葛蘭素史克 (GSK) 2002 Q4 法說會逐字稿

Please stand by. Good day everyone and welcome to the Corixa Corporation fourth quarter year end conference call. Today's call is being recorded. With us today is the senior director of corporate communication Mr. Jim Denike. Please go ahead sir.

Good afternoon and thank you for joining us today. With me today is Dr. Steven Gillis, and Michelle Burris. Earlier today we issued our fourth quarter and year end earnings release for 2002. As well as an update on Bexxar's orphan immediate is (inaudible) medicinal drug definition in Europe. If you haven't received copies, they are available at www.corixa.com.

And a recording of this call will be archived and available for replay later today in the investor section of our Website. In a moment I'll turn things over to Steve who will provide an update on our key programs and objectives for this year. Michelle will walk you through the results and provide financial guidance. As always I would like to remind you that during this call Corixa may make projections and other forward-looking statements regarding future events or performance of this company. As you know these statements are just predictions and actual results or predictions will differ from statements made.

Please refer to the documents filed with the S.E.C. for information about risks that may affect the company all of which are also available in the investor section of our Website. With that said I'll now pass the call over to Steve.

Thank you, Jim. Much of our discussion today will focus on the positive response that Corixa received from the FDA's oncologic (ph) results panel in December 2002, the subsequent steps that Corixa are taken in potential approval and or fan medicinal product designation. Before I get into details about Bexxar and other selected products, I'd like to outline some priorities for 2003. We made significant advances in 2002, moving Bexxar closer to approval, securing new and expanded partnership and licensing agreements and achieving encouraging results in clinical trials.

This progress takes place against a backdrop of increased focus and prioritization of programs at Corixa. Since our finding in 1994 Corixa has pursued a comprehensive discovery approach to address a range of cancers, infectious diseases and auto immune diseases. This research has provided a steady stream of drugs targets and candidates and will form the basis of partnerships license agreements and consistent clinical progress. In 2002 we added a level of focus or validation to our research and development he efforts that we believe is critical to achieving our aggressive commercialization goal of consistently moving several preclinical programs into the clinic each year.

Validated discovery involves evaluation of early stage and mature programs according the guidelines that address clinical viability market demands and partnership potential. We continue to focus on our core development strengths including select antibody based therapeutics, cancer and infectious disease vaccines and extensive adjuvant portfolio, and TLR-4 agonists and antagonists that stimulates the body’s innate immune system. Now I’ll turn the discussion over to Bexxar. Corixa’s clinical and regulatory teams worked rigorously over the summer and fall to answer questions that have been posed in FDA's complete review letter and in subsequent discussions. Obviously with exceptional results.

The FDA announced in December their satisfaction with additional data and that it constituted a complete response to the agency's March 2002 complete review letter. The FDA also returned the Bexxar BLA to a standard regulatory review time frame with a Pedufa (ph) goal date of May 2nd, 2003. At the conclusion of our Odak (ph) presentation on December 17, the panel agreed that Bexxar studies provided substantial evidence of clinical benefit in both Ritoxin(ph) Abrefractory (ph) patients and in chemotherapy refractory, low grade and Follicular (ph) Nonhodgkin's(ph) Lymphoma(ph) with our without. The panel voted 10 to 3 in support on the efficacy of Bexxar therapy and Ritoxin abrefractory patients and unanimously supported it’s clinical utility in chemotherapy relapsed refractory low grade NHL with or without transformation.

As we stated previously the FDA has not bound by the committee's actions but often takes its recommendations into consideration when determining marketing approval of a new product. The new Pedufa goal date for the FDA to complete it’s review of all materials regarding Bexxar is May 2nd, 2003. With the positive ODEC response in hand we are moving forward with plans for production and marketing for the product. Specifically we are working with GSK and the FDA to draft appropriate language for both the package insert and label. In addition manufacturing site inspections are in the process of being confirmed, and will occur before, well before the Pedufa day.

These are standard inspections required by the agency prior to approval. And while it is not a condition of approval Corixa and GSK, have initiated patient accrual and a swag sponsored two armed trial evaluating the efficacy of Bexxar plus chop chemotherapy versus Ritoxin plus chop chemotherapy. Because the primary end points in this initial stage trial are survival and time to disease progression, data from the study will take considerable time to mature.

In addition to this trial, we are also working with the FDA on a trial designed comparing Bexxar with Ritoxin, and another study that would compare Bexxar with Zevalin (ph). The primary end point for the Ritoxin study would be duration of response, and the end point for the Zevalin study would be an analysis of safety. Furthermore, Corixa and GSK are planning an aggressive sales and marketing push at approval. GSK has expanded it’s oncology in recent months and our marketing teams have a strong commitment to the successful commercialization of Bexxar if it is approved. Sales and marketing directives are already in place and we expect to meet our launch goal of mid year provided we receive FDA approval on or about the Pedufa date.

