吉利德科學 (GILD) 2002 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Triangle's second quarter conference call.

At this time, all participants are in a listen-only mode.

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. Andy Finkle, Triangle's General Counsel.

Mr. Finkle, you may begin.

Good morning and welcome to Triangle's conference call.

Before we start today's call, I would like to remind everyone that in our discussions this morning, we may make forward-looking statements.

These are statements that refer to what we think might occur in the future.

Please remember that actual results and events may differ materially from these forward-looking statements.

You should always consider these statements in connection with the risks identified in the press release announcing this conference call as well as the risks and uncertainties identified in our quarterly and annual reports which we file with the Securities and Exchange Commission.

We will start today's call with a corporate update from Dan Welch, Triangle's Chief Executive Officer.

Following Dan's remarks, then Chris Rallis, Triangle's President, and the other management team will be available to take your questions.

It is now my pleasure to introduce Triangle's new Chairman and Chief Executive Officer, Dan Welch.

Thank you, Andy.

Good morning, ladies and gentlemen.

Since I joined Triangle on August 5, I am more convinced of the opportunity and value that exists at Triangle Pharmaceuticals.

What has impressed me is that in addition to the existing strong assets and talents, Triangle has recently become a brand new Company in several important ways.

Just a few short months ago, Triangle was a Company facing serious challenges on virtually every value driver of the Company.

First, in January of this year, Dr. David Barry, the founder, Chairman and CEO of Triangle died.

Triangle has operated without a CEO since then.

Second, the intellectual property position on Coviracil, our latest stage compound for HIV and hepatitis B was unclear due to a patent challenge by Shire.

Similarly, our IP position on Amdoxovir also known as DAPD was unclear.

Third, Triangle was involved in a collaboration with Abbott, covering all three of our compounds and HIV and hepatitis B.

While Abbott was an excellent partner, the development priorities of Abbott and Triangle and HIV and hepatitis B grew apart during the three years of the agreement making it difficult to effectively progress our programs.

Our ability to collaborate with other companies interested in our compounds was complicated by the collaboration.

The fourth challenge facing Triangle was some external concerns about the eventual place in therapy for Coviracil.

These four challenges define Triangle in the eyes of investors as a Company with interesting compounds, but a future which was less than clear.

Every one of the four major challenges facing Triangle just a few months ago has resolved in a very satisfactory manner.

Having resolved these challenges, I'm very comfortable stating without exaggeration that Triangle is a brand new company.

Let me tell you why.

First, Triangle is a new Company because it has a new Chairman and CEO.

My background fit the search criteria established by the search committee of the board of directors.

These criteria were: a strong track record of launching major brands, broad and deep pharmaceutical experience, a track record in general management and success in the United States and international markets.

My 23 years in the pharmaceutical industry with small, mid and big pharma', my track record for having launched Plavix, Avopro and Eloxatin for [inaudible] with combined 2002 sales for these products projected to be roughly $4 billion in 2002.

My experience managing pharma' business in the United States, Canada and Europe and my experience in managing a 500-person R&D organization qualified me in the opinion of the search committee to take on this unique and exciting opportunity at Triangle.

Second, Triangle is a new Company because we have resolved the major IP disputes affecting Coviracil and Amdoxovir.

Chris Rallis and his team have done an excellent job resolving the intellectual property question on these compounds.

First, with respect to Coviracil, Emory University obtained an exclusive license from Shire under Shire's patents relating to Coviracil.

Under the terms of our license agreement with Emory, we automatically acquired an exclusive sublicense to the Shire patents relating to Coviracil.

Our milestone and royalty obligations to Emory will not be affected.

With respect to Amdoxovir IP, we announced in our most recent form 10-Q, that we have resolved the ongoing worldwide IP dispute with Shire Pharmaceuticals.

We have agreed to enter into a settlement and license agreement with Shire, Emory and the University of Georgia, under which we will pay a royalty to Shire and we will receive an exclusive sublicense to Shire's right in the compound.

