吉利德科學 (GILD) 2001 Q4 法說會逐字稿

Good day ladies and gentlemen, and welcome to the Triangle Pharmaceuticals' (Company: Triangle Pharmaceuticals Inc.; Ticker: VIRS; URL: http://www.tripharm.com/) fourth quarter earnings conference call.

At this time all participants are in a listen-only mode, and later we will conduct a question and answer session and instructions will follow at that time.

As a reminder this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Chris Rallis, President and COO of Triangle Pharmaceuticals. Mr. Rallis?

Thank you,

. Good morning. As

indicated this is Chris Rallis, President and Chief Operating Officer of Triangle Pharmaceuticals. I want to welcome each of you to this conference call in which we will review our key highlights from 2001,

and provide you with some updated financial and operational information for 2002.

Joining me today from Triangle are Bob Amundsen our Executive Vice President and Chief Financial Officer, Dr. Franck Rousseau our Executive Vice President of Medical Affairs, Dr. George Painter our Executive Vice President of Research and Development,

Anne McKay our Executive Vice President of Drug Regulatory Affairs, and Paul Dreyer our Executive Vice President of Commercial Operations and Business Development.

As you all know, last week the Triangle family was saddened by the untimely death of our chairman and chief executive officer Dr. David W. Barry. I'm sure everyone joins us in conveying our thoughts and prayers to Dave's family.

My colleagues and I at Triangle will miss Dave's leadership and friendship. Fortunately thought, Dave built a strong management team and a strong company.

I have been greatly encouraged by everyone's efforts over the last ten days, despite the tragic nature of the loss. This is not only a testament to Dave, but also reflects our determination to make his vision for Triangle become a reality.

I also want to thank all of you personally who have expressed your sympathies in various forms over the last several days.

The board of directors of the company recently met and established an executive committee to work closely with us as we position the company in the wake of Dr. Barry's death. Among other issues this committee will be discussing

with senior management the succession plan after which it will make a formal recommendation to the entire board regarding succession.

In the meantime, I and the other senior managers of the company are conducting daily operations and continuing to execute our operational plan with the most important near term objective being our planned third quarter submission of an NDA for Coviracil.

This will certainly represent a major milestone for the company.

2001 was an important year for us at Triangle Pharmaceuticals. We accomplished a great many objectives.

In November we completed enrollment of the third pivotal Phase III trial for Coviracil and HIV, which put the company in position to submit and NDA in the third quarter of this year in the United States.

We showed sustained antiviral activity of Coviracil for HBV in trial

. We completed a Phase I/II trial for DAPD, a novel antiviral compound in development for HIV. We established proof of concept in a Phase I/II trial for Clevudine, a novel antiviral compound in development for HBV.

We also raised 133 million in gross proceeds from equity financing. And lastly, we successfully implemented a cost reduction program in August, which streamlined our infrastructure and focused our development programs on our later stage drug candidates.

In summary, we've taken significant steps towards our goal of becoming one of the leading antiviral companies of the biotechnology industry. We believe we're very well positioned as we begin 2002. We expect to submit the NDA in the third quarter of this year,

as I previously indicated, and this will mark once again a major milestone for the company. We also have a number of important clinical trials,

which you'll hear more about in a few minutes, planned and ongoing for DAPD for HIV, Clevudine for HBV, and Coviracil for HBV.

As we continue to gather and evaluate clinical data from these programs we are very enthusiastic about their prospects. We're also in a strong financial position to achieve our 2002 plan.

But most importantly we have a management team with the capability and experience to execute these plans. This morning, three of our executive vice presidents will make some brief comments. Bob Amundsen will review 2001 results and provide you with updated financial guidance for 2002.

Dr. Franck Rousseau will then provide a review of our HIV and HBV project. And finally, Anne McKay will update you concerning the regulatory status of Coviracil in Europe and the U.S. After these presentations I will open the conference for a Q & A. Bob?

Thank you, Chris. As reported in our press release, during the fourth quarter we incurred a net loss of $13.7 million or $.18 per share, compared to a loss of $25.3 million or $.66 per share for the same period in 2000.

For the year ending December 31st, 2001 we lost $75.9 million or $1.40 per share, compared to a loss of $109.5 million or $2.87 per share for the year ended December 31st, 2000.

Operating expenses of approximately $84 million for 2000 were down 32 percent compared to the prior year. Primarily due to a significant reduction in manufacturing, clinical research, and other development costs.

