Emergent BioSolutions Inc (EBS) 2008 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Trubion fourth-quarter and year-ended 2008 earnings conference call. My name is Cynthia and I will be your conference facilitator. I would like to inform you that today's call is being recorded. At this time, I would like to turn the call over to Trubion's Senior Director of Corporate Communications, Jim DeNike. Please go ahead sir.

Thanks, Cynthia. Thanks, everyone, for joining us today. On the call from Trubion are Dr. Peter Thompson, President, Chief Executive Officer and Chairman, Dr. Scott Stromatt, or Chief Medical Officer, and Michelle Burris, Senior Vice President and Chief Financial Officer. Dr. Ken Mohler, our Senior Vice President of R&D, is also available for questions as needed.

Earlier today, we issued our fourth-quarter and year-ended 2008 financial results. A copy of our press release and 10-K can be found on the Trubion Web site at Trubion.com.

I would like to remind each of you that today's conference call may contain forward-looking statements based on our current expectations. These statements are only predictions and actual results may vary materially from those projected. Please refer to Trubion's documents filed with the SEC concerning factors that could affect the Company, copies of which are also available on our Web site.

I will now turn the call over to Peter.

Thank you Jim. Thanks to all of you for joining us today.

During this call, we will review our accomplishments for 2008, particularly for our clinical assets and how they have positioned us for a number of important milestones throughout 2009. Michelle will conclude the call with a summary of our fourth-quarter and year-end 2008 financial results and we will review our revised financial outlook following our recent actions to moderate our cost structure.

Despite a global economic crisis that has affected so many of our industry and many others, 2008 marked the advancement of several of our product candidates for autoimmune and inflammatory diseases and cancer, including TRU-015 for rheumatoid arthritis, SBI-087 for rheumatoid arthritis and other autoimmune and inflammatory diseases, and TRU-016 for B-cell malignancies.

At this time, I would like to invite Scott Stromatt to provide an overview of our progress and anticipated ones for our product candidates that are currently in clinical evaluations. Scott?

Thank you, Peter. I will start with an overview of the programs in our Wyeth alliance. In 2008, we announced positive data from two ongoing retreatment studies that demonstrate that repeat administration with a single dose of TRU-015 continued to produce robust clinical responses with integral B-cell recovery after treatment.

We have now collected over two years of retreatment data in RA patients. We expect to announce at the UR and ACR Scientific meetings updated TRU-015 rheumatoid arthritis retreatment data from both the Phase IIa studies which we refer to 15001 and the Phase IIb study which we refer to as 15002.

Last year, we also announced that Wyeth initiated patient dosing in a second TRU-015 rheumatoid arthritis study. It's a Phase IIb clinical trial that we refer to as the 2203 study. This study is designed to identify an optimal induction or initial dosing regimen. Wyeth is managing this study which is currently enrolling patients. We hope to announce trial results by the end of the fourth quarter, provided patient enrollment progresses as planned. As we have stated previously, we believe this study has been designed in a way that would support a registration package.

In April of 2008, Wyeth initiated Phase Ia clinical trial of SBI-087 in RA. This study is currently enrolling patients and we hope to announce data by the end of the fourth quarter of this year.

In mid 2008, Wyeth presented positive clinical data on the molecule evaluating its PK and pharma dynamics following a single IED dose. Administration of SBI-087 resulted in dose dependent (inaudible) [depletion] in that peripheral blood and lymphoid tissue. It was more profound to sustain SBI-087 treated groups compared to Rituximab.

Wyeth has also been working to initiate a Phase I trial initiating SBI-087 for SLA.

Yesterday, Genentech and Biogen Idec announced that their Phase III Rituxan study in lupus nephritis patients failed to meet its primary endpoint. As a result, we plan to review the Rituxan data in more detail with our partner and we will determine if clinical valuation of SBI-087 for SLA is still warranted. We will provide additional guidance regarding our strategy for pursuing lupus after we have reached a decision with Wyeth.

In our proprietary pipeline, we initiated Phase I2a dose escalation study for the treatment of chronic lymphocytic leukemia, or CLL, with TRU-016 in 2008. There are two parts to this trial. The first part is a Phase I dose escalation study designed to evaluate the safety, tolerability and PK of TRU-016, the second part of the study the Phase II expansion cohort designed to further evaluate safety and to estimate clinical activity of TRU-016 in patients with previously treated CLL or small lymphocytic leukemia. We are currently in the dose escalation phase of the study and our abstract was excepted by ASCO for presentation on May 31.

