輝瑞 (PFE) 2010 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth quarter 2010 Icagen, Incorporated earnings conference call.

My name is Jasmine, and I'll be your operator for today.

At this time, all participants are in a listen-only mode.

Later, we will conduct a question-and-answer session.

(Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to your host, to Dr.

Richard Katz, Executive Vice President and Chief Financial Officer.

Please proceed.

Thank you very much, operator.

Good morning, everyone.

Thanks for joining us today to discuss Icagen's corporate research and clinical progress, as well as our financial results for the fourth quarter and the year end.

With me here today is Kay Wagoner, our CEO, and Greg Rigdon, our head of New Product Development.

Kay will start the call today with a general overview.

I will then address the financial results, and Greg will be available to answer questions as well.

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 of the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from these forward-looking statements, as a result of our -- of various important factors, including those discussed in our most recent quarterly report, 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 to update you on our corporate and clinical progress.

Thanks, Rich.

The last month of 2010 and the first two months of 2011 have been very positive months for Icagen.

We've made progress on all fronts.

Certainly, financially and clinically.

We have two clinical programs in areas of medical need, with potential for significant commercial market opportunities in the areas of pain and epilepsy.

Additionally we are better funded, we -- our value is increasing for our shareholders and our listing on NASDAQ is secured.

I will summarize some of the progress in the Pfizer program first, and then turn to the KCNQ program.

The progress that we have made with Pfizer has been very outstanding.

We have discovered, and continue to discover, many potent and selective antagonists for subtypes of sodium channels for new and better pain treatment.

Our lead compound in the Pfizer collaboration, which is now in human clinical trials, is a very selective antagonist for the sodium channel called Nav1.7, or SCN9A.

This is a target which has been genetically linked to pain, and one of the most exciting pain targets in our industry today.

While there are marketed sodium channel blockers which are used for a variety of conditions, including the block of pain transmission and sensation, none is truly selective for this particular ion channel target.

We at Icagen believe that selective sodium channel blockers represent an unique and highly promising approach to the treatment of pain conditions.

We have convinced ourselves, through our joint efforts with Pfizer, that truly selective drug candidates are possible.

We look forward to continued progress in this collaborative effort, in which we continue to identify multiple promising compounds that block Nav1.7 or other sodium channel targets for utility and treatment of various serious and chronic pain conditions.

Some of the specifics of our joint efforts with Pfizer include that we are, as I noted, currently in Phase I.

This is a single ascending dose trial in healthy volunteers, and that study is going well.

Following the successful completion of that first study, we do anticipate initiation of a multiple ascending dose trial later this year.

As we have noted before, the general timeline for Phase I studies is about a year, based on industry standards.

But it is important to note that Pfizer controls and funds all the clinical development for this program, so we will give further updates as they are forthcoming from Pfizer.

You may remember that we have received about $4 million in milestones related to this program earned over the past 2 quarters.

We expect and hope for significant future milestones as this first compound progresses.

Additionally, we anticipate other milestones upon successful identification of additional clinical candidates for any of these 3 targets.

You also may remember that we are continuing to have the research phase of our collaboration, which continuous at least through the end of 2011.

So that program is going really well, and we're excited about the progress that we have made together with our partner, Pfizer.

On the KCNQ front we're also pleased, following successful discussions with the FDA to be now in a position to have the option to continue the development of ICA-105665, our novel KCNQ agonist for the treatment, primarily of epilepsy.

Preparations are underway in anticipation of a Phase II trial in the target population.

So we're doing final protocol writing, we're preparing drug substance.

Subject to the finalization of this protocol and our plans, this will be a double-blind placebo-controlled study with a treatment duration of four weeks.

Now, it is in the target population, partial onset seizure patients, who are currently taking other anti-epileptic drugs.

This is the largest segment of the epilepsy market needing better treatment today.

We anticipate enrolling approximately 60 patients in 10 to 15 sites in the US.

We are working with a leading industry expert, Dr.

John Messenheimer.

John has worked with us over the last year, and continues to work in the planning for this program.

He's had both academic and industry experience.

His primary focus is on finding new treatments for epilepsy, and he has been involved with the development of multiple anti-epileptic drugs in his career, particularly with GSK.

