葛蘭素史克 (GSK) 2004 Q1 法說會逐字稿

Good day, everyone, and welcome to the conference call regarding Corixa's first-quarter and year-end earnings. 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.

Thank you for joining us. With me today is Dr. Steven Gillis, Chairman and CEO of Corixa; David Fanning, our Chief Operating Officer, and Michelle Burris, our Chief Financial Officer. Earlier today we issued our first-quarter 2004 earnings press release, a copy of which can be found in the News section of our Website at www.Corixa.com. As always, a recording of this call will be archived and available for replay later today in the Investors section of our Website.

In a moment, I will turn things over to Steve who will review our progress in the first quarter. David will provide an update on Bexxar. Michelle will discuss the quarterly financial results, and then we will invite your questions.

Before I turn things over to Steve, I would like to remind you that during 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 statements are just predictions, and actual events or results may differ from the statements made. We caution you not to unduly rely on these forward-looking statements which only reflect our projections 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 Investors section of our Website. I would also like to add that the Investors section of our Website now also contains our policies and procedures for corporate governance and compliance.

Thanks again for joining us today.

In the first quarter, we continue to achieve results in each of our three core areas of focus -- monoclonal antibody therapeutics, vaccines and adjuvants and our innate immunity program. This includes the deployment of our sales force at the end of the first quarter nearly three months ahead of schedule. This is an extremely experienced group that is cast with education and promotion of Bexxar in the marketplace. David Fanning will provide more details regarding the salesforce, as well as our ongoing outreach activities surrounding Bexxar in a few minutes.

Bexxar sales for the first quarter were 1.3 million. This number is in line with our expectations for the quarter recognizing that our salesforce was not deployed until the end of this quarter.

With that said, our sales expectations for the year far exceed our current run-rate, and we believe that the recent deployment of our salesforce, working in concert with the GSK salesforce, will have a significant impact on Bexxar sales over the next several quarters. The annualized Bexxar sales run-rate based on orders in the month of March, the month prior to the deployment of Corixa's salesforce, was 7.4 million. The annualized run-rate based on sales in the month of April, the first full month following the deployment of Corixa's salesforce, was 11.2 million or a 50 percent increase. As a result, we believe the deployment of our salesforce, together with the long-standing and hard-working efforts of the GSK sales and marketing teams, is beginning to have a positive effect on acceleration of Bexxar market and sales penetration. Therefore, we remain committed to our forecast of sales target for the year.

Turning to our pipeline programs, I am pleased to report we have initiated two new Phase I clinical trials already this year. In January we began a trial for our new tuberculosis vaccine, and last month we began enrolling patients in a Phase I clinical trial of CRX-675, our proprietary TLR4 agonist. This is the first product candidate to enter the clinic from our innate immunity program, which represents a substantial opportunity for future growth.

In addition to these two new trials, we completed several licensing transactions during the first quarter, settled our litigation with Biogen Idec, and were awarded 11.6 million in funding from the NIH for our TLR4 research program. I will discuss these accomplishments in greater detail today, but first I would like to turn the call over to David Fanning, Corixa's Chief Operating Officer, for an update on our progress with Bexxar. Dave?

Thanks, Steve. As Steve mentioned, we deployed our new sales team at the end of March. Today I will provide an update on our efforts to grow the market for Bexxar, as well as Radioimmunotherapy. Our entire salesforce has been out in the field for nearly a month now, and while we expect their educational efforts to take time before they yield results that are reflective of Bexxar's ultimate potential, we are already seeing a positive impact on sales.

In the months since the group has been deployed, we are making inroads in training new sites in major metropolitan areas and booking multiple treatments in sites that have completed training. We are receiving encouraging feedback from physicians who are presenting new patients for treatment with increased frequency, and we are expressing interest in Bexxar over other available therapies. Most importantly, we had a record month for Bexxar sales in April and look forward to continued growth in the coming months.

As Steve mentioned earlier, preliminary results indicate that this effort is beginning to pay off as orders in April were 50 percent higher than those recorded in March. As I mentioned, we continue to make inroads with our site training and certification efforts. Our efforts are paying off as we observed a 26 percent increase in completed site trainings in the first quarter. These key high-volume, strategically located centers treat a majority of NHL patients in the US, and our salesforce is building important relationships with these centers as we speak.

As I mentioned on the last call, a key component of our continuing education programs will be a presentation of clinical trial data at upcoming important industry conferences. I am very pleased to report that seven Bexxar abstracts will be presented at the June annual meeting of the Society of Nuclear Medicine and five abstracts at the June annual meeting of the American Society of Clinical Oncology. Multiple Bexxar abstracts have also been submitted for presentation at upcoming meetings of the American Society for Therapeutic Radiology and Oncology and the Radiology Society of North America.

