Repligen Corp (RGEN) 2011 Q1 法說會逐字稿

Good day ladies and gentlemen, and welcome to the First Quarter 2011 Repligen Corporation Earnings Conference Call. At this time all participants are in listen-only mode. Later, we will conduct a question-and-answer session. (OPERATOR INSTRUCTIONS)

I would now like to turn the call over to Mr. William Kelly, Chief Financial Officer. Please proceed.

Thank you, and good morning. The purpose of today's call is to briefly review our financial results for the first quarter of fiscal year 2011, update our financial projections for fiscal year 2011, 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 may contain forward-looking statements. These statements are subject to factors which may cause our plans to change or results to vary. Additional information concerning these factors is discussed in our Annual Report on Form 10-K and other filings we make with the Securities and Exchange Commission. We assume no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

This morning we released our financial results for the first quarter of fiscal year 2011, which ended on June 30th, 2010. For the quarter, we recorded total revenue of $7 million, including product revenue of $4.3 million and royalty and other revenue of $2.7 million. Product revenue increased by $1.8 million or 73% compared to Q1 fiscal year 2010.

Most of our products are used by companies for the purification of monoclonal antibodies. This is a well-established class of drug for which we continued to see new products being launched. We believe that in the current period we benefited not only from the growth of the monoclonal antibody market but also from the fact that after a period of lower sales due to global economic factors, customers were no longer able to work down existing inventories, and as a result, met or exceeded past purchasing levels.

Operating expenses decreased $0.4 million compared to the prior year as a result of higher spending last year as we were actively enrolling patients in our Phase 3 clinical trial for RG1068 and performing critical pharmacology and toxicology studies to enable our IND filing for RG2833, which we announced this May. This decrease in spending was partially offset by a milestone payment to McLean Hospital upon the issuance of a US patent covering the use of uridine in the treatment of patients with bipolar disorder. We are pleased to report that we concluded the first quarter with nearly $1 million in positive net income. Our cash and investments on June 30th were $58.6 million.

Today, we are updating our financial expectations for fiscal year 2011, which ends on March 31st, 2011. For fiscal year 2011, we project total revenue to be between $24 million and $26 million, including approximately $13 million in product revenue, which represents an increase of approximately 30% over prior year. We also expect royalty and other revenue, which is comprised primarily of royalties from Orencia, to increase to approximately $11 million to $12 million.

R&D spending for the year is projected to be between $12 million and $14 million or up to $2 million less than fiscal year 2010 due primarily to lower clinical trial activity for RG1068 and RG2417 in the current year.

SG&A spending is projected to be about $8.5 million or $1.4 million more than fiscal year 2010, as we continue to promote our bioprocessing business and anticipate increased marketing expenditures towards the end of fiscal year 2011 and in the successful outcome of the re-read of the data from our RG1068 trial.

As a result, we expect our net loss to be less than $3 million and our cash burn to be less than $2 million.

Cash and investments on March 31st, 2011, are projected to be approximately $57 million to $58 million. While we are actively evaluating additional licensing and asset acquisition opportunities to strengthen our therapeutics and bioprocessing businesses, these projections exclude the potential impact of any such transactions.

At this point, I'd like to turn the call over to Walter Herlihy for an update on our bioprocessing business and our therapeutic pipeline.

Thank you, Bill. In addition to the rebound in product sales, we were also encouraged this quarter by the initial feedback from customers on the first products from our Opus chromatography platform, which we acquired last March. This platform enables us to provide end users with pre-packed, ready-to-use chromatography columns for the purification of biologic products and vaccines. The initial products from this platform were launched in March and have been detailed to a variety of potential research and biotechnology customers. We are pleased with the initial customer response, which has confirmed our assessment that pre-packed columns represent an unmet market need.

Turning now to our therapeutics pipeline, last year we completed data collection in a Phase 3 clinical trial, evaluating RG1068, a human synthetic secretin, for the ability to improve the visualization of structure abnormalities of the pancreas. As previously reported, the analysis of the images by our contract radiology lab was flawed. And based on numerous deficiencies, the FDA and the EMA have both agreed to a reanalysis of the data. We have selected a new contract radiology laboratory and preparation for the re-read of the Phase 3 data has begun. We expect to recruit and train new readers in September, with a goal of completing the data analysis by the end of the year or early in 2011.

