Celldex Therapeutics Inc (CLDX) 2008 Q1 法說會逐字稿

Good morning and welcome to the first-quarter 2008 AVANT Immunotherapeutics, Incorporated, earnings conference call.

My name is Sarita and I will be your operator on today's call.

Before we begin our discussion, I would like to refer participants on the webcast to slide 2 and caution listeners today that today's speaker will be making forward-looking statements.

Such statements reflect on current views with respect to future events and are based on assumptions and subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such forward-looking statements.

These forward-looking statements are subject to risk and uncertainties that may cause actual future experience and results to differ materially from those discussed in the forward-looking statements.

Certain of the factors that might cause AVANT's actual results to differ materially from those in the forward-looking statements, including those set forth under the headings Business Risk Factors, and Management's Discussion and Analysis of Financial Condition, and Results of Operations in each of AVANT's annual reports on Form 10-K, its current report on Form 8-K, as well as those described in AVANT's press release and filings with the Securities and Exchange Commission.

You should carefully review all of these factors, and you should be aware that there may be other factors that could cause these differences.

These forward-looking statements are based on information, plans, and estimates as of this call, and AVANT does not promise to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events, or other changes.

Please be advised that the question-and-answer period will be held at the close of the call.

I would now like to turn the call over to Mr.

Marucci, Interim CEO of AVANT Immunotherapeutics.

You may proceed.

Good morning, ladies and gentlemen, and thank you for joining us this morning on this rescheduled conference call.

I'm Anthony Marucci, Interim President and CEO of AVANT Immunotherapeutics.

With me on the call are Chip Catlin, AVANT's Senior Vice President and Chief Financial Officer, and Tom Davis, our Senior Vice President and Chief Medical Officer.

During this call Chip will review AVANT's first-quarter financial results, and then I will provide a summary of the important events that have occurred so far in 2008, give you a brief update on our lead clinical programs and our milestones for the remainder of the year.

Following that, we will open the call to questions that Chip, Tom, and I will be happy to answer.

Chip?

Thank you, Anthony.

We announced in our press release yesterday financial results for AVANT's first quarter of 2008.

The press release is available at AVANT's website on the investor information page.

I will now review summary financial results for the three months ended March 31, 2008.

In the first quarter, we reported a net loss of $22.1 million or $2.19 per share, compared with a net loss of $4 million or $0.49 per share for the comparable three months of 2007.

The first-quarter 2008 financial results included a onetime non-cash charge of $14.8 million for purchased in-process research and development arising from the merger of AVANT and Celldex, and a non-cash charge of $1.6 million for stock-based compensation.

At March 31, 2008, our cash balance was $11.4 million.

This figure does not include upfront payments and an equity investment totaling $50 million which will occur upon the effective date of AVANT's recently-announced license and development agreement with Pfizer, or a $10 million milestone payment from Paul Royalty Fund upon the US launch of Rotarix, expected in the second half of 2008.

With respect to these financial results, it is important to keep in mind two facts.

The first is that AVANT instituted a 1 for 12 reverse stock split on March 7 and therefore the Company currently has approximately 15 million shares outstanding.

The second is that Celldex was deemed the accounting acquirer in the merger, and therefore historical financial information reflects the results of Celldex only.

At this point, I will turn the call over to Anthony for some comments on our recent accomplishments.

Thank you, Chip.

For those on the webcast, you may want to turn to slide 3, where we highlight the recent CDX-110 deal with Pfizer.

As many of you know, on April 16 we announced an exclusive global partnership with Pfizer for the clinical and commercial development of CDX-110, our EGFRvIII therapeutic vaccine in Phase 2b/3 development for the treatment of glioblastoma multiforme, or GBM.

This agreement gives Pfizer exclusive rights to the development of EGFRvIII vaccines in all cancer indications.

In exchange for these rights, AVANT will receive total potential deal value that we believe makes this transaction one of the largest executed to date in the cancer immunotherapy space.

Beyond the financial value of the deal, the transaction is significant because it brings a major pharmaceutical player with tremendous resources to the table for the development of a compound that we believe has significant potential for the treatment of GBM and other very difficult to treat cancers.

Secondly, it demonstrates our ability to capitalize on the Company's assets, capturing near-term value to further our promising pipeline, while retaining substantial future upside potential for CDX-110.

Finally, it is a landmark deal demonstrating the continued progress being made in the cancer immunotherapy space.

On slide 3, I have outlined the terms of this transaction, which are substantial and speak highly of the intrinsic value of CDX-110.

The total potential value of the transaction is approximately $390 million, based on the successful development and commercialization of CDX-110, as well as other potential products that may further extend this unique tumor-specific target.

In addition, AVANT will also be eligible for double-digit royalties on any product sales.

Upon the effective date, Pfizer will make a $40 million upfront payment to AVANT and will also make a $10 million equity investment in AVANT at a 25% premium to the trailing five-day average closing price of the Pfizer agreement of April 16.

