Cardiovascular Systems Inc (CSII) 2007 Q1 法說會逐字稿

Good day, ladies and gentlemen. And welcome to the first quarter 2007 Replidyne, Inc. earnings conference call. My name is Nicole and I'll be your coordinator for today.

(OPERATOR INSTRUCTIONS)

I would now like to turn the call over to Ms. Sabrina Oei. Please proceed.

Thank you, Nicole.

I'm Sabrina Oei, Replidyne's Director of Investor and Public Relations. And I'd like to welcome everyone to today's conference call to discuss our financial results for the first quarter ending March 31, 2007.

We appreciate your participation and interest in Replidyne.

The press release announcing our earnings was issued this morning. And the release is available on our website, as is a webcast of today's conference call, at www.replidyne.com.

The financial section of today's call will be given by Mark Smith, Chief Financial Officer. It will be followed by a general update given by Ken Collins, President and Chief Executive Officer.

In addition to Mark and Ken, we are joined by Replidyne's Chief Scientific Officer, Nebojsa Janjic, and Chief Commercial Officer, Peter Letendre.

After the update, we will open the lines to your questions.

As I turn the call over to Mark, I would like to remind everyone that during this call we will be making forward-looking statements that involve significant risks and uncertainties including those discussed on this call and others that can be found in the Risk Factor section of Replidyne's annual report on Form 10-K dated December 31, 2006.

We encourage you to review all of our SEC filings. No forward-looking statements can be guaranteed and actual results may differ materially from those we project. Information provided during this call represents our current view as of this date.

Replidyne does not undertake any obligation to update any forward-looking statements made during this call as a result of new information, future events, or otherwise.

The Safe Harbor language in today's press release regarding forward-looking statements also applies to our comments on this call.

I'll now turn the call over to Mark Smith.

Thank you, Sabrina.

The details of our financial results are largely contained in this morning's press release. And I will direct my comments to some of the more significant items as well as our financial expectations.

At the end of the first quarter we had cash assets totaling $119 million representing a net cash burn of $6.6 million during the first quarter. This result is consistent with the cash burn guidance we provided at year-end earnings that we expect an approximately $35 million to $40 million cash burn for the full-year 2007.

You will note that we reported revenue of $2.9 million under our agreement with Forest Laboratories this quarter, comprising $1 million of license revenue and $1.9 million of contract revenue for funded activities.

On February 6th we announced the termination of our collaboration with Forest. The agreement provides for a 180-day transition period following notice of the termination to allow for a smooth transition of the faropenem program.

During the initial 90 days of transition, the terms of the original agreement remain in effect. As a result, for the 90-day period ending May 7, 2007 we continue to operate under the agreement, including recognizing the first quarter portion of upfront and milestone payments received in February 2006 and reimbursement of certain faropenem related costs.

To confirm, no amounts received under this agreement are refundable, including the $60 million in upfront and milestone payments.

Accordingly, upon effective termination dated agreement of May 7, 2007, the balance of deferred license revenue reported on our March 31 balance sheet of $55.2 million will be fully recorded as revenue. This revenue will be reported in the second quarter of 2007.

At that date, reimbursement for certain faropenem development costs will also stop.

Research and development costs for the first quarter of 2007 were $9.4 million compared to $9 million for the first quarter of 2006.

Approximately 65% of our research and development spend in Q1 2007 was assigned to faropenem. This spend included the cost of completing the acute otitis media study, which results were announced in March 2007, costs to reinitiate the ongoing AECB study, as well as $1.8 million for purchase of bulk API from our manufacturing partner in Japan.

This material was acquired for use in clinical trials as well as to complete stability testing.

The acquisition of API was not included for reimbursement under the Forest agreement.

The balance of research and development costs were incurred to complete Phase I clinical trials of REP8839, as well as work on this product's formulation, and pre-clinical activities related to our discovery research programs primarily C. difficile and inhibition of DNA replication.

Sales, general, and administrative expenses for the quarter were $3.5 million and reflect personnel and personnel related costs to establish commercialization and business development capabilities and personnel and professional services to support our operations as a public company.

You may note that we do not report income tax expense. Notwithstanding, we expect to bring into income $55 million of deferred revenue in the second quarter.

We have analyzed our ownership changes over the past several years including through the IPO and assess some annual limitations in the use of available net operating loss carry-forwards.

However, we believe that we will have available adequate net operating loss carry-forwards to offset this item in 2007 net of our other operating expenses.

Due to this factor and that we expect to report losses while we are focused on product development, we do not anticipate reporting a significant income tax expense in 2007.

As a reminder, in the first quarter of 2006 Replidyne recorded dividends due to preferred to stockholders as $2.7 million.

All outstanding preferred stock and accumulated dividends were converted into common stock upon closing of the IPO on July 3, 2006. And no preferred stock or accrued dividends were outstanding after that date.

