Celldex Therapeutics Inc (CLDX) 2005 Q3 法說會逐字稿

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

My name is Jackie, 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 toward the end of today's conference. (OPERATOR INSTRUCTIONS) I would now like to turn the presentation over to your host for today's call, Dr. Una Ryan.

You may go ahead, ma'am.

Thank you.

Good morning, ladies and gentlemen, I am Una Ryan, President and CEO of AVANT Immunotherapeutics Inc.

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

I would 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 Chip will first review AVANT's third-quarter financials.

Then I will give you a brief update on our lead clinical programs.

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

Thank you, Una.

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

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

AVANT reported a net loss of 4.5 million or $0.06 per share for the third quarter compared to a net loss of 3.7 million or $0.05 per share for the third quarter in 2004.

For the nine months ended September 30, 2005 the Company reported a net loss of 14.1 million or $0.19 per share compared to a net loss of 9.5 million or $0.13 per share for the nine months ended September 30, 2004.

The increase in loss between quarterly periods primarily reflects an increase in 2005 operating expenses.

Due to increased clinical trial costs incurred on the Company's TP10 program as well as full-scale operations at the Fall River manufacturing facility and increased general and administrative expenses.

These were offset in part by an increase in revenues from government contracts and grants.

Outstanding shares at quarter end were approximately 74.1 million shares, and at September 30, 2005 AVANT had cash and cash equivalents of 22.2 million.

Thank you.

Now I will give you an update on the clinical programs.

But first I want to emphasize that AVANT has tremendous capabilities in the vaccine space, an area that is becoming a great interest to both the public health and financial communities.

And what we've been able to do is develop our vaccine resources to the point where we believe we can return value in the near-term, the mid-term, through the long-term, by creating a pipeline of proprietary product opportunities and high-value partnerable candidates.

In addition, we've assembled the personnel and infrastructure to do this repeatedly.

Now there is a rapidly growing, multibillion dollar market for bacterial vaccines, and we're making great headway here.

During the quarter we announced a breakthrough in the control of Cholera with positive preliminary results from a Phase II clinical trial of CholeraGarde in infants and children.

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

And there are currently no licensed Cholera vaccines worldwide indicated for children under age two.

So these data reinforced the strong safety and protective immune responses reported last year in adults receiving this vaccine.

During the third quarter we began production of the Plague vaccine of the Fall River facility and in July 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.

Also during the third quarter, AVANT began working on a Phase I small business innovation research grant to support the development of a live, attenuated salmonella vaccine against Campylobacter which was awarded in April 2005.

The NIAID award provides approximately 131,000 in funding.

Now we have good news today.

AVANT has heard that the National Institutes of Health has filed an IND to initiate a Phase I clinical trial in approximately 50 subjects, aimed at demonstrating the safety and immunogenicity of AVANT's typhoid fever vaccine, Ty800, as an NIH funded clinical site during the first quarter of 2006.

Now in addition to our bacterial vaccines franchise, we have developed late stage cardiovascular programs with high-value partnering potential.

We announced this month that enrollment was completed in the Phase IIb study of TP10, our complement inhibitor in women undergoing cardiac bypass surgery.

AVANT expects to report results of this study in the first quarter of 2006.

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

Now clearly Rotarix is an example of an AVANT product that is being developed, partnered and commercialized and where we have already monetized some of the future earnings potential of the product to provide financial resources to develop our core franchise.

Rotarix under GAAP sales guidance is now licensed in 22 countries worldwide.

The two most recent being the Philippines and Singapore.

So AVANT's broad pipeline of programs and emerging portfolio of next generation oral vaccines, together with state-of-the-art technologies and manufacturing facilities offer exciting opportunities to build value in the near-term, mid-term and long-term.

Let me lay this out for you.

In the near-term, by which I mean the years '05 and '06, we should be receiving Rotarix milestones, expecting TP10 confirmatory Phase II data, and CholeraGarde will be manufactured in the Fall River facility.

In the mid term, '07 and '08, we will still be expecting Rotarix milestones.

We will be monetizing the cardiovascular programs and making advancements in the vaccine pipeline.

In the long-term '09 and '10, we will now be receiving Rotarix royalties above the deal caps in the Paul Capital deal receiving cardiovascular program royalties and commercial vaccine product revenues.

So this is the end of my introductory statement, and we now welcome your questions.

(OPERATOR INSTRUCTIONS) Harry Rosenblum (ph), private investor.

