葛蘭素史克 (GSK) 2002 Q3 法說會逐字稿

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

Today's call is being recorded.

At this time, for opening remarks and introductions, I would like to turn the conference over to Mr. Jim DeNike, Director of Corporate Communications. Please go ahead, sir.

Good morning, and thank you for joining us today. With me today is Dr. Steven Gillis, Chairman and CEO of Corixa, and Michelle Burris, our CFO. Earlier this morning, we issued our earnings release as well as an update on our PVAC program. If you haven't received the release, copies are available in the "News" section of Corixa's Web site at www.corixa.com.

As always, the recording of this call will be archived and available for replay on our Web site 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, as always, 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 such statements are just predictions and actual events or results may differ from the statements made. Please also refer to our documents filed with the SEC for information about risks that may affect the company, all of which are also available in the investors section of our Web site.

Thanks again for joining us this morning -- Steve.

Thank you, Jim. Today we'll provide an update on select core programs and walk you through Corixa's financial performance for the third quarter of 2002.

With respect to BEXXAR, we announced on Tuesday of this week that the Food and Drug Administration has confirmed our BEXXAR oncology drug advisory committee presentation on December 17th, 2002. Preparations in anticipation of this meeting have been underway at Corixa for some time. We are eager to present our data in support of the approval of BEXXAR, given our belief that BEXXAR addresses the medical need that has not been met through the administration of previously approved products in patient population, including Rituxan and Zevalin.

As Jim mentioned - concurrent with today's earnings release - Corixa along with our partner Genesis Research provided a program update on the development of our PVAC treatment for psoriasis. Two 12-week trials recently completed in Brazil and the Philippines demonstrated clinical activity and safety in patients with moderate to severe cases of the disease. While results from both studies were encouraging in terms of improvement in disease and the appearance of a dose response effect, we are hopeful that greater exposure to PVAC treatment dosing may result in an optimal effect.

To that end, we are working diligently to complete recruitment of our ongoing, blinded, controlled study announced in the second quarter of 2002. The study is investigating multi-dose administration of PVAC treatment versus placebo. Given the safety profile of the treatment the study is being conducted in mild to moderate disease patients with efficacy assessment at 24 weeks. The study is approximately 50 percent accrued and based on the current rate of accruals we expect the results of this study next year.

In an effort to further evaluate PVAC efficacy, a 60 patient trial is currently underway in New Zealand that evaluates PVAC treatment administered in advance of subsequent treatment with ultraviolet light. This randomized and controlled study is based on anecdotal reports of unexpectedly high levels of response in several patients - from the US Phase II study completed last year - who received ultraviolet light therapy following PVAC treatment. This study is now fully recruited and the results are expected in the third quarter 2003.

The Brazil and the Philippine studies and results are consistent with our findings from the US Phase II trial announced last year and provide a strong footing for our effort to develop PVAC treatment as a novel therapeutic for the management of psoriasis. These study results will allow us to expand our evaluation to different schedules of therapy, longer durations for assessment of efficacy, and will include patients that make up the vast majority of psoriasis population. We are increasingly turning attention and resources to new and expanding part of our pipeline.

The development of synthetic immunomodulators, amino (inaudible) protamine phosphates for AGPs as candidates for standalone therapy. This program is an excellent example of how we continue to leverage existing technology - in this case from our strength in adjuvant development - to create innovative product opportunities while defraying a percentage of initial expense through funded collaborations - in this case with the Department of Defense. We've discovered that AGP's interact with toll-like receptors (ph) therein stimulating the body's innate immune response. There are multiple potential therapeutic applications for AGPs that function as agonists or toll-like (ph) receptors ranging from prevention of infection in chronic obstructive pulmonary disease to promotion of upper airway resistance to infection with biological warfare organisms through a contract with the Department of Defense.

The therapy of rhinitis, allergy and asthma, we are very encouraged by the initial prospects for these compounds particularly given that they can manifest their effects when given through non-injection routes of administration. We look forward to providing further updates on the development of these exciting compounds in future communication.

As we look ahead, I'd like to briefly outline how our company is evolving to meet the needs of patients and our investors. And in doing so, provide a context for our financial performance over the past quarter, which Michelle will outline in just a minute. Originally founded on leading proprietary antigen discovery technology, Corixa has evolved into an emerging product development company with several product candidates in late stage human clinical trials and a company driven by a commercialization strategy that we believe will give us the best opportunity for sustained and consistent product commercialization in the long term.