Accordingly, there is no comparative dividend in the first quarter of 2007.

This item affects our reported EPS per common share in 2006 periods.

Now looking ahead to the balance of 2007.

In the first quarter of '07 we advanced our understanding of the specific clinical trials program required for approval of faropenem to treatment of adult community respiratory indications.

We also generated clinical results from our Phase II dose ranging study among pediatric patients with acute otitis media.

With this information we continue our guidance for cash burn provided in our year-end earnings call. That is, we expect out net cash burn to be limited to approximately $35 million in 2007. This guidance would increase to $40 million if we initiate faropenem pediatric clinical trials this year.

This guidance does not [consider] a partner for the faropenem program or any other business development transaction.

To achieve this result we will limit our clinical trial activities for the adult faropenem program to the ongoing AECB trial. Although we will invest in the preliminary steps to allow for timely initiation of additional Phase III clinical trials for acute bacterial sinusitis and community acquired pneumonia in support of our partnering initiatives.

As we noted in our year-end call, we may initiate Phase III testing of faropenem pediatric for acute otitis media, a decision that will be made following additional interaction with the FDA.

We will incur costs in 2007 to initiate Phase II testing of REP8839 for treatment of impetigo.

In addition to these activities we intend to continue development of our C. difficile and DNA replication programs, as we believe each of these programs holds considerable promise.

I'd now like to turn the call over to Ken Collins.

Thank you, Mark. As Mark briefly described, in the first quarter of 2007 Replidyne has made progress on a number of fronts.

In early March we announced the completion of our Phase II clinical trial using faropenem in pediatric patients with acute otitis media.

Initial analysis of the study results showed that it met its primary objective to show that faropenem was effective in eradicating pathogens from the middle ear and to permit the dose selection for Phase III trials in acute otitis media.

We've continued to actively engage the FDA in discussions to gain regulatory clarity for the future approval of faropenem in adult respiratory indications.

On March 27th we announced a preliminary regulatory plan in which the FDA had indicated that a total of four Phase III clinical trials and three adult respiratory indications will be sufficient for a new drug application for faropenem.

These indications are acute bacterial sinusitis, community acquired pneumonia, and acute exacerbations of chronic bronchitis.

According to this plan, Replidyne could conduct two active control non-inferiority studies using faropenem in patients with CAP as well as one placebo-controlled superiority draw in patients with ABS and AECB to submit for approval of these three indications.

Replidyne and the FDA have agreed that future clinical trials of faropenem will be conducted using a 600-milligram dose administered twice daily.

The FDA has further indicated that an acceptable safety database needed for a review at this dose is approximately 1500 patients, assuming no safety signals emerge during the studies.

The proposed four Phase III studies and three adult respiratory indications are expected to provide this safety database.

Replidyne is continuing to work with the FDA to define the specific details that will permit the timely enrollment of patients in these proposed new studies.

Finally we can now report that we have reinitiated our Phase III trial in adult patients with acute exacerbations of chronic bronchitis. Replidyne proactively halted the trial in December 2006 when a joint FDA advisory committee recommended that the risk of Ketek outweighed its benefit for the treatments of AECB.

Replidyne's Phase III trial has been designed as a three-arm trial comparing faropenem versus Ketek versus placebo, but was amended to remove the Ketek treatment arm, which was included in the study primarily for commercial competitive reasons.

Restarting this study was a major priority for us and we are pleased to announce its recommencement.

In the second quarter of 2007 you can expect the following from Replidyne.

We've completed the Phase I studies of REP8839, Replidyne's topical antibiotic product candidate for the treatment of impetigo. And we intend to announce these results in the coming weeks.

We plan to advance REP8839 into Phase II clinical testing in the second half of 2007.

We intend to meet with the FDA to further discuss trial design in both the adult Phase III faropenem program and the pediatric Phase II faropenem program.

After our meeting with the FDA we will make a decision on whether to pursue the pediatric program on our own.

And we intend to seek a new commercial partner for faropenem adult indications in the very near-term. We do not intend to conduct any new clinical trials for the adult tablet other than the ongoing AECB study until we secure a new commercial partner.

We continue to believe that faropenem will be attractive to potential partners due to its product attributes and the absence of significant branded and promoted competitors in the community antibiotic space when faropenem is ultimately launched.

We appreciate your attention in this call and I will now ask the operator to open the line to questions.

(OPERATOR INSTRUCTIONS)

And there are no questions at this time.

Thank you, Nicole. And thank you everyone for your time today and your interest in Replidyne.

A replay of this conference call will be available through Tuesday, May 15, 2007 at midnight. Callers may access the replay by dialing 888-286-8010 domestically or 617-801-6888 internationally. The audio replay passcode is 34071436.

To access a replay of the webcast visit the Investor Relations section of Replidyne's web site at www.replidyne.com.

Thank you.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.