葛蘭素史克 (GSK) 2002 Q2 法說會逐字稿

Good day, everyone, and welcome to the Corixa Corporation second quarter 2002 earnings conference call.

Today's call is being recorded.

With us today from the company is the Director of Corporate Communications, Mr. Jim Denike.

Please go ahead, sir.

Thank you.

Good afternoon.

Thank you for joining us today.

With me today is Dr. Steven Gillis, chairman and CEO of Corixa, and Michelle Burris, Corixa's CFO.

Corixa issued a second quarter earnings press release at 4 p.m.

Eastern Time.

If you haven't received the release, a copy is available in the news section of the company's website at WWW.Corixa.com.

As always, a recording of this call will be archived and available for replay on our website later today, and replay information can be found at the end of the earnings press release.

Before I turn things over to Steve and Michelle, I'd like to remind you that during the course of this call, Corixa may make projections and other forward-looking statements regarding future events or future financial performance of the company.

Please note that these statements are just predictions and actual results or events may differ from the statements made.

Please refer to our documents filed with the SEC for information about risks that may affect the company, also of which are also available on the investor section of our website.

Thanks again for joining us today, and I'll turn it over to Steve.

Thank you, Jim.

Today I'll provide you with an update on progress of select drug development programs and walk you through Corixa's financial performance for the second quarter of 2002.

Starting with BEXXAR, Corixa announced on June 27th, 2002, that the company has successfully been granted an appeal by the FDA regarding the regulatory review status of BEXXAR in investigational radioimmunotherapy for the treatment of low grade or transformed low grade non-Hodgkin's lymphoma.

Although we are not scheduled to present at the September ODAC meeting, as we stated previously we expect to present data on BEXXAR at an ODAC meeting by the end of this year.

We continue to believe that BEXXAR addresses a medical need that has not been met through the administration of previously approved products in this patient population including Rotuxin [phonetic] and Zeflin [phonetic].

Also in the second quarter Corixa initiated a phase U.S. clinical study to evaluate the potential efficacy of our PVAC treatment for patients with mild to moderate plaque psoriasis.

Patients have already begun enrollments in clinical sites across the United States.

This study is an important step in our effort to develop PVAC treatment as a novel therapeutic for the treatment of psoriasis.

It will allow us to expand our evaluation to different durations of therapy and will include patients who have not failed prior immunosuppressant therapies as well as patients with mild as opposed to moderate or severe disease.

Effective July 31, 2002, we reacquired worldwide rights to our MELACINE vaccine from Schering Plough.

Schering Plough exercised its right to discontinue its commitment to sales and marketing of MELACINE if the product was not approved in the United States by June 30, 2002.

Schering Plough subsidiary, Schering Canada, has agreed to continue to distribute MELACINE on Corixa's behalf under the terms of the prior agreement until Corixa enters into a new agreement with Schering Canada.

The MELACINE agreement with Schering Plough represented a commercialization agreement established by the former Ribi Immunochem Research, Incorporated, acquired by Corixa in 1999, under which Schering Plough provided no funding for the manufacturing development or the clinical development of the product.

Corixa has begun to discuss commercialization of MELACINE with other parties that have already expressed interest.

This transaction does not negatively impact our cash requirements for MELACINE.

In terms of partnerships we remained active in our partnering efforts in the second quarter pursuing a number of active opportunities as well as finalizing a license and supply agreement with Rhein Biotech for the use of our synthetic adjuvant RC-529.

Our adjuvant is currently used in Rhein's two-dose hepatitis B vaccine that has been tested in a phase III pivotal clinical trial conducted by Rhein and Corixa.

Preliminary results indicated that patients achieved over 95 percent seroprotection after two injections within a time period of one month.

Finally, I'd like to briefly review a series of operational adjustments we undertook in May to strengthen both our balance sheet and our focus on commercialization of immunotherapeutic products.

On May 23rd we announced the restructuring of our South San Francisco operations which resulted in approximate 60 percent reduction in our South San Francisco work force and is expected to produce annual cost savings of more than $30 million.

In conjunction with the restructuring Medarex acquired Corixa's proprietary Ultra-Potent toxin technology and certain preclinical product development programs in exchange for more than $21 million in cash and/or Medarex stock.

As part of the transaction, Medarex will provide us with a license to use the Ultra-Potent toxins with certain monoclonal antibodies for which Medarex may receive milestones and royalties in the future.

At this time I'd like to turn the call over to Michelle Burris to discuss our financial performance.

Thanks, Steve.

Good afternoon, everyone.