You mentioned that on the cardio inhibitor that you were planning on monetizing it as well.

I thought it was a good move to monetized the Rotarix because it is keeping you from diluting the shareholders.

But why would you also want to monetize the other?

Maybe it's the use of the word monetize.

We mean we can return value in a partnership.

We believe that we can develop our bacterial vaccines franchise vertically, go all the way through manufacturing and sales.

We did not believe that is wise for AVANT to do late stage expensive Phase III clinical trials, manufacturing for which we do not have the capability for TP10, and we certainly don't have sales and marketing teams in the cardiovascular area.

So we expect to partner that program with somebody who does have those capabilities, and that should return, and I don't want to prejudice what form the value would be returned in, but that is what I mean by returning value.

And I don't mean to say we will anticipate a royalty stream that we then monetize.

We simply mean that we will engage a partner to codevelop that.

I see.

Thank you very much.

Russell Gilbertson (ph).

First question, could you just give us a little more insight into how you're going to recognize the payments from Paul Royalty Funds over the next few years, what the expectation is for that?

Yes, certainly.

Remember this year we have an upfront milestone of 10 million, which is there are no conditions attached to it.

We have received 5 million of those, and we expect to receive the second 5 million on the first of December of this year.

That is without question going to happen.

We also anticipate that GSK has done an extremely good job of filing this vaccine.

They have now filed in 75 countries, including the EU.

The EU is 16.

So that is 91 countries, and that EU filing occurred in December of '04.

Now we don't know.

There are no guarantees, but we would anticipate that they will get approval in Europe and be able to launch in the first half of '06.

When that happens it will trigger a 40 million milestone payment to AVANT.

So that would mean that within one year of doing the Paul Capital deal we should be looking at receiving $50 million, which as Mr. Rosenblum said is nondilutive.

Now in addition, we would expect that when the U.S. filing is done, we will receive 9, 10 or 11 million in addition depending on the year when that occurs.

And so we would be receiving up to 61 million in milestones from Paul Capital, and we still have milestones to expect from GSK from our original deal.

So that's the milestone story.

On top of that, we did not monetize our entire royalty stream.

We monetized it up to certain caps.

These are annual caps of 27.5 million each year, and then there is a whole deal cap which is 2.45 times whatever money Paul has put in at that time.

So that would translate into sales by GSK annually of 500 million, and a deal any time it goes over 2.6 billion.

Now we of course don't know what the future holds.

What GSK has put out in some of their discussions with analysts is that they believe that their rotavirus vaccine market is between 1.8 and 2.4 billion annually in 2010.

So if they are correct, we should easily meet those caps in the later years.

Very good.

Just in terms of the 40 million that you could potentially receive in '06, will you recognize that all when it is received, ort will that be amortized over thirty years?

Russ, let me explain that to you.

The accounting treatment requires us to reflect that as deferred revenue and to recognize it as Glaxo generates royalty stream to Paul, Paul Royalty Funds.

So we will be recognizing that 40 million from a revenue perspective over a period of time as the royalty stream increases.

So it's important to note that the 40 million from a cash point of view will come into the Company's coffers in the first half of 2006.

Or we expect it to.

Thanks for clarifying that, Chip.

Just moving on to CETi-1, what are your plans for CETi-1 and when can we expect it back in the clinic?

We have an interesting situation with 31 (ph), which we believe we have to manage from the best business point of view.

We have more than one option of how to develop it with new adjuvants and new technologies.

And they are all different.

So going down one pathway too quickly before we have completed negotiations with each of the separate companies involved doesn't seem to make sense.

As soon as we have done that, we will conduct the tox studies necessary to get back in the clinic.

So I would say it will take as at least a year to do that.

Thank you, and one more question, if you would.

What is the potential to apply your vectored program to the use of developing influenza vaccines, oral influenza vaccines?

Of course that would simulate mucosal immunity which could generate IGA antibodies which could be quite effective against the entry of influenza virus.

So what are your thoughts on that, and what could you do to develop it?

I think that our vectored vaccine platform is extraordinarily versatile and certainly could be applied to viral infections.

So I have no problem with that, and we feel quite confident about it.

I think flu is a special case because as you know just with what we call regular flu, the strains vary every year.

So it doesn't really fit what we're trying to do, which is come up with platforms where we can manufacture time and time again repeatedly.

We would have to reformulate every year to include the new strains unless we used common antigens and so far there is no evidence that they are successful in protection.