We'll update you on the timeline for starting this next Phase II study once our preparations are complete.

So with that, I would like to turn this back over to Rich for the financial update.

Thanks, Kay.

I am going to focus my remarks this morning on the full year results, and I will certainly be happy to take questions related to the fourth quarter results, as well.

Revenues in 2010 came in at $10.5 million, and this compared to $9.6 million during the same period in 2009, representing an increase of 9%.

On a cash basis though, the increase was much more significant, as the 2009 figure included amortization of the up-front payment from Pfizer, whereas the 2010 period did not include that, but did include $4 million of cash revenues that we received as a result of completion of certain milestones in that collaboration.

During 2010, we also had the sale of a non-core patent ,which resulted in proceeds of about $1 million as well.

So, significant improvement in terms of cash revenues.

On the operating expense side, 2010 came in at $17.6 million which was down significantly from the $22.4 million from 2009.

This was a result of 2 primary factors.

One, we had decreased clinical expenses as a result of, primarily timing related issues in the 665 program.

But just as importantly, we had a very significant decrease in our burn rate as a result of cost control measures that were put in place during the course of 2010.

And that of course, carries over into 2011 as well, and I will comment on that in just a minute.

Net loss for 2010 was $6.4 million, again a significant improvement over the net loss of $12.8 million in 2009, a $6.4 million improvement.

And again on a cash basis, the improvement was even more significant.

Cash use in ops for 2010 was $5.7 million, down roughly $9.7 million from the $15.4 million that we used in operations during 2009.

So again, both on the revenue side as well as on the cost side from a cash perspective, very significant improvement over the past year.

We ended the year with about $12 million on the balance sheet.

This figure, I should mention, does not include about another $1.7 million in net proceeds that we raised from the ATM that we had filed during the fourth quarter, which actually came in then during the first quarter.

So from a cash perspective, we are in, again, very solid shape going into 2011.

Our burn rate, as we look forward, we're currently spending at a rate of about $2.5 million per quarter and taking in about $1 million per quarter from Pfizer.

So on a net basis the burn rate running currently at about $1.5 million per quarter.

The trial that Kay mentioned, Phase II trial for our 665 compound, is expected to cost somewhere in the neighborhood of four-ish million dollars, $4 million to $5 million, starting sometime in the second half of 2011.

I am not factoring that into the current burn rate that I just mentioned.

But in terms of opportunities for funding that trial as well as the rest of the Company, a couple things to note.

One, the Pfizer collaboration continues, as Kay mentioned in her update, to proceed very nicely.

We certainly will have the opportunity for additional milestones in that collaboration, both related to the most advanced compound now in Phase 1 studies as well as potential backups that are being worked on currently, as well as, of course, the continued R&D funding, which we expect is guaranteed through year-end 2011, at a minimum.

In addition, we were successful in raising money through an ATM.

We were quite pleased with the results of that, and we're certainly going to be looking at opportunities to raise additional capital as needed through an ATM-like facility.

And then finally, I would note that we do have a broad research platform focused on a wide variety of targets and there is always the potential for additional revenue through collaborative opportunities, as well.

So let me stop there, and we'll be happy to take your questions.

(Operator Instructions) Christopher James with McNicoll, Lewis and Vlak.

Good morning, and thanks for taking my questions.

Starting with the epilepsy program, the KCNQ program, ICA-665, on the partnership front, if the current study you're designing shows the drug is both safe and effective, do you get the sense that this Phase II study in 60 patients will be enough to get a partnership, or do you think potentially additional clinical work may be needed?

Hello, Chris.

Thank you for the question.

I certainly think that this will be a pivotal trial in those decisions to partner.

We have to decide to partner first.

But I think that companies will be quite interested in partnering 665 following the completion of this current trial that's planned.

Okay, thanks, Kay, appreciate that.

And then moving onto the pain collaboration, congrats on the progress made with Pfizer there.

From what I gathered, SCN9A, this is a two-part Phase I study.

Can you provide any guidance as to when we could possibly see top line data from the first part of the study?

And when do you think the Phase II study could start, just given the unique design of the Phase I, meaning, could it potentially start earlier than expected?

The study is ongoing and blinding, so I don't have any information on any of the findings to share.