Just as importantly, operating expenses of approximately $35 million in the second half of 2001, which included a $2.3 million restructuring charge. We're 30 percent below those incurred in the first half of the year.

The decrease in operating expenses during the second half of the year reflect the successful implementation of the cost cutting measures which we announced in August of 2001. These included a 35 percent reduction in head count, and reduction in selling,

general, and administrative costs, and reduction in costs from later to earlier stage development programs, as well as basic research and development activities.

In terms of cash flow, we were able to meet our planned cash usage target of $36 million for the second half of the year, which included approximately $3 million of additional funds from borrowing. It excluded the equity financing led by Walburg

, which was completed in the fourth quarter.

This $36 million cash usage total was 18 percent less than the cash usage of $44 million incurred in the first half of the year.

Dr. Rousseau will discuss in more detail in a moment out current plans, but we continue to be pleased with the clinical progress of our drug candidates and their significant commercial potential. Given this potential, our strengthened cash position going into 2002,

and the prospect for a third quarter NDA submission for Coviracil, we've decided to accelerate the development of our earlier stage programs in 2002 primarily for DAPD and Clevudine.

We expect that the moderate additional investment in these compounds, assuming the programs are successful, will enable us to accelerate time to market for the compounds.

Looking forward, we are now projecting a net loss for 2002 of $55 million, which is 28 percent less than the 2001 net loss of $76 million. We're now targeting 2002 cash usage, which excludes the effect of any possible additional financing of approximately $61 million,

which is moderately above the previously announced $54 million target. But remains less than the cash usage in the second half of 2001, if that amount were to be annualized over a 12-month period.

This increase is primarily driven by some accelerated regulatory and pre-launch expenses for Coviracil, as well as the acceleration of our earlier stage programs, including development programs for DAPD and Clevudine.

This increase will be partially offset by a key man life insurance payment we expect to receive in early 2002.

We believe that we will be able to increase our development activity and complete the submission for Coviracil with only a moderate increase in head count, and by generally maintaining our smaller infrastructure.

We believe that this spending plan is prudent given that we may be able to accelerate the time to market for two of our important compounds.

To summarize our cash situation we ended 2001 with approximately $108 million in cash, cash equivalents, and investments. Then excluding any 2002 additional equity financings, our end of year 2002 cash balance is targeted to be approximately $47 million.

We also stand to receive $85 million in milestone payments from

upon approval and launch of Coviracil in the United States and Europe.

Dr. Rousseau will now provide you with an update on our clinical development activities for 2002. Franck?

Thank you, Bob. We believe that the development program, which I will outline for 2002, will enable us to meaningfully

a feature of our

. Obviously our primary focus at this time is to complete the clinical program for Coviracil,

our lead compound for the treatment of HIV, which will allow us to submit an NDA for the drug in the third quarter of this year.

Concerning Europe, ongoing Phase III studies for Coviracil FTC-301, we completed enrollment as previously announced November of last year. A total of 584 patients have been randomized in the study which compares Coviracil to d42, also known as

,

with a background regime of

and

. The last patient is scheduled to complete the week 24 visit in May 2002; thereafter we will lock the 24-week database,

perform the statistical analogies and prepare a study report to be included in our NDA submission for the third quarter of this year.

Moving to DAPD, our other nucleoside

being tested for the treatment of HIV with completed

a two week Phase I/II study exploring various levels of DAPD whether alone or added to an existing antiviral regime in treatment experienced patients.

Based on the result of the study we have designed several Phase II studies aimed at refining the

and tolerability profile of the drug.

We are currently patients in two studies. In the first study, the

, 300 mg of DAPD administered twice a day as compared to 500 mg administered twice a day in multiple drug experienced patients in the U.S.

In the second study, the

, we're studying the compound in children to help define the appropriate dose for that patient population.

We also have progress to either final protocol or near final protocol for two Phase II studies to be conducted in collaboration with the North American Aids Clinical Trial group also known as ACTG.

The first study,

, will test the combination of

from

to the trial from

to

from

and the DAPD multiple drug failure patient.

The second study,

, will asses the tolerability and the antiviral activity of DAPD in multi-drug failure patients with and without micofelic

which has been show to significantly enhance the antiviral activity of DAPD in-vitro.

