葛蘭素史克 (GSK) 2003 Q1 法說會逐字稿

Good day, and welcome everyone to the Corixa Corporation first quarter 2003 earnings conference call. Today's call is being recorded. With us today from the company is the Senior Director of Corporate Communications, Mr. Jim DeNike. Please go ahead, Sir.

Good afternoon and thank you for joining us. With me today is Dr. Steven Gillis, Chairman and CEO of Corixa and Michelle Burris, our CFO. Earlier today we issued two press releases, one announcing our first quarter 2003 financial results and another announcing the first regulatory filing of an infectious disease vaccine that contains our MPL adjuvant. Copies of both press releases are available in the news section of Corixa's website at www.corixa.com. 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 will turn things over to Steve who will provide an update on today's MPL news, our key programs and recent progress and Michelle will then walk you through our first quarter results and provide a financial update.

Before I turn things over to Steve and Michelle, I'd like to remind you that during this call we make projections and other forward-looking statements regarding future events or future financial performance of the company. As you know, 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, all of which are also available in the investor section of our website. Thanks again for joining us today. Steve?

Thank you, Jim. I'm going to start today's call with a discussion of an announcement we made earlier today regarding the first regulatory filing for approval of an infectious disease vaccine containing our MPL adjuvant. I am pleased to report that Glaxo Smith Kline, one of our adjuvant development partners, has filed for European regulatory approval of Fendrix. Fendrix is a vaccine designed to prevent infection from Hepatitis B and includes GSK's angerics B vaccine and Corixa's MPL adjuvant. This filing marks a milestone for our company's adjuvant business and further demonstrates not only how we continue to leverage core technologies, but also how we are delivering on our commitment to move more products into the clinic and ultimately on to application for approval. Based on the process as outlined by the EMEA, the review could take approximately 12 months.

An adjuvant is a formulated compound or additive, that when combined with the vaccine, boosts the body's immune response to antigens contained in the vaccine. Our adjuvant technology is based on the fact that certain microbial products have long been recognized as potent immune system stimulators and have been shown to induce a broad range of known substances that can affect the immune response. Our adjuvants are also the subject of many additional programs under development that are designed to create safe, and more effective treatments to protect against a broad range of diseases including cancer, allergy and infectious disease. Several vaccines that include our MPL and RC529 adjuvants are in late stage clinical trials and we look forward to the growth potential of this business and its financial contributions to Corixa and our stockholders in years to come.

I'm also pleased to reiterate progress we recently announced regarding our potential approval of BEXXAR therapy. Last week Corixa and GSK announced that many of the steps required for approval of BEXXAR are complete. However, the FDA has extended its reviewed of the BEXXAR application for up to an additional three months. As we stated last Monday, this extension provides additional time to further refine post-marketing trials commitments and package insert language and to insure that it is consistent with an updated safety database that we provided in early April of 2003. We are continuing to work diligently toward approval as soon as possible. The FDA has advised us that the PDUFA date for completion of the review of BEXXAR is August 1st, 2003. The majority of the steps required for approval already have been completed and we continue to work closely with GSK to prepare marketing reimbursement and sales resources as well as other procedures for rollout upon approval. We continue to make progress with our launch plans and expect to launch within approximately 30 days following FDA approval.

I'd also like to take a few minutes to highlight other key events from the first quarter. In February, we announced that the European Commission granted orphan medical product designation for BEXXAR therapy. The OMP designation means that we pay reduced fees and have access to free scientific advice from the EMEA. It also means that if BEXXAR is the first to receive marketing authorization in Europe for its designated indication, it will be entitled to 10-year market exclusivity We also have entered into a new cancer vaccine collaboration agreement with Glaxo Smith Kline Biologicals to further advance the development of multiple solid tumor vaccines. An IND for the Her-2/neu vaccine has been approved. GSK has manufactured a formulation of this vaccine and we expect to begin treating patients shortly. This new agreement extends our collaborative efforts into vaccine development and potential proof of principal clinical trials and follows on our successful research efforts under the multi-field vaccine discovery collaboration and license agreement.

Also during the first quarter we advanced our lung cancer vaccine collaboration with Zambon. The first vaccine from this collaboration has moved into clinical development and we received a one million dollar milestone payment for this advance. In addition, we have reacquired the North American rights of certain lung cancer vaccines from Japan Tobacco and now hold exclusive rights to all adjuvants discovered in this lung cancer vaccine program in all countries previously licensed to Japan Tobacco with the exception of the vaccine that has advanced into clinical development where Japan Tobacco continues to hold rights in Japan.

