Celldex Therapeutics Inc (CLDX) 2005 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the second quarter 2005 AVANT Immunotherapeutics earnings conference call.

My name is Michelle, and I will be your coordinator for today.

At this time, all participants are in a listen-only mode.

We will be facilitating a question and answer session towards the end of today's conference.

If at any time during the call you require assistance, please press star followed by zero and a coordinator will be happy to assist you.

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

I would now like to turn your presentation over to your host for today's conference call, Dr. Ryan, President and Chief Executive Officer.

Please proceed, ma'am.

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 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, Chip will first review AVANT's second quarter financials.

Then I will give you a brief update on our lead clinical programs and discuss our transaction with Paul Royalty Fund.

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

Good morning, ladies and gentlemen.

We announced in our press release today AVANT's financial results for the second quarter of 2005.

The press release is filed as an exhibit to the Form 8-K with the SEC and is available on AVANT's website on the Investor Information page.

AVANT reported a net loss of 4.7 million or $0.06 per share for the second quarter compared to a net loss of 3.9 million or $0.04 per share for the second quarter in 2004.

For the six months ending June 30th, 2005 the Company reported a net loss of 9.6 million, or $0.13 per share, compared to a net loss of 5.8 million or $0.08 per share for the six months ending June 30, 2004.

The increase in loss between quarterly periods primarily reflects a decrease in revenue, due to lower billing levels to DVC for the anthrax plague program and an increase in increase in 2005 of operating expenses due to increased clinical trial costs incurred on the Company's TP10 program and operating expenses of our Fall River manufacturing facility, as well as increased general and administrative expenses.

Outstanding shares at quarter end were approximately 74.1 million shares, in that June 30, 2005, AVANT had cash and cash equivalents of 27 million, which included a 5 million up-front payment received from Paul Royalty Fund during the quarter.

Thank you, Chip.

Now for an update on the clinical programs.

We 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.

Last week, we were pleased to announce a breakthrough in the control of cholera with positive preliminary results from a Phase II clinical trial of CholeraGarde in infants and children, which reinforces the strong safety and immunogenicity results reported last year in adults receiving this same experimental vaccine.

Researchers in Bangladesh found our single dose oral CholeraGarde vaccine to be well-tolerated and highly immunogenic, with 77% of children age nine months to five years generating protective immune responses.

The ability to induce protective immune responses in children under age 2 is extremely important and would allow the introduction of the vaccine into the routine pediatric immunization calendar in endemic regions.

There currently are no licensed cholera vaccines worldwide indicated for children under age 2.

Cholera remains a global threat according to the World Health Organization, especially in developing countries and to travelers.

Infants, children and the elderly are at the highest risk of dying from the disease.

Now we'll also be working with Harvard University to apply our VitriLife technology for vaccine thermo-stability to our cholera vaccine under a grant that was also announced recently from the National Institutes of Health.

With respect to our complement inhibitor, the enrollment rate in the Phase IIB study of TP10 in women undergoing cardiac bypass surgery improved during the quarter as a result of steps taken to increase enrollment, including the addition of new study sites.

AVANT now expects to complete enrollment in this trial by year end.

The aim of the trial is to augment the safety data for TP10 and further define its effect in women before advancing to a Phase III study.

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

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

We have contracted for the production of GMP peptide for the newly formulated vaccine, and AVANT is seeking a development partner for this program.

During the second quarter, we completed all of the validation at the Fall River facility required to start vaccine production of the plague component of our oral combination anthrax plague vaccine.

We have begun production of this vaccine during the current quarter.

And as I just mentioned, we've also recently reported that AVANT, together with Harvard Medical School, will receive approximately $500,000 from the National Institutes of Health to apply VitriLife formulations to our CholeraGarde vaccine.

With respect to our biodefense programs, during the quarter we experienced lower billing levels to our partner DVC for work on the anthrax plague vaccine program; however, we anticipate billing levels to increase during the third quarter as we complete productions of the plague vaccine candidate in Fall River and prepare for pre-clinical animal toxicology and stability studies.