We are very pleased with this settlement because it removes the uncertainty associated with this IP dispute and allows to us move forward in our development of Amdoxovir.

So, resolving the IP disputes with Shire, regarding Coviracil and Amdoxovir makes Triangle a new company.

Third, Triangle is a new Company because we recently reacquired ownership of our three compounds.

We announced on July 30 the dissolution of our collaboration with Abbott. The upsides to this position are very important to investors.

First, this new ownership position returns all assets to Triangle and should we wish to do so, we are now free to partner our three compounds and four development programs as separate, value-creating opportunities.

Second, Abbott has agreed to manufacture Coviracil and provide $42 1/2 million in lines of credit.

Now, of course, this new ownership carries with it some short-term pressure on us to commercialize Coviracil in the U.S. and outside the U.S. and to finance our launches and development plans ourselves.

Overall, the reacquisition of our rights from Abbott is very positive for Triangle and its shareholders.

And last but certainly not least, Triangle is a new company because study FTC-301 has confirmed the value of Coviracil in the management of patients with HIV.

As we reported on July 30, study FTC 301 was unblinded early because one arm of the trial was performing better.

The better-performing arm was the Coviracil arm.

Significantly improving a well-performing standard of care regimen in terms of the primary and secondary end points, including discontinuation due to adverse events.

To our knowledge, this is the first time that an NRTI drug has been proven superior to another NRTI in a triple drug regimen. With the results of study 301, Coviracil has an even stronger regulatory package and commercial profile.

So as a result of these significant and very positive developments in four critical areas, Triangle is a brand new Company.

Having made my introductory comments, I will now give a report of the second quarter results as announced in our August 13 press release.

We are pleased with our second quarter '02 operating results. For the quarter ending June 30, 2002, we incurred a net loss of $14.9 million or 19 cents per share as compared to a net loss of $21.2 million or 45 cents per share for the same quarter in 2001.

These results reflect an approximate 30% decrease in our aggregate net loss which is directly associated with the reduction in our second quarter operating expenses.

Our 2002 six-month results also reflect this trend.

In the first six months of 2002, we recorded a net loss of $16.7 million or 22 cents per share as compared to a net loss of $44 million or 99 cents per share in the first half of 2001.

In both the second quarter and the six-month results, the significant reduction in our 2002 net loss as compared to the corresponding 2001 periods, results from the restructuring of our operations last year and a deliberate and significant reduction in operating expenses.

During this period of tighter control, we have been able to steadily advance our core development programs.

The reacquisition of our compounds from Abbott will cause us to incur additional expenses and the timing of certain expenses will be earlier in order to prepare for a successful launch of Coviracil.

Accordingly, we have increased our forecasted cash usage for fiscal 2002 to approximately $64 million, an increase of $3 million beyond our previous guidance.

Our forecast of $64 million dollars provides for approximately $38 million of cash to be utilized in the last half of '02, which will leave us with approximately $45 million in cash and investments at the end of the year assuming no new capital infusions.

I now turn to a brief update on our progress in research and development.

First, Coviracil for the treatment of HIV.

Coviracil, also known as emtricitabine and FTC is Triangle's most advanced compound.

Based on the positive results already reported on studies FTC-301, Triangle is moving forward with its plans to submit an NDA to the FDA in September.

Our NDA package will include favorable comparisons to the two most widely prescribed NRTIs for HIV.

Likewise, plans for a European submission for Coviracil remain on schedule for a fourth quarter 2002 submission.

Our second program for HIV is Amdoxovir, also known as DAPD, currently in phase two.

Let's take a look at our progress on Amdoxovir.

As you may recall, Amdoxovir has demonstrated in vitro anti-viral activity against resistant virus, including those that are resistant to 3TC and AZT.

In a short term phase one study, we saw a 1.5 log drop in viral load in naive patients and 0.7 log decline in viral load in treatment experienced patients.

These results encouraged us to move forward.

Earlier this year, we initiated study DAPD-150.

This study is evaluating the activity and safety of Amdoxovir in treatment experienced patients and has completed enrollment.

