葛蘭素史克 (GSK) 2003 Q2 法說會逐字稿

Good day and welcome to the conference regarding Corixa's second quarter earnings and an update on BEXXAR availability. Today's call is being recorded. With us today is the Senior Vice President and Chief Financial Officer, Michelle Burris, please go ahead m'am.

Thank you. Good afternoon. With me today is doctor Steve Gillis, Chairman and CEO of Corixa, and Kevin Lokay, Vice-President of GlaxoSmithKline oncology division. Earlier today Corixa and GlaxoSmithKline issued a joint press release announcing that BEXXAR is commercially available. Corixa issued its second quarter 2003 financial results which we will also review on this call. A copy of those press releases can be found 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 thing over to Steve. He will provide an update on BEXXAR availability. Kevin will provide additional detail on BEXXAR launch activities and I will conclude with a summary of our earnings results.

Before I turn things over to Steve and Kevin. I would like to remind you during the course of this call we may make projections and other forward-looking statements regarding future events or future financial performance of the company. As you know, these are statements are predictions in the actual event or results may differ from the statements made. We caution you not to place undue reliance on the forward-looking statements which speak only as of today. 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.

Thanks, Michelle. I would like to begin by discussing the success we are having with the initial stages of BEXXAR product availability. As you know, BEXXAR received full fda approval on June 30 for the treatment of patient of CD20 positive follicular non-Hodgkin's lymphoma whose disease are refractory and has relapsed following chemotherapy. As promised we made BEXXAR commercially available nationwide to patients 30 days following fda approval. Our ability to make this quickly is a reflection of our commitment to patients, strong collaboration between Corixa and GlaxoSmithKline and the dedication of our manufacturing, marketing and sales teams. BEXXAR will be launched at a price comparable to other lymphoma therapeutic regiments.

The wholesale acquisition cost for BEXXAR is $26,000. When determining the overall cost associated with new cancer therapies like BEXXAR, it's important to consider not only the price of the drug, but also other related costs. BEXXAR is given as a single cycle of treatments which is different from many other cancer therapies. As a result, cost related to treatments such as those from managing side effects or for administering the treatment occur one time with BEXXAR compared to treatments given in repeated cycles where the related costs would also be repeated. As you know, BEXXAR unlike other radioimmunotherapies on the market is shipped ready and labeled and ready for administration. In contest, BEXXAR standard chemotherapy is repeated over 6 to eight months even convention antibody therapy for non-Hodgkin's lymphoma involve the administration of multiple doses over weeks or months. It's important to consider that with a single treatment, BEXXAR is capable of producing durable responses lasting years in a number of high risk patients who have received multiple prior therapies. Longer remission following treatment in these patients with relapse to refractory non-Hodgkin's lymphoma may lead to additional fewer treatments and associated costs.

The BEXXAR therapeutic regiment is the only non-Hodgkin's lymphoma treatment that's specifically dosed based on individual drug clearance rates. Dosimetry allows the adjustment of radiation that will be administered dose of BEXXAR. This tailors delivery of the maximum tolerated total body dose of radiation to each patient taken into account their unique radiation clearance characteristics. For both patients and physicians, BEXXAR therapeutic regiment is quite simple. BEXXAR is typically provided on an out patient basis from a hospital or treatment center. It consists of two sets of intravenous infusions with three gamma-camera scans in between. The gamma-camera scans are administered in the hospital or clinic and take just 15 to 30 minutes. These scans allow for individual patients specific dosing. Evidence supports the importance of individualized dosing for patients.

I would like to add we agreed with the FDA to conduct several additional clinical trials of BEXXAR. We will conduct a randomized comparison of BEXXAR versus Rituxan administered to patients who have received one or two prior treatments and are appropriate candidates for systemic therapy. The primary objective is for label expansion demonstrating a longer event free survival and patients treated with BEXXAR as compared to those treated with Rituxan. The second trial will compare BEXXAR versus Zevalin. Administered in patients who failed at least three regimens one of which was Rituxan. We will examine retreatment of patients who had duration of response of at least six months. The primary objective of this study is to compare the pharmakinetics of BEXXAR on retreatment versus initial treatment. Within the confines of these study, we will furnish the FDA additional information of vaccination of patients following BEXXAR therapy. The effects of HAMA sero-positivity on subsequent diagnostic procedures and future occasions of [INAUDIBLE] or acute leukemia.

