葛蘭素史克 (GSK) 2005 Q1 法說會逐字稿

Welcome to the ID Biomedical Corporation first quarter earnings results conference call. Following the presentation we will conduct a question and answer session. [OPERATOR INSTRUCTIONS] I will now turn the conference over to Mr. Dean Linden, Director of Corporate Communications. Please go ahead sir.

Good afternoon and thanks for joining us to discuss ID Biomedical's quarter ended March 31, 2005. My name is Dean Linden, Director of Corporation Communications. I am joined today by Dr. Tony Holler, ID Biomedical's Chief Executive, Todd Patrick, the Company's President and Richard Bear, VP of Finance and Administration. Today we will begin with a report on the Company's 2005 first quarter financials. Tony will then take us through a general overview of the Company's activities during the quarter. And finally we will open the call to your questions. In a moment I will turn the call over to Richard. However, first I need to make a brief comment regarding forward-looking statements.

The information in this conference call contains so-called forward-looking statements about ID Biomedical's expectations, beliefs, intentions or strategies for the future. Which may be indicate by words or phrases such as anticipate, expect, intend, plan, will, we believe, ID Biomedical believes, managements believes and similar language. All forward-looking statements are based on ID Biomedical's current expectations, and are subject to risks and uncertainties and to assumptions made. Important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include: The Company's ability ability to successfully integrate the Shire vaccine business. The Company's ability to successfully complete preclinical and clinical development of its products. The Company's ability to manufacture its products. The seasonality of the flu vaccine business and related fluctuations in the Company's revenues from quarter to quarter. Decisions and the timing of decisions made by the health regulatory agencies regarding approval of its products for human testing. The Company's ability to enter into distribution agreements for its products. And to complete and maintain corporate alliances relating to the development and commercialization of its technology and products. Market acceptance of its technology and products and the competitive environment and impact of technological change. And other risks detailed in the Company's filings with the Securities and Exchange Commission.

ID Biomedical bases its forward-looking statements on information currently available to it and assumes no obligation to update them. With all that said I will turn the call over to Richard Bear to report on the 2005 first quarter financials.

Thank you, Dean. Looking at the financial highlights for the three months ended March 31, 2005, the Company recorded revenue of $12.8 million with a net loss of $27.6 million, or $0.64 per share. For the period ended March 31, 2004, the Company recorded revenues of $1.5 million with a net loss of 10.9 million, or $0.26 per share. The Company's business follows a seasonal pattern with sales of fluviral, the majority of the Company's product sales occurring only in the third and fourth quarters. The seasonality of the Company's fluviral sales may result in performance in any quarter that may not be necessarily indicative of performance for the entire year.

Included in revenue are product sales from our two marketed products, fluviral and NeisVac-C, research and contract revenue, deferred licensing revenue and other revenue. The Company recorded product revenue of 6.9 million for the three months ended March 31, 2005. This revenue primarily relates to the sales of the Company's NeisVac-C vaccine to the Canadian Government with no product revenue during the first quarter of 2004. The Company recorded research and development contract revenue in the amount of 4.3 million for the three months ended March 31, 2005, compared to 0.8 million for the same period in 2004. Research and development contract revenue includes; revenue recognized as a result of the Shire funding facility to support the development of the pipeline vaccine candidates acquired from Shire. The Company determined that these amounts are appropriately recognized as revenue; since the amount and date of repayment of these advances are not known and there is no requirement to repay any advances if the pipeline vaccine candidates acquired from Shire are not successful.

The Company recognized deferred licensing revenue of 2.7 million for the first quarter of 2005 compared to 2.7 million during the same period of 2004. The amortization of deferred licensing revenue did not result in additional cash to the Company. The Company also recorded other revenue of $0.9 million for the three months ended March 31, 2005. Other revenue consists primarily of the pandemic readiness speed to maintain a state of readiness against an influenza pandemic as required under our agreement with the Government of Canada. And other fees to store and distribute vaccines under our agreement with the Quebec Ministry of Health. There was no other revenue for the three months ended March 31, 2004.

The Company recorded cost of product sales of 6.2 million for the three months ended March 31, 2005. For the three months ended March 31, 2005, the cost of products sales includes the expenses related to the distribution of NeisVac-C, the cost related to pandemic readiness and other revenue related expenses. There was no cost of product sales for the three months ended March 31, 2004. The Company recorded research and development expenses of 22.2 million for the three months ended March 31, 2005, compared to 10.1 million for the same period in 2004. This increase is a result of the clinical development programs acquired from Shire, predominantly the costs being incurred in support of the U.S. licensure of the Company's injectable influenza vaccine, fluviral. Also impacting research and development expenses is the clinical costs associated with advancing our other lead development programs.