After initiation, changes in lenzopacity were observed were observed in a small number of patients in this study.

Lenzopacities are common in middle aged persons and we believe the lenzopacities observed in DAPD-150 are unrelated to Amdoxovir treatment.

However, at this stage of clinical development, we believe it is prudent to characterize the risk benefit profile of Amdoxovir. Therefore, we recently agreed with the FDA to place the Amdoxovir program on partial clinical hold.

Now, the implications of the program are as follows.

First, the patients who are currently enrolled in study DAPD-150 and are benefiting from treatment will continue to receive Amdoxovir with increased eye examinations.

And number two, an ongoing single dose pediatric study will be closed.

Number three, two trials conducted by the AIDS clinical trial group, ACTG, will be allowed to initiate in the planned patient group of patients who have failed triple class regimens.

More eye exams will be incorporated into the protocol for these trials and the trials will begin as soon as possible.

We are pleased that patients are continuing on study 150 and that we will enter patients in the 2 ACTG trials.

The FDA, our investigators, and Triangle are all very interested in finalizing as soon as possible a plan to continue the development of Amdoxovir beyond the current trials.

Now moving onto our HBV program.

As you know, Triangle has two programs in clinical development for hepatitis B.

The first is Coviracil where we have completed enrollment of our first Phase III trial.

Results from one of our Phase II trials supported selection of the 200 milligram once daily dose and demonstrated a low incidence of HBV resistance through 48 weeks.

Seralogical [ph] response as defined by antigen loss or seral [ph] conversion observed with Coviracil compared favorably with that observed in other studies with Lamivudine, also known as 3TC, and Adafavere [ph].

Enrollment in the Phase II, FTC b-301 was completed as of July 30, 2002.

This is a 48-week study comparing Coviracil to placebo in patients with chronic HBV infection.

Now, as in HIV therapy, combination therapy in hepatitis B patients could play an important synergistic or adjunctive role.

We therefore initiated two Phase II trials to explore this potential, study FTCB-201 and study FTCB-204.

Study FTCB-201, a Phase II study examining the combination of Coviracil and Adefavere [ph] versus Adefavere [ph] alone recently began enrollments.

The second Phase II combination study, FTCB-204 is also underway.

This study examines the combination of Coviracil and Clevudine, our second compound for HBV, versus Coviracil alone.

To date, more than 60 patients have been enrolled in this trial.

Clevudine, also known as L-FMAU, is Triangle's second compound in development for HBV.

Results from the completed Phase I-II study, L-FMAU-102, demonstrated potent anti-viral activity for the 28-day dosing period and a very interesting observation of a prolonged suppression several months after completion of dosing.

A phase one-two study L-FMAU-102-b is currently enrolling patients and will help define the dose of Clevudine.

As mentioned previously, a Phase II study, FTCB-204 is under way and will examine the combination of Clevudine and Coviracil in HBV.

Finally, I will share with you now our second-half 2002 objectives.

First, we will submit our Coviracil HIV NDA to the FDA in September following the filing strategy agreed at our pre-NDA meeting with the FDA.

Second, we will submit our Coviracil HIV MAA [ph] to the European authorities by the end of this year.

Third, we will finalize our commercialization plans for Coviracil for U.S. and ex-U.S. territories.

Last, but not least, we'll integrate the impact of the many positive and recent developments on our capital requirements for 2003 and make definitive plans to satisfy these requirements.

In conclusion, I'm very excited to lead what is in many respects a brand new Company.

With resolution of major IP disputes, convincing new data on Coviracil, reacquisition of our three promising compounds and a revenue stream possible as early as 2003.

Thank you very much.

My management team and I look forward to answering any questions you may have.

Operator?

Thank you.

If you have a question at this time, please press the one key on your touchtone telephone.

If your question has been answered or you wish to remove yourself from the queue, please press the pound key.

Again, if you have a question, press the one key.

Our first question is from Steven Sabba of KillKenny Capital.

Yes, hi.

Congratulations on your new position.

And things do seem to be going well.

