Repligen Corp (RGEN) 2010 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Repligen First Quarter Fiscal Year 2010 Earnings Conference Call. My name is Kama and I'll be your coordinator for today. (Operator Instructions.) I would now like to turn the presentation over to your host for today's call, Mr. Bill Kelly. Please proceed.

Thank you and good morning. The purpose of today's call is to briefly review our financial results for Q1 of our fiscal year 2010, update our financial projections for the year, and to update the status of our development programs. Joining me today is Walter Herlihy, our President and CEO.

At the outset, I would like to state that this discussion will contain forward-looking statements which are not guarantees of future performance, such as our financial projections and projections for US sales of Orencia, opportunities for licensing, our intellectual property portfolio and our plans and projections for clinical trials.

These statements are subject to certain factors which may cause Repligen's plans to materially differ or results to materially vary from those expected, including market acceptance of our products, unexpected preclinical or clinical results or delays, delays in manufacturing by us or our partners, failure to receive adequate supply of clinical materials from our partners, timing of product orders, delays in or failure of regulatory approval, adverse changes in commercial relationships and a variety of other risks set forth in our filings with the Securities and Exchange Commission, including but not limited to our Annual Report on Form 10-K.

Except in circumstances in which prior disclosure becomes materially misleading in light of subsequent events, we do not intend to update any of these forward-looking statements.

This morning we released our financial results for the first quarter of fiscal year 2010, which ended on June 30th, 2009. For the quarter we recorded total revenue of $5.1 million, including product sales of $2.5 million, and royalty and other revenue of $2.6 million.

Royalty and other revenue decreased $5.4 million compared to the prior year, from $8 million to $2.6 million. This decrease was due to the fact that the prior year results included a $6.3 million one-time gain upon settlement from Bristol's sales of Orencia prior to the beginning of our fiscal year 2009.

Current-year royalty and other revenue benefited from a 33% increase in Orencia sales as well as a $500,000 increase in research and other royalty revenue.

The company has continued to invest in our product pipeline, resulting in a net loss of $1.1 million for the quarter. Our cash and investments on June 30th were $62 million.

Today, we are confirming our financial projections for fiscal year 2010, which ends on March 31st, 2010. We believe that demand for our Protein A products will continue to be impacted by reduced demand from Protein A end users and a continued inventory reduction by our largest customers which is not expected to be completed until at least year's end.

Conversely, we are projecting Orencia sales, and thus our royalties, to grow between 25% and 30% in fiscal year 2010.

As a result, we can confirm today a total revenue projection for fiscal year 2010 between $20 million and $22 million, including $10 million to $11 million in product sales, $9 million to $10 million in royalty income, and between $1 million and $1.5 million in other revenue. We are also confirming our plan to increase spending to provide the necessary funding to successfully complete our Phase III program and NDA filing preparation for RG1068, synthetic human secretin in pancreatic imaging, and to recruit most of the patients for our Phase IIb trial for RG2417, our oral formulation of uridine in bipolar depression.

For fiscal year 2010, not counting the potential impact of any acquisition or other significant transaction, we are affirming our expectation of a GAAP net loss of approximately $5 million to $6 million, and we expect to end the year next March 31st with approximately $58 million to $59 million in cash and investments.

At this point, I would like to turn the call over to Walter Herlihy for an update on Orencia and our development programs.

Thank you, Bill. Before updating our pipeline, I would note several positive developments this quarter for Orencia. First, in June, Bristol-Myers released the five-year follow-up data for Orencia at a European arthritis meeting. Favorable five-year safety and efficacy data is an important milestone for biologics used to treat arthritis, since many physicians are reluctant to prescribe these chronically-used drugs on the basis of shorter-term data. Five-year data on Orencia included 539 patients, or 83% of the total original population.

The conclusions were, first, the majority of patients sustained more than a 50% reduction in their symptoms at year five. Second, the safety over years two through five was consistent with the favorable profile observed in year one. And third, the arrest of structural damage seen after one year was sustained in most patients over a five-year period. These data will be important in convincing physicians and patients of the value of Orencia in a chronic-use situation.

Additional upcoming milestones for Orencia include the release of Phase III data in ulcerative colitis later this year, the presentation of Phase II data in psoriatic arthritis at the American College of Rheumatology in October, and potential FDA approval in 2010 of Bristol's request to expand the label to include patients with early erosive rheumatoid arthritis. We expect this continued news flow and the new five-year data will support Orencia's continued sales growth.

Turning now to our internal pipeline, our Phase III clinical trial of RG1068 in MRI imaging of pancreatic abnormalities is currently recruiting patients at approximately 30 sites, and there are approximately 215 patients in various stages of the study.

Of these, approximately 130 actually have a documented pancreatic abnormality, which is close to our goal of 140 patients with an abnormality. We plan to enroll the last 20 to 30 patients needed to reach this target by the end of the September, which will enable us to collect the last patient data in October and to lock the database by the end of the year, at which point we will release the top line results.

We are assuming that our Phase III study will be successful, and have begun the process of preparing the new drug application for filing in the United States, several sections of which are now complete. We plan to request a pre-NDA meeting with the FDA for this fall, at which point we will present our NDA filing plans. Assuming agreement and a successful trial, we plan to file our NDA by the end of March. We have received fast-track designation from the FDA, and we will request the six-month expedited review process, which may allow us to receive marketing approval by the end of 2010.