In addition, we are pleased to report that the April 15th issue of the Journal of Clinical Oncology included an article summarizing the results of a Phase II two center study that evaluated treatment with Bexxar at first or second recurrence of indolent or transformed indolent T-cell lymphoma. Results indicated that 31 of 41 patients or 76 percent had an overall response and that 20 patients or 49 percent achieved a complete response. Response rates were similar in both indolent and transform disease. We are very pleased with these results and intend to continue to publish data like these that further demonstrate Bexxar's utility in a variety of treatment settings.

The three postapproval studies that we have talked about extensively in the past are moving ahead as planned. The first of these studies which compares front-line treatment of CHOP chemotherapy plus Rituxan versus CHOP chemotherapy plus Bexxar is being conducted by the Southwest Oncology Group with participation from the Cancer and Leukemia Group. The trial will include approximately 250 patients per arm with primary endpoints including survival and times progression. This study, together with Bexxar versus Rituxan and Bexxar versus Zevalin studies that have been discussed in detail before, represent a critical part of our continued development strategy. They will help to define Bexxar's role in the treatment of NHL, provide us with additional data for possible further registration and label expansions, establish cooperation between specialty physicians, and give important oncology centers experience with administration of Bexxar.

With that, I will turn the call back over to Steve.

Thanks, Dave. As you can see, we continue to make progress with Bexxar commercialization, and we expect to see sales grow over the course of the year now that our salesforce has been deployed.

I will now shift to a discussion of our pipeline programs, and I will touch first on the progress we are making with vaccines and adjuvants. Early in the first quarter, together with our partner GSK Biologicals, we began enrollment in a Phase I trial to evaluate the first new tuberculosis vaccine to be tested in the United States in over 60 years. This novel recombinant protein vaccine contains our MPL adjuvant and is the first such vaccine ever to be tested in humans. TB is a significant world health problem with more than 2 million people dying from the disease each year. The World Health Organization estimates that more than 50 million people worldwide may be affected with drug resistance strains of TB, creating an urgent need for a more efficacious prophylactic vaccine.

In our adjuvant business, we gained an important new partner, Aventis Pasteur, during the first quarter. We completed new license and supply agreements with Aventis Pasteur for the use of our synthetic RC-529 adjuvant and a variety of potential infectious disease vaccines. We have not disclosed specific financial terms of the transaction, but we will receive upfront license fees, success-based milestones, and royalty payments. Aventis Pasteur is also committed to placing annual orders for supplies of RC-529 based on its clinical and commercial forecasts.

The agreements also include a provision for Aventis Pasteur to add additional non-exclusive vaccines deals in the future subject to their availability and future payments to Corixa by Aventis Pasteur. This agreement follows on the regulatory approval of the first infectious disease vaccine containing RC-529 last year.

As well, last year our partner GSK Biologicals submitted Fendrix for approval in Europe. Fendrix is a novel vaccine designed to prevent infection from hepatitis B. The vaccine includes the GSK Biologicals' hepatitis B antigen together with our MPL adjuvant. The Fendrix filing represented the first regulatory filing for an approval of an infectious disease vaccine that contains Corixa's proprietary MPL adjuvant. We expect a regulatory decision by the end of the year.

In addition, there are multiple GSK vaccines in late stage development that contain our MPL adjuvant directed at significant patient indications, including Simplirix and Cervarix, vaccines for the prevention of infection of herpes virus and human papillomavirus cervical cancer respectively. GSK is currently enrolling patients in final pivotal clinical trials for each of these vaccines, and we look forward to the results of these trials in the coming years.

Our adjuvant business continues to be the source of partnering and licensing opportunities for us. The importance of this business for Corixa and its shareholders continues to grow through partners progress in the clinic, multiple licenses to new partners, and continued manufacturing contracts.

Finally, I would like to take a minute to outline important developments in our innate immunity program. We have recently achieved two important milestones in this development area -- obtaining $11.6 million in funding for our TLR4 agonist program and bringing the first TLR4 agonist into clinical development. This is an emerging field, and Corixa is one of a handful of companies leading the development of such promising compounds.

There are 10 types of toll-like receptors, and each recognizes a different type of antigen or pathogen structure. Our proprietary compounds bind to TLR4, a receptor that can be found on a range of antigen presenting cell types, including hematopoietic cells, mini-epithelial cells and cells associated with vascular stability. By binding to and triggering TLR4, our small molecule TLR4 agonist can dramatically influence innate immune responses, the body's first line of defense.