So while we recognize the very large market associated with flu, I think one of the beauties of the AVANT bacterial vaccines program is the reproduceability of the manufacturing process, and we can churn these things out efficiently at Fall River, and in that sense I'm not sure that flu fits.

But we continue to look for a good, common antigen that would be protective, and then we can try this idea out.

But I would not want to take it on at present with the current differing strains every year.

David Hornor (ph), private investor.

He just asked the question I was going to ask, and I think that was a very nice clarification.

Thank you.

You are very welcome.

Joe Donosky. (ph)

The trials that Glaxo has going on in Africa and Russia right now with the combination vaccines, how come we're not notified of them?

I don't know which trials you're referring to, combination of what?

It's a combination of the rotavirus with other vaccines.

They have conducted vaccines trials where rotavirus has been tested since its an oral vaccine with other oral vaccines.

Basically we were at the point now in our relationship with Glaxo where we are simply looking at launches and sales.

We're not involved at all with the clinical trials that are ongoing.

So I don't want to sound as if we're not interested, but what matters to us now is sales.

Okay.

Thank you.

They have no particular obligation to tell us.

I talked to them this morning to be sure that we get the -- we have the exact numbers -- there's always been some confusion of where we filed and how many countries are actually licensed.

But I think I have given you the updates on that.

And it sounds as if you know more than I do about these other trials.

They are in Africa and I know they are in Russia with the combination vaccine.

I do not know about combination vaccines.

They have been looking at coadministration because for example in those countries that still use oral polio, they wanted to be sure that those vaccines were as effective when they were given together.

And I think in countries like Mexico where that occurs they will actually be separating them by a month or so.

Okay.

Thank you.

Tyne Davis. (ph)

Thanks for taking my questions.

My first question actually just has to do with the length of time that you think the cash will, that your cash will last you and whether or not how you come to that number.

If it includes the $40 million -- if it includes any money coming from potential partnerships with TP10 or other sources.

Well, we would expect, if we receive the 40 million and we have the cash we have now that we would be funded well into '08.

The 40 million is a single payment and is related solely to the European launch of Rotarix.

Any monies coming in from other programs would be in addition to that.

Okay.

Thank you.

Also I was just wondering if you could talk I guess more specifically about the TP10 program again to discuss what your expectations are for the drug based on how it didn't -- that it didn't seem to show effect in women in the last trial, your ability to partner it regardless of whether or not the Phase II is positive or not in the first quarter of next year.

Of course we don't know the results from the women only trial; we have completed enrollment but it will be towards the end of the first quarter before we can report out data from that.

I would say that the drugs that clearly seem to be very effective for males, and we were unable to show an effect in females.

Now, so I am wording it a little differently from you.

The history is not that it didn't work in females, but that we weren't able to see the same benefit.

We felt always, and I think the FDA agreed with this, that this was because there really were not enough women in the initial trial to make any kind of valid evaluations.

We believe that the purpose of the current trial, and we have confirmed this with the FDA, is not to get statistical efficacy, but it is simply to show that the drug is safe and has a benefit to women.

If that is so, we can then power a Phase III trial, and we would not do that without a partner and it would not require that we would have any special labeling in the final product.

If in the possible but unfortunate event that it is not good for women, and there are several drugs that do seem to have gender differences, some are not good for one gender or the other, others are simply less effective in one gender than the other.

In that situation of course we would have to go to the FDA and see what the label looked like.

But since three-fourths of all the people going to cardiac surgery are male, we would still have a product that is beneficial for males.

And therefore representing the larger part of the patients in need.

However, it would not be as good a label, it would not be as competitive against other products, but I think it would still have a place in a formulary.

So again, it is difficult to speculate about things we don't yet know.

Let's just look at the data at the end of the first quarter and hope that we can move forward without any gender mention at all in the label.

When you say that it has some sort of benefit I guess you're looking generally -- what you are.

By benefit we would simply want -- we're not looking for statistical significance.

The trial was not powered to show -- well it was powered but not strongly powered because we simply didn't have enough material.

All we need to do is reassure the FDA that there is safety and a trend towards benefit in women.

And then what would be, I guess -- and this is -- what would be the expected timing on a possible partnership, just sometime in 2006?

You know, the longer you stay in the biotech business the better you know not to predict.

We are talking to people, but I cannot give you a date when the partnership will happen.

I can promise you we will announce it the next morning.

And do you think that there are companies out there that would be interested regardless of it shows some sort of trend or benefit in women or not?

I really think that we need to look at the degree of trend.