As the company and our research partnerships continue to evolve and mature, we expect revenues from select partnerships to continue to fuel certain future developments. However, as our emphasis shifts from discovery to product commercialization, we will be focusing greater internal resources on product development. This shift will also influence our partnering strategy and how we approach commercial transactions to provide additional resources required to support sustained product commercialization. We believe our systematic and focused approach toward drug development combined with innovative focused and validated discovery research will continue to offer a long-term source of potential new drug targets for both in-house and - when appropriate - partner development.

At this time, I would like to turn the call over to Michelle to discuss our financial performance for the third quarter.

Thanks, Steve, and good morning everyone. For the third quarter of 2002, Corixa reported total revenue of 9.9 million compared with total revenue of 14 million for the prior year period. Our net loss applicable to common stockholders for the third quarter was $16.8 million compared with a net loss of $40.7 million for the third quarter of 2001.

Diluted net loss per common share for the third quarter of 2002 was 37 cents. That compares with diluted net loss per common share of 99 cents for the third quarter of 2001. When you exclude the acquisition-related charges, such as intangible and deferred compensation amortization related to Corixa's South San Francisco operations, net loss applicable to common stockholders and diluted net loss per common share for the third quarter of 2002 were $16.2 million and 36 cents respectively, and that compares with net loss applicable to common stockholders and diluted net loss per common share of $23.7 million and 58 cents respectively for the third quarter of 2001.

On August 14th, 2002, we completed the sale of approximately 7.3 million newly issued shares of common stock in a private placement to select institutional and other accredited investors. In connection with the private placement, Corixa also issued warrants to purchase approximately 1.2 million shares of its common stock at an exercise price of $6.13 per share. Corixa received proceeds of approximately $42.8 million after deducting underwriting discounts and commissions but before deducting expenses payable by Corixa. Proceeds from the private placement will be used for research and development, working capital, and general corporate purposes.

As Steve mentioned previously, the evolution of several other research partnerships have largely contributed to a decrease in revenue for the third quarter of 2002 compared with the prior year period. Specifically, the decrease in revenue is primarily due to decline in reimbursement revenues from our collaborative agreement for BEXXAR with GlaxoSmithKline and the conclusion of funded research under certain collaborative agreement with GSK, the Infectious Disease Research Institute, and a reduction in funding under our research agreement with Zambon. It is important to note that conclusion of research funding and agreement was effected and reflect a natural progression in the life cycle of a biotech company.

Some of these funded research programs are now entering clinical trials under our partners' oversight. We are also discussing arrangements that would allow us to contribute to the development with greater potential upside in the future, and we will update you on the status of these discussions as they progress. The decrease in revenue was partially offset by increased revenue from collaborative arrangements with Beaufour Ipsen and Wyeth as well as an increase in product sales.

Now, at the end of the quarter, Corixa had approximately 116.6 million in cash, cash equivalents and investment. This cash balance does not reflect approximately 6.1 million payable in cash or stock under the terms of our previously announced asset sale to Medarex - a portion of which has been received by Corixa after the end of this quarter and remainder of which is owed to us by November 30th 2002. In addition, this cash balance does not include Corixa's 75 million equity line credit from BNY Capital Market - we have not yet accessed that line. Our guidance for the year remains as it has since May 2002. We expect to fall within following guidelines.

On a cash basis, we expect to receive 70 million to 80 million and the net operating cash burn of approximately 55 million to 65 million, excluding investments in fixed assets and facilities. On a GAAP basis, we're looking at revenues of approximately 45 million to 55 million, operating expenses of approximately 125 to 135 million, acquisition-related expenses associated with the write-off of approximately 165 million, and other income of approximately 20 to 25 million resulting from the sale of assets to Medarex. Finally, a net loss of approximately 210 to 230. That translates to a net loss of approximately 45 to 65 million if you exclude the acquisition-related expenses.

At this time, I'd like to pass it back to Steve for closing remarks.

Thanks, Michelle. In 2003, our preliminary expectations are that revenue and operating expenses - excluding acquisition related expenses - will remain relatively flat when compared with 2002. These projections assume a mid-year BEXXAR approval, the rebuilding of a dedicated sales and marketing organization in advance of that approval, the sharing of product launch and associated expenses with GlaxoSmithKline under the terms of our co-marketing agreement in the United States, and continued selected investments in key areas of our product pipeline including process development expertise and the AGP opportunities I mentioned a moment ago.