The second quarter of 2002 we reported total revenue of $13.9 million compared with total revenue of $15.6 million for the prior year period.

Net income applicable to common stockholders for the second quarter was $5.2 million compared with a net loss of $32.4 million for the second quarter of 2001.

Net income applicable to common stockholders for the second quarter included other income of $21.9 million from the sale of certain preclinical assets and equipment to Medarex.

Diluted net income per common share for the second quarter of 2002 was twelve cents compared with diluted net loss for common share of 79 cents for the second quarter of 2001.

When you exclude acquisition-related charges such as intangibles and deferred compensation amortization in the restructuring charges related to Corixa's South San Francisco operation, net income applicable to common stockholders and diluted net income per common share for the second quarter of 2002 were $7.8 million and 16 cents respectfully.

In comparison, net loss applicable to common stockholders and diluted net loss for common shares were $14.2 million and 35 cents for the second quarter of 2001.

Corixa recorded restructuring charges of $1.9 million in the second quarter of 2002.

Those charges are related to the work force reduction in our South San Francisco operations.

We also expect to incur additional charges related to our lease facilities if we enter into sublease arrangements for these facilities.

The decrease in revenue for the second quarter of 2002 compared with the prior year period was primarily due to a decline in milestone revenue from our collaborative agreement for BEXXAR with GlaxoSmithKline as well as the expiration of our ex-vivo research agreement with the infectious disease research institute.

These decreases were partially offset by increased revenue from our collaborative agreements with Beaufour Ipsen, Japan Tobacco, Organon, and Wyeth Lederle.

At the end of the quarter Corixa had approximately $80.5 million in cash, cash equivalent and investments.

This cash balance does not reflect the approximately $18 million payable in cash or stock that is owed to Corixa under the terms of its recently announced asset sales to Medarex.

In addition, the cash balance does not include any of our $75 million equity line of credit from BNY Capital Markets, a subsidiary of the Bank of New York.

That has not yet been accessed.

And as Steve previously stated this cash balance is not impacted by our reacquisition of worldwide licensing rights to MELACINE from Schering Plough.

To reiterate the revised guidance provided in May of 2002, we expect to fall within the following guidelines.

On a cash basis we expect receipts between $70 and $80 million and a net operating cash burn of approximately $55 to $65 million.

That excludes investments and fixed assets or facilities.

On a GAAP basis we are looking at revenue of approximately $45 to $55 million for the year, operating expenses of approximately $125 to $135 million, and acquisition-related expenses of approximately $165 million.

Other income of approximately $20 to $25 million resulting from the sale of assets to Medarex and net loss of approximately $210 to $230 million.

That translates to a net loss of approximately $45 to $65 million if you exclude the acquisition-related expenses.

Thank you, Michelle.

We are encouraged by our progress in the second quarter and look forward to continued success throughout the remainder of 2002.

I thank you for joining us today, and if you have any questions, I'd be happy to address them now.

Operator, will you please open the call to questions at this time. 00:10:15

Thank you, sir.

Today's question-and-answer session will be conducted electronically.

If you'd like to signal to ask a question, please press the star key followed by the digit one on your touch tone phone.

Once again, that is star followed by the one.

We'll pause for just a moment to give everyone a chance to signal.

Our first question comes from Mark Monane with Needham and Company.

Hi, good evening.

This is Ren Benjamin in Mark Monane's place.

Two questions.

One is what sort of guidance could you give us as far as your plans for the MELACINE product now that Schering Plough has discontinued its sales and marketing commitment?

And then the second question would be, are there any additional data that's being submitted to the FDA or to the ODAC panel?

Can you give us any sort of update on how you're updating the FDA or ODAC panel as far as BEXXAR is concerned?

Sure.

With respect to the first issue in MELACINE, we're continuing to evaluate the timing and potential timing of going forward with the second clinical trial, which we now know in the United States will be required for eventual approval of the product, having resolved at the February ODAC the precise nature of that clinical study.

The return of these rights may in fact allow us to reposition MELACINE with another partner who may be in a position of contributing actively both financially as well as on the development side to the further commercialization of the product.

And that will obviously depend on the outcome of discussions, which has now only just begun.

We will take the outcome of those discussions together with the other opportunities that avail themselves from our own pipeline into consideration before pressing the go button on an initiation of a second and lengthy approval clinical trial here in the United States.

In the interim, we're also evaluating the potential utility of filing the data that we currently have for MELACINE in Canada to expand its label and we are heartened by Schering Canada's continued desire to distribute the product on our behalf until such time we would be interested in distributing on our own behalf.

We may well look at the issue of filing those data in the European Union as they stand today.

