葛蘭素史克 (GSK) 2004 Q2 法說會逐字稿

Good day and welcome, everyone, to the conference call regarding Corixa's second-quarter earnings. As a reminder, today's call is being recorded.

With us today from the company is Jim DeNike, Senior Director of Corporate Communications. Please go ahead, sir.

Thank you for joining us today. With me is Dr. Steven Gillis, Chairman and CEO of Corixa; David Fanning, our COO; and Michelle Burris, our CFO. Earlier today, we issued our press release on our second-quarter 2004 financial results, a copy of which can be found in the news section of our website at Corixa.com. As always, 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 review our progress in the first half of the year, David will provide an update on BEXXAR, Michelle will discuss the quarterly financial results, and we will open the call for questions.

Before I turn things over to Steve, I'd 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 investor section of our website.

Thanks again for joining us today. Steve?

Thank you, Jim. At the year's midpoint, I'll begin this call with an overview of the progress we've made against our 2004 corporate objectives. During the first six months of 2004, we've moved two new potential products into clinical development, advancing the Company's goal of commercializing new therapies. We've secured funding from the National Institutes of Health for our innate immunity program, and completed a long-term guaranteed supply contract with GlaxoSmithKline for our MPL adjuvant. All of these accomplishments will support the long-term success of Corixa.

There are also a few areas, specifically our initial BEXXAR sales results, where we have encountered some challenges and are taking steps that we believe will result in marked progress in the second half of the year.

I'll turn the call over to Dave Fanning, who will provide more details on our BEXXAR successes and challenges to date, as well as our expectations for the second half of the year.

Thanks, Steve. We achieved several BEXXAR milestones this year, including building and deploying our Corixa sales force ahead of schedule at the end of March. I'm pleased to report the combination of GSK's oncology sales force and our specialized professionals is having a positive impact on BEXXAR marketing and sales, as we continue to gain RIT market share while growing the overall market in the process.

BEXXAR sales totaled 2.2 million for the second quarter, up 69 percent from 1.3 million in the first quarter of 2004. We recognize that we still have a lot of work ahead of us, in order to meet our sales objectives. However, we're optimistic and hopeful that this trend is continuing, as July sales represent a record month for BEXXAR orders.

I'd like to take a moment to outline what we've learned, and how we plan to capitalize on the tangible opportunities we have already identified. With over 200 treatment centers trained, we have developed plans with our GSK counterparts to shift resources from site training to facilitation of the treatment process. As I'm sure you are aware, the administration of radioimmunotherapy requires coordination between multiple specialists on the treatment team. GSK and Corixa personnel are now focusing a majority of their efforts on effective facilitation of this process, in an effort to expedite the learning curve commonly associated with the adoption of a new class of drug. We believe the key to long-term market penetration can be achieved by working with our currently trained sites to establish an administration process that can be performed efficiently and reproducibly, leading to sustained repeat treatments at each site. We have seen market progress in this area during the last portion of the second quarter, and have a number of examples in multiple territories where our efforts have worked to significantly reduce the time interval between patient treatments at individual sites.

To boost our BEXXAR efforts in these and other areas, we recently appointed Christof Marre as Vice President of Marketing. In this position, Christof leads our domestic and international marketing and strategic planning efforts for the Company's commercial programs, including BEXXAR. Christof, in collaboration with GSK marketing, will play a key role in establishing BEXXAR brand equity among key audiences such as community oncologists, treatment centers and patients. We've implemented a number of programs aimed at reaching those who that are critical in the adoption of BEXXAR. While we cannot disclose the details of our sales and marketing plan, we're working very diligently to increase our involvement in the patient advocacy organizations, increase our presence in industry conferences and educational events and, notably, better leverage outreach opportunities with our radiopharmacy industry partners.

We continue our education efforts by presenting and publishing BEXXAR data in a variety of forums. In June, we presented compelling data at the American Society of Clinical Oncology meeting, showing that therapy with two different standard chemotherapeutic regimens, each followed by a single treatment with the BEXXAR therapeutic regimen, produced complete responses in 80 percent to 83 percent of patients as front-line treatment for follicular B-cell, non-Hodgkin's lymphoma. As part of our strategy to grow the market opportunity for BEXXAR, we recently submitted a supplemental BLA for expanded use of BEXXAR in treatment of patients with relapse or refractory low-grade follicular or transformed CD-20 positive non-Hodgkin's lymphoma, whose disease has relapsed following chemotherapy. This filing is one of several steps we have taken in an effort to move BEXXAR earlier in the treatment cycle for patients with NHL.

Concurrent with this effort is the continued clinical development of BEXXAR. To that end, we will continue to initiate post-approval studies and evaluate BEXXAR in additional settings and against competing products. During the second quarter, we signed a new 12-year agreement with the Australia Nuclear Science and Technology Organization to develop, market and sell BEXXAR in certain countries within Australasia, including Australia, New Zealand, Singapore, India, Indonesia and China. We also granted ANSTO co-exclusive rights to supply BEXXAR to Japan, South Korea and Taiwan. This new agreement expands the potential reach of BEXXAR to now cover many of the world's major markets, and we look forward to progress with worldwide approvals and launches over the coming years.