Finally, in collaboration with the French National Agency of Research Against Aids, also known under the acronym

, we're developing a protocol for a study of DAPD versus placebo in patients who have failed two previous lines of triple combination anti

.

This will be a larger Phase II study, and upon finalization of an agreement with

, we will initiate enrollment of approximately 120 to 150 patients in France. We are please with the level of interest of these two collaborative study groups in the

DAPD and their involvement obviously enables us to accelerate the development of this drug.

This entire Phase II program will help us to define the program of the DAPD,

both in terms of safety and activity in patients who are in need of new drugs who have failed multiple lines of antiviral therapy in order to design our Phase III study.

Now I would like to switch gear and review our Hepatitis B portfolio, which includes

and

, two nucleoside analogues. For

we have completed two studies,

, a Phase I/II study, and

,

a Phase II trial which indicated

and antiviral activity and good tolerability of FTC for the patient with chronic Hepatitis B infection.

The result of the study led us to select 200 mg per day as the dose of

for pivotal trial in Hepatitis B.

is an ongoing Phase III pivotal trial comparing

to placebo in patients with chronic Hepatitis B.

Our target enrollment is 240 patients of whom 175 have been currently randomized in the

is our second compound in development for the treatment of Hepatitis B.

We have been very enthused about the initial result from our ongoing Phase I/II trial of this compound. These results were presented at the

the

meeting in Dallas last October and confirmed the same post-treatment antiviral effect in humans as has been previously observed in animal models.

In this study, study

, six months after complete a short course of one month no therapy, patients still had a 99 percent

viral suppression of drug. In our experience, this post antiviral effect is unique and also the compound is at the early stage of development.

We're excited about this potential.

We've successfully opened a USIND for Clevudine in January 2002 and have an open

equivalent for the drug in Hong Kong, Korea, the U.S., France and Canada.

In the first part of the ongoing study

, called

, we are assessing a 30-day course of increasing dose of Celvudine. In the second part of the study,

,

we will be randomizing patients who have three months more therapy course of 10, 30, and 50 mg per day. We anticipate enrollment in this second part to begin in March 2002.

As is the case for HIV treatment, Triangle has always believed that combination

therapy will be necessary to effectively treat HBV infection. The initiation of two combination trials with

reflect our commitment to this strategy.

In the first of these combination studies,

, we will compare

to

in combination with

. This will allow us to both assess the effect of combination therapy and the added effect of

to

. We plan to begin patient screening in this study this month.

In the second round of this combination studies,

we will Clevudine to placebo in the background of

in approximately 150 patients. We will complete our pivotal trial

. We plan to begin screening patients in the U.S. in this study this month as well.

These trials will provide us with information to help us define tolerability and activity in Clevudine in various populations as well as assisting in selecting a dose to be used in pivotal trials.

In summary, 2002 should be particularly significant year for our portfolio. Not only do we expect to submit our first NDA, but anticipate making significant progress in the development of our other drug candidates.

I will now turn the

over to Anne McKay who will discuss our current and planned regulatory activities.

Thank you Franck. With regard to the NDA submission for Coviracil for HIV, the Triangle project team is working diligently to submit the NDA in the third quarter of this year.

Many of the data required for the individual technical sections have already been completed, including all of the pre-clinical sections. We expect that the other technical sections, including the

,

, and chemistry data will be completed well before the summer.

For the clinical data, based on discussions with the FDA, we plan to use study

, which has been completed, and the ongoing study,

as the two pivotal clinical trials to support approval. For the third quarter NDA submission 24-week data from

will be available.

The FDA will require the 48-week data from this study to be supplemented during the NDA review period. Although study

, the study conducted in South Africa, will not be reviewed as a pivotal study it will be reviewed as supportive study, along with several other completed clinical studies.

In Europe we are working with our colleagues at

to meet with several European agencies this quarter to finalize a regulatory silent strategy for Europe. I'll turn it back to Chris now.

Thank you, Anne, and thank you, Bob, and Franck.

I think we'll now commence the question and answer question of the conference call.

Thank you, Mr. Rallis. And ladies and gentlemen, at this time, if you have a question, please press the number one key on your touch-tone telephone. If you're question has been answered, or you wish to remove yourself from the queue, please press the pound key.

Once again, if you have a question, please press the number one key. Please stand by for questions.

Thank you, and our first question is from Shekhar Basu of EGS.

