Celldex Therapeutics Inc (CLDX) 2004 Q4 法說會逐字稿

Good day, ladies and gentlemen and welcome to the fourth quarter 2004 AVANT Immunotherapeutics, Inc. earnings conference call.

My name is Alisha and I will be your operator.

At this time, all participants are in a listen-only mode, and we will be facilitating a question-and-answer session towards the end of the call.

If at any time during the call you require assistance, please press star followed by the number zero an an operator will assist you.

As a reminder, this conference is being recorded for replay purposes.

I would now like to introduce your host for today's call, Dr. Ryan, Chief Executive Officer for AVANT Immunotherapeutics.

Please go ahead.

Thank you.

Good morning, ladies and gentlemen.

I'm Una Ryan, 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 by AVANT during this call, which 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.

During this call, I'll first review AVANT's fourth quarter and year end financial, and then give you a brief update on our lead clinical programs.

Following that, I'll open the call to questions, and after answering questions I'll make a few closing comments.

First, the fourth quarter financial results.

We announced in our press release today AVANT's financial results for the fourth quarter of 2004.

The press release is filed as an exhibit to Form 8-K with the SEC, and is available at AVANT's web site on the investor information page.

AVANT reported a net loss of 3.7 million, or $0.05 per share, for the fourth quarter compared to a net loss of 2.9 million or $0.05 per share for the fourth quarter in 2003.

In the fourth quarter of 2004, we recognized a $2 million milestone fee from GSK, 50 percent of which is creditable against future royalties.

The milestone fee was received by AVANT in January 2005.

We have recorded 300,000 in cost of revenue as an accrual for future license fee obligations, with respect to the portion of GSK's payment that will offset future royalties.

For the full year ended December the 31st, 2004, AVANT reported a net loss of 13.2 million or $0.18 per share compared to a net loss of 12.7 million or $0.20 per share for fiscal 2003.

The increase in loss between periods primarily reflects increased -- increased research and development expenses, due to increased clinical trial costs and contract manufacturing costs incurred on the Company's TP10 program.

This was partially offset by an increase in product development and license agreement revenues.

Outstanding shares at quarter end were approximately 74.1 million.

At December the 31st, 2004, AVANT had cash and cash equivalents of 31.7 million, a decrease of 3.5 million from the prior quarter.

Now, for the clinical programs.

We're pleased that our partner, GlaxoSmithKline Biologicals, which I'll refer to as GSK received approval from the Mexican Board of Health to market Rotarix in Mexico, for the prevention of gastroenteritis caused by rotavirus infection, and launched Rotarix this January.

We anticipate that this is just the first of a series of marketing approvals for Rotarix, as GSK continues its worldwide launch efforts for this vaccine.

Addressing a worldwide market opportunity, estimated by GSK at 1.8 billion, they have already filed for market approval in more than 20 countries worldwide, as well as with the European regulatory authorities.

Royalty revenue to AVANT from Rotarix sales should begin in the first half of 2005, with estimates totaling about 1 to 2 million for the year, increasing over the next several years, as more countries approve this much-needed vaccine.

AVANT licensed in the Rotarix technology in 1995 and owes a license fee of 30 percent to Cincinnati Children's Hospital Medical Center on net royalties received from GSK.

With respect to our complement inhibitor, TP10, enrollment in the Phase IIb study in women undergoing cardiac bypass surgery has progressed more slowly than we anticipated.

We now expect enrollment for this trial to be completed as soon as possible, and to report out results in the third quarter 2005.

We recently completed a very constructive end of Phase II meeting with the FDA to discuss our plans regarding the Phase III clinical development of TP10.

The FDA emphasized their interest in assessing safety in females and showing at least a trend in efficacy in the current Phase IIb study prior to starting a Phase III trial.

We do not believe the current Phase IIb study needs to provide strong evidence of efficacy in women for AVANT to proceed to a Phase III study.

We will continue routine ongoing discussions with the FDA to further define the clinical pathway for TP10 in cardiac bypass surgery, and the FDA's requirements for a special protocol assessment submission.

We are working closely with our manufacturing partner, Lonza Biologics plc, to continue process development and scale up efforts in preparation for the production of Phase III clinical materials.

AVANT is seeking to partner the TP10 program prior to starting a Phase III trial.