Pfizer will fund all costs associated with the development and commercialization of CDX-110, in which AVANT will continue to play a significant role.

AVANT is, of course, eligible for substantial pre-commercialization and commercialization milestones.

The $40 million milestone payment is expected to be recognized on a straight-line basis through the estimated launch date of the first commercialized product under the agreement.

As customary, this agreement is subject to the approval of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and is expected to close in the second quarter of 2008.

Supporting our belief in CDX-110, important clinical data were recently presented at the American Association of Cancer Research.

Looking at slide 4, the data would suggest that temozolomide, the standard chemotherapy agent for GBM, may potentiate the effect of CDX-110 against this disease, which is the most common and aggressive form of primary brain tumor.

All patients vaccinated with CDX-110 in the Phase 2 ACT II extension study showed a tumor-specific immune response, a significant improvement over previous vaccines against this disease and over CDX-110 alone.

Contrary to conventional scientific expectation, the data suggest that chemotherapy enhances the induction of the vaccine-specific immune response and that daily chemotherapy may further enhance the vaccine's effect.

We expect to present survival data from the study in June at ASCO, the American Society of Clinical Oncology meeting, and also expect to announce data later this year from our currently enrolling randomized Phase 2b/3 study, which we have named ACT III, which is designed to confirm the Phase 2a results.

Moving to slide 5, we recently announced positive results from our Phase 2 double-blind placebo-controlled trial of Ty800, our single-dose oral typhoid fever vaccine.

Data from the trial show that the vaccine was well tolerated with a safety profile similar to placebo and achieved a desired immune response.

Moreover, that immunogenic response was dose-dependent, achieving response rates of 65.5% and 80%, respectively, in the low- and high-dose groups, both of which were significantly higher than placebo.

This suggests that AVANT's typhoid fever vaccine may have significant potential advantages over currently approved vaccines in terms of safety, patient protection, and ease of administration.

It is our aim to employee Ty800 vaccine as part of a super-combination travelers' vaccine designed to combine protection against multiple bacterial diseases including cholera, typhoid, ETEC, and paratyphoid in one convenient and efficient vaccine.

In April, we had exciting news regarding Rotarix, and I would like to review the financial impact to AVANT.

As you will see on slide 6, in 2005 we monetized 70% of the Rotarix royalty stream with the Paul Royalty Fund.

To date, we have received $50 million in milestone payments.

On April 3 of this year, Rotarix received market approval from the FDA, which triggered the receipt of a $1.5 million milestone payment from GSK, $750,000 of which AVANT has retained.

The launch of Rotarix in the US by GSK will trigger a $10 million milestone payment from Paul Royalty Fund, which is expected in the second half of 2008.

Finally, as many of you know, we announced last week the departure of Dr.

Una Ryan as Chief Executive Officer of AVANT.

Dr.

Ryan has served for the past 15 years as the Chief Executive of AVANT and its predecessors and has also provided stewardship in the immunotherapy industry.

We thank Una for this dedicated service and wish her all the best in the future.

As we move forward to our expectations for 2008, you will see on slide 7 that our pipeline has and is expected to continue to generate a number of value-creating milestones.

First, as we have already noted, the positive results from the Phase 2 proof-of-concept study of Ty800 was announced in early April.

Second, we look forward to presenting the Phase 2b randomized CDX-110 data in front-line treatment of brain cancer at the end of this year.

We are also anticipating Phase 1 data on our lead APC targeting program, CDX-110, in the second half of this year.

Throughout the year, we also plan to initiate additional Phase 1 studies in cancer and infectious disease, along with announcing the initiation of our human monoclonal antibody program.

As previously mentioned, we anticipate receiving a $10 million milestone payment upon the US launch of Rotarix from the Paul Royalty Fund in the second half of 2008.

Achieving these milestones will continue to reinforce and enhance our Company's strength of research and product development, our existing and future pipeline.

With that, I will end our prepared statements and we welcome your questions.

(OPERATOR INSTRUCTIONS) Mark Monane of Needham.

Thank you.

Good morning and congratulations, Tony, on the first conference call.

Thank you, Mark.

A lot of excitement in the second -- so far in 2008.

A lot going on.

Question about 110 to start off with, please.

Pfizer was obviously interested in this compound not only for glioblastoma but the opportunity in other disease indications.

Can you outline the strategy going forward in these other indications that you can so far?

Sure, Mark.

I will let Tom handle that since he is working closely with Pfizer on that.

Thanks, Mark.

That is certainly a very important point, that while the initial work with 110 has focused on glioblastoma, EGFRvIII is expressed in many other tumors and there are a lot of possibilities there.

However, as you know, we really at this point are just closing our discussions with Pfizer around the deal and sitting down and finalizing plans, so we're not really in a point to specifically discuss the intentions to move forward in other diseases.