I would say one of your -- going forward one of your major tasks is financing additional clinical trials and marketing Coviracil, assuming it's approved.

A couple of questions.

What are your plans as far as marketing?

Would you like to co-market this?

Would you like to license it out?

Would you like to do it yourself or are all of those on the table?

The second question is, do you want to raise additional capital through a partnership or through financing?

And what are the pros and cons of those two decisions?

And I guess that's -- and also my third question is, do you expect a standard review or priority review for Coviracil?

Thank you.

Okay, thank you, Steven.

Thank you for your note of congratulations, and a lot is going very right with Triangle.

It is an excellent observation.

Specifically to your two questions, first on financing, regarding marketing, will we co-promote or do some other arrangements?

And I'll wrap that question into the next, which relates to partnering and financing.

Since we've announced all this good news, we've been approached by several Companies that are very interested in collaborating with us in some fashion.

Using your terms, all options are on the table.

We are looking at going alone.

We are looking at co-promotion, and we are looking at other forms of collaboration.

We are very, very pleased by the interest registered by very important companies in the Company in general and in particular in Coviracil having published the news both on the IP front as well as the clinical study front.

We are looking at partnering versus financing, and again, we're evaluating both those alternatives equally and we'll make that decision once the discussions with partners have matured and we can compare those in every respect versus the pros and cons of financing.

We haven't made that decision, quite frankly, Steven, especially since the Abbott dissolution is only a couple of weeks old and we have a number of discussions ongoing.

To your final question about review of the package, we are guiding towards a standard review.

We are at the same time requesting an expedited review.

Thank you.

Thank you.

And ladies and gentlemen, once again, if you do have a question, press the one key.

And our next question is from David Boushay of Unterberg Tolbeth [ph].

Thank you.

Hi, Dan.

Listen, would you say that all of the interest that you're getting from the industry and the opening up of options in terms of various types of collaborations, could that reduce the risks associated with getting financing to the capital markets for your Company?

David, it is part of the equation, certainly.

The partners could bring a number of things to us, not the least of which would be resources.

And as we evaluate the different alternatives, whether they may be capital funding or partnerships, I think they will be evaluating not only independently as alternatives but also how they could be worked in conjunction.

They could very well be complementary.

We are obviously very cognizant of the market conditions and would certainly take that into consideration.

And so that any increased capital funding would take into consideration the best moment for that exercise.

But you're certainly right, all of the interest by pharmaceutical companies could carry with them significant resources of various types.

And that could in turn affect our plans for external financing.

All right, Dan.

Obviously one of the challenges you have in front of you is to commercialize Coviracil on your own, but you also have to develop your pipeline on your own now as well.

When you were at Elan [ph] and you were in charge of their R&D group there, can you give us a little bit of guidance on the state of their R&D programs when you took over and what it was like when you left?

Yeah.

The state of the programs when I got there, it was a company that was making a transition, frankly, from a classical biotech model, which was based mostly on the Athena technology, the nurex technology, for example.

And their model was a research-oriented company, which relied heavily on CSOs for development.

We thought that that -- well, I thought and also the head of research and development, Dr. Lars Eckman who I recruited from industry believed that a balance somewhere in between 100% reliance on CSOs and having a complete clinical development staff was the right model.

When I left Elan [ph], we had recruited and built significantly in the clinical development area, responsibly, I would say, because being able to do everything in clinical development is extremely expensive.

You have peaks and valleys in development.

And you can't always keep your people fully engaged.

So we found a balance in between that.

We got three NDAs approved while I was there and we also progressed a major molecule which is antigran [ph] a mono-[inaudible] antibody for multiple sclerosis and Crohns Disease. We progressed that from Phase IIb into Phase III which is the largest Phase III program the company had ever embarked upon.

And so in general, that is the before and after effect at my prior company.

All right.

One of the advantages you don't have with having a partner anymore is the marketing apparatus in Europe that would have been pre-existing.

You spent a lot of time in Europe and Santa Fe.

Can you give us a little more detail about your commercial business there?