Our key areas of focus for the first few months of product availability continue to be training centers to administer BEXXAR. Obtaining reimbursement from CMS and private pairs. And educating physicians on BEXXAR both about its clinical data and administration procedures. We are making great strides with all of these initiatives and before I give you an update on other programs, Kevin will provide further detail on launch activities.

Thanks, Steve. I would like to congratulate both the Corixa and the GlaxoSmithKline teams for making BEXXAR available to patients within 30 days of FDA approval. This demonstrates our commitment to bring this to market and we believe we have the resources in place to increase the awareness and adoption of radioimmunotherapis. Corixa medical science liaisons and GSK clinical educators have been in the field since the have been coordinating training activities for key personnel at sites that will begin treating patients. Our goal is to have at least 200 sites trained by the end of the year.

On a sales and marketing front, we have submitted some 50 different pieces of advertising promotion and educational materials to the FDA for approval to use by the sales and marketing groups to support the launch of BEXXAR. The GSK sales force is working with hematologists, medical oncologist, radiational oncologist nuclear medicine specialist to make sure they understand the benefits and logistics of BEXXAR. All of the distribution and ordering systems are in place and responding to requests for BEXXAR. Now that BEXXAR is in the hands of health care specialists, we will monitor our launch progress by tracking physician awareness of BEXXAR and actual product use trends and we will evaluate market changes and competitive issues. We will make the necessary adjustments to our plans to eliminate barriers for BEXXAR use and effectively communicate the benefits of BEXXAR for patients and physicians. I'm happy to report the BEXXAR service center are dedicated customer response center for BEXXAR has received many calls from physicians and patients requesting information on BEXXAR.

On the reimbursement front, Corixa and GlaxoSmithKline have been working diligently with CMS to ensure the necessary processes and codes will be in place soon to allowed Medicare patients access to BEXXAR. The companies have committed significant resources to work with private pairs to facilitate appropriate reimbursement for treatments sites treating patients with BEXXAR.

So I have to say that we are thrilled with the responses we have received so far for the patient and physician communities and are very excited about the launch progress to date. Now I will turn the call back over to Steve and look forward to speaking with you further during the Q&A at the end of this call.

Thanks, Kevin. I will ask Kevin to remain on the call as we briefly summarize Corixa's progress during the last quarter. I would first like to discuss additional accomplishments that support our BEXXAR launch goals. Manufacturing front we signed a new 7 year manufacturing agreement with MDS Nordion to radiolabel the antibody in BEXXAR. The new supply agreement replaces our existing agreements and highlights our ability to provide an on going supply of BEXXAR to patients in the future.

Second and part of our continuing education and outreach efforts for BEXXAR we presented data at the American Society of Clinical Oncology meeting in may. The data presented showed a high [INAUDIBLE] achieved long term durable responds to the BEXXAR therapeutic regimen. Many had complete responses and remain in remission five or more years after treatment. We believe the ability of BEXXAR to produce long-term remissions in patients with advanced treatment resistant non-Hodgkin's lymphoma is compelling evidence for physicians and this will be a key differentiating feature for BEXXAR in the marketplace. We will showcase important clinical data on BEXXAR at meetings like ASCO as part of our on going out reach to physicians and patients. Also on the BEXXAR front, we entered in into a license and supply agreement with GSK Canada for BEXXAR therapy in Canada. In the event of Canadian approval, GlaxoSmithKline will market BEXXAR in Canada and this collaboration leverages or joint success in the United States and extends to that market and to a new market additional opportunities for sales. We are continuing to hold discussions with additional potential BEXXAR licensees in the far east, Austral-Asia and the Pacific rim regarding manufacturing and marketing of BEXXAR in these territories. In addition, we continue to work diligently with our European partner, amertium health in preparation of filing for approval in the European union where BEXXAR was granted orphan drug status earlier this year.