Thank you. Good morning. I'm just wondering if the 48 week data on both the trials will be mature by May? Am I correct in assuming that, or are you going to file the NDA and then provide the 48-week data after the NDA has been filed on

, sorry.

As Anne said, we will submit the NDA in September. That initial package will include 24-week data from

and 48-week data from

. During the NDA review period, the package will be supplemented by full 48-week data from

.

OK. Well when do you think that 48-week data might be ready, the sections 48-week data?

Enrollment in the trial was completed in November of 2001. It's a 48-week trial, so the last visit would be in October of 2002.

OK. And as a follow-up, in-vitro work showed when DAPD was combined with

acid you showed some synergy. Can you just describe to us synergy and whether that can also shown in pre-clinic models to show how the antiviral activity might look pre-clinically to, or is that not a reasonable model?

I think I'll let our Executive VP of Research and Development, Dr. George Painter, respond to that question.

Thank you. We combined

acid with DAPD in all of the cellular models and found that they were quite synergistic. In fact we can drop the apparent

as much as a 100 fold.

And we investigated that synergy in the context of being able to overcome desensitization as the result of mutation. There isn't an animal model in which you can adequately examine that type of synergy,

so we'll take that in-vitro data and use it to help our clinical colleagues design the

DAPD combination trial.

OK. Let's take a follow-up, the in-vitro synergy that you saw was on what mutations when you combined DAPD with

acid?

We examined across the board. We looked at the impact it would have on

,

associated mutations, in combinations with

and we also looked at it with multi-drug resistant mutations, 151.

And we also looked at the impact it would have on in recombinant virus on

and

, the mutations we grew up during the course of

. So across the board it seems to have an impact in increasing apparent efficacy against mutated viruses.

As a final follow-up if I may? What does this trial and DAPD being filed to show in the

randomized trial?

The study is designed to show .7

difference between the

as compared to the placebo.

And I believe you saw 1.3

reduction in the Scotland data a couple of years ago, am I correct? As a single agent in resistant patients.

Right. I mean these were - we've presented successful

data in the database, but that's a

yet. It's between 1 and 2

.

So it's a -

acid is going to potentially affect

DAPD? It's sounds like you're overpowering the study. Am I correct? Statistically?

No.

No?

We did a lot of the study in collaboration with the ACTG and as you know they're a strong sense of leadership in that group.

We're very comfortable that this study is adequate to test the

patient

as I mentioned before and only half the patients will receive

acid.

OK. Thank you very much.

Thank you.

Thank you. Our next question is from Scott Stromatt of Unterberg Tobin.

Good morning.

Hi, Scott.

Hi, sorry about Barry. A couple of questions, the milestone payment for the filing, would that be approximately $20 million in the fourth quarter

.

Scott, we don't anticipate any of those monies to hit this year, but at least some of it would come in, in 2003, possibly all of it depending on when we launch.

OK. And then in terms of expenses then, pretty much most of it would be the development, probably around $55, $58 million?

We're not giving that level of guidance, but the proportion of our development expenses as always is quite high in relationship to all of our expenses.

The debt that you took of $3 million, could you go into a little bit more detail on that?

Yeah, the debt that's now on the balance sheet, most of that is related to a 30-month loan that we took out with existing laboratory equipment as collateral. It's equipment that we had previously purchased and we just leveraged the equipment.

OK.

There's a small amount of other stuff in there, Scott, that's very small. Small loans from vendors technically.

All right. And the $1 million investment loss, could you explain that one?

Yeah, as you know we - a few years ago made a $2 million equity investment in

and at the end of the year, just as part of our standard procedures, we reviewed the fact and circumstances around that investment and made the decision that we should write it down by

50 percent based on our knowledge of

financings that we've done. So we just took a conservative position there and wrote that down.

OK. Are any formulation studies under way with

and other product, either

or

for perhaps ... ?

Hi, this is George Painter. You're speaking to combination with already approved agents?

Correct.

Yeah. We have initial studies under way to look at stability, so that we can make sure that any number of agents are chemically stable at the time that we actually formulate the combination.

And that's with a number of different drugs?

Right.

Great. I'm glad to hear that. Can you summarize real quick what clinical data we can expect this year?

We can expect - this is

, we can expect to - well it depends for who. For us or for you? I mean there are some data that we'll ...

Stuff that you'll announce so that we the public can see it.

