輝瑞 (PFE) 2007 Q2 法說會逐字稿

Good morning, ladies and gentlemen.

My name is Natasha and I will be your conference operator today.

At this time, I would like to welcome everyone to the Icagen Second Quarter 2007 Earnings Release Conference Call.

(OPERATOR INSTRUCTIONS)

Thank you It is now my pleasure to turn the floor over to your host, Dr.

Richard Katz, CFO.

Sir, you may begin.

Thanks very much.

Good morning, everyone and thank you for joining us today to discuss Icagen's corporate research and clinical progress, as well as our financial results for the second quarter of 2007.

We'll begin the call today with a Company overview by Kay.

She'll review the clinical progress to date in our programs and then I will review the financial results.

With us as well, we have Greg Rigdon.

Greg is head of New Product Development and the leader of the program that recently entered the clinic, our KCNQ program, ICA-105665 and Greg will be happy to answer and address any questions with regard to that program.

Seth Hetherington is on vacation today, so Greg will be filling in for him.

Also with us are Bob Jakobs and Caroline Carr, both Senior Directors in our Finance group.

So before we begin, I'd just like to read the following regarding any forward-looking statements that we may make today.

Various remarks that we may make about the Company's future expectations, plans and prospects constitute forward-looking statements for purposes of the Safe Harbor Provisions under the Private Securities Litigation Reform Act of 1995.

Actual results may differ dramatically -- I'm sorry, materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in our most recent Quarterly Report on Form 10-Q, as filed with the SEC.

In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date.

While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change, and therefore you should not rely on these forward-looking statements as representing our views as of any date subsequent to today.

So, with that, let me now turn the call over to Kay.

Thanks, Rich.

First let me start out by saying how very proud I am of our teams here at Icagen.

They've shown a great deal of depth and resilience over the last quarter.

The Discovery and

Development groups are focused on our new programs in pain and epilepsy and making outstanding progress.

The senicapoc team has also increased it commitment to our IK-1 program and is pursuing indications with potentially significant returns and I'll talk about that a little bit more later.

The quality of the science at Icagen has always been consistently high and now, with the singular focus on discovering novel compounds, we're demonstrating our success, in the recent IND filings, our IP estate, the strong progress in our multi-target study in the calcium channel programs and the extensive interest from major pharmaceutical companies in several of our programs.

We continue to invest in our scientific core and to recruit hire great scientist in order to ensure that we are always able to regenerate our pipeline.

So let me describe that pipeline and talk about, first, the KCNQ program.

Our achievement in the KCNQ epilepsy and pain program is certainly a highlight.

Once again, we've developed the target expertise, we've discovered newly patented compounds and through the work of our biologist and pharmacologists and chemists and clinical teams have actually done all the work to compile, write and submit the IND.

Our clinical team will conduct and monitor the Phase I trial itself, which will begin in the third quarter if our application is accepted by the FDA.

The IND compound I call ICA-665 is selective for subtypes of KCNQ channels and has been shown by Icagen and other laboratories, including the NIH, to be efficacious in a broad spectrum of seizure models.

Including those models that are most predictive for effects in humans who have generalized or partial seizures, or those who have seizures that are resistent to current therapies, or treatment-resistent seizure disorders.

And they also work in certain pain models, including the Chung Model, which is a classic model of neuropathic pain.

Now 665 has a very encouraging safety and toxicity profile and that profile provided the strong basis for our plans to move into Phase I human clinical testing later this year and provided that those Phase I studies are promising, we plan to initiate Phase II studies in 2008.

Now those Phase II studies, at this time, are planned to be both in epilepsy and proof of concept studies in pain indications.

We haven't made specific decisions about the trials and their design, because we'd like to see the results of the Phase I, as well as work with experts in this field.

And I think Greg will have some more to say about that, as you ask questions about the 665 program.

We have, and at this point planned, to continue to retain 100% of the worldwide rights to this program, which not only is comprised of 665, but a growing number of backup possibilities, which are being generated by the KCNQ team of scientists here at Icagen.

Senicapoc is the second asset that I'd like talk about.

This is our potential drug that has completed eight Phase II clinical trials.

It's been tested in over 200 volunteers and found to be general well tolerated in those volunteers.

The target for senicapoc is called IK-1, or KCNN4, and target is expressed in a number of cells, including immune system cells, and proliferating cells.

So, on the basis of that, as well as in vitro and in vivo work that we've done over a number of years, we believe that this compound may be important in certain inflammatory and proliferative disorders.

So, in order to narrow that focus and determine what those disorders are that we would like to break in Phase II clinical trials with next year, we have recently initiated series of preclinical studies with senicapoc to explore those possibilities.