So I think it is a mistake to predict.

As I said, there are -- there is a market, there are people out there called males who would benefit from this.

But quite how marketing departments in our different perspective partnering companies will look at it, I think will depend on how great the trend is in women.

And again, this is a little forward-looking, but the type of partnership you might want to enter into would be a front-end, a back-end, a 50-50 split?

I understand the 50-50 split might be tough because of the cost, but is the CETi-1 program -- are there -- is there something we can look at that to see what kind of partnership you would be interested in striking?

I think we need to be open-minded at this point.

While 50-50 cost-sharing and revenue sharing is very attractive, it would actually be very hard for AVANT at this point where we're trying to dedicate our resources to the vaccine programs.

So I think that is fairly unlikely, but we did a nice deal with Rotarix in the past.

There are industry standards.

I think we would want to make sure we get sufficient royalties in the back end.

But I think you tend to do the deal that you add them all up, you look at them, you compare them and you do the one that returns the best value to the company overall.

Okay.

Thank you very much.

(OPERATOR INSTRUCTIONS) Derek Jellinek.

In regards to CholeraGarde, have you had an end of Phase II meeting with the FDA, and would you provide a timeline on your Phase III open field study?

I am so sorry, the beginning of your question got cut off.

I heard a question about an end of Phase II meeting.

Are you speaking of CholeraGarde?

Yes, have you had the end of Phase II meeting with the FDA?

We have written requesting an end of Phase II meeting with the FDA for CholeraGarde, and we would expect to do a Phase III FDA trial in this country, a component of which would involve challenge as we did in Phase II very successfully, and we would hope that the Bangladesh studies could be used as supportive, showing safety in children.

I am sorry it was difficult to hear the questions.

Did that answer it?

Yes it did, and I was wondering, do believe in RFP will be released for cholera?

By the NIH?

Yes.

I have not heard about it.

We would certainly respond if there were to be one.

We would like to see DOMI, the Diseases of the Most Impoverished and the IVI get funded by Gates again for a field trial in Bangladesh.

But we are not waiting on that; we will be very supportive of it.

We would go ahead and manufacture the material for our own challenge trials in the U.S. for sale as a travelers vaccine.

And we will let the developing world market, come along on Gates money.

Would give us an update on your bio defense programs?

Yes, we are very pleased that the Fall River manufacturing plant is now fully validated, and we are beginning the manufacture of the Plague vaccine under GNP in Fall River.

We will then go through all the necessary preclinical work to begin a trial -- I think at the end of '06 there.

So we will be funded into '07, and we're just going full steam ahead.

Any timeline for the completion of the Phase I Injectable Anthrax program?

No.

We're not pursuing that one.

It was not picked for the stockpile.

It is in many ways a more old-fashioned vaccine; its injectable, multi-dose.

We certainly would be willing to offer it to other countries, but we will not be developing that one ourselves.

That one we had in fact licensed to DVC who did compete for the stockpile with us but since it went to another company we were putting all of our efforts into what we believe is a much more modern and competitive area, which would be single-dose, oral combination anthrax Plague vaccines.

Right.

Could you give us an update on the HIV program under Walter Reed?

Yes, its entirely under their control.

It enrolling -- Chip is saying maybe it is enrolled, so it is a Phase I, and it is moving forward.

Great.

Thank you so much.

We're not ready for Phase II yet or anything like that, but that is being moved forward by Walter Reed.

Great.

Thanks.

John Grimash (ph).

Una is there any update on the animal programs?

I believe it was with Pfizer?

They are still active.

Pfizer reimburses us for our patent costs in that area.

They are pretty tightlipped about the diseases, and no, we don't have an update there.

I'm sorry.

But it is still ongoing, that program.

At this time you have no further questions.

Well, let me finish with some closing remarks.

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

Rotarix is now licensed in 22 countries worldwide.

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

And as I mentioned, we're expecting an additional 5 million to be received on December 1, 2005.

In July we reported that AVANT together with Harvard Medical School would receive approximately 500,000 from the NIH to apply VitriLife formulations to our CholeraGarde vaccine.

Also in July 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.

During the quarter we began vaccine production in our Fall River facility.

Earlier this month we announced completion of patient enrollment of the TP10 study in females undergoing cardiac surgery.

So I want to remind you again that this press release and conference call contain forward-looking statements which 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 program next quarter.

Thank you very much.

Thanks for your participation in today's conference.

That concludes the presentation.

You may now disconnect, and have a good day.