody in the second half of this year.
And then from the other approximately 15 proteins, antibodies or small molecules that are noted on this Slide, those are all small ... all essential drugs that are in animal models that are used currently and from those approximately 15, we plan to identify the next IMDs that we'll bring forward in 2005 and 2006.
Slide 4 is headed "CG53135 for Cancer Support".
CG53135 is being developed for the indication of oral mucositis.
Oral mucositis is part of the supportive keratology (ph) market and some of the more prominent products in that marketplace are shown on this Slide and they include products such as Epigen, Nupigen, and Sofran and Anthromet (ph).
Of note all those products that I just mentioned, are all moving to positioning around ease of administration, a sort of one dose per cycle concept.
In the oral mucositis area, there currently is no drug approved and this is the unmet need for which we are targeting CG53135.
On the next Slide, Slide 5, headed " CG53135 for Oral Mucositis", some background around oral mucositis is presented.
Again, oral mucositis is a complication of chemotherapy or radiation therapy that occurs in patients undergoing treatment for cancer.
The cartoon basically shows a picture of the pathobiology of oral mucositis and it represents a cartoon, if you will, of the oral mucosa.
The mucosa consists of two primary letters, one called the epithelial layer which is the outermost layer on the lining of your mouth.
The second component of mucosa is the mesenchymal layer which is the underlying tissue compartment that provides the infrastructure for the epithelium.
Oral mucositis is a pan-mucosal injury, so the injury is to both of those compartments, both the epithelial compartment and the mesenchymal compartment and you can see that noted in the picture.
And more importantly, the healing of oral mucositis is driven largely from the mesenchymal compartment.
This is where the cells, the stem cells, and the growth factors reside that cause the proliferation of cells in repair of this epithelium.
That process is nicely reviewed in a review by Dr. Stephen Sonas (ph) from Harvard that was just published in this April's major reviews and again, Dr. Sonas is someone we collaborate closely with for CG53135.
Simply speaking, CG53135 is a growth factor which helps tissue repair in oral mucositis.
At the bottom of the slide we note that our strategy has been de-risked.
This refers to Amgen's positive Phase III data with FGF7 and oral mucositis.
FGF7 also known as KGF1 is a related growth factor to FGF20.
KGF1 predominantly targets that epithelial compartment as a mucosa.
On the other hand, FGF20 targets that same epithelial layer but also targets cell types in the mesenchymal compartment which, again, we think very important in terms of the healing process.
So in FGF20 we're confident that we'll have activity in oral mucositis again because we hit the same compartment that presumably is driving AmGen's activity.
We think we have the opportunity to have a better activity because of the activity we have in the mesenchymal compartment that we think differentiates this product.
On the next Slide I'll talk a little bit about animal data that supports that notion of differentiation.
This is Slide 6.
And it talks how that biology we just reviewed is translated into activity in animal models.
Again, we perform these animal models in collaboration with Dr. Sonas at Harvard.
FGF's potency is reflected in two key findings.
The first is that FGF20 is effective in preventing oral mucositis with a single dose in animal models and we think this is a unique finding.
The second key finding is that FGF20 is effective when introduced to treat oral mucositis which really represents a new paradigm in oral mucositis so everything to date that has been done in this (indiscernible) has been done in a prevention mode where treatment is introduced before oral mucositis is evident in terms of tissue injury.
In animal models we have shown we can wait until tissue injury is actually established and clinically visible, introduce treatment with FGF20 at that point and see a significant activity in terms of healing.
Data on single dose activity has been presented at the AACR a month or two ago, an additional single dose activity will be presented at MASK in June of 2004.
In addition, the animal studies showing the treatment effect will be shown at the MASK meeting in June of 2004.
Now we know that others in the clinic have needed to rely on more complex multidose regimens which isn't the trivial issue given all these therapies are intravenous.
And this potentially can limit the utility of these drugs in outpatient settings.
We also don't have any knowledge that others have been effective in this treatment paradigm regiment.
This is again particularly various to outpatient regimens where cancers have very common cancers like colorectal has an incidence of oral mucositis of 20 to 40 percent which would potentially enable you to actually wait till visible signs of oral mucositis before introducing a treatment which we think represents a significant opportunity.
So we will build our clinical differentiation around these two points.
One, trying to prevent oral mucositis with as little as one or perhaps two doses; and two, the ability to introduce FGF20 as a treatment for oral mucositis once oral mucositis is apparent.
Next Slide, Slide 7 talks about our new Phase I study in patients undergoing bone marrow transplantation.
We recently started dosing patients in this study.