One of the primary benefits of using RG1068 in conjunction with MRIs could help a physician assess the pancreas without the use of endoscopy, which is expensive and carries a high risk of complications. These risks of endoscopy were highlighted in our Phase 3 trial in which 54 of the 254 enrolled patients suffered a serious adverse event following endoscopy, resulting in 236 additional days of hospitalization compared to no serious adverse events and zero days of additional hospitalization following RG1068 with MRI. The recent analysis of our existing Phase 3 data indicates that the use RG1068 would have prevented as many as 41 of the 230 evaluable patients from receiving unnecessary endoscopy. These data illustrate that RG1068 has the potential to both improve patient care and reduce the significant hospital expense associated with the complications of an invasive procedure such as endoscopy. We believe there are more than 400,000 procedures per year which could benefit from the use of RG1068, which at a price of $300 per procedure represents an addressable market opportunity of more than $100 million.

We are also developing RG2417, our oral formulation of uridine, for acute treatment of depression in patients with bipolar disorder. We have enrolled approximately 166 patients in our Phase 2b trial. We expect to recruit the last patient in September and to report data in early 2011. To date, the low number of serious adverse events is consistent with the excellent safety profile observed in our Phase 2a study.

If our study is successful, we will seek to license this program to a corporate partner for further development and commercialization. We are currently having at-licensing discussions with several large pharmaceutical companies and we would expect additional partnering discussions to develop as we come closer to having the Phase 2b data.

RG2417 has the potential to be a significant drug. In the US alone, there are approximately two million patients with bipolar disorder. Assuming $5,000 as an annual treatment cost, a mere 10% penetration into the US market would represent $1 billion in annual revenue.

We're also developing inhibitors of HDAC-3 for the treatment of Friedreich's ataxia. On Monday, we announced the receipt of three grants to support our work in both Friedreich's ataxia and Huntington's Disease. The latter is a $6 million commitment from the National Institute of Neurological Disease and Stroke to develop an HDAC inhibitor for Huntington's Disease, based on previously-published results from our collaborators at the Scripps Research Institute, which showed that a prototype compound significantly improved motor function in a mass model of Huntington's.

Separately, we have been working with an academic collaborator to test one of our HDAC inhibitors in a mass model of memory formation. Initial results are encouraging and we expect the data from these experiments to be released in the fall.

These two new potential applications for our HDAC technology represent a growing awareness that HDAC inhibitors may have many applications beyond their currently-approved use in cancer.

It is thus not surprising that this program has elicited significant interest from several large biotechnology and pharmaceutical companies, despite the fact that it's still in the preclinical phase. While we may ultimately decide to retain full rights to this program, we are open to these discussions around an early partnership, if we believe that it will deliver significant value to our shareholders.

Last October, we licensed a potential treatment for Spinal Muscular Atrophy or SMA from Families for SMA. SMA is a devastating neuromuscular disease caused by a defect in a single gene, which results in low levels of a protein known as SMN. We have now designated one of the licensed compounds as a clinical candidate and have initiated the toxicology studies that will be required to file an IND. Results will be available next quarter, and if positive, would lead to an IND filing in the first half of 2011.

We believe that our two orphan CNS products have the potential to deliver life-sustaining benefit to patients with Friedreich's and SMA and, as such, they will command premium prices. Assuming 15,000 Friedreich's patients and 20,000 SMA patients, a very modest assumption of $50,000 per patient year would result in these products having a potential worldwide market opportunity of $500 million each.

In summary, we are pleased with the rebound in product sales from the depressed level of last year and the continued growth of our Orencia royalty stream. We were equally pleased with the advancement of our pipeline and look forward to the Phase 3 data on RG1068 and the Phase 2b data on RG2417 in approximately 6 months. As these products advance, we are actively seeking to in-license an additional product candidate. We look forward to updating you on progress on all these programs throughout 2010.

Operator, at this point, I would like to open the call to questions.

Thank you. (OPERATOR INSTRUCTIONS)

So, operator, if there's no question, we will just sign off and close up the call.

At this time, we have no questions.

Okay, so I'll-- thanks again for listening in on our call and as additional thoughts occur, please feel free to contact the Company directly at Investor Relations. Thank you.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect and have a great day.