With respect to our CETP vaccines for cholesterol management, in preclinical testing, we have identified a new adjuvanted formulation for the vaccine that elicits more than a 10-fold increase in anti-CETP antibody titers when compared to the current CETi-1 vaccine.

We have contracted for the production of GMP peptide for the newly formulated vaccine, and we expect to complete toxicology, release and stability studies in 2005, consistent with the goal of having CETi back in the clinic within approximately 12 months.

In November 2004, we opened our new manufacturing facility in Fall River, Massachusetts.

We're at present validating this facility, its systems and equipment, and expect it to be operational by the end of the second quarter.

The facility will produce our biodefense vaccines, travelers' vaccines, and implement our VitriLife technology.

With respect to our biodefense programs, funding of 2.8 million was included in the Defense Appropriations Act for fiscal year 2005, to support continued work on the oral anthrax/plague vaccine that AVANT is developing for the Department of Defense, bringing total funding for this program to approximately 10 million.

Finally, the international vaccine institute, IVI, has completed enrollment of its Phase II trial of CholeraGarde in Bangladesh.

In 2004, we announced positive results in the adult portion of this trial, in which over 70 percent of the vaccinated adults responded with a favorable immune response.

AVANT expects IVI to provide data from the pediatric portions of this study by this summer.

AVANT has accomplished a great deal this year.

Each of our achievements brings us one step closer to becoming a commercial company, and realizing the full value of our technologies and products.

I want to emphasize strongly that AVANT is a company with late-stage programs.

We now have an approved human healthcare product in Rotarix, and six other products in clinical development, greatly diversifying our risk and providing us with many exciting opportunities.

The majority of these programs are supported through partnerships with major companies, governmental agencies, or international health organizations.

These collaborations validate the value of our pipeline, and from a financial perspective, enable us to advance so many products towards commercialization.

This is the end of my introductory statement.

We now welcome your questions.

[Operator Instructions].

Derrick Gelleneck [ph], Ross Capital Partners.

Good morning, Derrick.

Let me ask -- I'm just wondering how confident are you in securing a partner for TP10 this year?

Well, we always go to great lengths not to give a precise date or quarter by when we would expect a partnership because it's so difficult to predict, but I'm very confident about it.

So would you be commencing that trial even if you don't secure a partnership?

No, we don't think that's wise at all.

We would want the partner actually to have some input into the design sites and conduct of the trial.

And I think it's a mistake to have 2 masters.

So I think we will secure the partnership.

I think the critical thing, actually, is the completion of the Phase II in women.

Right.

Right.

So have you met with the FDA, as you said, have you revised the Phase III design.

You said you would be seeking in an FBA [ph] as well.

Could you just elaborate more on that?

No, we haven't.

Actually it was a very supportive meeting.

It was a very good meeting, largely designed to talk about Phase III and criteria for a BLA.

It's clear they do want the results from the females.

I think that you need to understand what they want there.

They want, of course, to be sure about safety in females, and they want to be clear that TP10 has a benefit in women, but it's our belief that they don't require strong statistical readout from this.

We simply need the information in order to be able to write the label correctly for females.

So we either need to say this should not be used in females -- and I think that's extremely unlikely -- or that it may be.

And we simply need the information on -- I think you can see we're looking ahead to things such as labeling, to do that with confidence.

Right.

Jumping gears for a second.

Sure.

[Inaudible] defense program.

I assume from -- given your guidance that you're recognizing the whole 2.8 million received from the 2005 Defense Appropriations bill --?

Well, we actually -- it's sort of spend as you go.

So I think that we may not recognize it all in the year, but it's all ours to spend.

So the rate at which we do the work, and the scientists bill -- remember, it's time, materials and a small profit.

I think that's how -- how we will progress.

And how are you doing for lobbying for the fiscal '06 Defense Appropriations bill?

Well, I don't want to jinx it, Derrick, but I've been walking the halls of Congress.

We have been extremely successful.

We're one of the very few companies that has our own federal line item appropriation, but you know the government has a lot to spend money on this year.

Certainly the response from Senator Bond's office and Senator Kennedy's office is always supportive.

So please keep your fingers crossed.

Great.

Thanks so much.

Okay.

Russell Gilbertson [ph], Harris and Company.

Good morning, Una.

Good morning, Russ.

