Gyre Therapeutics Inc (GYRE) 2009 Q1 法說會逐字稿

Thank you, everyone, for joining us to the first-quarter 2009 Targacept, Inc., earnings conference call. My name is Erica and I will be your coordinator for today. At this time all participants in a listen-only mode. We will facilitate a question-and-answer session towards the end of this conference. (Operator Instructions)

Any statements made or responses given during this conference call that are not purely historical in nature constitute forward-looking statements made under the provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, statements regarding the timing for a decision by AstraZeneca whether to conduct further development of AZD3480 in either both of Alzheimer's disease and ADHD; the progress or scope of the research and development of Targacept's product candidates such as the number of subjects to be enrolled in any clinical trial, the timing for initiation or completion of or unavailability of results from any clinical trial, or the indication for which product candidates may be developed; the therapeutic benefit of Targacept's product candidates; any future payments that AstraZeneca or GlaxoSmithKline may make to Targacept or Targacept's plan; expectations or future operations; financial position; revenues; costs; or expenses.

Actual results may differ materially from those expressed or implied by forward-looking statements as a result of various important factors, including, without limitation, those described under the heading Forward-looking Statements in the press release that Targacept issued earlier today or under the heading Risk Factors in Targacept's most recent annual report on Form 10-K and in other filings that it makes with the Securities and Exchange Commission.

Such forward-looking statements speak only as of today and should not be relied upon as representing Targacept's views as of any date after today. Targacept disclaims any obligation to update any forward-looking statements except as required by applicable law.

At this time I would like to turn the floor over to Dr. Don deBethizy. You may proceed, sir.

Thank you, Erica. Good morning, ladies and gentlemen. I'm Don deBethizy, Targacept's President and Chief Executive Officer, and with me on this call is Alan Musso, Targacept's Chief Financial Officer, who in a few moments will review with you our financial results for the first quarter ended March 31, 2009, which we have just released; And Dr. Geoffrey Dunbar, Targacept's Vice President Clinical Development and Regulatory Affairs.

Let me begin by speaking about the positive top-line results from the Phase 2 study of AZD3480 in adult ADHD that we announced earlier this morning. The study was a double-blind, placebo-controlled crossover trial conducted under the oversight of Doctors Paul Newhouse and Alexandra Potter at Fletcher Allen Health Care, which is an affiliate of the University of Vermont College of Medicine.

In the study, subjects with ADHD between the ages of 18 and 65 received in random order daily doses of 5 milligrams of AZD3480, 50 milligrams of AZD3480, and placebo, each for two weeks, with the dosing periods separated by a three-week washout period. The efficacy dataset for the study included 24 completed subjects.

We achieved statistically significant results in favor of AZD3480 on the primary outcome measure of the study, the Conners Adult ADHD Investigator Rating Scale, which is often referred to as CAARS, and a number of secondary outcome measures including the Stop Signal Reaction Time, which assesses behavioral inhibition, a core cognitive deficit of ADHD. The preliminary results from the study indicate a magnitude of effect akin to what would be expected with stimulants.

Importantly, in addition to the positive results on the efficacy measures, AZD3480 was well tolerated and demonstrated a placebo-like side effect profile in the study, adding to an already robust safety database that now totals approximately 1,350 subjects. We believe there is a compelling need for novel efficacious, well-tolerated non-stimulant medicines to meet the needs of patients with ADHD and are very encouraged by the outcome of this study and the competitive potential of AZD3480.

Under our agreement, AstraZeneca has an exclusive global license to AZD3480. We are continuing to work closely with our AstraZeneca colleagues as they prepare to make their decisions regarding potential further development of AZD3480, which are expected in the near future.

Now let me move on to TC-5214, a nicotinic channel blocker for which we have retained the commercial rights. We completed enrollment in January 2009 in a Phase 2b clinical proof-of-concept trial of TC-5214 as an augmentation treatment for major depressive disorder, or MDD. In this study, 586 subjects were enrolled into the open-label first phase, which we expect to result in about 220 subjects qualifying for the double-blind second phase. We continue to expect to complete the trial and report top-line results in mid 2009.

The value proposition for TC-5214 is clear. First of all, MDD affects approximately 14.8 million adults in the US alone, of which an estimated 40% or more do not respond well to first-line SSRI treatment.

Secondly, feedback received from thought leaders in the depression field confirms a substantial need for new treatment options for these patients.

Third, the results from our completed Phase 2 TRIDMAC study validate the potential utility of the NNR mechanism to augment existing treatments for depression. Findings published by our scientists in peer-reviewed articles in the Journal of Pharmacology and Experimental Therapeutics and CNS Neuroscience and Therapeutics indicate TC-5214's superior overall preclinical profile as an antidepressant as compared to racemic mecamylamine.