And some of those that we are particularly interested in are asthma, rheumatoid arthritis, transplant rejection and even atherosclerosis.

We continue to await the final data collection and analysis from our early-terminated Phase III trial of senicapoc, which, you'll remember, had as its primary end point the reduction of vasoocclusive crises in sickle cell disease.

Also, as a result of the termination of that trial, we recently announced that the collaboration with McNeil was terminated and that is effective in September.

But besides that, we expect to fully analyze the data from this Phase III trials as we determine whether there are different indications in sickle cell disease for which senicapoc should be investigated.

So, on the one hand there's that possibility and the other hand there's the possibility that I just described, of moving into other disorders in the inflammatory and proliferative conditions that I've described.

Let me also highlight the sodium and calcium channel pain programs.

Those are the programs in which we are investing most of our discovery resources today.

We have bioavailable compounds, which show efficacy in pain models, and our near-term goal in those programs is as quickly as possible to select the compounds which have the potential to become clinical candidates.

We have the belief that these programs could generate multiple drug candidates, because pain is a very complex condition or series of conditions and we don't believe that one pill will fit all needs.

So we are taking a rather broader approach to selecting compounds in a variety of pain indications.

We have built and continue to build and impressive patent portfolio in this area.

We're currently -- we retain all the rights to our compounds and technologies.

As in all of the programs, the quality of science in these programs are very high, as evidenced by our recent publications in this area, particularly in the sodium channel area.

A brief update on our ongoing collaborations.

While Astellas continues to make solid preclinical progress on collaborations of compounds for memory disorders, including Alzheimer's Disease, we have been told this week that BMS is not moving forward with collaboration compounds for atrial fibrillation.

Their lead compound was just recently terminated due to formulation issues, among others.

And having just received this information, our current plan is to request a detailed review of available data to determine our interest in and the potential from BMS for pursuing the further development of collaboration compounds.

And finally, I'd like to just remind you that we have been building a drug discovery and development expert panel to work with Icagen to advise us on a variety of topics.

We had announced earlier this year that we formed this panel and the first two members were Dr.

Chris Cimarusti and Dr.

Ian Skidmore, who are former R&D managers in major pharmaceutical companies.

Recently we added Bill Catteral, who is Professor and Chairman, Department of Pharmacology at the University of Washington.

He is an excellent ion channel scientist, particularly experienced in the sodium channel area.

We've added Christine Sang, M.D.

She's the Director of the Translational Pain Research at Brigham and Women's Hospital and Harvard Medical School and finally, Cheryl Zimmerman had been added.

She's the Professor and Director of Graduate Studies at the Department of Pharmaceutics at the University of Minnesota.

These three academicians help round out the expertise of those panels and we had a recent meeting here at Icagen.

I think that it was very helpful.

They had great suggestions, but I think it was also nice to hear that these individuals who reviewed our programs were very impressed with the quality, science, the progress, and the status of our programs at Icagen.

So those are just some of the highlights of our key programs and our ongoing activities.

So I'd like to turn it now back over to Rich for the financial overview.

Thanks, Kay.

Let me just start out by saying that the financial results were consistent with our expectations, in all material respects.

The only complicating factor this quarter, of course, was the termination of the McNeil contract and that flowed into the financials this quarter and will flow in next quarter as well.

It results in a change of our guidance for the full year.

But excluding the McNeil termination, there's no change, essentially, to our guidance or our expectations.

Let me just start out by kind of recapping the way the accounting works for the McNeil collaboration.

When we signed the agreement, there was an up-front payment of $10 million and then there was a milestone, which was recorded very early after the end of Phase II meeting with the FDA, that was $5.0 million.

So that $15 million was capitalized, put on the balance sheet as deferred revenue.

And it was being recognized gradually, over time, over a 15-year amortization period, so about $1.0 million a year.

We had a balance of deferred revenue at the end of the first quarter of $12.25 million left unamortized.

As you're probably familiar with the termination of the contract, we changed the estimated useful life of that agreement to reflect the September 18th termination date and as a result, that $12.25 million of deferred revenue is now being amortized on a more rapid schedule into revenue.

So it'll be fully amortized by the time of the effective date of the termination.

That resulted in a recognition of about $1.9 million of revenue during the second quarter and the balance of that amount of approximately $10 million-ish, a little bit more than that, will be recognized in the third quarter.

And that will, obviously, in a significant increase in the revenues beyond our original expectations, but in terms of the operating performance of the Company, on a cash basis, our expectations are as they had been.