How are you doing today?

Question regarding the milestone payment from GSK.

You had mentioned that up to 50 percent of that payment could be recouped by GSK against future royalties on the product.

Could you just give us a little more detail on that?

That's exactly right.

The milestone for filing in Europe was 2 million.

They actually sent it -- we received it in January. 1 million of that is ours fully, the other million is an advance against royalty, and I think you will see that that's how we have dealt with it in terms of accounting.

Do you anticipate getting a royalty upon approval in the EU, and would there be a similar type of arrangement?

It will -- we expect to get royalties, but I think you mean a milestone, Russ.

Right.

There's another 5.5 million in milestones remaining.

We would expect to receive milestones for launch in major market countries in Europe, of which there are 4, and then we would expect a milestone for launch in the U.S.

So it's actually 1 million for each major market country in Europe and 1.5 million for the U.S.

We would expect to receive royalties on all sales anywhere.

Okay.

So these are on launch and not on approval --

Plus I wanted to add that those milestones, they are also 50 percent creditable against future royalties.

Okay.

Understood.

Understood.

And you're pretty comfortable with that third quarter data reporting for TP10?

Yes, I think we are.

I think that's what coincides very well with our sort of general timelines.

We need to look at stability in the September time frame, I think that's what -- that's what we've been saying and that's what will work best.

Right.

Could you give us a clinical update on the anthrax/plague program, and also your HIV trial, with the Therapore technology?

Yes, the anthrax and plague program is still preclinical.

We do expect that we will get the plague portion in the clinic in '06 -- beginning of '06.

It doesn't -- I don't want you to get too hung up on which parts are animal and which parts are human.

Under the biodefense accelerated approval, you have to do the 2 animal rule.

And I think some companies want to do this first and some people want to do it second.

We will do challenge studies in animals prior to entering humans.

So I think we're still a ways away from being ready to apply for stockpile money, but the program's going very smoothly.

So animal studies would be this year?

Yes.

They will be challenged with live spores.

So they will not be done in house at AVANT.

And we will be doing them outside.

Good.

Yes.

Oh, and your second question was about HIV.

That is being supported under a crater [ph] with WRAIR, the Walter Reid Army Institute of Research.

They plan to enroll 18 patients.

They have been screening them.

I believe they have started enrollment, and I imagine that they will finish it this year.

Okay.

So we --

-- Enrollment this year.

Enrollment, so maybe data first quarter of '06.

Yes, I would say.

Okay.

Very good.

Thank you.

Thank you.

Ren Benjamin, Rodman & Renshaw.

Hi.

Good morning.

Congratulations on your ongoing progress.

Thank you, Ren.

Good to hear from you.

Can you give us a little bit of insight regarding the rollout of countries for Rotarix, in particular, when you think -- or GSK thinks European approval could be achieved?

Yes, I want to preface everything I say, that this is my best estimate, or guesstimate might be more accurate.

There's nothing new that GSK has told us or their investors.

So let me tell you what really is AVANT's management's belief.

We believe that they will roll out extensively, probably most countries across Latin America this year, 2005.

We also believe that southeast Asia should come really well on the heels.

So some at least of the southeast Asian countries, I would believe, would come aboard in '05.

Whether Australia and New Zealand will be part of the first or the -- the avant-garde or the end of that, I don't know.

On the subject of Europe, I think that's the very exciting time point for AVANT, because then we'll be in on patent countries.

If you look at how long it took GSK's filings over the past few years, it took from 12 to 15 months for them to get approval in Europe.

So we have felt that roughly a year from the time that they filed, so I would say early '06.

Okay.

And just kind of switching gears to your vaccine programs.

Do any of them qualify for Shield?

Yes, it's a very good and very interesting question.

Under BioShield 1, the answer is no.

As you know, I'm extremely familiar with this area.

The expectation is that what we call BioShield 2, it's actually S3, this will be not only for the category A bioterrorism threats, but also for serious infectious disease, such as cholera, typhoid fever, shigella, ETEC.

They are expected to be included.

As you know those are category B bioterror threats, but the attempt is to make the next round of BioShield include those kinds of vaccines that AVANT is actually developing.

And is it too early to presume that you would be applying for those -- is that how it works, that you apply for those programs?

Yes, you do.

Well, first have you to wait for an RFP.