I think you're talking about some measurements that are going to be made in that study, but those measurements are just biomarkers for target engagement, so no indications of efficacy can come out of this first single ascending-dose study.

As far as their timeline, I would anticipate that by mid-year they could be in a position to be in a multiple ascending-dose study.

That's a speculation, based on the timing for these studies normally to taking about a year, and, as you remember, they started late in the fourth quarter of 2010.

So that's my estimation based on industry standards.

But when the study is finished and they do start a new study, I am positive that we will be able to give you some updates on that.

But it is still blinded, so I don't know anything to share with you, at this point.

Sure, Kay, appreciate that.

Finally, the multiple ascending-dose study, is that a Phase II study and will that trigger a Phase II-ish type milestone from Pfizer?

Well, a multiple ascending-dose study is a safety study and a Phase I study.

Okay.

And will that trigger a milestone?

No, it will not.

Okay, thanks so much.

Congrats.

Thanks, Chris.

Thanks for your questions.

Chris Richard with Merlin Nexus.

Hello?

Hello.

Hello, yes, this is Dominique Semon.

I apologize.

We got cut off here from the first part for technical reasons, for the first part of the call, so I am sorry if you have covered that, Kay, but could you please perhaps describe a little bit this 665 study that you are about to engage now?

Is it just a continuation of the photosensitivity study or --?

Absolutely not.

So, this is a new study --.

Okay.

-- and this is the first study that we will do of this nature in our target population.

Remember, our target population is individuals with partial onset seizures, and that's the study that we're talking about, completely new study.

As I had mentioned earlier, it is a double-blind placebo-controlled study, or planned to be.

We are still in the final preparations and the final protocol writing.

Treatment duration is about four weeks, and these will be patients that are already taking anti-epileptic drugs, as per the guidelines from the regulatory authorities.

Any study of a new AED has to be, first, an add-on treatment.

So these individuals will take their drugs, and they will be in stable doses of the drugs, and then they will start our drug.

And we anticipate about 60 patients, in about 10 to 15 sites.

We hope to do this study completely in the US.

That helps to keep the costs down.

And the study should cost, as Richard said, somewhere approximately $4 million.

And what's the end point?

Well, this will be the first time that we study this drug in patients for this long; it is a four-week study.

So primarily we're looking at safety, because before we have only studied this drug for one week in this population, so primarily safety, but we also, as designed, since it is a placebo-controlled study, we believe that it will give us the first opportunity to begin to evaluate efficacy in terms of the reduction in seizure frequency.

But you do not expect with a four-week duration to have enough events to conclusively make an efficacy assessment?

That's not actually true.

One of the advantages we have with this drug is that we don't need to titrate.

A lot of the studies that have been much longer are with drugs that you need to titrate up to a tolerable dose over an extended period of time.

And luckily, 665 is tolerated very well, so within the first 48 hours or so we should be at stable drug levels.

So we should have a full four weeks to really look at this.

And there have been plenty of other drugs that have been studied, and they began to show nice effects that separate from placebo by four weeks.

Okay.

I think that we do have the possibility to begin to see separation from placebo in four weeks.

In terms of number of seizures, over the period?

Yes, because remember, these individuals already are having seizures, so they're having enrollment criteria.

We will ask them to have at least four seizures in four weeks in order to get in the study.

What happens when you enroll at that level, though, you usually get people that have a median level of seizures, about eight in four weeks, so they're having lots of seizures.

I see.

And so it doesn't take that long to begin to see separation from placebo.

Okay, thank you.

Kay, I am sorry, one last question for me.

Any cap on dose?

What doses do you intend on testing?

We have selected a dose of 200 milligrams BID.

That's a dose that we have previously shown in our earlier trials to be extremely well tolerated in both healthy volunteers and patients, and it gives us a dose that we have seen really good efficacy in pre-clinical studies, as well as in our clinical results to date.

So we're happy to have this dose of 200 milligrams BID.

So it will be one dose of drug in one arm, and placebo in the other arm.

Okay.

And so this is equivalent essentially to the 400mg single dose in the photosensitivity study.

Is that the right way to look at this?

I think that's one way to look at it.

Remember, when you give a single dose at a higher level, you have high, what we call, Cmax.