This is a simple study given a single dose and three coverts with splitting doses starting at .3 mg per kg going to one mg per kg and completing the three mg per kg.
This study will enroll approximately bone marrow transplantations at risk for oral mucositis.
The risk for oral mucositis in these patients is very high -- in the range of 80 to 90 percent.
Some of the reasons for undertaking the study and the utility it provides us fairly relates to how it will facilitate our transition into Phase II in the second half of 2004.
This study will provide for us additional safety and pharmacokinetic data that will be helpful for designing our Phase II study.
In addition it gives us an opportunity to work out any kinks in operational elements before we get into Phase (inaudible).
So we now have a working protocol in bone marrow transplantation in the Phase I study which will become the model for the Phase II protocol.
We have also obviously established all the infrastructure required for data flexion and types of data that needs to be collected in bone marrow transplantation and in essence we get to give those a trial run here, work out the kinks before starting our critical Phase II program so this should really enable us to get into Phase II quite efficiently and really build momentum for that.
In addition it has given us an opportunity to convey to thought leaders in bone marrow transplantation -- again bone morrow transplantation will be a key indication for us in Phase II and Phase III and having these thought leaders engage with us is important.
And in addition this Phase I study also serves as a bit of a trial balloon with both IRBs (ph) and regulatory agencies in it makes clear our intent to go into these patients and in fact we have already done so.
And this is no guarantee that we won't potentially hit obstacles but, again, sort of smoothes the path.
And that IRBs have already seen this intent on the data that supports our intention to go into bone marrow outside the FDA.
The final thing I'll mention is there is a chance -- an outside chance -- that we could see activity in this study, again, that's not the primary reason to do it.
The primary reason, really, is the safety in pharmacokinetics as well as field operational momentum and a momentum with opinion leaders to robustly get into Phase II in this population in 2004.
Moving to slide eight, slide eight outlines our current concept for clinical development.
Again on the left-hand part of the slide we now how two Phase I studies ongoing that will lead into Phase II in the second half of 2004.
We plan to present the results of the Phase I studies at scientific meetings in the second half of 2004 in conjunction with the initiation of Phase II.
The slide also shows the patient populations that we will consider studying in Phase II.
We have met with our external consultants that work with us in this field to formulate our safety strategy and we have begun activities to operationalize strategy in preparation for beginning the Phase II studies later this year.
We will detail that strategy and the operational plan that supports it in the second half of the year when Phase II begins.
Slide 9 again summarizes our main pipeline milestones for 2004.
The first is to complete Phase I program for (inaudible) in oral mucositis which sets the stage for the second milestone which is the initiation of Phase II in oral mucositis.
The third milestone is the initiation of Phase I trial for CG53135 in the second indication.
As we mentioned before we plan to move 53135 into a second indication that will likely be inflammatory bowel disease and again that will happen in the second half of the year.
Fourth milestone, again, we will begin a Phase I trial for our second new product CR002.
That's our first monoclonal antibody that is a line of antibodies that neutralizes PDGF-D and we will be studying that in kidney inflammation.
Again that Phase I trial will start in the second half of the year.
And then the last milestone reflects to comments I made on the opening portfolio slide from those again just the inter cell protein antibodies and small molecules we currently have and animal models of disease we plan to identify the next candidates for INBs (ph) that will become INBs in 2005 and 2006.
With that I'll turn back over to Jonathan Rothberg.
Dr. Jonathan Rothberg - CEO, President and Chairman
I want to emphasize the depth we put into our organization over the last three years that gives me confidence that we will be able to efficiently move our strong preclinical and clinical pipeline through the clinic, have impact on patients and to the market.
Slide 10 is titled "Depth of Our Drug Development Expertise".
We have increased our R&D leadership including leaders like Tim Shannon.
Exceptional people throughout our clinical and regulatory affairs area; a strong protein development team; as well as a commitment for new facilities to get better control, critical mass in the areas of proteins and antibody development as well as teams to take the knowledge that we've gained from the genome and understanding the mechanisms that underlie disease, to study our drugs in patient populations and to have biomarkers for companion diagnostics that allow us to not only dose the correct patients but understand when our drugs are properly getting to the diseased tissue and having effect in those patients.
We also think that our biomarkers will allow us to accelerate our clinical development and help overcome potential regulatory hurdles.
In summary, we now have a strong, able, development team and a very exciting pipeline for them to advance for unmet medical needs.
The next slide is titled "454 Life Sciences - A Real Threshold Moment".
I want to give you a quick update on our investment in 454 Life Sciences.
Last year 454 Life Sciences' progress was featured in a New York Times article.