In addition to BEXXAR, we made progress with several other programs in our development pipeline during the second quarter. First, our partner GSK filed for European regulatory approval of Frendix in May. It's a vaccine that's designed to [INAUDIBLE] and prevent hepatitis b infection. This filing marks a milestone for our business and further demonstrates not only how we plan to leverage core technologies but how we are delivering on our commitment to move more products into the clinic and on to approval. We expect the European review process for this to take approximately 12 months. Also, during the second quarter, we initiated a Phase One clinical study to evaluate the safety and immune response activity of an investigational [INAUDIBLE] vaccine designed to treat patients with high risk breast cancer. The vaccine consists of a [INAUDIBLE] protein in combination of the GlaxoSmithKline biological [INAUDIBLE] that Corixa's MTL antigen. Both [friendrics] represent progress in our antigen and cancer vaccine programs. With our partners we are evaluating a number of vaccines that are designed to be safer, more effective to either protect against or treat a broad range of diseases. In the coming months you can expect additional trial indications in other key diseases.

During the second quarter, we completed two financing transactions that give us the flexibility to commercialize BEXXAR while we continue to develop our other selected priority programs. Michelle will discuss these developments after she reviews our financial performance for the second quarter.

I will begin with second quarter results and then I will provide an update on our balance sheet and reiterate or guidance for the year. Our discussion will include certain nonGAAP financial measures which are financial measures that cannot be calculated in accordance with generally accepted accounting principals or GAAP.

In our earnings release issued today, we provide a reconciliation of the nonGAAP financial measured included in the release and referred to in this call as a most comparable GAAP financial measure. These adjustments to our current period GAAP results are made with the intent of providing investors and more complete understanding of Corixa's underlying operational results and trends and market base performance. The nonGAAP results are indication of our base line performance before other charges that are considered by us to be outside of our core operating results such as acquisition related charges and good will impairment.

I would like to highlight a few items from today's press release. Second quarter revenue totalled $20 million compared with total revenue of $13.9. This quarter's revenue includes an eight figure milestone payment linked to FDA approval of BEXXAR. Net loss applicable to common stock holders for the second quarter of 2003 with $20.9 million. Compared to net income of $5.2 million for the second quarter of 2002. The 2002 quarter included other income of $21.9 million from the sale of certain preclinical assets and equipment. The second quarter of 2003 includes a $12.6 million charge for the write off of certain lease related assets resulting from the sublease of two of our south San Francisco facilities. Of the 151,000 square feet of facilities in south San Francisco, Corixa now occupies 25,000 square feet. Approximately 100,000 square feet are sublet. We were in discussions regarding the sublease of the remaining 25,000 square feet. Diluted net loss of 2003 was 41 cents.

Compared with diluted net income of common share for 12 cents for the second quarter of 2002. When you exclude the acquisition related charges such as in tangible and deferred commercial and amortization and the good will and lease impairment charges, net loss amicable to common stock holders and diluted net loss for the second quarter per share in 2003 were $7.9 million, and 15 cents respectively. That's compared with net income to common stock holders at $7.8 million and 16 cents respectively for the second quarter of 2002. Our cash position with strengthen substantially during the quarter with a completion of two financing transactions that netted approximately $125 million to our balance sheet. We completed both an equity private placement with net proceeds of $28.4 million in a $96.4 million private placement as convertible subordinated net. Following the transactions and as of June 30th, 2003, we had $214 million in cash, cash equivalent and investments. We have access subject to certain conditions to a $75 million equity line of credit for a bank in New York capital markets. Subsidiary bank New York. Draws under the credit line total $2.6 million as of June 30, 2003.

We currently remain on target to achieve the guidance previously provided for the 2003 year. It is important to note that a BEXXAR launch in the second half of 2003 was already built into the guidance previously provided. While we expect sales in the third quarter, we also expect operating expenses to exceed sales. That is true for the next 12 to 18 months depending upon sales growth. Therefore, because we do not expect our joint profit and loss statement with GSK to be profitable this year, we do not expect BEXXAR sales to impact Corixa's revenue.

On a GAAP basis, we were looking at revenues of approximately $50 to $60 million. Operating expenses of approximately $130 to $140 million. And net loss of approximately $70 to $90 million. These projections exclude the lease impairment charges incurred during the quarter. An additional lease charges that we may incur if we sublease the remaining south San Francisco facility. On a cash basis, we expect to receipts of $70 to $80 million excluding financing activities and the net operating cash burn of approximately $50 to $70 million excluding investments and fixed access to the facilities. At this time I will pass the call back to Steve for closing remarks.