Looking ahead, we expect to announce data from the expanded cohort portion of the trial by the end of the year. As a reminder, we currently retain all development and commercialization rights for the TRU-016 program. Finally, we expect to disclose our next IND candidate by the end of the second quarter this year for which we expect to file an IND application in 2010.

That concludes my update on our clinical programs. I will now turn it back over to Jim.

Thanks Scott. Last year, we also introduced two new proprietary technologies that expand the technical foundation for Trubion's product development efforts -- SCORPION, [[multivale] and protein therapeutics and TRU enhanced potency enhancing technology for immuno pharmaceuticals. We believe product candidates based on our SMIP, SCORPION and TRU enhanced technologies may provide the basis for long-term development of additional best in class and first in class product candidates. We will continue to update you on these pre clinical programs as IND candidates are selected and timelines are finalized.

Before I turn the call over to Michelle, I want to take a moment to discuss the pending Pfizer acquisition of Wyeth. Pfizer and Wyeth announced that they expect the merger to close in late Q3 2009 or early Q4 2009. While we cannot speculate on the ultimate disposition of our programs once the merger is effective, we are encouraged by Pfizer's previously stated strategic initiatives, many of which appear to be synergistic with Trubion's business objectives.

Once the merger is effective, there are change of control and divestiture provisions in our Wyeth agreement that would take effect. In an effort to address common questions associated with this transaction, these prohibitions are discussed in detail in our 2008 10-K which was filed today and is available on our Web, as is a redacted copy of our Wyeth agreement that was filed as an exhibit to our S-1 in 2006.

Following the completion of the acquisition, Pfizer would assume all of Wyeth's rights and obligations under the collaboration agreement with us and become our partner for the development of TRU-015, SBI-087 and other products in development under the collaboration agreement. After the merger is effective, we are entitled to request further written assurances from Pfizer reaffirming its commitment to comply with the terms and conditions of our agreement. In the interim, we and Wyeth are continuing to pursue our 2009 development objectives and we look forward to a number of important milestones throughout the year.

That concludes my update. Before we open the call to questions, I would like to turn the call over to Michelle for a summary of our fourth-quarter and year-end December 31, 2008 financial results and a review of 2009 guidance.

Thanks Peter. I will take a few minutes to review the financials for fourth quarter and year ended 2008 and then we will review the guidance for 2009.

Revenue for the fourth quarter of 2008 was $4.3 million compared with $5.7 million for the fourth quarter of 2007. Our revenue for the year ended December 31, 2008 was $16.5 million compared with $20.1 million for the year ended December 31, 2007. Revenue in 2008 was earned through our strategic collaboration with Wyeth and was comprised of $11.1 million for collaborative research funding and $5.4 million for amortization of the upfront fee of $40 million that was received in January 2006.

The three-month and twelve-month decrease in revenue under Wyeth's collaboration are due to, one, a decrease in the reimbursement costs related to the Phase IIb clinical trial for TRU-015 for RA; two, an extension of the recognition of the $40 million upfront fee due to an extension of the estimated research and development period; and finally, three, a decrease in reimbursable legal costs.

Total operating expenses for the fourth quarter of 2008 were $10.7 million compared with $11.4 million for the fourth quarter of 2007. Total operating expenses for year ended December 31, 2008 were $43.0 million compared with $47.3 million for the year ended December 31, 2007. The three-month decrease in operating expenses was primarily due to decreased legal and personnel related costs partially offset by a fourth-quarter increase in manufacturing costs to TRU-016. The twelve-month decrease in operating costs from 2007 to 2008 was primarily due to, one, a decrease in outside manufacturing costs related to TRU-016, a decrease in clinical costs related to the Phase IIb clinical study for TRU-015 and decreased lab expenses for TRU-016.

Net loss for the fourth quarter of 2008 was a $6.4 million, or $0.36 per diluted common share, compared with a net loss of $4.9 million, or $0.28 per diluted common share, for the fourth quarter of 2007. For the year ended December 31, 2008, net loss was $25.6 million or $1.43 per diluted common share, compared with a net loss of $23.3 million or $1.32 per diluted common share for the year ended December 31, 2007.

We had $52.9 million in cash, cash equivalents and investments as of December 31, 2008, compared with $78.5 million as of December 31, 2007.