On the European front, we are very pleased to announce today that following the favorable opinion of the European agency for the evaluation of medicinal product adopted by the committee of orphan (ph) medicinal product, the European commission has granted orphan medicinal product designation to our product candidate (inaudible) and iodine I 131 radio label (inaudible), or Bexxar therapy as it is known in the United States, for the treatment follicular lymphoma. The OMP designation has been granted on the basis that follicular lymphoma affects more less than 5 in 10,000 persons in the European community, although the potential population remains sizeable, that the condition is serious and life-threatening and although satisfactory methods of treatment has been authorized in Europe, Tossatumamab (ph) and iodine I 131 radio label Tossatumamab may be of significant benefit to those affected by the condition.

The OMP designation will result in reduced marketing authorization application fees, free access to scientific advice from the European agency for the evaluation of medicinal products and other potential research and development incentives. Furthermore if a product with OMP designation is the first to receive marketing authorization in Europe for its designated indication, the product will be entitled to ten year market exclusivity which means that a similar drug is prevented from receiving authorization for the same indication during this period. We are very encouraged by this ruling and continue to work aggressively with our European partner Amershamhel (ph)to prepare and file the application in Europe later this year.

To switch gears, I'll provide a brief update on our Melocene (ph) program, as you might recall Corixa acquired the rights to this experiment on melloma (ph) vaccine when we acquired RIBI immunocem (ph) in 1999. Since that time we've continued to evaluate the results of an initial phase 3 trial which was well under way at the time of acquisition. And in Q1 of 2002 we announced acceptance from the FDA's oncologic drugs committee for a proposed trial of a second phase 3 trial however enrollment in this study is not yet under way. Currently we are still in the process of evaluating the impact of the Melacene program on our Montana based adjuvant operations. Given the demand for adjuvant from our current customers our own vaccine programs as well as increased company emphasis on TLR 4 agonism and antagonism programs,

Commitment of considerable time and resource for provision of Melacene for an additional six year clinical study may not be in the best interests of the company at this time. We are also continuing to discuss certain Melacene development issues with FDA that are important to resolve in advance of making our final decision. We anticipate a decision on the future of this program by mid year.

At Corixa we believe strongly that business collaborations can play a role in the successful and rapid commercialization of products. Key partnership announcements in 2002 included our December 2002 collaboration and license agreement with Karen (ph) brewery on the WT 1 program and license agreements for both Ipsen (ph) Beckmen Colter (ph) are for clinical diagnostics , all announced in Q1 of 2002. In 2003, we have already extended several partnerships following the completion of productive research agreements including some with GlaxoSmithKline (ph) and Zambon (ph) and we continue to have the right to receive success base milestone payments, and in some cases co-development funding while we move maturing programs into human clinical trials as the case with our lung and breast cancer vaccine developments. Our 2003 objectives include securing selective partnerships for certain clinical indications for our TLR 4 agonism and antagonism programs as well as certain cancer vaccine adjuvant and cancer diagnostics licenses. Meaningful discussions and in some cases negotiations are well under way in all of these targeted programs.

As I discussed in our Q3-2002 earnings announcement, we expect that our 2003 revenue and operating expenses, including acquisition related expenses will remain relatively flat when compared with 2002. These projections assume, first, a mid year Bexxar approval. Second, the rebuilding of a dedicated sales and marketing team. Third, the sharing of product launch and associated expenses with GlaxoSmithKline under the terms of our collaborative agreement on Bexxar and fourth, continued selected investments in key areas of our product pipeline including process development expertise and the TLR 4 agonist antagonist opportunities I mentioned earlier.

We cannot provide further delineation of projected product sales at this time but will endeavor to do so when we receive Bexxar product approval. At this time I'd like to turn the call over to Michelle to discuss our financial performance for the fourth quarter, and year end.

Thank you, Steve and good afternoon everyone. I will first take a moment to recap our fourth quarter, and year end results, and then provide guidance for 2003. For the fourth quarter of 2002, we reported total revenue of $9.4m compared with total revenue of $14.9m for the fourth quarter of 2001. Net loss applicable to common stockholders for the fourth quarter of 2002 was $19.7m compared to $34.1m for the fourth quarter of 2001.

The diluted net loss per common share for the fourth quarter of 2002 was 40 cents per share compared with diluted net loss per common share of 83 cents per share for the fourth quarter of 2001. If we exclude the acquisition related charges such as intangible and deferred compensation amortization, our net loss applicable to common stockholders and our diluted net loss per common share for the fourth quarter of 2002 were $19.1m and 39 cents per share respectively, and that happens compared with net loss applicable to common stockholders and diluted loss per common share of $18.1m and 44 cents per share respectively for the fourth quarter of 2001.