There was another aspect to the accounting here, which is also worth mentioning, and that is when we received the $15 million from McNeil we, in turn, made a milestone payment to a licensor, Children's Medical Center Corporation, that had done some of the early research in terms of Gardos channel inhibition.

And that payment was capitalized as an asset, as a long-term asset, represented at the time, I believe it was about $1.9 million, $2.0 million.

And that, in turn, was also being amortized on a similar schedule.

When we received notification of the termination, we determined that that asset should be viewed as impaired and so we took a full write-down for that asset.

The balance was about $1.6 million and that asset was written down during the second quarter.

So that was reflected as an increase in the R&D expense.

That's why you'll see in our financials that R&D expense jumping up to $8.7 million.

There's about $1.6 million in there that is non-cash related to that write down.

So, if one were to exclude both the extra revenue and the extra expect that were non-cash associated with the McNeil termination this quarter, our results are completely consistent with prior quarters and with what we expected.

So, with that as background, let me just say quickly that revenues for Q2 '07 were $3.4 million.

This compared to $2.6 million during the same period in '06.

This was an increase of 28%.

The increase was primarily due to -- was entirely due to the recognition of the extra revenue as a result of the termination, as we just discussed.

Operating expenses were $10.3 million.

This compared to $9.4 million during the same period in '06.

This was an increase of 9.0%.

Again, the predominant reason for this was the write-down of the capitalized asset, that milestone payment to CMCC of $1.6 million, again non-cash.

So net loss for the Q2 '07 was $6.5 million.

This compared to $6.3 million during the same period in '06, an increase of 2.0% due to the factors that we just cited.

For the six-month period, our revenues were $5.4 million.

This compared to $4.5 million during the same period in '06.

This was an increase of 19%, again, entirely due to the termination of the McNeil contract.

Operating expenses were $19.1 million for the first six months of '07.

This compared to $18.4 million in '06, an increase of 4.0%.

Again, predominantly driven by the $1.6 million of write-down the CMCC asset.

Net loss for the six months was $12.9 million.

Again, this compared to $13.1 million during the same period in '06, a decrease of 1.0%, again, for the factors cited above explains the quarter-to-quarter comparison.

Financial guidance for the remainder of the year -- let me just start by saying that our prior expectations and our current expectations are consistent, if one excludes these non-cash items.

Our prior expectation for revenues had been in the range of $4.0 to $5.0 million.

With the increase in the recognition of revenue it'll be $16 to $17 million is our current expectations.

In terms of R&D expenses, we had been expecting $22 to $26 million and we now expect $24 to $28 million, again reflecting the approximately $1.6 million impairment charge.

Our expectation for G&A expenses is unchanged and that's $5.0 to $6.0 million and so while our prior operating loss expectations had been $21 to $25 million, that's now significantly reduced, down to $11 to $15 million, again, those numbers reflecting the non-cash revenue and non-cash expense associated with the termination of the McNeil collaboration.

I will also just mention briefly that these numbers also include the effect of stock-based compensation expense, which we expect to be about $2.5 million during '07, again that's the same number that we had provided previously.

We ended the quarter with the cash balance of $35.1 million and that's, again, consistent with where we had expected to be at this time.

So, that will conclude the financial update and operator, we can now open the call to the listeners' questions.

Thank you.

(OPERATOR INSTRUCTIONS) Richard Smith with JP Morgan.

Yes, good morning, everyone.

Good morning, Richard, how are you?

Good, good, just a couple of quick questions.

With the 673 -- yes, sorry, 665, how does that differ to the prior compound?

I think it was 673 that was also a potassium channel inhibitor.

Yes.

Let me as Greg Rigdon, our head of new product development.

Greg will be happy to address that question.

So 696, both of these compounds are openers of the same potassium channel.

673 had a problem in the clinic that was due, probably, to an active metabolite.

The new compound 665 is a totally different chemical structure to 69673, even though the mechanism of action is similar.

They both target KCNQ, is that correct?

Yes.

All right and just with the Phase I, could you provide a little bit more detail, maybe patients, I guess it's a single dose ascending trial, but number of patients?

That's a single ascending dose study in healthy male volunteers.

It'll be conducted at a CRO starting in Q3.

We anticipate probably about six cohorts in order to find maximum tolerated dose.

That's the primary reason for doing the study, is to establish maximum tolerated dose and also the pharmacokinetics of the compound.

Do you have any sense at this moment whether that's QD or BID?

BID, probably.

Okay and just curious, male volunteers?

What's the reason for just focusing on males?

There's no repro tox data, reproductive toxicity data as yet, so the standard development procedure, at least in the U.S., is to start out with healthy male volunteers and then, after you establish pharmacokinetics, move onto females when you've gotten more reproductive toxicity data from your preclinical studies.