As we have previously guided we expect our research and development expenses to continue to be substantial through at least the remainder of this year as we seek to bring fluviral to the U.S. market. The Company's benefited from research and development tax credits and grants in the amount of 1.5 million for three months ended March 31, 2005, compared to 0.3 million for the same period in 2004. Included in research and development tax credits; are amounts received or receivable from technology partnerships to Canada and National Institutes of Health and Provincial Government investment tax credits. The Company recorded selling, general and administrative expenses of 7 million for the three months ended March 31, 2005, compared to 2.3 million for the same period in 2004. This increase is primarily the result of the selling and administrative employees acquired in the Shire acquisition. Also contributing to the increase, is costs related to our Sarbanes-Oxley reporting compliance and stock based compensation.

The Company recorded interest income of 0.8 million for the three months ended March 31, 2005, compared to 0.9 million for the same period in 2004. The Company recorded a foreign exchange gain of 0.5 million for the three months ended March 31, 2005, as compared to a loss of 0.01 million for the same period in 2004. This foreign exchange gain is a result of the U.S. dollar denominated Shire funding facility for the flu advances and the U.S. dollar denominated financing transaction used to repurchase the Shire subscription receipts. Interest expense and other finance charges in amount of 3.9 million were recorded for the three months ended March 31, 2005, compared to 0.1 million for the same period in 2004. The increase in interest expense and other finance charges is a direct result of the flu advances received under the Shire funding facility and interest expense and finance charges associated with the financing transaction to repurchase Shire subscription receipts that closed on January 5, 2005.

The Company has cash and short term investments of 150.1 million at March 31, 2005, as compared to 105.1 million at December 31, 2004. Included in cash and cash equivalents and current liabilities are amounts related to the U.S. $30 million payable to Shire on September 9, 2005. These amounts are held in escrow as of March 31, 2005. The Company's net working capital increased to 86.8 million at March 31, 2005, compared to 53.7 million at December 31, 2004. The increase in working capital is primarily the result of the sell and lease-back transactions thus funding of the Company's developing, manufacturing, clinical trials, facility expansion and research. That concludes the financial highlights for the three months ending March 31, 2005.

Thanks, Richard. I will now call on Tony Holler to give his report on the activities of the Company during the quarter.

Thank you, Dean. The number one priority for ID Biomedical in 2005 is the commercial development of fluviral for the U.S. market. During the first quarter of 2005 were we achieved important milestones in our pursuit of this objective.

First, in early January the U.S. Food and Drug Administration allowed ID Biomedical to begin clinical testing of fluviral in the United States. This clinical trial involved testing fluviral in a randomized, double blind, comparator controlled study in 300 healthy adult subjects. This trial was the first clinical study of fluviral ever done in the United States and was a necessary initial step on the path towards ultimate licensure of our product in this important market. Under the initial plan that we started upon, marketing approval would have required additional clinical trials and as earliest we expected to be in position to enter the U.S. market in time for the 2007, 2008 flu season.

Then in late January, we got some very good news. The FDA had made fluviral eligible for accelerated approval and priority review. Accelerated approval and priority review are specific regulatory programs to expedite the availability of products into the U.S. market, which address important healthcare needs. By achieving this status, it meant that ID Biomedical could be in the position to enter the U.S. market in time for the 2006, 2007 flu season. Or, one year earlier than originally planned. As part of this accelerated approval process the FDA requested that we expand the ongoing clinical trial in the U.S. from 300 to 1,000 subjects. Enrolling an additional 700 subjects presented a great opportunity but also a logistical challenge in order to file our BLA by the end of the year. At the end of March we received confirmation that all 1,000 subjects had been successfully enrolled. With enrollment complete we expect data from this trial in September, putting us on schedule to file our BLA in the fourth quarter of 2005.

Priority review gives the FDA up to six months to review the BLA as opposed to the 12 months under normal circumstances. Priority review can be done as early as in four months, depending on FDA priorities. The timing of the BLA filing is important because with a six month review time we would expect to hear from the FDA if the review is positive by May, 2006, or within our manufacturing window for the 2006, 2007 flu season. The earlier we can hear something positive the better obviously. But this timing would be sufficient to allow the Company to potentially manufacture 20 to 25 million doses for to the 2006, 2007 flu seasons.