Zambon remains our development partner in Europe. The first quarter also marked continued progress in our antibody developments as we licensed an antigen to Purdue Pharma for development of monoclonal antibodies for the treatment of a female reproductive tract cancer. Also during the first quarter, a Phase I clinical study was initiated to test the safety and tolerability of an investigational vaccine to treat or protect against various forms of human leishmaniasis. This study is being run in conjunction with the Infections Disease Research Institute. I'd now like to turn the call over to Michelle to discuss our financial performance for the first quarter.

Thanks, Steve, and good afternoon everyone. I'll begin with our first quarter results and then reiterate our guidance for the year. Our discussion will include certain non-GAAP financial measures which means financial measures that cannot be calculated in accordance with Generally Accepted Accounting Principals, or GAAP. In our earnings release issued earlier today, we provided a reconciliation of the non-GAAP financial measures included in the release and refer to these in this call to the most comparable GAAP financial measure. These adjustments to our current period GAAP results are made with the intent of providing investors with a more complete understanding of our underlying operations and trends and our market place performance. The non-GAAP results are an indication of our baseline performance before other charges that are considered by us to be outside of our core operating results. We have adjusted for acquisition related charges such as intangible and deferred compensation amortization and goodwill impairments just as we provided in prior earnings releases.

For the first quarter of 2003, we reported total revenue of $9.1 million compared with total revenue of $15.6 million for the first quarter of 2002. Net loss applicable to common stock holders for the first quarter of 2003 was $19 million compared with $176.9 million for the first quarter of 2002 which included a goodwill impairment charge of $161.1 million. Diluted net loss per common share for the first quarter 2003 was 38 cents compared with diluted net loss per common share of $4.25 for the first quarter of 200. Excluding the acquisition related charges such as intangible and deferred compensation amortization and the goodwill impairment charge, net loss applicable to common stockholders and diluted net loss per common share for the first quarter of 2003 were 18.4 million and 37 cents respectively compared with net loss applicable to common stockholders and diluted net loss per common share of 14.3 million and 34 cents respectively for the first quarter of 2002.

Now the decrease in revenue for the first quarter of 2003 compared with the prior year period was primarily due to the anticipated expiration of the funded research phases of Corixa's vaccine development collaborative agreement with GSK, the expiration of certain collaborative agreements with Japan Tobacco, Zambon and the Infections Disease Research Institute and a decrease in reimbursement revenue from our collaborative relationship for BEXXAR therapy with GSK. These decreases were partially offset by an increase in research product revenue.

Now our cash position remains strong. As of March 31, 2003, we had $101.1 million in cash, cash equivalents and investments and have access, subject to certain conditions, to the $75 million equity line of credit from BNY Capital Markets, a subsidiary of the Bank of New York. Draws under the credit line total $2.6 million as of March 31, 2003. In 2003 we expect to fall within the previously provided guidance and currently do not expect the extended review of BEXXAR to alter our predictions. To reiterate, on a cash basis, we expect receipts of $70 to $80 million and a net operating cash burn of approximately $50 to $70 million excluding investments and fixed assets and facilities. On a GAAP basis, we are looking at revenues of approximately $50 to $60 million, operating expenses of approximately $130 to $140 million and a net loss of approximately $70 to $90 million. These projections exclude any additional charges we may incur if we enter into sublease arrangements for our South San Francisco facilities. Such incremental charges would be in the form of intangible on leasehold improvement write-offs associated with the Colter acquisition in late 2000. At this time, I'd like to pass the call back to Steve for closing remarks.

Thanks, Michelle. Before we open up the lines for your questions, I'd like to reiterate that we're working hard with the FDA to complete its review of BEXXAR as soon as possible. Many of the steps required for approval are complete and we are looking forward to a final decision. And as you've heard, we continue to make steady progress in our core areas of focus - - validated discovery, collaborative development and product commercialization, and we expect continued progress in all of these areas throughout the second quarter. Thank you for joining us today and now we'll be happy to answer your questions. Operator, will you open the call to questions at this time?

Thank you, Sir. Today's question and answer session will be conducted electronically. If you would like to ask a question, please signal by pressing the star key followed by the digit one on your touchtone telephone. If you are using a speakerphone, please make sure that your mute function is turned off to insure that your signal reaches our equipment. We will come to you in the order that you signal and we'll take as many questions as time permits. Again, that is star one to signal for a question. We'll pause for just a moment to assemble our roster. We'll take our first question from Phil Nadeau with SG Cowen.

Good afternoon. Thanks for taking my question and congratulations on today's news about the filing. My first questions are on the filing and the market that is currently there for HPV vaccines. Is your - - if I remember correctly, your royalty agreement with GSK is a 5% royalty on net sales of the HPV vaccine. Is that correct?

Okay, two things to remember. This is an HBV vaccine and we have never released royalty figures. We do get paid a royalty as well as a transfer price on each dose of MPL that is sold.

Okay. Is there currently about a one billion dollar market for HBV vaccines. Is that figure approximate?