Late this year, AVANT expects the National Institutes of Health to initiate a Phase I-II clinical trial in approximately 50 subjects aimed at demonstrating the safety and immunogenicity of AVANT's typhoid fever vaccine, Ty800, at an NIH funded clinical site.

Now, let me just finish up by reviewing the transaction with Paul Royalty Fund.

In May, we announced an important strategic transaction that provided AVANT with non-diluted financial resources for furthering our product development programs.

The deal with Paul Royalty Fund enables AVANT to receive a considerable amount of the future royalty stream now from future sales of Glaxo's vaccine against Rotavirus disease, Rotarix.

At the same time, the agreement allows AVANT to retain significant upside in future royalty revenues depending on sales of Rotarix.

The Company announced that an affiliate of Paul Royalty Fund would purchase for up to 61 million an interest in the net royalties AVANT is due to receive on worldwide sales of Rotarix.

AVANT expects to receive 50 million of this funding within the next 12 months, with a guaranteed 10 million to be received this year. 5 million has already been received at signing, and 5 million will be received on December 1, 2005.

We really want to emphasize that AVANT retains a substantial share of potential future royalties from Rotarix that, depending on its commercial success, could be quite significant.

Under the agreement with Paul Royalty Fund, AVANT will continue to retain half of up to 5.5 million in future growth milestones payable by Glaxo.

In addition, we will keep 92.5% of royalties above the first 27 million in any year, which goes to PRF -- Paul Royalty Fund.

Once they receive a return on the investment of 2.45 times its cash payments, AVANT will receive 92.5% of all future royalties.

So to try to quantify the impact of these deal caps, Glaxo currently expects worldwide sales of Rotavirus vaccines to be between 1.8 and 2.3 billion per year by 2010.

Thus, these deal caps are triggered when Rotarix annual net sales exceed approximately 500 million, or when aggregate Rotarix net sales exceed approximately 2.6 billion, and then AVANT will receive 92.5% of all subsequent Rotarix royalties.

This is the end of my introductory statement.

And we now welcome your questions.

Thank you, ma'am.

Ladies and gentlemen, if you wish to ask a question, please key star followed by one on your touch-tone telephone.

If your question has been answered or you wish to withdraw your question, please key star followed by 2.

Questions will be taken in order received.

Once again, that is star 1 to ask a question.

Our first question comes from the line of Derek Jellinek of Roth Capital Partners.

Please proceed.

Derek Jellinek, Ph.D.: Good morning.

Good morning, Derek.

Derek Jellinek, Ph.D.: Would you outline for us your commercialization strategy for CholeraGarde in light of the safety and immunogenicity data?

Yes.

I think that there will be two areas of commercialization.

The first will be for travelers from countries such as the United States and the wealthier countries of the world.

We intend to move forward and have an end of Phase II meeting with the FDA, we hope by the end of the year, but the exact date will be up to them.

We would then proceed under an FDA-sponsored trial, we hope, a Phase III.

We have to, of course, get their sign-off on that.

And we would expect to do a sort of 3,000 patient trial Phase III, which would have a challenge component which might include more elderly people than we used before, and move forward to a BLA in the U.S. under FDA sponsorship for travelers.

At the same time, we would plan to look for funding from such people as the Gates Foundation, through organizations such as the IVI, the International Vaccine Initiative, and DOMI, the Diseases for the Most Impoverished, to do a Phase III trial in regions where cholera is endemic, such as Bangladesh.

You know, we've used a very special facility in Bangladesh for the clinical trials up to now, and we would hope to continue with them.

So we would expect to fund ourselves the Phase III for travelers.

We would hope to gain a third party funding for an approval overseas in endemic regions.

But I just want to point out again, Derek, that if you listened to the Glaxo Smith Kline announcements on Rotarix, they are expecting quite substantial sales in poor countries, and I assume this is from non-governmental organizations such as Gates, the G8 Funding, recent announcements from the UK, Minister Gordon Brown.

So I think while we, AVANT, will push for the traveler's market there may be a more substantial market than we had realized outside the U.S.

Derek Jellinek, Ph.D.: Right, right.

So on Rotarix, how -- did you receive royalties from GSK for sales in this quarter?