And finally, our retained commercial rights and the significant market opportunity in MDD create promising partnering potential for our depression program. We believe TC-5214 may have therapeutic application in a number of areas in addition to MDD. In April, we initiated a Phase 2 exploratory study of TC-5214 as an augmentation therapy for resistant hypertension, where we believe the mechanistic rationale to be compelling. We expect a single-site study to enroll approximately 12 subjects and be completed in the second half of 2009.

Moving now to TC-5619, we continue to prepare for planned Phase 2 development of this highly selective alpha7 NNR targeted product candidate in cognitive dysfunction in schizophrenia, or potentially one or more other conditions characterized by cognitive impairment. In our Phase 1 single rising dose and multiple rising dose trials, TC-5619 was generally well tolerated at doses at least 100 times greater than the doses that we expect to evaluate in future clinical trials.

AstraZeneca has the right to license TC-5619 following our completion of a planned Phase 2 clinical proof-of-concept trial. If TC-5619 achieves clinical proof-of-concept and AstraZeneca licenses it, the pre-negotiated terms provide for AstraZeneca to pay us a $40 million fee, for us to be eligible for substantial pre-commercialization milestones, and stepped double-digit royalties on future product sales, and for AstraZeneca to assume responsibility for and fund later-stage development and commercialization.

AZD1446, which we also refer to as TC-6683, is a third clinical-stage product candidate subject to our collaboration with AstraZeneca. AZD1446 is the most advanced compound arising from the alpha4 beta2 focused preclinical research collaboration that we are conducting with AstraZeneca and is currently in development for Alzheimer's disease, ADHD, or one or more other conditions characterized by cognitive impairment. AstraZeneca is currently conducting Phase 1 clinical development of this product candidate.

In addition to our collaboration with AstraZeneca, our alliance with GlaxoSmithKline provides us a foundation to leverage our discovery and development capabilities and accelerate the progression of multiple preclinical programs. Specifically, our eligibility for up to $16 million in success-based progress milestones in each of the alliance's therapeutic focus areas, prior to initiation of Phase 2, allows us to advance programs that might otherwise be inactive and creates multiple opportunities to expand our portfolio and diversify the risk inherent in drug development.

In the first quarter of 2009, our research efforts resulted in $2.5 million in milestone revenue from GSK.

In summary, I believe we are well positioned to continue to execute our operating plan and work towards achieving our vision of building health and restoring independence for patients for whom existing therapies are inadequate. We have a deep pipeline that presents multiple clinical opportunities, a productive discovery engine, alliances with two of the world's leading pharmaceutical companies, and over $80 million in cash resources as of the end of the first quarter.

I will now turn the call over to Alan Musso, our Chief Financial Officer. Alan?

Thank you, Don. Let me review now with you our financial results for the first quarter of 2009. We ended the first quarter of 2009 with over $80 million in cash, cash equivalents, and short-term investments. We continue to expect that our current cash resources will be sufficient to meet our operating requirements at least through the first half of 2011, and we remain focused on the efficient use of capital and controlling our expenses.

Turning to our operating results, we had a net loss of $4.7 million for the first quarter of 2009 compared to a net loss of $5.8 million for the first quarter of 2008. The first quarter of 2009 our net operating revenues were $6.1 million compared to $4.3 million for the first quarter of 2008. The increase was primarily due to an additional $2.5 million in milestone revenue generated in our alliance with GlaxoSmithKline. The higher amounts in revenue was partially offset by a decrease of $714,000 in collaboration research and development revenue.

Our research and development expenses totaled $9.5 million for the first quarter of 2009 compared to $9.1 million for the first quarter of 2008. The higher research and development expenses were primarily attributable to an increase of $586,000 in costs incurred for third-party research and development services in connection with preclinical programs, including programs in the therapeutic focus area of the alliance with GlaxoSmithKline.

This increase was partially offset by a decrease of $218,000 in costs incurred for third-party research and development services in connection with clinical-stage product candidates. And for the first quarter of 2009, the third-party costs totaled $2.2 million and were incurred principally for TC-5214 and TC-5619.

Our general and administrative expenses were $1.5 million for the first quarter of 2009 compared to $1.7 million for the first quarter of 2008. The lower general and administrative expenses were primarily attributable to a decrease of $271,000 in patent-related expenses.

Our net interest income was $302,000 for the first quarter of 2009, compared to $919,000 for the first quarter of 2008. The decrease was principally attributable to lower short-term interest rate, a lower average cash balance, and increased indebtedness under loan facility used to finance equipment, software, and other fixed assets.