All of these efforts are designed to drive adoption of BEXXAR and expand the potential for radioimmunotherapy. While we are pleased with recent reports from the field sales force in the United States, we're well aware of the fact that our efforts must translate into a steady and sustainable increase in product usage if we are to meet our sales objectives for the year. Third-quarter sales results will be of significant use in forecasting year-end sales for BEXXAR. As a result, we expect to provide further guidance on the annual BEXXAR sales expectations at the end of the third quarter.

We are committed to the long-term potential of BEXXAR in radioimmunotherapy, which can offer patients a therapeutic option unlike traditional chemotherapy or naked monoclonal antibody treatment. Our long-term strategy to build an oncology franchise and grow the RIT market has not changed. We have built a sales force dedicated to specialty oncology, and this team has the experience and resources necessary to establish a track record of success for Corixa.

While today's focus is on BEXXAR, we're continuing to evaluate additional end-license opportunities in the field of oncology that might serve to bolster and enhance our near-term oncology product line.

At this time, I would like to turn the call back over to Steve for an update on other products candidates in our pipeline.

Thanks, Dave. We have already achieved many of the milestones we set for ourselves in our vaccine, adjuvant and innate immunity projects this year. We moved new potential products into clinical trials, beginning studies to evaluate a tuberculosis vaccine, and CRX-675 for seasonal allergic rhinitis. CRX-675 is the first product candidate to enter the clinic from our innate immunity program, which represents a substantial opportunity for future growth. Earlier in the year, we received $11.6 million in funding from the NIH for our TLR4 research program, and signed Aventis Pasteur as an important new partner for our RC-529 adjuvant.

Last week, we announced an adjuvant manufacturing and guaranteed supply agreement with GlaxoSmithKline for our MPL adjuvant. This agreement guarantees annual purchases of MPL through 2012. MPL is a component in multiple GSK vaccines that are currently undergoing Phase III clinical trials or awaiting regulatory approval, including GSK's Fendrix vaccine for Hepatitis B. The agreement establishes a solid foundation for long-term adjuvant revenue, and provides specific plans for both companies to develop manufacturing improvements. Achieving guaranteed payments and significant potential product royalties from GSK vaccines that contain MPL should ensure a steady revenue stream for Corixa from our adjuvant program for many years to come.

I'm pleased to report that we have achieved many of our 2004 objectives already this year. You can expect us to provide further updates on several additional events in the next six months, including reporting on BEXXAR approval status in Canada, progress toward in-licensing of late-stage oncology product, further adjuvant and other commercial relationships and the filing of an IND for our prostate cancer vaccine. Look for progress in these areas throughout the remainder of the year, along with continued updates on BEXXAR commercialization.

Now, I'll turn the call over to Michelle for a review of our second-quarter financial results. Michelle?

Thanks, Steve. Good afternoon, everyone. I'll begin with our second-quarter results, provide an update on our balance sheet and reiterate 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 June 30, 2004. As we have stated previously, during the initial period of product availability, we expect to record 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 on product sales until 12 to 18 months after the receipt of our reimbursement pull (ph) and full deployment of the 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 or 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 second-quarter results for those of you who have not had a chance to review the release. For the second quarter of 2004, we reported total revenue of 5.8 million, compared with total revenue of 20 million for the second quarter of 2003. The decrease in 2004's second-quarter revenues compared with 2003 is primarily due to one-time milestone and reimbursement revenue received in the second quarter of 2003 from GSK following the FDA approval of BEXXAR.

Net loss applicable to common stockholders for the second quarter of 2004 was 10.6 million, in comparison to net loss of 20.9 million for the second quarter of 2003. The net loss for the second quarter of 2004 includes other income of 9.9 million, which represents the $29 million payment received from Biogen Idec for the settlement of BEXXAR patent litigation, net of portions paid to other parties. The net loss for the second quarter of 2003 included a $12.6 million impairment charge associated with lease-related assets.

Diluted net loss per common share for the second quarter of 2004 was 19 cents. That compares to 41 cents for the second quarter of 2003. And if we exclude the acquisition-related charges, such as intangible and deferred compensation amortization, and the lease-related impairment charge, net loss applicable to common stockholders and diluted net loss per common share for the second quarter of 2004 were 10.4 million and 19 cents, respectively, and that compares with the net loss applicable to common stockholders and diluted net loss per common share of 7.9 million and 15 cents, respectively, for the second quarter of 2003.

As Dave mentioned, BEXXAR sales for the second quarter were 2.2 million, although that number is not included in our revenue number, due to joint P&L accounting for BEXXAR. As of June 30, 2004, we had 168.5 million in cash, cash equivalents and investments. Our cash balances give us operating flexibility and financial strength to pursue the commercialization of BEXXAR and the continued clinical development of our promising pipeline program. We believe we have the resources necessary to pursue our objectives for the next few years.