The drug level goes up pretty quickly and then comes down, and so you have a little bit better profile, a smoother profile when you get it at 200 BID, not such a high level to start with, but a nice level ultimately.

Okay.

And the results, expected I guess fourth quarter 2011, is that too aggressive?

That's too aggressive.

These studies take eight to 12 months to recruit at this size.

So I don't want to give any specifics on the timeline, because until we start the study we don't know what that means.

But those studies generally take eight to 12 months to recruit.

So, second --?

So more like mid-2012, then?

Why don't we wait to identify that one until we know that we're actually going to start, and what time we're going to start and that sort of stuff?

Yes, okay.

So I will update you on the timeline at a subsequent meeting.

Great, thank you, Kay.

Thank you, gentlemen.

(Operator Instructions) [Tore Steen] with Anthem Funds.

If you don't mind, could you review the terms of the market issuance sales agreement that you have with McNicoll, Lewis and Vlak?

And also, the press release talks about the gross proceeds, but can you provide more color, especially the pricing of what you raised the money at, in December 2010 and in January of this year?

The after market sales issuance agreement, the way that that works is the shares are sold directly into the market by MLV on our behalf, and then obviously there is a commission associated with that, and then we receive the net proceeds.

So we raised roughly, I want to say $2.4 million gross, rough numbers.

I don't have the average share price at my disposal.

I can certainly get that to you.

I don't have that right in front of me at the moment.

Okay.

And what's the actual cap on this program?

Well, the program that we filed, so we filed the initial ATM was completed -- or let me say this, after we raised the $2.4 million of the $2.5 million, we terminated that ATM, and so we don't currently have one.

But I think what I was trying to say during my remarks was that, to the extent that we look at raising additional capital on a going forward basis, that would certainly be, in my view, an attractive mechanism.

OkayYes, I apologize, I actually got on the call late, so I didn't hear that.And do you have a shelf in place?

Yes, we do.

And what was the original money that can be raised under the shelf, and how much has been?

So $25 million was the shelf size that was initially filed, and we have raised, through the ATM thus far, about $2.4 million.

Oh, I see.

So you have most of the shelf left, and you could just do it the conventional way through the shelf, or do it through this ATM method?

Well, the shelf is a filing that enables a company to raise capital.

It is not a mechanism for actually raising capital.

So the ways that capital is typically raised with a shelf filing would be through either a traditional public offering with what's called a follow-on offering, or a registered direct offering, or a type financing.

And more recently, this mechanism, called ATM, and it's analogous to other mechanisms that have also been in use for some time now, you will hear the phrase committed equity facility or similar such terminology.

Those are all means to raise capital from the shelf.

Now, there are restrictions on smaller market cap companies regarding the amount of capital that can be raised over a certain period of time when one's market cap is below $75 million, which ours is, and so that does place some restrictions on the amount that can be raised in any given period of time.

But we do have additional capacity, and the capacity that we currently have with the share price having hit pretty close to $4, I guess was -- it peaked at around $3.83.

We do have meaningful additional capacity on top of the $2.5 million that we recently raised.

All right, I see.

So the ATM, one advantage is that you can -- you don't have to issue a separate press release, let people know that you have raised money, it basically shows up in the Q, and you can do it more opportunistically when the share price is more attractive?

Well, yes, there are public disclosure requirements, and we'll, of course, meet all of those and have met all of those in the past.

But one of the real attractions, as I think you're referring to with regard to the ATM, is that the issuer has a great deal of control, which is not typically the case in public offerings or private offerings for companies of our size in our industry.

So in other words, if the share price seems attractive, there is the capability to increase issuance, provided that there is sufficient liquidity in the marketplace.

If the share price is deemed to be less attractive, the amount of issuance can be reduced or stopped entirely.

So there is a great deal of issuer control, which is relatively unique to this mechanism.

And lastly, did you say on the call you had about -- what you would be comfortable with at a cash position by year end?

I didn't.

I think that it is just generally prudent financial management to always have at least a year of cash, and preferably a longer runway than that.

But I think that I would view that as the minimum acceptable level, from a financial management perspective.

And did you say what the burn is anticipated to be this year?

I apologize again for getting on the call late.

That's okay.