Let me be very clear about the understanding, though.

I think that we have one vaccine, CholeraGarde, that clearly would be ready to -- for us to put together for such an RFP if it were to occur.

But have you to take them to the point where they're within about 5 years of approval.

So I would say our CholeraGarde makes that.

Ty800 typhoid fever is coming along, but we will need to advance the dysentery and ETEC a little further before they're ready.

And when would -- when would you apply for this?

Well, I don't want to be too precise, but I would say in a couple of years.

Okay.

Okay.

And then finally, can we just run through the expected milestones for the Company for 2005?

I would expect that we will -- as I've just told you, expect to see exciting numerous new launches for Rotarix.

You will see a report out on the women -- the female trials for TP10.

We expect to complete either publish it or get CETi-1 back in the clinic within the next 12 months using a new formulation.

We would expect to report out the CholeraGarde trials from the Bangladesh study, which has been moving extremely well, about mid year this year, '05.

And we expect Ty800 to be moving in the Phase I/II with the NIH.

Terrific.

Thank you very much.

You're welcome.

Richard Auslander [ph], UBS.

BusinessWeek article on the rotavirus vaccine indicated that the IVI of the Gates foundation was going to be providing funding.

Do you have any idea the dimensions of that?

Where it's going to be?

That's actually not quite correct.

The IVI will not be funding it.

There are some monies from GAVI, the Global Alliance For Vaccines and Immunization, that's recently received about 750 million from Gates and more money from the G8 countries, particularly the UK.

That will be for accelerated distribution in those countries where they can't pay anything.

In countries like Mexico, they will pay for the vaccine, and it may be at a tiered price compared with the U.S.

But there are some countries where rotavirus is devastating, as you know, and GAVI actually will be responsible for accelerated distribution in those countries.

They will pay GSK for it.

Our royalties are based on any sales anywhere.

So, we will get a proportion of that.

Okay.

So basically as they get approvals and then as they start distributing and selling is when the royalties would come in?

Yes.

Okay.

Second question.

On the CETi vaccine, is it possible you'll be able to do Phase I/II trials combined, or do you have to go back to your drawing boards just do Phase I?

I think it's possible that you could do Phase I/II combined, but at the beginning when you're looking really just to test for dose, it sometimes makes sense to do a Phase I, because it's a little bit quicker; but I think the good news is that we have a lot of experience now, and we have good safety data from what I would call mop [ph] 1.

So I think we're in good shape, and we can do it either way.

The concern I have is in the original trials they required you to wait -- what was it, 9, 10 months before you gave a second dose.

Yes, they did.

It was -- it was an issue.

It is a new formulation, but, again, I think that the whole concept they're more comfortable with now.

The concept of generating antibodies against a cell protein; and, of course, we did see proof of principle in the Phase II study.

So I think there might be a small bridging arm since this is actually a new formulation, but we have not got the details of the clinical trial worked out with the FDA yet.

Will the Pfizer CETi pill be of assistance to you, fighting through the FDA?

No, I think it's a completely different -- I think it's a completely different molecule.

I mean, I don't want to imply that we need assistance with the FDA.

We just simply haven't been in to have the meeting with them.

I wasn't suggesting that.

I was just hoping that they help fight it through the FDA, the concept.

It's a different concept.

The other than immunological approach.

Yes.

Agreed.

Their's is toxic, I believe to an extent.

Well that won't help us, I don't think.

I don't think so either.

It may mean we have to do more safety studies as we saw with Rotarix.

The last point, a number of companies have taken their institutional presentations -- and I know have you a good number of those meetings -- and put them on to their web sites so all the shareholders can look at them, which is very inexpensive and a good way to communicate.

Would you consider doing that, please?

We not only would consider it.

We have done it.

We webcast most of them.

The Roth conference that Mr. Catlin presented at is on now.

I presented at the bioconference at about the same time, so we didn't put both on.

But I'm very glad that your investors are now all wired up, and, yes, I think it is a very good idea.

They are not all wired up, but we're trying.

Okay.

There's always wireless too.

Thank you very much, both of you.

You're welcome.

[Operator Instructions].

John Donahue [ph], private investor.

Dr. Ryan, at the conference last week, a question was asked regarding outsourcing our Fall River manufacturing facility.

I was just wondering, your thoughts on that, as a potential revenue stream?