As a reminder, our financial guidance for 2004 is unchanged, and remains as follows. We expect cash receipts to be in the range of 70 million to 95 million, excluding financing activities associated with leasehold improvements, and we expect our net operating cash burn to be in the range of 45 million to 65 million, excluding investments in capital assets and leasehold improvements. On a GAAP basis, we expect revenues of approximately 45 million to 55 million, and operating expenses of about 130 million to 140 million. Lastly, we expect our net loss to be in the range of approximately 60 million to 80 million.

While BEXXAR sales are currently running behind the pace we previously anticipated, positive developments in the other sectors of our business continue to support our current guidance, including our significant progress in our adjuvant franchise, as well as lower-than-previously-anticipated clinical and development expenses. We will provide additional update on financial performance and further guidance at the end of the third quarter.

That concludes the update of our financials, so I'll turn the call back over to Steve for closing remarks.

Thanks, Michelle. Overall, we're pleased with our performance against corporate objectives we set forth at the beginning of the year. With one quarter's worth of direct sales experience behind Corixa, we've had first-hand observations, and we've used this data to modify our approach in an effort to foster increased adoption of radioimmunotherapy. Armed with this data, we've devised a strategy for long-term success, and have shared with you many of the ways we hope to achieve significant improvements in product sales over the second half of the year. We're pleased with commercial progress reported to date within our adjuvant product franchise, and we look forward to the role that this business will play in the overall success of our company.

Thank you for your continued interest in Corixa, and for joining us today. At this time, I'd like to invite the operator to open the call for your questions.

(OPERATOR INSTRUCTIONS). Michael Higgins, CCL Partners.

If you could clarify a little bit the costs, the ongoing quarterly costs of promoting BEXXAR, it seems to be put into the SG&A line. I'm not really sure -- we were looking at what the revenue is by quarter, but I'm not sure what the costs are by quarter. If you could give us any insights on that?

Yes. I can give you some guidance in order to understand how the BEXXAR P&L works, as we've previously stated. So sales come into the top of the P&L. Cost of goods is then reimbursed. Both Corixa and GSK can then charge 32 full-time equivalents, at a predetermined reimbursement rate, directly against the P&L; those are direct sales and marketing full-time equivalents having to deal with BEXXAR. And then the last thing to be charged against the P&L is a promotional budget, which is agreed upon by Corixa and GSK at the beginning of each calendar year. That promotional budget is set somewhere between $8 and $10 million a year -- for example, for this year. And that's why we have said that it takes on the order of $28 to $33 million of top-line sales for the P&L to generate profit distributed to both parties.

I have a question on the guidance that apparently you are staying with the BEXXAR guidance of 19.5 million for the year -- I believe you are. Could you clarify that? Because it seems to be somewhat aggressive considering the first- and second-quarter sales. We were all looking to see some sort of growth in the second half; it just seems to be quite a bit. If you could comment on that?

Well, I think your analysis of the mathematics is accurate, in that if you add the first- and second-quarter sales of BEXXAR together, we have to see a lot of progress in the third and fourth quarters. We are, however, heartened by the increase in sales that we saw Q2 versus Q1, and we are particularly pleased with how July has started off for us -- as David Fanning mentioned, a record month of orders. That needs to continue and to accelerate, in order for us to meet our sales goal. We just need more data, in order to figure out whether we're going to be successful in doing that or not. As we've said at other times during the call, other differences in our business, as well as revenues anticipated from a number of agreements, including our recently signed MPL supply agreement with GSK, provide us with the feeling today that it's not necessary for us to modify overall guidance for the Company, for the year.

That's why your 45 to 55 range is remaining the same, in other words?

That's correct.

In your other income line, I believe you're showing 9 million and 20 million as coming, as you said, or has come from Biogen, which leaves a -10 million in that other income line. What would that be from?

The 20 million up-front settlement fee -- GSK and Corixa were responsible for the joint funding of that litigation. We split the proceeds 50/50. The other party that received some benefit from that settlement was our licensor, the University of Michigan. And that was a complicated calculation as to what percentage of the proceeds they received, based on the fact that there was adjustment made for legal expenses that GSK and Corixa had taken on, on behalf of the University of Michigan. So that's why you see 20 million coming in, and the net effect is 9-point-something and change, as net other income. But it's not revenue, because we don't make a habit of litigation.

(OPERATOR INSTRUCTIONS). Mr. Gillis, it appears there are no further questions at this time. I'll turn the conference back over to you for any additional or closing comments.

Well, thank you very much. I'm glad that we've obviously been very clear in telling you what our results have been for this quarter, and we look forward to providing you with future updates on the progress of the Company and its products. Thank you.

And that concludes today's conference call. We thank you all for joining us.