Before we open up the lines for your questions, I would like to re-iterate the progress we made during the second quarter which is impressive. We received FDA approval of BEXXAR and launched regimen within 30 days after the approval. We expanded the commercialization opportunities of BEXXAR to distribute the therapy in Canada and we signed a new 7 year BEXXAR manufacturing agreement with our partner, MDS Nordion. We brought a new product into the clinic initiating a Phase One study of a new breast cancer vaccine. It has been submitted for regulatory approval. And we completed two financing transactions that give a substantial cash balances and operating flexible. All of these milestones support our focused efforts to increase share holder value through product development and commercialization. We look forward to updating you on our progress with these efforts next quarter. Thank you again for joining us today and I will answer your questions. Operator, will you open the call to these questions at this time.

The question and answer session will be conducted electronically. If you like to ask a question, please press star 1 on your touch-tone telephone. If you are using a speaker phone, please make sure the mute function is turned off to on the phone. Just a moment while we gather our audience. We will take our first question from Daniel Holman with Solomon Smith Barney.

I enjoyed this time. Could you tell me how many patients you estimate will receive the BEXXAR treatment over the next two quarters?

We aren't going to provide a patient by patient estimate of therapies over the next couple of quarters. Again, as I stated, our goal for the next couple of months is obviously in shipping product as orders come into the call center, but also to continue training at sites, to secure reimbursement for the product through CMS and continue to make physicians and patients aware of the therapeutic benefits of BEXXAR. We will provide appropriate updates on the actual sales of the product in the context of quarterly filings and announcements in the future.

Thank you.

We will take our next question from John McKin in the with Med Techs.

my question concerns the financing done during the quarter and maybe you can give us color on what was prothesis that drove those decisions and how do we see those proceeds being used going forward? It appears with the $57 million cash or equity line, you guys were in decent shape at that point and received a lot of questions regarding those financings.

I think it's important to note with an equity line of credit, that instrument works very well in an upward or flat marketplace. But by the nature of that type of an instrument, you are selling or putting pressure on your stock each time you make a draw. So in a marketplace that is negative, those instruments, they can be devastating to your stock if you exercise them aggressively. So while the equity line was in place and it was great, to have it in place, unfortunately with the market overall doing what it did, it was not an instrument that we could take advantage of without hindering our existing stockholders. And so for that reason we were not able to drawdown that line as aggressively as we had hoped. We still have the ability to drawdown the line. Although obviously we are sensitive to where we are, our needs or lack there of from a financing perspective and our shoulder's perspectives. At the same token, the convertible market is an unusual market for bio-tech in that it's not open very often. It becomes open to companies in the mid market side very rarely. And based on the confluence of economic indicators that are completely outside of the bio-tech's control such as the overall yield rates, the inflow of cash in to the bond market, et cetera. When that opportunity came and because we do believe in the potential success of the company over time, the convertible instrument was a very logical choice to go to for those reasons.

I think it makes some sense and I agree that the convert market has opened, but it appears that on one side you are concerned about share holders from the equity line down, but at the same time those share holders have been significantly diluted with the recent financings. And the final point would probably be that stock did not appreciate very much and appreciated less in the index through the year and not many companies that raise many had their stock move up during the second quarter. Those are some of the reasons people were still wondering and at this point, you have a large cash position and my last question is how do you plan to utilize for the last six months of the year or maybe the next 18 months to see what else happens outside of BEXXAR.

I think in terms of cash utilization, you will see with greater clarity as we move forward in the next six months to a year priority programs that Corixa is interested in investing its own resources in. Most notably our developments of what we called AGPs or a TRL 4 antagonists. These are extremely exciting compounds. Things we would like to develop on our own as opposed to licensing them away before we generated what we think is reasonable value. That's one thing. Another obvious potential use of cash could be in the acquisition of another product opportunity for the sales force that will be building over the next period of time to actually market to the oncology community. We are looking very hard at products that might be available to us. Either from companies in the bio-technology space or the pharmaceutical space. When we have news on something we will do, obviously you will hear about it.

Thank you.

We will take our next question from Mark Monane from Needham & Company.

Is that an average price based on the dosimetry results that you used before? How did you come out with that price and how should we think about the dosing for the individual patient?

Are you going to take that or would you like me to?

Go ahead, Kevin.