Yes, I -- I assume you're meaning our primary use for the Fall River facility will be for AVANT's own vaccines.

That's correct.

We expect to start with our own vaccines such as CholeraGarde, typhoid fever and the plague vaccine, which we will need for our clinical studies.

We also have had a lot of interest in our VitriLife technology.

So we will be applying for grants and we are open to the concept of contract manufacturing for people's second generation vaccines.

We don't want to get bogged down with doing a whole lot of contract process development for other people's early stage vaccines, but we are in the process of validation now.

You will see the factory up and running this year, '05.

Thank you.

You're welcome.

Robert Eardsy [ph], private investor.

Good morning, Dr. Ryan.

Good morning.

I have a question about the collaboration on livestock vaccines with Pfizer.

I was wondering if you could give us some insight into the progress in that partnership.

Yes, it's a good question and I'm afraid I can't.

Pfizer is very tight lipped about, A, the targets, what kind of livestock we're working on.

When we are working on projects with them, it's largely run through our St. Louis facility, with whom they have great confidence.

But I'm afraid we can't give out very much more information on it.

I'm sorry, Robert.

Okay.

On -- switching gears to VitriLife, there's been a lot of concern over storage of new vaccines, either flu vaccine or the new Avian flu vaccine, and it seems like VitriLife would be an ideal way to try to address that issue.

Have you had any discussions, or are you planning to have discussions, with the federal government and vaccine manufacturers in applying VitriLife or licensing VitriLife for those applications?

Yes, we are very willing to talk to anyone and everyone on it.

As you know, we do talk to the military and civilian sides of the government.

We've actually had a lot of interaction with large and small companies about vaccine projects.

As I said, though, we have to prioritize on a business basis.

We will manufacture our own vaccines, and those vaccines that don't disrupt our own production needs and do provide a good return.

You can always get a royalty, but AVANT does not want to be in the contract manufacturing business.

We want to license our VitriLife technology, but we don't want to just end up getting contract manufacturing margins that would compromise our own work.

And finally a question as an investor -- a long-term investor in AVANT, looking at valuation, it's perplexing why this biotech which has a billion-plus-dollar vaccine in Rotarix, and with very strong support from Glaxo, and a host of other important therapeutics is still valued at $1.60 for a total market cap of 120 million.

Have you looked at this issue and how do you plan to address it?

The answer is it is -- it's very distressing.

Any one of our product is probably worth more than the market cap of the Company, but along with all other small vaccine companies, we're extremely undervalued.

I think one of the problems, as I've said before, is the stock price itself, the market cap itself, and a lot of incorrect information that you see out on the chatrooms.

And we are not currently looking to do a financing or anything like that.

I think our long-term investors understand the value in the Company, and we are absolutely committed to increasing that, and I hope it will be demonstrated.

You've heard from, I think 4 analysts who are interested in the Company.

We will try to reach out more to the retail community, and make communications there.

We will be on the road in April, probably not just New York, but visiting -- I believe you are on the West Coast; is that right?

Yes, that's correct.

We will try to be out, talking to investors.

I think that's the best way.

Everybody who hears the story loves it, is impressed by it and says exactly what you are saying.

How come you're so undervalued?

So we will get out on the road as much as we can.

Okay.

Congratulations on the great progress that you're making.

Thank you so much for your continued interest.

Great.

Dr. Ryan, we have no more questions in the queue at this time.

Would you like me to prompt for more questions?

No, I think we have investors who can look after themselves.

I just want to close by emphasizing strongly that AVANT is a company with a variety of late-stage programs in clinical development and already in 2005, we've accomplished some notable milestones.

First, we've announced that GSK had filed in late 2004 for market approval of Rotarix with the European regulatory authorities, triggering the 2 million milestone payment we've been talking about.

Also in January, GSK announced the launch of Rotarix in Mexico, representing first step in a series of global product launches to begin this year.

I want to remind you again that this press release and conference call contain forward-looking statements, which are subject to a variety of risk, uncertainties, and other facts that could cause actual results to differ materially from those expressed in any such forward-looking statements.

We enjoyed talking to you, and we look forward to updating you on our programs next quarter.

Thank you.

Good-bye.

Ladies and gentlemen, this concludes your conference.

You may now disconnect.

Good day.