Yes, in Europe, I was responsible for -- I was the General Manager of a part of the European continent which is called the Benolux countries, Belgium, Luxembourg, Netherlands.

I also was responsible -- I was promoted to the corporate headquarters in Paris to create and then run an international marketing department which, of course, had an oversight responsibility and leadership responsibility for Europe as well as the rest of the world.

My principal task and challenge at that time, and this was in 1996, was to prepare the company to develop, register and then launch three major blockbusters at the time, which thankfully, became blockbusters.

And that is, of course, Plavix [ph], which is approaching $3 billion in annual sales in 2002, Abapro [ph] an anti-hypertensive, which is approaching $1 billion this year and Eloxitin [ph], a product for colorectal cancer which is in the quarter billion range and just recently got approved in the United States.

So my experience there was operational both at the Benolux level and then strategic and corporate in collaboration with the Bristol, Myers, Squibb Company.

Great, thank you.

You're welcome.

Thank you.

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

One moment for questions.

And our next question is from Mark Lomein of Neida.

Thank you, good morning.

Would you please take a step back and tell us what you think the state-of-the-art is now in terms of the management of HIV?

We have a number of different strategies out there, including vaccines and immuno-therapies in general, and now we have, looks like we're going to have another exciting option in terms of oral therapy.

Can you step back and tell us how Coviracil fits into the current state-of-the-art in HIV management?

Let me introduce Dr. Frank Russo, who is the head of our Research and Development, Mark.

Hi this is Frank Russo.

I think the state-of-the-art of therapy has progressed but not really changed.

Really there is only one convincing strategy nowadays, it's anti-viral therapy.

None of the other approach as demonstrated in the meaningful benefit although there is a significant need for vaccine and immuno-therapy.

Unfortunately, the only thing that has shown to prolong survival and reduce morbidity are anti-viral drugs.

So, that statement said, Coviracil is an anti-viral.

The way Coviracil is going to contribute to improving and progressing anti-viral therapy is through its potency, safety and entirely once a day therapy particularly in combination with once a day drug as we've established in study FTC-301, for example.

Does that answer your question?

Yes, but, that's very helpful.

But specifically, could you narrow then on Coviracil and how it fits into the other oral therapies available, where you think it will be positioned?

Yes.

I think I can do that from a medical point of view.

If you want my colleague Paul Dreyer, head of Marketing, can give you his perspective on that.

I think that we have been among the first to promote simplification of therapy when the patient needs therapy, they are safe, effective and really can fit into their lifestyle rather than build a lifestyle around their treatment.

And the development of Coviracil was specifically targeted in that direction with once a day, and I would make a difference between once a day and two 24 hours.

There are many drugs that could be considered available for dosing every 24 hours.

Coviracil is a once a day drug, which means it's -- you could take it Monday morning and Tuesday evening.

I think that may clarify a little bit what I mean by flexibility.

And in the once a day regimen like we used for the one study, DDI, videx, FTC and Sustiva we have observed extremely good clinical results for [inaudible] safety and have no doubt, although we have not measured that directly, but the appearance has been simplified by the fact that the regimen is very simple to take.

And I do believe that for first-line therapy, entirely once a day regimen will be the way forward.

Yeah, Frank, this is Paul Dreyer.

I'd just like to add a little to that.

We know from market research and discussions with physicians as well as patients that the potency of Coviracil is highly valued as well as it's very robust pharmacokinetics.

As Frank mentioned, it's not simply a qd drug, it is truly a once a day drug.

Coviracil is particularly well tolerated, which is important to both physicians and patients.

And in addition, there are currently four drugs in the market today that can be administered once a day, and there are two more that are submitted or close to being submitted to regulatory agencies.

So with the approval of Coviracil, physicians will be able to prescribe a very compact, potent, fully once a day regimen to their patients.

And, you know, we believe given the profile of Coviracil, that it will be an essential component of these much more convenient once daily regimens.

Terrific.

Thank you very much for the information.

You're welcome, mark.

Thank you, and our next question is from Michael Walsh of Killkinny Capital.