Shown in this slide is a picture of our commercial instrument as well as excerpts from the New York Times article.
The New York Times article had supporters which looked at 454 technology as a glass half full represented by advisers to the Company such as Richard Gibbs who said, "this is going to be big, this is a real threshold moment."
We also had people that looked at this as a glass half empty, making statements like, "I think doing a whole bacterial genome will be the real challenge."
Well in the next slide, I would like to answer both groups, our supporters and our critics.
This slide titled "Ramping Up Commercialization", slide 12, shows that we've now sequenced a number of whole bacterial genomes, removing the technical risks from 454 platform and focusing 454 on its commercial strategy.
We have recognized revenue from our first customer who we brought on board in the second half of last year and we continue to ramp up commercialization of services with additional customers in preparation for sales of instrumentation, software, and system, in the second half of this year, for whole genome sequencing of emerging pathogens, including viruses and bacteria.
Sequencing of whole genomes is similar to computing.
The more you can do the greater the need becomes.
We believe and the 454 team believes that sequencing whole genomes will be on par Sunday with imaging such as MRI as a foundation for human health care and diagnostics.
In addition, there are applications in other industries, including biodefense and the emerging pathogens field, animal health, agriculture and industrial processing.
In summary, 454 has signed its first customers.
It's recognized its first revenue and it is preparing to become an independent company.
I'd like to summarize our presentation today in slide 13 titled "CuraGen Is Focused On Its Pipeline".
We have a deep pipeline of products based on our leadership and an understanding of systems biology, mechanisms and biomarkers.
Our pipeline is composed of proteins such as FGF-20 that we describe fully human monoclonal antibodies which we plan on bringing in the clinic later this year; and products for oncology and inflammation that we plan on announcing later this year for 2005 and beyond INDs.
In addition we have a pipeline of orally available small molecules drugs in obesity and diabetes, an area that has become a greater drain on health-care costs than smoking.
In addition, we have cash with 480 million cash and investments to realize the potential of our pipeline.
We have the team to realize the potential of our pipeline and we have a 66 percent ownership in 454 Life Sciences which gives us both potential strategic opportunities as well as financial opportunities.
On the note of financial opportunities, I turn you over to our CFO, David Wurzer.
Dave.
David Wurzer - EVP and CFO
Thank you, Jonathan, good morning, everyone.
First quarter financial highlights included the following.
A net loss of $18 million or 36 cents a share.
Collaboration revenue of $1.6 million and importantly cash burn from operation of $22 million which included a semiannual interest payment of $4.5 million for our 6 percent convertible debt.
We also raised $110 million through the issuance of 4 percent subordinated convertible debt due in February 2011 and in the quarter we bought back 20 million of our 6 percent subordinated convertible debt due in 2007.
Leaving the cash and investment balance, as Jonathan said, of $407.6 million.
Speaking of our outstanding converts I wanted to reiterate our statement in our prior press releases regarding use of proceeds from our new 4 percent convert.
CuraGen intends to use a portion of the net proceeds of the 4 percent offering to repay existing debt.
Depending on market and other conditions from time to time the Company may repurchase a portion of the outstanding 6 percent convertible subordinated debentures in open market purchases or privately negotiated transactions or otherwise.
In addition the Company may also use net proceeds for working capital, general corporate purchases and potentially for future acquisitions of complementary businesses per technologies.
I also wanted to mention other financial numbers for the quarter, including depreciation amortization expense of $2.2 million and capital expenditures of $1.2 million.
Finally the financial impact of our convertible debt transaction is anticipated as follows.
CuraGen's cash burn and net loss guidance for the full year 2004 remains unchanged from that provided in our February release with the exception of gross interest income for 2004 -- which is now expected to decrease by approximately $1 million as compared to 2003 -- and gross interest expense for 2004 -- which is now expected to increase by approximately $3 million or approximately 33 percent compared to 2003 levels.
Again associated with the net increase in the convertible debt balance.
And with that, I'll turn the floor back to Jonathan.
Are we ready for questions?
Dr. Jonathan Rothberg - CEO, President and Chairman
Thanks, I also have Chris MacLeod who heads up strategic relationships available for questions.
+++ q-and-a.
Operator
(OPERATOR INSTRUCTIONS)
William Ho with Piper Jaffray.
William Ho - Analyst
Couple of questions.
I just wanted to get an idea of operating expenses, you had a drop of about 1.5 million.
Should we consider our R&D expenses to be lower going forward?
David Wurzer - EVP and CFO
The R&D was slightly down as you mentioned from December levels but, obviously, up from first quarter of last year and that's just purely a function of the timing of related collaborative expenses and the timing of certain protein manufacturing expenses.