Now let me turn the call back over to Don.

Thank you, Alan. Let me end by saying we are very pleased with the recently announced outcome from the adult ADHD study and with the continued progress of our pipeline of NNR Therapeutics. Thanks to everyone again for joining us on today's call. We would be happy to take any questions you may have.

(Operator Instructions) Terence Flynn, Lazard Capital Markets.

Hi, good morning. Thanks for taking the question. Just on 3480, I was wondering when you guys give us the AstraZeneca go/no-go decision on future development, if you will be able to give us any details on the next steps with the program with respect to next steps for AD in terms of trial design, or what the Phase 2b program for ADHD would look like.

Good morning, Terence. We are working closely with our partner, AstraZeneca. As you know, we have a close working relationship with them; and as we previously disclosed, they will be making their decision in the second quarter. So at this time, I don't have any additional information to provide to you.

Okay. Then if AstraZeneca say makes a no-go decision with respect to future development and returns the rights to you guys, would you anticipate taking the drug forward for either AD or ADHD on your own?

Well, we would like to just wait and go through the process with AstraZeneca and their decision-making progress. As you know, we are very excited about the molecule. It's been studied now in 1,350 patients and subjects.

This outcome in this most recent trial is very gratifying to us, because it's consistent with the studies we've done previously in age-associated memory impairment as well as the secondary measures in our Alzheimer's disease trial. So as you know we're excited about the molecule. We are interested in it moving forward, and we are working very closely with our partner, AstraZeneca.

Great, thanks a lot, guys.

Bret Holley, Oppenheimer.

Yes, thanks. Thanks for taking the question. My question, actually, is the applicability of the CAARS endpoint for further development. What is the precedent that we have seen in adult ADHD? How might we think about the applicability of this result in the Phase 2a to further studies?

You know, just from a top-line, Bret, the CAARS was developed for adults and it's been used previously in other adult ADHD trials. But I will let Dr. Dunbar address that.

Thank you, Don. Indeed, the Conners Adult ADHD Rating Scale is, if you like, the gold standard in this area. It has been used, I believe, in all of the adult studies of ADHD.

Vis-a-vis this utility in further Phase 2, Phase 3 development, then absolutely we will continue to use this, the Conners, as the primary outcome measure.

I guess the question I have is that if you were able to show a positive outcome in 24 patients, are we talking about trials that are not hundreds and hundreds and hundreds of patients going forward?

Well, do remember that this early trial was a crossover design. As a result, even though 24 patients seems like a small number, the fact that it's a crossover design significantly increases the power.

Vis-a-vis further development, of course, we would be moving to parallel group design. But again, the effect that we've seen in this early trial bodes very well for easy or relatively easy separation from placebo in parallel group design trials.

I think the other -- so we're not sure what the Phase 3, Phase -- the additional clinical development plans will look like yet. We will be working through that. But as you know, we have been in over 1,000 subjects.

So I think the safety database has been growing and hopefully we will be able to do a further development program that isn't a huge number of people. So we will be working through that and lining it up with what the expectations of the regulatory agencies are.

Okay. Thanks very much, Don and Geoff.

Kim Lee, Wedbush Morgan Securities.

Good morning. Congratulations on the positive data.

Thank you.

Just a couple of technical financial questions here. Can you tell us exactly what Inversine revenues were? And do you still reiterate your financial guidance, the top-line guidance and also OpEx that you have (inaudible) in February.

Yes. Hey, Kim, this is Alan. Good morning. Yes, our Inversine net sales in the first quarter were $251,000.

In regards to our financial guidance, the guidance that we've previously issued remains in place and we have made no updates to that. That, as you may recall, had operating revenues of $14 million to $16 million and had expenses of between $46 million and $50 million, and also had us ending the year with at least $54 million in cash, cash equivalents, and short-term investments.

Great, thanks.

(Operator Instructions) Jon LeCroy, Natixis.

Hey, thanks for taking my call. Can you touch on what diseases our molecules led to the Glaxo $2.5 million payment?

Yes. We've made progress with smoking cessation, and we received a payment related to smoking cessation as well as obesity.

All right, thanks.

(Operator Instructions) We have no further questions in queue. I would now like to turn it over to Mr. Don deBethizy for closing remarks.

Thank you, Erica. Well, I want to thank everybody for being on the call, and I especially want to thank our partners, AstraZeneca and GSK, for their continued support and commitment to the programs that we are jointly working on, as well as our colleagues at the University of Vermont who executed our ADHD trial.

So thank you all for attending the call this morning and look forward to further updates as we move forward in second quarter. Thank you.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect and have a wonderful day.