That price is the price of the BEXXAR therapy regardless of what the individual dose is. So it doesn't matter the slight adjustments on a patient by patient basis. That is the price of the entire BEXXAR therapy, the cold dose, the dose metic dose and the therapeutic dose. It is what the price is. It's not an average of any prices that will be the exact price. Now, there are other prices -- there are other costs associated with the BEXXAR therapy, the scans and administer -- administration cost, et cetera, but that's the product cost from us of that particular product. And that price as Steve mentioned was derived based on the value provided by the therapy in terms of one single therapy compared to a regiment of several courses of chemotherapy or several courses of a cold antibody along with looking at the effectiveness relative effectiveness and duration of responses. One of the things we look at is the value and the disease free days that you might expect from BEXXAR versus other therapies. That's where that price was derived from.

That was helpful. Please one more. Let me go back to that question again. The thing I liked about dosimetry, before one would assume the person was a big tumor with a big tumor and a small person with a smaller tumor. For a given patient they will get more or less of BEXXAR depending on the dosimetry results showed. Will the price still be the same no matter what the dosimetry results show?

Yes. The manufacturing process and the -- and the runs -- each dose is not manufactured on a custom basis. It's a set manufacturing process and then it's prepared so that the custom amount is given to each individual person and that will not be adjusted because once that process is done, that product starts to decay. It's not something that you can store or anything like that. The price is the price regardless of what the dosimetry shows is the appropriate dose. You are right. It doesn't matter the size of the person. Actually, the size of the tumor could have some impact. But it's also the way that particular person processes the antibody and eliminates the antibody and there are a lot of factors that determine what that particular dose is.

That's fair. Were you able to make the September 30 deadline for CMS evaluation of BEXXAR? Excuse me, June 30th I'm sorry.

We have been in negotiations and discussions with CMS since way before June 30. We were able to were able to provide them the information that they needed based on the fact that we got approval when we did. So our objective is to get our codes by October.

October 1. Good. And then the last question would be at the ASCO meeting which was completed, there was a lot of attention paid to biologics. Rituxan really overshadowed the meeting. Would you help with us the current biologicals that are available and coming down the home stretch and how should we think about this drug for cancer?

Well, I think BEXXAR is a very exciting novel addition to the armterium. It's a radioimmunotherapy that allows specific dosing. It allows us to dose the patient to the maximum tolerated am of dose of radiation that the bone marrow can tolerate. Our initial trials will be to go after patients who have failed Rituxan therapy and try to convince them and their physicians that rather than taking repeat courses of something they already failed, that they would be better off switching to BEXXAR. They have have a better chance of achieving a response, and most importantly if they did achieve that response, better chance of it lasting for a much longer period of time. I don't know what more I can add to that. We are very excited about the progress that we have made. The interest that the call centers had in the past few days and we look forward to continuing to update you on the progress of the commercialization of the product.

Thanks, thank you very much for that information.

Ladies and gentlemen, at this time we would like to remind the audience if you have a question or a follow-up to a previously stated comment, star-1 on your touch-tone telephone. Once again, star-1 to ask questions. We will take our next question from Karmen Tang.

Thank you for taking my question. I have a question regarding the reimbursement. I would like to know if BEXXAR will be reimbursed based on the regional [INAUDIBLE] reimbursement scheme similar to Zevalin? And if so, will Glaxo and Corixa have some reimbursement program in place to support centers that will incur a loss?

At this point in time, we are still in discussion with CMS on that issue. We are committed to making sure that BEXXAR is available to the patients who need it and we will certainly be, once we are finalized as to what our reimbursement situation will be, we will take the steps appropriate to make sure that there is no barriers to people who need BEXXAR to getting it. Right now the reimbursement situation is very fluid in the U.S. and particularly with regard to Medicare. So I don't want to be evasive. But we really until we have the I's dotted and the T's crossed with CMS, I don't want to be too concrete about that either.

Due to time constraints, this will conclude the discussion and answer session. At this time, for final remarks, I would like to turn the conference over to Mr. Steve Gillis.

Thank you all for joining us today. Again, we are very pleased with the progress we have made this quarter. Thank you, Kevin, for joining us again and we look forward to updating you on Corixa's progress as time and events warrant. Thanks again.

Ladies and gentlemen this concluded today's discussion. Thank you for your participation.