That's correct.

And are the two players in the market still GSK and Merck?

Those are the two major players. The company previously known as Rhine Biotech, now Burna Biotech, I believe is the third position and you should notice that they are a licensee of RC529, another of Corixa's adjuvants.

Okay, and if I remember correctly, the EU patent on GSK's current HBV vaccine expires in 2004. Is that correct and are there any generics expected to come in against that vaccine or is GSK just going to switch over their current franchise to your new vaccine and there really won't be any effect of the time expiry other than that?

Well, I think that's probably a better question for GSK than it is for us, but in terms of genericism, you should note that Rhine currently sells a recombinant Hepatitis B vaccine in many countries of the world where patents today don't exist. When I say Rhine, again, technically that is Burna Biotech.

Okay, and you mentioned in your prepared remarks that there are other vaccines that are using the MPL adjuvant. Could you give us an idea of what those vaccines are or the timing to filing of those?

Well, I believe that GSK has published that. MPL is a component of their malaria vaccine and is also in their Herpes Virus vaccine and there are other indications within the GSK portfolio that have progressed to late stage or pivotal trials.

Have they disclosed when the malaria and the Herpes would be filed?

No, they have not.

Okay. My - sorry, just two more questions. My next question is a quick one for Michelle. On the SG&A line this quarter, it was lighter than what we've seen in the past. Is this the SG&A that we should be modeling going forward or was this quarter kind of an anomaly?

No, it's reflective of the downsizing that we had last year for the sales and marketing group. As we build the sales and marketing organization, you will see that line increase, but right now I wouldn't expect it to double, let's say that, in the near future.

Okay, and my last question is -- BEXXAR's E-filing, I think that's expected mid-year. Is that still on track for that timing?

You know, we're still working hard on the European filing. I'm sure we'll have an update on that as we get closer to the time point.

Great. Thank you.

Once again, if you would like to ask a question, that is star one. We'll take our next question from Jeff Shriner with MS Capital Management

Good afternoon. Good quarter. I just wanted to get a couple questions in here relating - - one, relating to the announcement today. How many patient doses per year in Europe are currently being done for the new MPL adjuvant?

Well, we presented data in the past. This may be what you're referring to, is to how the addition of MPL to Hepatitis B vaccine allows for a two dose vaccination protocol as opposed to a three dose vaccination protocol.

Okay, and I thought I've seen on a presentation before that - - is it just the entire Hepatitis B realm that there's 25,000 doses annually? Is that worldwide in terms of a number?

That's the number of patients who have received MPL in clinical trials to date.

Okay. Thank you for that clarification. What was the largest driver in working capital decreases, Michelle?

On working capital, it's just the ongoing R&D expenses.

Would it just be a timing issue on some things?

Yeah, I mean, we basically have research and development expenses that we incur and just the timing of investments coming and basically liquidating investments and what have you. There's no - - there's nothing significant in that working capital alteration. It's just timing of expenses versus liquidation of cash positions.

Okay, so just short term investments or what have you coming due versus when you may expense out payables.

Exactly.

Okay, and then just, if you could, if you are breaking this out publicly, what was the litigation expense in the quarter?

No, we had not disclosed what the litigation expense is. We don't separate it. It is in the sales, the SG&A line.

All right. Thank you very much.

Please press star one on your phone if you'd like to ask a question. We'll go next to Mark Monane with Needham & Company.

Thank you. Good afternoon. Question for you - - big picture question. When we look at the Corixa pipeline there's actually quite a lot going on in the company. Can you help us segregate these into important areas of focus for the company or add some of your perspective on which opportunities present the most value for Corixa and the shareholders? There's just a lot going on for a company and your perspective would be very helpful.

Sure, Mark. I think it's important that everyone remember that our first priority for this year is the launch of BEXXAR and we are clearly focused on that as an objective. Beyond that, as we've talked in the past, we define Corixa as a company that's focused on immunotherapy and we define immunotherapy as certain antibody therapeutics, cancer and infectious disease vaccines, the importance of our adjuvant business as delineated by today's announcement, and then in terms of new things that come from the R&D pipeline and the laboratory, we’re quite interested in this family of compounds that we refer to as TLR-4 agonists and antagonists. So, while we do have a lot going on, I think if you parsed it into four pots of major importance, those would be specific antibodies, specific vaccines, our adjutant business, and immuno-modulators.

Great. Very helpful. Thank you and congratulations on also your addition to the NBI.

Great. We're pleased with that.

There appear to be no further questions. At this time, I'd like to turn the call back over to you, Dr. Gillis, for any additional or closing remarks.

Well, thank you all for joining us. We look forward to updating you with news as time and events warrant. Thank you again.

That does conclude today's conference. Thank you for your participation. You may disconnect at this time.