Our distribution partners, Henry Schein, AmerisourceBergen and McKesson have a contractual obligation to purchase these doses if we get licensure of the fluviral by April 1. But we believe that even if we go past that date, we believe, so long as approval looks to be imminent and we are having positive feedback from the FDA, we will be able to sell our entire capacity. We are very pleased with our collaborations with the FDA to date and it is clear that they are making every reasonable effort to ensure adequate flu vac supplies for the United States public. Given the events of the first quarter we are optimistic that we will be on the U.S. market next year.

Also in the first quarter ID Biomedical began development of a pandemic flu vaccine based on the H5N1 strain of influenza. This is the strain that most experts believe could cause the next worldwide flu academic. We obtained a genetically modified strain of H5N1. that can be grown in eggs and is no more dangerous to work with influenza strains used by manufacturers during annual flu vaccine production. Additionally, ID Biomedical responded to a request by the Canadian Government to carry out clinical testing on mock pandemic flu vaccine based on this strain. We expect to receive funding for this program in the near future.

ID Biomedical continues to be a leading Company in terms of pandemic preparedness. And with the expansion of our manufacturing facility we will be well-positioned to supply this important product to the Canadian Government as well as other potential partners in need of pandemic vaccines. Such as governments in southeast Asia or the United States. Continuing with our influenza vaccine business, also in January, we announced final results from a large field efficacy study of our nonliving intranasal flu vaccine FluINsure. Previously we announced that the one dose regimen of FluINsure was efficacious in preventing influenza like illness in association with positive influenza virus culture. The immunogenicity and safety data further supported the potential value of this product. We are currently carrying out a bridging and reimmunization study of FluINsure with our own antigen. Once completed, we will seek permission from regulatory authorities to beginning testing FluINsure in children.

In terms of our other programs in clinical development: In last March we received clearance to move our pneumococcal vaccines, PGCvax into phase I studies in infants. PGCvax has been in phase I clinical trials in adults, the elderly and toddlers. Clinical trial results to date suggest the vaccine is both well tolerated and elicits a strong immune response. Regarding our StreptAvax vaccine program; we have completed a series of clinical trials in healthy adults and are in discussions with regulatory authorities seeking permission to begin testing in the adolescent population. We are hoping to receive permission to begin these studies during the second half of this year.

Also in the first quarter, our biodefense program showed progress as DynPort Vaccine Corporation announced they were beginning phase I clinical trials of their recombinant injectable plate vaccine candidate. ID Biomedical acted as the manufacturing development partner DynPort. And carried out the analytical process development and manufacturing activities related to producing the vaccine for this clinical trial under good manufacturing practices. DynPort is the prime systems contractor for the U.S. Department of Defense Joint Vaccine Acquisition Program and has been developing the injectable plate vaccine candidate. That concludes our report for the period ending March 31, 2005. We look forward to reporting on additional progress throughout the year. I'd just like to at this point remind listeners that next week - - our annual general meeting we will actually - - be having our report from the annual general meeting and we invite listeners to listen to our reports at that time.

Thanks, Tony. I would like to now open the call to your questions. As Tony said, we've got our annual meeting coming up next week and so we will just take one or two questions at this time. Can you help us out?

Thank you. One moment, please. [OPERATOR INSTRUCTIONS] Your first question comes from Dave Dean of Sprott Securities, please go ahead.

Can you explain to me exactly how it is the pandemic preparedness program might allow to you begin manufacturing the vaccine on - - assuming approval, of course, maybe sooner than otherwise considering that you might not have to order eggs? I'm not clear with that process. And the second question is if you could update us on your understanding of the flu vaccine prices right now? That would be great. Thanks.

Thanks, Steven, it's Tony Holler speaking. In terms of pandemic preparedness I think what we are getting at is fact that under the contract with the Canadian Government; we have to be prepared 365 days a year to produce pandemic flu vaccine if the World Health Organization and the Canadian Government declares a pandemic. Which really puts us in the position that we are always in the position to produce flu vaccine of some sort, whether it be pandemic or it be regular influenza vaccine supplies. So this preparedness - - or pandemic preparedness actually helps us in every situation in terms of manufacturing flu vaccines.

Okay. I guess my question is I'm not clear if then you are diverting some of the eggs to regular flu vaccine, how that allows you to maintain your preparedness level?