In addition, we are planning to file marketing authorization application for Europe in the second quarter of next year.

We have also just completed a protocol for a pilot study to evaluate the potential of secretin in improving the assessment of the pancreas by a second imaging technique, endoscopic ultrasound, which we expect to initiate later this year.

Finally, we are evaluating a pilot study in 2010 for the use of secretin in diagnosing and/or staging pancreatic cancer using CT, or computed tomography, based on encouraging data in a recent literature report.

We are also developing RD2417, our oral formulation of uridine, for acute treatment of depression in patients with bipolar disorder. Our Phase II trial is actively recruiting at 23 sites, and we have enrolled 70 of the planned 150 patients. We plan to open approximately five more sites this year at academic centers to enable us to meet our goal of completing enrollment by mid-2010.

To date, the number of serious adverse events observed is consistent with the excellent safety profile we saw in our Phase IIa study, and we are recruiting patients whose history of disease symptoms matches our target patient profile.

Our business goal is to identify a development and marketing partner for this program in 2010, after we have the results of the Phase IIb trial. We've had several informal partnering inquiries, and we plan to formally launch this effort in September. We believe that bipolar depression is a very significant opportunity and that chronic use of uridine in even 10% of the bipolar population would result in sales in excess of $1 billion.

Our market research has confirmed a high degree of dissatisfaction with the side effects of current therapies and established that the high tolerability of uridine may enable it to be positioned as a first-line therapy if its efficacy is confirmed. The only competitive drug in mid to late-stage clinical development for bipolar depression that we are aware of is Cephalon's NUVIGIL, a stimulant currently prescribed to induce wakefulness.

We're also developing inhibitors of specific HDAC enzymes for Friedreich's ataxia. Recently, we entered one of our lead compounds into a GLP two-species toxicology study which is required by FDA prior to initiation of clinical trials. We should have data from this study by the end of the year.

We have identified several chemical modifications to our lead compound that appear to significantly improve its potency and ability to penetrate into the brain, which is the site of action, and further characterization of these compounds this quarter will determine if we have the pharmacologic properties for an improved drug candidate.

In summary, we are pleased with the progress on our pipeline in the last two months, which we expect will result in significant clinical milestones in all three of our programs over the next year.

Operator, at this time, I'd like to open the call to questions.

(Operator instructions.) The first question comes from the line of [Joel Fiziny], from Merriman Curhan Ford. Please proceed.

Hi, guys. Good morning. Thanks for taking the question. A couple quick questions, maybe in the order of the programs as you hit them. Can you just give a little more color about what the potential might be for using secretin for imaging pancreatic cancer?

Well, I think that it's probably too early just based on a single report to give too much detail, but I think we've had conversations with a number of leading radiologists who have reviewed that data, and they suggested that secretin may provide a unique benefit in both identification and staging of the cancer. So, our first idea is to see if we can simply replicate that report in a small pilot study, perhaps in the first half of 2010, and from there we could potentially expand it into an additional indication for secretin.

Sure, that's fair. Thanks. And if you just look forward now to 2417, just first a little housekeeping point. When you said you'd look to launch formal potential partnering talks in September, were you referring to September '09, or after the data come out?

September of '09. So, our thought would be that if we wished to consummate a partnership in, say, a year, that it was not too early to begin exploring with potential partners and educating them about our program. We have enough data right now -- and we've actually had to respond to several inquiries -- that we would initiate those discussions. But, I do believe that until the data is in hand we are unlikely to consummate such a partnership.

Sure, sure, makes sense. And then, just lastly on the product -- or, I'd say, for a potential partnership -- if you were to look at -- without disclosing too much, obviously -- if you were to look at Repligen's wish list with regards to a partner, what is the ideal type of partnership you'd be looking for?

Well, clearly we'd like somebody with a global footprint in psychiatry, and there are half a dozen pharma companies who you could think would be sort of your first priority to have the muscle to really make uridine a standard of care in bipolar disease. We think that based on the marketing data that I alluded to -- which was based on interviews with a number of KOLs -- the vast majority of the KOLs suggest that if we can replicate that efficacy and maintain the tolerability which we described, that this should be the first-line therapy in bipolar depression. Clearly, that's a game-changing kind of objective and one which you'd really want to have the muscle, as I say, of a top pharmaceutical company with a footprint in this area.

Great, thanks a lot, Walt.

Yes.

Your next question comes from the line of Ronnie Wilson, private investor.

Yes, good morning, Dr. Herlihy.

Good morning.

I just wanted to know, is there any takeover news, maybe from Bristol-Myers Squibb? Because we had some dealings with them in the past year or two.

That's right. We do receive a royalty from Bristol-Myers Squibb on Orencia, but there hasn't been any discussions between the companies other than that.

Okay. I've been a loyal owner of Repligen since '94, so I've been hanging in there with you.

Good, well --

Yes. Thank you very much.

Okay, thank you.

(Operator Instructions.) We have no questions at this time. I would like to turn the call back over to management for closing remarks.

Okay, well, I thank everyone for listening in on today's call, and as always, if you have any additional questions or comments feel free to direct them to the company via investor relations. Thank you.

This concludes the presentation for today, ladies and gentlemen. You may now disconnect. Have a wonderful day.