Well, we won't be receiving them.

We have received a royalty report from the first quarter of royalties a little under $2 million.

But those are offset against milestone payments we received earlier in the year.

Just to clarify, Derrick --

Derek Jellinek, Ph.D.: Yes.

We did receive a royalty report.

They had sales of about 2 million in the first quarter.

And again, we recognized a milestone in December, and half of that milestone offset the first million of royalties.

Derek Jellinek, Ph.D.: Right.

Right.

Okay.

I understand.

So another typical question from me is, can you kind of outline your partnership discussions for us on TP10 and CETi-1?

Yes, well TP10, it's always the same story.

We are in discussions.

Everybody is waiting for the end of the Phase II-B study in women.

So I think that all I can say is that any partnership we will do will be after the end of Phase II, and before the start of Phase III.

Derek Jellinek, Ph.D.: Right.

What about CETi-1?

Oh, CETi-1.

Yes, we are also in partnering discussions on CETi-1, but I think there's -- our strategy has always been to take products to Phase II.

So I think there's less urgency on -- on CETi-1.

We will not be able to do a Phase III on TP10 on our own, but there is plenty of work we can do at the pre-clinical level on -- on the next generation of CETi that we're getting ready to go back into the clinic.

Derek Jellinek, Ph.D.: On CETi-1, how to you think that drug will be positioned against the likes of Tercetoped Atorivastatin (ph) if that Phase III trial is successful and the combination pill is approved?

Well, I think that in many ways that will be very good.

I think it will make the case, as Novacor did, for substances that lower LDL that, you know, we can intervene and raise HDL.

So I think it will bring the second half of the equation to both patients and investors alike.

I think the combination is fine, you know, if you are already on Lipitor or if you already own Pfizer stock.

But I think one of the attractive things about our vaccine is that it could be coupled with other cholesterol management agents.

Derek Jellinek, Ph.D.: Right, right.

Maybe one last question, quickly, on -- this is maybe for Chip, are you still staying with your top line guidance of six to seven million?

Yes, we are.

Derek Jellinek, Ph.D.: And does that include the one to two in Rotarix sales?

Well, I think this has all changed because of the royalty -- the royalty deal that we did with Paul Royalty Fund.

But I think we will maybe not be six to seven, but I think five to six million this year.

Derek Jellinek, Ph.D.: Five to six.

What about your expense line and your R&D?

I know you just burned in the second half -- sorry, in the first half -- 7.5 million; so the second half according to your guidance to 18 to 20 million would put you to 10.5 to 12.5 million.

That's probably high.

Derek Jellinek, Ph.D.: Yes.

We have scaled back on a few things, so I think we're going to be more in the 12 -- 12 million, that range.

Derek Jellinek, Ph.D.: Okay.

Wonderful.

Great.

Thank you.

Thanks.

And as a reminder, ladies and gentlemen, that is star 1 to ask a question.

Dr. Ryan, I'm currently showing we have no questions in the queue at this time, ma'am.

Thank you.

Then I'd like to make a few closing remarks.

Again, we want to emphasize strongly that AVANT is a company with a variety of late stage programs in clinical development.

Already in 2005 we've accomplished a number of notable milestones.

We announced that GSK had filed in late 2004 for market approval of Rotarix with the European Regulatory Authorities, triggering a 2 million milestone payment to AVANT.

Also in January, GSK announced the launch of Rotarix in Mexico; it’s now launched in seven countries, so that represented the first step in a series of global product launches this year.

In May, we reported an important strategic transaction with Paul Royalty Fund that provides AVANT with non-diluted financial resources for furthering our product development programs.

Recently, we reported that AVANT, together with Harvard Medical School, would receive approximately $500,000 from the National Institutes of Health to apply VitriLife formulations to our CholeraGarde vaccine.

And last week, we reported positive Phase II study results for our single dose oral CholeraGarde vaccine that showed the vaccine to be safe and to generate protective immune responses in infants and children.

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

We look forward to updating you on our programs next quarter.

Goodbye.

Ladies and gentlemen, thanks for your participation in today's conference call.

This does conclude your presentation, and you may now disconnect.

Good day.