But I can certainly assure you that that is high on our priorities, and we will be doing it as soon as we possibly can.

You may be aware that we have a collaboration in place with the National Cancer Institute, working with their Cancer Therapy Evaluation Program.

One of their primary roles has been to expand indications for promising new drugs, so we're looking forward to working with them to develop a fairly broad Phase 2 program that will look at all the possible indications over the next several years.

That was helpful.

We're expecting some data as well from, I guess, Avastin in looking at glioblastoma.

What do you think the gold standard is in evaluating data so far?

Can passive immunotherapy with Avastin and active immunotherapy potentially with 110 have a happy future together?

Well, I think the gold standard for glioblastoma certainly still is temozolomide in the newly diagnosed or adjuvant setting.

As you know, we are adding the vaccine to temozolomide and looking to improve over what is currently the only approved therapy for this disease.

The data with Avastin in the recurrent setting certainly are impressive, although they are complicated.

Because Avastin, while it does have immune effects, certainly has vascular effects as well that do impact the appearance of a tumor on an MRI scan, making it difficult to know whether you are actually shrinking the tumor, impacting the cancer, or simply changing the fluid balance, changing the permeability of the vessels.

However, it is clear that Avastin is an important new drug in this disease.

It is being used fairly widely in the recurrent setting.

I think people are just now beginning to use it in the adjuvant setting.

But it carries quite a few complications, and people are not sure if it is ever really going to be firmly established as an adjuvant treatment for glioblastoma.

But the data that suggest it can improve the function of dendritic cells and improve the ability of a vaccine to work certainly suggest that, whatever happens with Avastin, it is probably going to work well with our vaccine too, and we're fully prepared to integrate our development with Avastin at the point where it seems that Avastin is going to be here to stay for glioblastoma.

So I think, as you said, there is quite likely a happy future for the two.

We are just not quite at the point yet where we can define when that combination is necessary and where it will be used.

That was helpful.

Then we have one last question on financials, please.

This is [Glenn].

I had a question on the relationship with Paul Royalty and the Glaxo royalty rate, either 7% or 10%.

It is there an update on what Glaxo will pay and how that affects the $27.5 million annual threshold for the royalty stream in later years?

This is Chip Catlin.

Let me answer that for you.

The dispute we have with Glaxo on the royalty rate is still in place.

So GSK is paying us at 70% of the patent rate, which ramps from 7% to 10%.

So paying at 70% means they are paying from 4.9% to 7%.

Because GSK is paying at that lower rate, the $27 million threshold in any year has gone away.

So the only threshold that we have in place is the 2.45 times Paul Royalty Fund's payment is the only threshold that remains.

So we haven't resolved that dispute yet.

We have been in conversation with GSK, but that has not been resolved.

Thank you very much for the added information and we look forward to upcoming events.

Jonathan Aschoff of Brean Murray.

Good morning, guys.

I think most of my questions would be for Tom.

Tom, when was the AACR data cut, and when will the ASCO data be cut as of?

Well, the ASCO data will be the latest update possible.

We are actually just cutting the data this week in order to submit slides for the meeting, which is coming up in a couple weeks.

The AACR data was cut back in April in preparation for that meeting, although there was a slightly different focus to AACR, of course.

We were looking at chemo combination there, rather than the overall experience.

Right.

Is the Phase 3 trial in any way sort of in neutral until Pfizer kind of figures out exactly how they want to carry it forward?

Or is it still enrolling at whatever rate it was before the transaction?

You know, we're certainly not delaying anything.

I think Pfizer's highest priority, just like ours, is to collect data, to accrue patients as quickly as possible.

So there is no pause.

The Phase 3 is accruing at the same rate.

In fact, we continue to add new sites to assure that we can capture patients as quickly as possible, so that things are still accelerating for that trial.

Okay, great.

There is one thing I wanted to ask you to reconcile.

In the ASCO abstract there is a sentence where it says there were no significant differences in vaccine immunogenicity between the TMZ regimens.

I was wondering how that fits with the bullet point on slide 4, the top bullet point, where you said that you got the P of 0.028 with antibody titers.

It comes down to a question of terminology, a question of how many patients actually make immune responses and how strong those immune responses are.

When you give the daily temozolomide, you do get a much higher humeral immune response.

The patients appear to make a lot more antibodies.

However, everyone still seems to make antibodies, so that there is not a difference in the rate from the perspective of patients; but there is a difference in the strength, the robustness of the immune response.

Okay, thanks a lot, guys.

At this time we have no further questions in queue.

I would now like to turn the call over to Anthony Marucci for closing remarks.

Thank you all for participating on today's call.

If you have additional questions please feel free to give me or Chip a call directly, and we look forward to updating you again next quarter.

Thank you for your participation in today's conference.

This concludes the presentation.

You may now disconnect.