Hi, to follow up on that last question, do you plan on positioning FTC as a replacement for 3TC or is it going to be more broadly positioned?

Could you describe how you're going to -- how you think about those things and also, given that you have some -- you've got combavire and trisivire which kind of lock up the ability to enter into patients' regimens. How do you market into that kind of situation against a combavire or a trisivire?

Thank you.

This is Paul Dreyer.

Let me try to address the positioning first.

As Dan mentioned in his introductory comments, our NDA package will include comparative trials to the two most widely prescribed NRTIs for HIV disease.

Both 3TC as well as D4T.

I think that we will be able to show physicians that Coviracil is really the drug that you should include in a regimen for a -- as I mentioned early, a potent compact regimen.

So whether we, you know, choose to directly compare it to 3TC, it does share the safety profile of 3TC which is very important to subscribers or whether really more broadly useful in the marketplace.

You do raise an important consideration, and that is about half of the 3TC usage is tied up in combinations with combavire and trisivere.

And I think that does point, at least to me, in the market place of how physicians value more convenient regimens.

There are some downsides to fix those combinations, and that is you're also locked into the other drugs as part of that regimen, and you know, to think about the 301 trial.

We were able to treat patients with a regimen that would be three tablets, once a day, a very convenient regimen.

So I think it will compare favorably, you know, with a combination pill like combavire or trisivire

Lastly, if you think, yes, you're correct, that a fair bit of 3TC is locked up in combinations, but a fair bit is not.

And we think that Coviracil has been demonstrated that it can be administered qd and has a similar safety and efficacy to a 3TC regimen given twice daily.

We've also shown some potential improvement relative to the development of resistance in one of our trials.

So we think that there are some positive comparisons of Coviracil to 3TC and that it should be looked at in the future as the drug that needs to be included as part of more convenient once daily regimens.

Thank you and our next question is from Michael Solomon of Bank of America Securities.

Hi.

Along that line, is FTC active against M184-V mutation commonly caused by 3TC?

Frank Russo, our head of R&D will take that one.

No, the two drugs share the same resistance profile.

The difference, as Paul Dreyer was mentioning, is in one study we show that the patient who failed the regimen containing FTC versus patient who failed the same drug but the regimen containing 3TC, there was a significantly lower incidence of M184-V in the FTC group as compared to the 3TC group.

Okay.

And also, the tox-profile, is it similar to 3TC?

Do you see the mytochondrial tox? [Inaudible], acidosis [ph] and so on.

Well, actually, as you may know, 3TC is probably the best [inaudible] nucleoside analog [ph] out there since FTC is not approved.

We've seen the comparative profile of safety and tolerability of the two drugs is really equivalent.

We did observe some cases of [inaudible] in our development program, but as you know, there is no more therapy studies any longer with HIV, and they were receiving other drugs known to be associated with [inaudible] side effects.

As for 3TC and all the nucleoside in general, when the drug will have the label, there's no question there will be a warning about lactic acidosis in patients treating with nucleoside.

Just to mention, in our [inaudible] therapy trial in hepatitis B study, we've never seen any cases of lactic acidosis so far.

How do you think the tox profile compares to Veriad [ph]?

Well, it's very difficult -- I cannot answer.

Obviously, I don't think the drug would be used -- the drug could be used together more likely than against each other so from -- we have not -- clearly not tested FCC versus Dinofovire [ph].

I think Dinofovire [ph] looks very well tolerated from the label.

I don't know that, you know, they have a trial versus placebo in experience.

It's difficult to extrapolate from that across.

I cannot make that comparison.

Have you done drug-drug interaction studies with the two or with any other drugs likely to be used?

We are actually right now conducting that study.

Okay.

Okay.

Thanks.

You're welcome, Michael.

Thank you.

And I am showing no further questions.

Okay.

If that -- if there are no further questions, I thank the listeners very much and we look forward to continuing to update you with further progress at Triangle Pharmaceuticals.

Thank you very much.

Ladies and gentlemen, this concludes today's conference.

Thank you for your participation and you may disconnect at this time. Have a nice day.