Remember, David, that the preparedness only happens if it's declared. And then what happens - - let's say right this very minute a pandemic were declared. What would happen is we would stop manufacturing the regular flu vaccine that's given annually and right away move to the pandemic flu vaccine manufacturing. So, you wouldn't change - - it wouldn't change your requirement for eggs, it's just that we are prepared 365 days a year. So the two are not related but in some ways they are related.

In terms of flu vaccine pricing; approximately eight years ago flu vaccines were priced at an average wholesale price of approximately 2.50 a dose. And in the last - - in the 2003, 2004 flu season the average wholesale price was approximately $8 a dose. We know that Aventis this year for this coming flu season is advertising their vaccine at 9.95 U.S. a dose. And what that really tells us is that flu vaccine prices have been increasing for some time. And we believe in part because flu vaccines are such an incredible bargain even at $10 U.S. that that price will be continuing going to up. Remember the other thing is that there are some major investments that companies are making into this business. Companies such as Chiron. And they have to get a return on investment. So, I think from a pricing standpoint we remain confident that pricing will remain robust and has room actually to increase.

And have you said publicly what you expect your cost of goods to be?

We haven't said publicly what we expect our cost of goods to be. But I would just add that you know we have the most modern plant in the industry. So you can imagine we have some cost advantages. And the other thing that hasn't been lost on you is that we operate in Canada, in Canadian dollars and so obviously we sell in U.S. dollars that's a huge advantage.

Okay. Thanks, guys .

Your next question comes from Russell Gilbertson of Caris & Co. Go ahead.

Just a quick question regarding FluINsure. Could you refresh us on design of the bridging and the reimmunization and the number of patients, duration, when we can expect data? And kind of, what kind of trial design you would anticipate in the study in children?

Okay. Russ, remember, this is done in a fairly limited number of people. It's about 100 people this reimmunization study and bridging study. Remember the bridging part of the study is really so that we can get the eight previous clinical trials into our new drug master file. Remember that we now have our own antigen supply and offer our own product totally. So we are no longer getting our antigen supply and manufacture our own product totally. So we're not longer getting our antigen supply from a European manufacturer. So we had to - - because the regulators look at this as a brand new product we had to do these bridging studies to really - - so we didn't have to repeat all those eight clinical trials, basically.

So, we expect results from that - - from those bridging studies sort of towards the end of June, that type of timeframe. And that date is important to us because we won't be able able to go into our pediatric studies without that data. Yes, we have a very large field efficacy study, which obviously is very important in moving into children. And remember that was done in healthy adults. But the bridging study is critical for to us move forward in children. And really because all we have to show is that these products were equivalent. Our own antigen influenza versus the European manufacturers antigen and influenza.

The studies in children will probably start with relatively small studies, first in older children and then moving to younger children. And remember - - the other thing I point out is that remember in children that whether you use - - the, young children, whether you use the injectable vaccine or intranasal vaccine, the product is a two dose product. So, in young children would you anticipate this to be a two dose product. So our studies in children will look at two doses and one dose. But remember that in adults, one dose product.

Right. So, just to recap that, the bridging study is the one that's really critical in terms of moving forward with FluINsure. And you expect that data in June and the study in children could be before year end?

Yes, we anticipate it to be before year end.

And that would be a small study. Do you think that licensure would first be in children then with FluINsure or you do you think you'll attempt to get licensure in adults first?

Sorry, could you repeat that?

Do you think that - - ultimately when you look for approval of FluINsure will it be in children or adults first?

In children. And the reason we have targeted children is that appears to be a readily accessible market. One of the things that's coming down the pipeline with health authorities is broad recommendations for pre and school age children. And there is no real product to address that except the injectable vaccine at the present time. So we would look to the pediatric population for our first approval.

Okay. And that would be adolescence or would it be from six months up to 18 years?

Well, we haven't determined exactly the first group that we will go after. But obviously we'd like to get that whole group, from the six months to 18 years. Because they are in school. They are a population that's easily vaccinated through the school system and public health units. So, we definitely are targeting that whole age group.

Thanks.

Your next question comes from Claude Camire of Paradigm Capital. Please go ahead. Sir, please go ahead.

I guess we've lost Claude. I guess that would give me the opportunity to thank you very much for participating on this conference call. Again I'd like to remind you that the Company is holding its annual meeting May 26. That's Thursday of next week, in Montreal. And we'll be providing a Webcast of the proceedings. So with that said on behalf of the management of ID Biomedical I'd like to wish you all a very good day.

Ladies and gentlemen, this concludes the conference call for today. Thank you for participating. Please disconnect your lines.