Through our research we have discovered that some of our compounds act as agonists or stimulants of TLR4 mediated immune responses and some act as antagonists of TLR4 signaling. In addition, TLR4 signaling has been shown to shutoff inflammatory immune responses, triggered by a natural TLR4 ligands. As such, TLR4 antagonists may be of use in a number of anti-inflammatory conditions such as in the cases of inflammatory bowel disease or arthritis.

The $11.6 million award from the National Institute of Allergy and Infectious Disease, part of NIH, will support further development of our proprietary TLR4 agonist small molecules, particularly in the prevention of infection in the upper respiratory tract. In preclinical studies, we have shown that our drug candidates can activate the immune system to protect against infection from a variety of upper respiratory pathogens. The contract was awarded to us from the NIH Biodefense Partnership and gives us significant resources to use in completing the transition between discovery stage activities and clinical evaluation of these compounds.

Additionally last month we began a Phase I study to evaluate CRX-675, the first TLR4 agonist to enter clinical development from our innate immunity program. The trial is designed to test the safety and immune response activity of CRX-675 for seasonal allergic rhinitis. TLR4 agonists can affect the immune system's response to allergens, substances in the environment that trigger an allergic reaction or hypersensitivity. We have several TLR4 agonists in development, which are capable of being administered via non-injection roots such as intra-nasally or potentially orally.

Now I will turn the call over to Michelle Burris for a review of our first-quarter financial results.

Thanks and good afternoon everyone. I will begin with our first-quarter results. I will give an update of our balance sheet and review our financial guidance for 2004.

As a reminder, co-promotion revenue or expense under our agreement with GSK for Bexxar is determined based on the calculation of joint profit or loss as defined in the agreement and is included in SG&A expense for the quarter ended March 31, 2004. As we have previously stated, during the initial period of product availability, we expect to report losses as a result of increased expenses commonly associated with the launch of a new drug, and we don't expect the joint P&L to provide positive cash outflows to Corixa and GSK based upon product sales until 12 to 18 months after the receipt of our reimbursement code, until deployment of our launch resources.

My discussion will include certain non-GAAP financial measures, which are financial measures that cannot be calculated in accordance with Generally Accepted Accounting Principles or GAAP. In our earnings release issued earlier today, we provided a reconciliation of the non-GAAP financial measures included in the release. These adjustments to our current period GAAP results are made with the intent of providing investors with a more complete understanding of Corixa's underlying operational results, current trends and our marketplace 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 such as acquisition-related charges and goodwill impairment.

I will take a few minutes to summarize our first-quarter results for those who have not had a chance to review the earnings release. For the first quarter of 2004, we reported total revenue of 7.3 million compared with total revenue of 9.1 million for the first quarter of 2003. As Steve mentioned, Bexxar sales for the first quarter were 1.3 million, although that number is not included in our revenue number due to the joint P&L accounting for Bexxar.

Net loss applicable to common stockholders for the first quarter of 2004 was 21.2 million. That compares with a net loss of 19 million for the first quarter of 2003. Diluted net loss per common share for the first quarter of 2004 and the first quarter of 2003 was 38 cents. Excluding acquisition-related charges such as intangibles and deferred compensation amortization, the net loss applicable to common stockholders and diluted net loss for common share for the first quarter of 2004 were 21 million and 38 cents respectively, and that compares with a net loss applicable to common stockholders and diluted net loss per common share of 18.4 million and 37 cents respectively for the first quarter of 2003.

As of March 31, 2004, we had $178.6 million in cash, cash equivalents and investments. In 2004 we expect to fall within the guidance previously provided, and to reiterate, on a cash basis, we expect cash receipts to be in the range of 75 to 95 million, and that excludes financing activities associated with leasehold improvements. We expect our net operating cash burn to be in the range of 45 to 65 million, and that excludes investments in capital assets and leasehold improvements.

On a GAAP basis, we expect revenues of approximately 45 to 55 million, operating expenses of approximately 130 to 140 million, and lastly we expect our net loss to be in the range of approximately 60 to 80 million. As a reminder, we expect to include the patent settlement in other income.

That concludes the update on our financials, so I will turn the call back over to Steve for closing remarks.

Before we open the lines for your questions, I would like to review the 2004 business objectives and milestones that we met during the first few months of the year. They included obtaining 11.6 million in funding for our TLR program from the NIH, deploying an experienced, dedicated Bexxar focused salesforce a full three months ahead of schedule, initiating two Phase I clinical trials, one for a new tuberculosis vaccine and another to evaluate CRX-675, the first TLR4 agonist compound to come from our innate immunity program, and working toward the continued clinical evaluation of Bexxar in three postapproval studies to further evaluate the potential role of Bexxar in treating patients with NHL as compared to other therapies in both relapsed and frontline patients. We are pleased with our progress to date and look forward to sharing additional results in the coming months.