I did say that our burn currently is running, on a net basis, at about $1.5 million per quarter.

That's comprised of spending at about a $2.5 million quarterly run rate, and about $1 million per quarter that we receive from Pfizer.

What is not factored into that calculation would be additional expenditures that we would incur in association with the Phase II trial in epilepsy.

That trial will not start until later in the year, sometime in the second half, assuming that everything is a go.

But we are currently certainly planning for that, and are anticipating that the costs of that trial will be roughly $4 million, maybe a bit higher than that, but roughly $4 million, and that we would start incurring those expenses during the second half of the year.

And the $1 million from Pfizer, that will continue in 2011?

So the $1 million per quarter, we receive funding through year-end 2011.

We typically receive that $1 million in advance of the quarter, and so we would have three more payments that we would expect to receive during the course of 2011.

So in other words, the payment for the first quarter of 2011 was received in the fourth quarter of 2010, and the payment that we'll receive now, during the first quarter of 2011, is payment for services that will be rendered in the second quarter of 2011.

So the $1.5 million net burn is -- I would refer to that as the core burn, so the burn for expenses at the Company, not including clinical trial expenses.

So that number, that $1.5 million, would be a reasonable number to expect for the first quarter, the second quarter, and the third quarter on a cash basis.

And in the fourth quarter, if Pfizer decides to renew beyond the current term, then that funding would continue.

If they didn't, then of course, we wouldn't have that $1 million, on a cash basis, in the fourth quarter of 2011.

We would have it on a traditional accounting basis because we would, of course, recognize the revenues in the quarter in which they were earned.

So is it fair to say it's $1.5 million, basically times four, plus if you start the epilepsy trial in the second half, another $4 million, although not all of that will be spent obviously in that quarter.

So maybe take, I don't know, half of that, so maybe you spend about $8 million for the year, in that ballpark?

It is a little hard to say exactly, but if we just follow the math that you outlined, you would say $1.5 million times -- for the next three quarters, on a cash basis, not an accrual basis, on a cash basis, and then the fourth quarter you'd have $2.5 million.

So using your math, that would get you to $7 million.

And then with the epilepsy trial, again, the specifics are all to be worked out , but let's just assume that half of the expense would be incurred during 2011, and the other half during 2012.

If that assumption were to bear out, that would bring you to a total of cash burn in the neighborhood of $9 million.

Now that's not counting, of course, any revenues that we may receive from Pfizer beyond the R&D funding, and there are two important sources of those.

One would be the identification of additional clinical compounds, clinical candidates for the other targets, or back-up compound for SCN9A, so there is potential revenues there.

There is also potential revenues from the initiation of a Phase II trial with the lead compound in the program, the one that's currently in Phase I.

There is a double-digit million milestone payment that's due upon initiation of Phase II.

And as I also referenced in my prepared remarks, we do have a very broad research platform as well, and historically have done a number of collaborations, so in that figure that I just mentioned, that would not include any potential revenues from those sources that I just referred

Okay.

And just lastly to clarify, you said the initiation of a Phase II triggers a double-digit million dollar payment?

Yes.

Okay.

And are you able to ballpark how much a milestone payment is for an additional clinical compound or a back-up?

So historically, I mean we have reported that -- it is a little bit complicated, but generally these are in the million dollar range.

It is a little bit complicated because of -- it depends in part upon what milestones have already been achieved and which specific target, and so forth.

And are you anticipating that Pfizer will initiate the Phase II this year?

It wouldn't be appropriate for me to make a comment on -- to be able to comment on that.

What we can say, as Kay mentioned in her prepared remarks, they are in Phase I currently.

Phase Is typically take about a year to complete.

But of course, there is all sorts of things which can impact the timing of any specific programs, so it is very, very hard to say when they might start Phase II.

I really appreciate the thoroughness of your answers.

Thank you.

Of course.

Thank you.

And at this time, there are no further questions.

I would like to turn the call back to Richard Katz for closing remarks.

Well, everyone, thank you very much.

We're really delighted to be able to update you on our results.

We're very enthusiastic going into 2011, and we look forward to keeping you up to date.

Thank you.

Ladies and gentlemen, this concludes today's conference.

Thank you for your participation.

You may now disconnect.

Have a wonderful day.