However, our clinical and regulatory group is fairly preoccupied with other matters at this point that will likely have far greater impact to us and to our shareholders.

With respect to BEXXAR, when the appeal was granted the FDA requested us to file with them a number of issues or number of items including electronic case record forms of patients who we grouped in the patient population of having a long duration of response as well as a rather large document and integrated summary of efficacy across all trials which speaks to the high percentage of patients that maintain a durable response following administration of a single course of BEXXAR.

That document as well was filed with the agency, and we are at present responding to any questions that they generate upon the review of those materials and assisting them in any manner that they request.

On our own side, we are preparing our briefing documents for ODAC presentation, and its our belief that the agency is doing the same thing on their side.

Terrific.

Thank you very much.

And just as a reminder, it is star one to signal for a question.

Our next question comes from Phil Nadeau with SG Cowen.

Hi, good afternoon.

Thanks for taking my question.

My first question is on actual panel presentation itself.

Do you think that you have to just show BEXXAR is safe and effective in order to get a positive recommendation from the panel, or would you in fact have to show that it meets a medical need at the panel in order to get a positive recommendation?

Well, that, I think it's the - I think it will actually depend on the questions that the FDA poses to the panel.

If the FDA poses the question does the product meet an unmet medical need, that will obviously influence whether the product is given a full or an accelerated approval.

If they simply ask depending on the indication whether the product is safe or effective, it may not have anything to do with answering an unmet medical need.

I do believe the full issue of provability of BEXXAR is safety and efficacy whether under full approval or under accelerated approval will be debated at ODAC.

And secondly, should you get a positive recommendation from the panel, what would then have to happen?

Would the file still be considered active with the FDA meaning you wouldn't have to resubmit any - responses to the previous - complete response letter or would you have to respond in some way and then refile?

I think that's really a regulatory net [phonetic] that I don't have an answer to today.

It's our impression on a larger scale that should we emerge from ODAC with a recommendation for approval that the agency then would be in a situation of having to complete whatever manufacturing inspections it would need to complete at that point in time and process the constructions and the debate over package inserts and move forward with the product to approval.

Whether we would have to file a complete response to their complete review letter based on the successful outcome of the appeal is really a regulatory question that we'll be happy to entertain upon a positive nod from ODAC.

And my final question is just on manufacturing.

What's the status of manufacturing operations and any FDA inspection for those facilities?

We have not yet had notification from the agency as to their desire to inspect any of the manufacturing sites.

The product is currently manufactured, Cold Antibody by BI Pharma, which is an organization with which the agency has a lot of interaction.

And the and radiolabel is applied by MDS Nordion in Canada which also has undergone several recent FDA inspections.

Great.

Thank you.

And our last question for the afternoon comes from Charles Collins with Miller Johnson Steichen and Kinnard.

Hi, how are you doing?

I just have one little question because I was more familiar with Ribi sometime back, curious on the herpes and genital warts that SmithKline Beecham had, and I thought that was down the road a ways in trials, and I just really haven't heard anything more.

Can you update me at all?

Well, with respect to HSV and prevention of disease, GSK completed one phase III clinical trial that included our flagship adjuvant MPL in it, and that product shoed efficacy in women but did not show efficacy in men and that a second confirmatory clinical trial is now underway.

With respect to therapeutic products for genital warts, I believe that that program was actually in-licensed to GSK from Cantab and it is now part of a GSK program with Medamune [phonetic].

I would encourage you for accuracy to look at the GSK website to find out exactly where that's therapeutic product stands.

Okay.

So that would not be part of your -

MPL adjuvant is present in that product as well.

But you don't know where it stands; obviously they would know better than you would?

That's correct.

From a vaccine perspective, I've updated you to the knowledge that we currently have.

And one more question.

On the hepatitis B, when does the U.S. patent run dry for SmithKline?

It's my understanding that the hepatitis B surface antigen patent portfolio begins to unwind in Europe first in 2004, and that's why we can expect or at least that's what we've been told so far by GSK to expect he regulatory filing of the MPL, Engerix product, prophylactic hepatitis B vaccine later this year.

I believe the U.S. patent begins to expire maybe 18 months to two years thereafter.

Okay.

That will take care of me.

This concludes today's question-and-answer session.

I'd now like to turn the conference over to Mr. Denike for any additional or closing remarks.

Actually I will just say thanks for joining us, and we look forward to continued results and turn it over to Steve if he has any additional closing remarks.

Thank you all very much and we'll be back in touch with you same time next quarter.

Take care.

This does conclude today's conference call.

You may now disconnect.