Thank you again for your interest in Corixa and for joining us today. At this time, I would be happy to invite the operator to open the call for your questions.

(OPERATOR INSTRUCTIONS). Phil Nadeau, SG Cowen.

Good afternoon. Thanks for taking my question. The increase in Bexxar's sales run-rate that you mentioned for April was really impressive. I was wondering if you could give us a little bit more color on what exactly your salesforce is doing differently versus what the GlaxoSmithKline salesforce was doing?

Right. It is a complementary set of skills that are out in the field that we think will be very important in the commercial delivery of Bexxar. The GSK salesforce will be responsible for driving demand in the community clinics and covering the medical oncology community where Bexxar patients, Bexxar candidates often present. Those patients get referred to institutions that deliver Bexxar, and that is our primary responsibility is to provide coverage in that key center.

Those centers are important because obviously the experience of the patients who receive Bexxar needs to be one that is very positive and where we think we can work with our GSK partners very productively there. But secondly, it is where the key opinion leaders are located, and we think that having adequate coverage in those centers allows them to have close contact with the product and again drive further discussion of the product in the market and awareness in the marketplace.

So was the uptick in demand due to the fact that there were community physicians who did not really have a place to send patients, or do you think you uncovered new patients who were under the care of these thought leaders that maybe would not have been dosed in the past but were dosed because you contacted their physician?

I am not sure that we really micro-analyzed the numbers to that extent yet. I think it is a reflection of two things that have gone on. One, yes, our salesforce was deployed, and the reason that we felt it was important to talk about the temporal change in sales was that we figured that people like you might ask us well, are they having any effect? And yes, it would appear that they are, but it is also important to remember that a lot of what we are seeing could easily be due to the continued efforts of the GlaxoSmithKline salesforce, which has been deployed in the marketplace for a considerable period of time.

It is heartening that we are seeing this effect, and obviously we are not going to be releasing monthly sales or weekly sales numbers of Bexxar. We are not General Motors, and we are not selling cars. But we are pleased with what we have seen so far. There could easily be lumps and bumps in the road as we go forward. It is early days, and it is more than likely the combined effects of both salesforces that have led us to where we are.

(OPERATOR INSTRUCTIONS). Paul Latta, McAdams Wright Ragen.

A couple of questions about the early stage pipeline. It seems like you have a handful of candidates in the early stage pipeline, especially now with the tuberculosis and new allergy treatment. What do you think is -- which drug do you think will see Phase I results first? What is your sense of timing?

In addition to the ones that you mentioned, we have two tumor vaccines in clinical trials as well. Our Her-2/neu clinical trial, our Her-2/neu vaccine with GlaxoSmithKline, and a lung cancer vaccine with Zambon, and it may well be likely that we will see results of those prior to results of CRX-675 or the tuberculosis vaccine. And again, it is important to remember that Phase I studies while we will attempt to tease certainly immunogenicity data from all of these studies, they are predominately safety studies.

I think the next thing in our pipeline that is of nearer term commercial significance is obviously our adjuvant business as contracts for production of adjuvants mature and as partnered vaccines mature to the point of product registration, notably with multiple GSK vaccines containing MPL now in the later stages or the last stage of the clinical trial prior to registration on a worldwide basis.

That kind of works into my follow-up question. On the adjuvant portfolio, maybe I can just ask the sense of timing for Cervarix and Simplirix. Is that like a year away, or is it two years away; six months away?

I think Simplirix and Cervarix are likely filings that might occur in the '06 timeframe. But that is probably a question that is better directed to GSK. I think the impact on Corixa on a near-term basis is in supplying the large amount of adjuvant in MPL that is required not just for conducting those studies but in for building inventory for eventual market launch. And while we don't have anything in particular to say about that today, we anticipate having some further commentary on that perhaps later this quarter or next.

Okay. Maybe I could ask one more on the tuberculosis vaccine. That uses your MPL adjuvant. Presumably this is more centered around your adjuvant portfolio. I guess what I am trying to ask here is some of the treatments you have with Glaxo, for example, I think there was a hepatitis B vaccine where it has adjuvant as part of a whole vaccine. This one is more than just the adjuvant?

Yes. Here the antigen as well came from a collaboration between Corixa and GlaxoSmithKline. So it is a proprietary antigen from Corixa, as well as part of the adjuvant preparation MPL comes from Corixa.

So presumably then the revenue opportunity would be a greater portion of the overall vaccine revenue with the tuberculosis?

That is absolutely correct.

There are no further questions at this time. I would like to turn the call back over to you, Mr. Gillis, for any additional or closing comments.

Well, thank you all for joining us today, and we look forward to providing you with continued updates on developments as they are warranted. Thank you.

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