For fiscal year 2002, results fell within our guidance provided throughout the year. Our total revenue was $48.7m compared with total revenue of $58.1m for the fiscal year 2001. Net loss applicable to common stockholder was $208.2m for fiscal year 2002, compared with $149.8m for the fiscal year 2001. The change in the net loss compared with the year ago was primarily due to the impairment of goodwill in the first quarter of 2002, as partially offset by decreased operating expenses and intangible asset amortization. The diluted net loss for common share for 2002 was $4.67, compared to diluted net loss for common share of $3.66 for 2001. Now, again, if we exclude the acquisition related charges such as intangible and deferred compensation amortization and restructuring charges related to our South San Francisco operation, not loss applicable to common stockholders and diluted net loss for common share for the fiscal 2002 were $41.8m, and 94 cents, respectively, compared to net loss applicable to common stock holders and diluted net loss for common share of $75.1m and $1.83 cents respectively for the fiscal year 2001.

The decrease in revenue for the fourth quarter of 2002 compared with the prior year period was primarily due to the expiration of the research phase of our vaccine development collaborative agreements with GSK, the expiration of certain collaborative agreements with Japan tobacco and the Infectious Disease Research Institute. As we stated previously the conclusion of research funding under certain research agreement was expected and reflects a natural progression in the last cycle of research date by a technology collaboration.

Candidates from some these funded research programs are already entering clinical trials under our partners oversight through existing or extended agreements. We have also entered into several arrangements that will allow us to contribute to development with greater potential upside in the future. Our cash position remains strong. As of December 31, 2002, we had $116.8m in cash, cash equivalents and investments, and we continue to hold a $75m equity line of credit from the bank of New York capital market, a subsidiary of the Bank of New York. Draws under the credit line totaled $2.6m as of December 31, 2002. In 2003, we expect to fall within the following guidelines. On a cash basis, we expect to receive between $70m and $80m, and we expect to have a net operating cash burn of approximately $50m to $70m.

That excludes investments in fixed assets and facilities. On a GAAP basis we are looking at revenues of approximately $50m to $60m operating expenses of approximately $130m to $140m, and the net loss of approximately $70 to $90m. These projections exclude any additional charges we may incur if we enter into sublease agreements for our South San Francisco facilities. Such incremental charges would be in the form of intangible and (inaudible) improvement write-offs associated with the Colter acquisition in late 2000. At this time I'd like to turn the call back over to Steve for any closing remarks.

Thanks Michelle. We've made significant progress in 2002 on a number of fronts and we look forward to what we believe will be a pivotal year for Corixa in 2003. Thank you again for joining us today and if you have any questions I'll be happy to address them now. Operator, would you please open the call to questions at this time.

Thank you. 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 using a speaker phone please allow the mute to remain off to allow the signal to reach our operation. First question from Phil Nadeau with S.G. Cowen. Go ahead.

Thank you and congratulations for a successful 2002. I have two questions, one on the manufacturing inspections you mentioned during your prepared remarks. If I remember in December you said the only outstanding inspection that had to be completed were those of the Nordion facility. Is that still the case or is the FDA looking to inspect the bulk antibody facility as well?

There is no plans to inspect the bulk antibody production facility at this time.

Okay. The second question is in regards to the Orphan status in Europe. In your press release you said that it would preclude similar products from the market, after ten years assuming that you're the first to be approved for that indication, could you talk about what a similar product is, would Zevalin be considered a similar product or would the product have to have the same monoclonal antibody attached to it?

It is our understanding that the European view of similarity of products would encompass Zevalin. Regardless of whether it uses the same isotope or the same antibody, given that it is directed against the same target. But this is obviously new ground, and I don't think we're going to know the definitive answer until we get there.

Okay. And could you update us on your filing schedule in Europe also?

Yeah. We have obviously been in touch with the European agency for some time. And we're looking to file the current data set, that is, the same data set that was reviewed publicly at the oncology drug advisory committee, as soon as we can. We'd like to get it in close to the end of the second quarter of this year, early in the third quarter. Some of the issues associated with that filing have to do with the fact that Habersham is in the process of building and completing a manufacturing facility for the radio-labeled product.

And we are awaiting some guidance from the European authorities as to whether we need manufacturing data from that facility in order to complete the filing or whether we can proceed with the filing and simply supplement it with that data once the filing is already under review. So I can't give you a precise time line, but obviously, we're trying to do it as soon as we can. But we are working closely with the EMEA to do that.

Great. Those are all my questions. Thank you.

As a reminder to the audience, if you have a question, star 1. We'll take our next question from Jeff Schreiner with MS Capital Management.