We cannot provide further delineation of projected product sales at this time, but we will endeavor to do so when additional product launch data are in hand.

In summary, we are encouraged by our progress in the third quarter; and we look forward to continued success throughout the remainder of fiscal year 2002. Before closing, I'd also like to extend our welcome to Wayne Gombotz, Corixa's new Vice President of Process Sciences and Pharmaceutical Development. In this position, he will oversee the design and development of all processes that Corixa uses to develop products for approval and will play a critical role in product commercialization. He brings extensive experience in this area including recent roles at Immunex and Bristol-Myers Squibb. We're exited to have Wayne on board.

Thank you again for joining us today. If you have any questions, I'll be happy to address them now. Operator, will you please open the call to questions at this time?

Thank you, Mr. Gillis. The question and answer session will be conducted electronically. If you would like to ask a question, please do so by pressing the star key followed by the digit 1 on your touch-tone telephone. If you are on a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, press star 1 on your touch-tone phone to ask a question.

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

Thank you. Good morning.

Morning.

A question, please, on the upcoming milestones for this year. What can we expect to see in terms of results and presentations of the Corixa pipeline?

Well, I think the major event that remains for us this year is obviously our presentation at ODAC on December 17th. We will have, more than likely, some additional announcements coming as some of the transactions that we're working on are finalized. Some of the events that you might be hearing about have to do with the filing of the Angeric MPL product from GlaxoSmithKline.

I think, as I discussed this at the last quarter, preparations for that filing in the European Union are well under way; and it's expected that the filing will occur before the end of the year.

Okay. One more question. Steve, could you step back in and tell us a little bit about what you think the state of understanding is of the disease non-Hodgkin's Lymphoma and what therapeutic options are available? And how BEXXAR could fit into that choice of options for the clinician?

Well, the standard of care for non-Hodgkin's Lymphoma therapy has always -- has been the frontline chemotherapy diagnosis and that the -- one of the most popular chemotherapy regimens is shock therapy. Obviously Ritoxin, which is a monoclonal antibody directed against CD-20 has enjoyed considerable success in the management of patients following chemotherapy, and is increasingly being used in conjunction with chemotherapy for treatment of frontline patients even though it's approval is in refractory patients.

Beyond Ritoxin - as you are well aware - Zevalin was recently approved which is a radioimmunotherapy somewhat similar to BEXXAR and that provides the added benefit of having an antibody directed against CD-20, which has some biological activity of it's own but it's the delivery of radiation to the tumor that provides it's greatest benefit. We've detailed in the past, on numerous occasions that the differences that we see between BEXXAR and Zevalin, and it is those differences we believe, that leads to the dramatic durable response rate that we see with BEXXAR and that I am sure you'll all have an opportunity to view at the upcoming oncology drug advisory committee.

Terrific. Thanks for the update and the added information.

We'll go next to Jeff Shriner with MS Capital Management.

Good morning, ladies and gentlemen. Michelle, I was just wondering if you give me a couple of housekeeping items quickly. Diluted share count for Q3?

The diluted share count for Q3 is 45, 6 and 7.

So it's the same as basic, basically.

Yes.

Okay.

It's a loss, but the diluted is the same.

Okay. And then, on cap ex for Q3, what did we spend?

In cap ex we don't actually have that number public in our P&L, but we're not spending a large amount on expansion right now ...

Right.

...in this year.

Okay. So ...

Cap ex is less than depreciation expense right now.

Okay. It is right now?

Yes.

Okay. So should it just be almost -- look at almost the same trend we've seen so far this year?

Yes. There's nothing exceptional happening there, and if anything, it's more conservative than it has been.

Okay. And then maybe should we just expect flat end for '03 as well.

I would expect flat as well. It's very similar to '02.

Okay, now, in R&D spending - I know that - Steve had just mentioned that maybe operating expenses we're going to be flat for '03. But R&D has come down so significantly from fiscal year '01, and I know you are, kind of, pulling back in the horns right now as we wait for the ODAC meeting regarding BEXXAR. But is part of that R&D pullback due to this event with Glaxo here on the refunding?