As a reminder, on February 25, 2009, we announced a workforce reduction of approximately 25% and in corporate restructuring in an effort to further reduce our costs and align our current resources with the strongest near-term opportunities while positioning the Company for long-term sustainability and success. Estimated charges of approximately $0.8 million will be recorded in the first quarter of 2009 in connection with one-time workforce reduction costs, including severance and other benefits.

Based on our current forecast and excluding any proceeds from potential new partnerships or financing, the reductions announced on February 25, 2009, in combination with targeted investments in pre-clinical and clinical programs, are expected to support our operations into the second half of 2010. Specifically, we expect revenues to be approximately $15 million to $20 million earned through the Company's Wyeth collaboration and we expect operating cash requirements in 2009 to be approximately $30 million to $35 million. Again, please note this guidance does not include any additional cash received associated with potential new partnerships.

That concludes my update on our financials. Before we open the call to questions, I would like to reiterate that we're pleased with our progress in 2008 and how it has positioned us for a number of important milestones throughout 2009. We believe strongly that this progress continues to validate the potential of our technology and our product candidates. As I have mentioned, we've recently taken steps to further reduce our costs that we believe, in combination with targeted investments in our pre-clinical and clinical assets, will increase our financial flexibility and decrease our need for financing in the short-term.

Thank you again for your continued interest in Trubion. At this time, I would like to ask Cynthia to open the call for questions.

(Operator Instructions). Greg Wade, Wedbush Morgan.

Good afternoon. Thanks for taking my questions. With respect to the potential partnering of 016, are there any milestones or data points that you believe are coming up in 2009 that would be key points that a partner might be considering for that drug? Thanks.

Greg, thanks for the question. I will let Scott Stromatt tell you what we anticipate in 2009 for data disclosures on 016.

The public disclosures will be first in ASCO and then we expect the expanded cohort to have data on that cohort presented at the end of the year at ASH. So ASCO is the end of May, beginning of June, and ASH is in December.

With respect to the Phase II expansion study that is ongoing or planned, would potential partners be or have access to data as it is generated in that study?

If they have confidentiality agreements, then they would have access to the data that is generated, yes.

What kind of data would you expect would be available by the end of the year to partners in that situation?

The data is a clinical trial, so what we have as we go along with the data is the demographics of the patients, the response rate, how they respond, the number of prior therapies, what you would expect from a typical clinical trial.

For how many patients might there be data available to those partners by year-end in that study?

Well, we haven't said but we're looking for a trial anywhere from 48 to 75 patients when the trial is all said and done. So it just depends on enrollment and what goes on in terms of how many patients you have to enroll per cohort.

Peter, could you just make a comment on the status of the discussions with respect to 016, if that is the molecule you expect you might get a deal for this year and if you are optimistic that could be something that's accomplished? Thanks for taking my questions today.

Thanks for the questions, Greg. We are very excited about this molecule for reasons we have shared with investors in the past and look forward to the disclosures of the data as it comes forward. With respect to dialogs with the potential partners, we will update investors as and if there are material disclosures that come out of any such dialogues.

Thank you.

(Operator Instructions). Joe Aguilera, BioRevolution Capital.

Good year. My question was answered actually on 016.

Thanks, Joe.

Thanks.

There are currently no participants in the queue. (Operator Instructions). Joel Sendek, Lazard.

Thanks. What is your contingency plan if Pfizer decides not to move forward with the alliance?

Joel, thanks for the question. They're pretty speculative at this point. I think that the CD20 assets for 015 are relatively mature later-stage assets. Of course, having direct control over those assets could be construed as a benefit to the Company, but it is far too early to speculate on those things right now.

Okay, so you are operating as if they will just continue moving forward as Wyeth -- obviously Wyeth has been very enthusiastic about it.

Wyeth has been very enthusiastic about it, as we discussed in the prepared remarks. It would be difficult, of course, to speculate about how Pfizer might view the same assets. But we think all of the statements that they have made about why they did the transaction in the first place as well as what is known about their pipeline suggests that they may share Wyeth's enthusiasm. As and if we become aware of information that changes that viewpoint, we will make sure we let the market know.

Thank you.

At this time, there are no further questions. Ladies and gentlemen, this will conclude the Trubion fourth-quarter and year-ended 2008 earnings conference call. We thank you for your participation. You may disconnect at this time.