Okay.

I'll get back in the queue.

Thanks.

(OPERATOR INSTRUCTIONS) Richard Smith, JP Morgan.

Back again.

With respect to just the tox studies, how much have you done so far, with respect to --have you done, I think, 28-day or?

Yes.

We've completed 28-day toxicity studies in rat and Cynomolgus monkeys with the compound and we've also completed all of the in vitro genetic toxicity studies as well as one in vivo genetic toxicity study and the compound looked -- it was clean in all of those.

And just switching over to the SCN9A sodium channel, what's the update there?

So, as I noted, that sodium channel program is going well.

We have three targets in the sodium channel program, one of which is SCN9A, as you've just mentioned, and that work is really going well.

We have a great compound, a newly submitted IP and the program is going along well.

What our goal is, is to try to find the compounds that are potential clinical candidates and we're making great progress to do that.

Is there any timing on maybe filing an IND from one of those three targets?

Yes, I wouldn't want to speculate on that until we've identified the compound and then we will be about nine months away from filing once we have the compound and we haven't selected a compound at this time.

Okay and maybe just one other question.

With senicapoc, obviously you've got to get through the data.

You mentioned there are a number of other indications, both with sickle cell disease and outside sickle cell disease.

Is there a kind of an order, at the moment, which you'd prefer just to focus on within all those indications with (inaudible - multiple speakers)?

All right.

The potential indications for which we have animal data with this compound or related compounds, the ones that are most provocative to us are the ones that I've mentioned -- asthma, rheumatoid arthritis and transplant rejection.

There's some really interesting work also in atherosclerosis, but as you know, that's a fairly tough area and so I think at this point in time, we would be leaning towards the asthma and rheumatoid arthritis indications.

But we really want to finish some of the other studies before we make that call.

Now there was talk before about looking at pediatric Sickle Cell Anemia.

Is that still something or?

Correct.

The thing that we really need to do is that we need to get the data set and we haven't gotten the data set yet.

It's being rolled up and put into tables and things and so when we get the data and really look at it, we can see what other possibilities in sickle cell disease there are.

The two that we've mentioned before are pulmonary hypertension and prevention of stroke in children and those indications are quite different, as you know, from the one that we were studying in the adult trial with the crisis rates.

So there's good science behind the relationship between hemolysis and those indications, hematocrit levels and those indications that I just mentioned.

But we really do need to study the data and see what it says to us before we make those decisions.

So, for a number of years at Icagen we really have been looking at this area for these other indications that I mentioned, like asthma, and now we've got the opportunity to fund one or more of these other programs.

So we'll have to look at the data.

We'll have to weigh the risk and balance and decide what is the best opportunity for senicapoc in the future.

It's a great asset, but we just need to time to sort out the data on the sickle cell side and to look at these preclinical animal results on the inflammatory and proliferative side to make the right call.

So do you have a sense of when you might be in that position?

Right.

So what our goal is, is to be back in the clinic with this compound in 2008.

I can't get much more clarity on that at this point in time, till is see the data and also until we finish these studies, which should be finished by the first quarter of 2008.

So, yes, that's where we are right now and we're focused on 2008, but I can't tell you whether it's second quarter or third quarter or fourth quarter at this point in time.

Okay, just one final question, with respect to partnerships.

I think you briefly touched on this.

How are things -- I mean, it sounds like you're getting some interest.

Maybe you could shed a little bit more light on the situation?

So it's been a really busy time with business development over the last two quarters.

We've had interest in the epilepsy/pain program, which, at this point in time, as I noted, we intend to retain those rights.

But there is certainly keen interest, now that the IND has been filed, in that program.

The sodium channel program is really the place that we are in the best position and having most interest, I think, and active discussions going on for that preclinical program.

Great.

Thank you.

Thanks, Richard.

(OPERATOR INSTRUCTIONS) Chris Richard, Merlin.

Thank you, Kay and Rich, actually Richard just asked my question, so thank you.

Okay, good, no problem, Chris.

There are no further questions at.

At this time, I would like to turn the floor back over to management for any closing comments.

Okay.

Operator, perhaps we'll just wait one more minute.

Sometimes people think of questions, so maybe we'll give folks a minute more and then we'll close it up if no more are forthcoming.

(OPERATOR INSTRUCTIONS) There are no further questions.

Okay, very good.

Well, thank you all for joining us.

We appreciate your time this morning and we'll look forward to updating you again on our next try call.

Thank you.

Thank you.

This concludes today's conference call.

You may now disconnect .