No, the actual pullback in the R&D is related to the sale of assets to Medarex.

Okay.

The reduction in force south (ph) San Francisco.

Okay. So it's just great basically a reduction of the assets that you had earlier in the quarter.

Exactly.

And then, on the European BEXXAR approval, have we got any information on that? And does the company still feel that BEXXAR approval in Europe would be a little bit easier stride than what we've gone through with the FDA here in the United States?

I'll let Steve address that one.

Sure. As you are aware, last November we licensed the European rights to BEXXAR to Amersham, and since that time we've been working forcefully with Amersham and with European regulators.

Based on discussions that have been going on between Amersham and those regulators, we will be filing the identical data package that we currently have with the European authorities basically as soon as we can get ourselves through the end of the year and the pending ODAC presentation. That filing will include the data set, obviously, from product that has not been made by Amersham but by another party.

And it's our intention then to supplement that file while it is under review by the European Union with batch records of product that has been made by Amersham in their manufacturing facility, which is under construction today for radio labeling of BEXXAR. That work is proceeding well and everything remains on target for that filing.

Great. Just two other quick ones, and thank you so much for your time, Steve. The Melacine partners, have we had any developments from Q2 on that? Are we still out looking for somebody?

We're definitely out looking for someone to help us with underwrite the expenses from that particular program. There are a couple of interested parties, and here again, those parties are potentially interested in leveraging the current data that we have to file that data set in Europe for approval as it stands. And hopefully, use some of those revenues to help underwrite development in the United States.

Okay. And Michelle, one last quick question. Other income, what happened in Q2? Were we booking some of the Medarex income into that line?

Absolutely. A sale of assets we booked as other income not revenue since it's hopefully not an ...

Right, it's only a one time.

... operational activity, yes.

Certainly, I hope it isn't either. But, great. Thank you so much for your updates, and have a great morning.

Great. Thank you.

Our next question comes from the Patrick Mooney with Thomas Weisel Partners.

Hi. Good morning. Steve, if you could just sort of walk me through the process -- a similar positive outcome at ODAC. What's the process now? Do you guys need to re-file? Is there a Pedufa (ph) date that's already established, if you give me a little clarity on that?

I don't have clarity, right now, with respect to what the Pedufa date will be given that, obviously, we've got into where we are by taking advantage of this appeal process. I think we'll be able to give you a greater clarity on Pedufa date, perhaps, by the end of the year or at the first of next year. We anticipate if there is a positive outcome at ODAC that the next event that need to occur will be, more than likely, an inspection of manufacturing facilities associated with the product, and a negotiation of package insert information.

Obviously Corixa has -- have -- has already been through multiple drafts of the package insert; and we will provide that information to the agency immediately upon a hope for a successful outcome at ODAC.

Okay. And then just one another question. Could you give us any kind of update on the litigation with (inaudible)?

I can't really give you any update on that. You know, the cases have been consolidated in the Southern district in California. Discovery is speeding. And as I said before, the next news will be when there is something substantive that develops and so far nothing has.

Thanks for taking my call.

Once again, that is star 1 to ask a question.

And we will go next to Alex Silverman with Special Situations.

Good morning. I apologize, but I wasn't able to scribble quick enough. Could you repeat your guidance?

Sure. Our guidance is the same as it was after the Medarex sale. So it hasn't change since May.

Okay.

May. Receipts -- the cash receipt of 70 million to 80 million ...

Okay.

... operating burn of 55 million to 65 million ...

Okay.

... then when we go to GAAP, revenues of 45 million to 55 million, operating expenses of 125 million to 135 million, acquisition related expenses that's the write-off of 165 million, other income between 20 million and 25 million, that all results in a net loss of approximately 210 million to 230 million. If you exclude the acquisition write-off, it's 45 million to 65 million.

I got it. Thank you very much.

Sure.

Once again, that is star 1 to ask a question. And we'll pause just a moment to allow everyone a final opportunity to signal.

Mr. Gillis, we have no further questions in our queue. I'd like to turn the conference back to you for any additional or closing remarks.

Well, thank you very much. We appreciate your joining us this morning on our third quarter results call, and we look forward to further updates as the quarter progresses. Thank you very much for your interest, and have a good day.

This does conclude today's Corixa conference call. We thank you for your participation. You may disconnect your lines at this time.