Obviously we will get the 24-weeks from

although I don't anticipate that we'll probably disclose the results,

because at the time we get the results the patient will still need to continue until 48 weeks and that study will show something dramatic and don't expect anything to be presented before completion of the trial.

OK.

That's for HIV. We also can expect the results from the French

trial. The last patient is scheduled to complete his visit in spring;

therefore I maybe think we'll be able to present something around

or the end of the year, if not the

the following year.

We will not generate until late this year enough DAPD data to presentable material as you know we're gearing up to launch a Phase II program, and with regard to

as an FTC trial in combination with FTCB-40 in

trial

where they're exploring the impact of agent on the ability to reconstitute the immune system on potent antiviral therapy.

This study I would expect some results to be presented this year at some conference. And for Hepatitis B we will probably - we intend to publish the results of our Phase I/II. We have presented the part of our Phase II with the liver

and

we may provide an update because a patient was still be followed-up. That's probably - we may be in position to present some more of the

with the Phase I/II study

.

Thank you, gentlemen.

Thank you, Scott.

Thank you. Our next question is from Steve Sabba of Kilkenny Capital.

Yes, hi. A couple of things on the application for Coviracil. Will you be seeking a priority review, and will this - when you file the - when you submit the NDA will that be a complete submission or is this a rolling submission, technically? Thanks.

Yes, this is Anne McKay. The FDA has advised us we will get a standard review for this application, and as far as I - we haven't reached an agreement yet on a rolling submission, but as I stated the -

most of the technical sections aside from the ongoing 301 study will be complete prior to the September submission, so we will plan to work and meet with the FDA and submit the other technical sections prior.

I guess in relation to the 48-week data from 301, that'll be - that's not part of a rolling submission in the sense that when you do your submission in September it will be quote/unquote complete FDA?

Right. As far as when the clock would start on the review ...

Yes.

... my understanding is that would be after the acceptance for filing after we submit in September.

OK, thank you. And sorry about Barry, thanks.

Thank you, Steve.

Thank you. And again ladies and gentlemen, if you have a question, please press the number one key.

We have a follow-up question from Shekhar Basu of EGS.

Thank you very much. If you could just follow-up and help us understand since FTCs are activity, this

appears to be very similar from a resistance standpoint.

How do you show efficacy with this drug and Hepatitis B that's superior to

?

Well, we actually didn't show that because we have not subjected to trial directly comparing head to head,

to

Hepatitis B infected patients.

It is true you are referring to the data we have presented for

that the result looked at least as good as the published literature on

, however, the trial was not containing any

therefore we cannot conclude that the drug is more potent than

.

It is our hope that it would show that, but we do not have the data to support that claim.

I guess what I was trying to say was this, in-vitro from a resistance profile standpoint; we know that the FTC is resistance profile is almost exactly similar to

.

Would you expect the HBV activity in-vitro to be very similar too?

I think the resistance and the activity are not necessarily correlate in the way implied. We do know that the resistance profile is the same between the two drugs, however,

at least in HIV where we have a head to head trial, we do observe a lower frequency of

re-mutation.

In

in Hepatitis B infected patients, I repeat, we have not conducted head to head trial comparing the two agents.

The only thing we can say within the confine of the study we reserved a lower rate of mutation with FTC, six percent at one year in the patient receiving 200 mg, which is very encouraging in light of literature. However, this was not a direct randomized comparison study.

Can you just remind me what

showed at one year in terms of the

mutation rate?

I think this is well described in literature. You know it's all over the place depending on the acid they use ...

Right.

So.

OK. Thank you very much.

Thank you.

Thank you. Our next question is from Cindy Stranad, and could you please state your company name please?

Tech wire.

Chris, you had mentioned the executive team as taking on succession planning, do you have a tentative timeline that you're working toward, and are you working with an executive search firm in that effort?

Well we've just started the process. We've recently met and will be talking with the managers, senior managers down here, and will proceed relatively promptly and a formal recommendation from that executive committee will be developed and presented to the board in the near future.

OK, thank you.

Thank you, and Mr. Rallis that was our final question. I'd like to turn the program back to you.

Thank you,

. I'd like to thank all of you again this morning for joining us in this conference call. I appreciate your interest in Triangle. I think you can tell from the comments of my colleagues this morning, why we are so enthused about our prospects for the upcoming year.

And with the rest of the work that we've described, we now have to end the call and get back to work, so thank you again.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may disconnect at this time. Have a good day.