And I think you'll see that again increasing -- if you add up the numbers to our guidance for the full year 2004 -- increasing over the remaining quarters.
William Ho - Analyst
And I have one other question.
Tim, you had mentioned operational (inaudible) that the Phase I trial gives you opportunities to improve on some operational elements.
Can you discuss that, by the chance?
Dr. Timothy Shannon - EVP of R&D, CMO
Yes the Phase II program will be a big undertaking -- multicenter study.
This is a smaller study in which we can sort of test drive what we're going to be doing in Phase II if you will.
Again, we have a protocol in Phase I that will become the basis of a Phase II protocol and we will get an idea quickly in the first half of this year of how well that protocol works.
(MULTIPLE SPEAKERS)
Dr. Timothy Shannon - EVP of R&D, CMO
Protocols and also you set up all the operational elements to collect the data so the case report forms make sure there's no problems with the way the data is going to be collected and the way the data is going to be analyzed -- so it gets you, it gives you an opportunity to work out all that in advance of actually doing the Phase II study.
William Ho - Analyst
Thank you very much.
Great quarter.
Operator
Bonnie Feldman with CCL Partners.
Bonnie Feldman - Analyst
I just have a question about the competitive landscape, relative to your all-new bursitis drug I mean we all know there are other trials that are further along and could you just explain to me as new to your Company story exactly how you see the competitive landscape at this point in time?
Dr. Jonathan Rothberg - CEO, President and Chairman
Okay, the main competition being that the product I alluded to which is (indiscernible).
Again, this product has positive Phase III data.
And Amgen has stated their intent to register to submit for a PLA this calendar year.
Again, we see that largely as a good thing and I will let you know why that is.
No. 1 again as I alluded they have establish proof of concept that a growth factor can work on oral mucositis which in essence risks our approach -- we know the biology they have we know it's reflected in our protein as well.
So we should have at least that activity.
In addition they've done a lot of hard work so they set up a clinical development infrastructure where the drugs are studied, which will utilize, they have activated the regulatory agencies to think about what the approval basis for these programs will be.
We will utilize that and not have to re-create it, they've also got a lot of excitement amongst opinion leaders in this area who are now eager to work in this area.
So we will take advantage of all that to try to be more efficient and capture an element of speed and use our energy to differentiate and, again, as I alluded to we think both on a cell biology basis and an animal basis we have a basis to differentiate so Amgen's product is given in six intravenous doses in a prevention setting in bone marrow transplantation.
Again we will try to differentiate by having the same or better activity with as little as one or two doses in that same population.
In addition, we will try to use the benefit of that single dose as well as the benefit of potentially having a treatment effect to be able to go at tumors other then those treated with bone marrow transplantation so things like colon cancer, lung cancer, breast cancer are all treated as outpatients and in chemotherapy these people have risks of oral mucositis in the range of 20 to 40 percent as outpatients.
So it'll be hard to get a patient 6 doses of a drug as an outpatient so if we can have a preventative effect with a single dose or two doses, that's potentially a much more acceptable outpatient regimen.
In addition in these cases where there's a 20 or 40 percent incident, the other risk is not to try to prevent disease when only 20 to 40 percent are going to get it but actually wait until people start showing signs and symptoms and then intervene in a treatment fashion.
This is a treatment paradigm we are alluding to where we have animal evidence that our drug is active there.
We don't know that any of the other competitors have that same evidence in animals and then that's, again, something we would expect to explore and try to differentiate on in clinic introducing a treatment paradigm.
Bonnie Feldman - Analyst
So if Amgen has first mover advantage would you could consider them as a possible future collaborator or merely as a competitor?
Dr. Jonathan Rothberg - CEO, President and Chairman
I think we are open.
Right now we are just trying to be aware of what's going on in the environment.
We have great respect for them which is why, again, when I say we will utilize what they've done that is because they've done a good job with what they've done.
In terms of potentially being a collaborator I think it would be premature to say.
Again, we're open.
Operator
(OPERATOR INSTRUCTIONS)
At this time, there are no further questions.
Gentlemen, are there any closing remarks?
Dr. Jonathan Rothberg - CEO, President and Chairman
Yes.
This is Jonathan Rothberg.
I want to, again, thank everybody for their support.
This has been a strong first quarter for CuraGen with progress in the clinic, progress with the FDA and progress with our pipeline as well as progress continuing to build a team that knows how to create value for all of our stakeholders.
Thank you.
Operator
This concludes today's conference call.
You may now disconnect.