Just a couple of questions. What type of revenue impact Michelle would you be expecting from US approval of Bexxar just any type of incremental revenue projections the that the company might have?

We aren't giving any exact projections as far as Bexxar product sales. But embedded in our guidance for the year we do anticipate a mid year launch of Bexxar.

And so even with that mid year launch you wouldn't expect any revenue increase from fiscal year 2002?

That's correct.

Okay. Why have we not seen any more improvement in the SG&A line? I know that we're running about the same even after the sale of assets to Metarex (ph) and the shut down of South San Francisco operations.

Let me explain a couple of things as well. On the Bexxar sale, we will record the bottom line from the joint P&L from SG&A. We will not record as revenue product sale of Bexxar I think that's important to note in those assumptions.

Okay.

The other thing to note is that while SG&A has declined, we are -- we include legal expenses in our SG&A category, which would include litigation costs associated with Bexxar..

Okay. Is that litigation cost including the IDEC lawsuit?

Yes, it is.

And has any discovery begun on that trial?

Discovery has begun on that trial.

What was the revenue balance at the end of Q4 Michelle?

We'll be filing our 10-K tomorrow and you'll be able to see the full balance sheet including deferred revenue at that time.

Steve in regards to the Melacene vaccine, is the reason for the re-evaluation was because you were not able to find any interested partners?

We've had discussions with partners and to be candid, I think most partners believe in the data that we have. However, in today's economic times, they prefer to wait until we were one year away from having the data from the repeat trial in our hands before entering into a partnership. That's one of the issues for us to reflect on this. But the -- another one valley the time and opportunity cost of our facility. We have a lot of things that need to be manufactured and shipped out of Montana. We have a growing number of adjuvant customers, and that's a business that's quite important to us.

Certainly. Just two quick questions for Michelle then I'll finish up here. Any reason for no share buy-back here in Q4 or is it something being discussed by management? You're sitting on a large pile of cash and investing it into government securities doesn't look like it could give the return possibly that maybe the share could.

I think at this point in time, the investors for the most part are interested in seeing the dollars that they've contributed to the company focused on pushing products into commercialization. And I think we need to make sure that we have positioned our selves and positioned ourselves successfully to allow for Bexxar to get commercialized as well as moving those products that are preclinical already in the clinic further along and at this point in time that's our focus.

What is the interest date you're paying on the debt from Bank of New York?

The Bank of New York is an equity line of credit it is at a slight discount so the interest is actually in the equity purchased by them.

Okay.

It is not a debt instrument.

I think I remember that from the filings. All right, thank you very much.

Sure.

Ladies and gentlemen, at this time, we would like to offer a final opportunity to ask a question. If you have a question, star 1. We do have a question from Mr. Mark Monane with Needham. Go ahead.

Hi, good afternoon. Could you talk about the regulatory and commercialization strategy going forward? Update us on the time line, and what process, please, you expect from CMS in order to fully receive reimbursement for the product.

Okay. Well, I think as Michelle indicated, the guidance that we're providing is based on an assumption that Bexxar is approved in the mid year point, and that it's marketed or launched around that same time, or early in the third quarter. That's obviously consistent with our current May 2nd Pedufa date. We are continuing to work with the agency on the outstanding issues that remained after the ODAC presentation.

Those were manufacturing site inspections, agreements on protocols for post approval trial commitments, and labeling and package insert. And we are making progress on all of those fronts that I think are consistent with the estimates that we just gave you. GSK, on the issue of CMS, has been actively involved in responsibility for reimbursement. They've had a dialogue going with agencies, unfortunately for the last two years, as we await the approval of this product, again, this is a part of the government we can't guarantee, when reimbursement codes will come. But we're very -- very confident in GSK's ability to shepherd Bexxar through the reimbursement maze at the government.

Can you give us any time line about Glaxo's intention of filing, assuming the May time frame of filing for CMS approval and reimbursement?

I'm sure it will be very quickly on the heels of approval.

Mark Monane Thanks for clarification.

Our next question is from Brian Rye with Raymond James.

Good afternoon, guys. Michelle, just one question about the revenue guidance you've given. Assumes mid year launch for Bexxar, does it assume a similar price per treatment for Zevalin or are you assuming a different price?

We have not finalized the price. But I would not expect anything materially different. Again, I think it's important for folks to realize that we don't expect the P&L on this product to be profitable particularly in its first, you know, six months which is what is embedded in our estimates.

Sounds good. That's all I needed. Thanks, Michelle.

Sure.

At this time we have no further questions in the queue. I'd like to turn the conference over to Dr. Gillis for any additional or closing remarks.

Thank you all for joining us. We appreciate your continued interest in Corixa and we look forward to providing you with further updates as news and events and time warrant. Thanks again.