Repligen Corp (RGEN) 2011 Q4 法說會逐字稿

Please standby by for a realtime transcript. Good day ladies and gentlemen and welcome to the Repligen Corporation fiscal year 2011 financial results, an update for fiscal year 2012 financial expectations, and corporate strategy conference call. My name is Fab, and I'll be your coordinator 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 Mr. Bill Kelly, Chief Financial Officer. Please proceed.

Thank you, and good morning. The purpose of our call is to update our financial expectations and corporate goals for FY2012 and, most importantly, share our thoughts about changes in our corporate strategy and the goals we have set for the following year, FY2013. Joining me today is Dr. 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 FY2011 which ended on March 31, 2011. For the year, we recorded total revenue of $27.3 million, an increase of 30%. The increase was driven by a 45% increase, compared to the prior year, in sales of our bioprocessing products to $15 million, and an increase of 16% in royalty and other revenue to $12.3 million. Total operating expenses were $27.7 million, resulting in a net loss of $44,000. As of March 31, 2011, we had $61.5 million in cash and investments, an increase of $2.4 million, compared to the prior year, and no debt. For additional detail on FY2011 results, please see our press release or our Annual Report on Form 10-K, which we are filing today with the SEC.

Today, we are updating our financial expectations for FY2012, which ends March 31, 2012. For FY2012, we expect sales of bioprocessing products to be $16 million to $18 million, compared to our initial estimate in April of $15 million, and total revenues of between $29 million and $31 million. R&D spending for the year is projected to be between $13 million and $14 million, or $1 million less than our initial estimate.

As we will describe later in today's presentation, we are preparing to transition the company to a commercially focused organization in 2012. And while our R&D budget is approximately the same as last year, its composition is quite different. As noted in the press release, included in the R&D budget are $4 million of expenses associated with the regulatory filings to support approval of RG1068, our product candidate for pancreatic imaging, in the US, Europe, and Canada. It also includes expenses associated with the manufacturing of drug products we will need to launch this product pending FDA approval and to fund additional clinical studies of RG1068 which may broaden its potential use beyond enhancement of MRIs and patients with pancreatitis.

In addition, the R&D budget includes a $1 million increase in bioprocessing product development activities, primarily to support the expansion of our Opus line of pre packed chromatography columns, and $500,000 of expenses associated with a fee for services contract to develop a manufacturing process for a new bioprocessing product that one of our customers intends to launch in 2012. Finally, there is an additional $2 million in R&D expenses associated with the work under grants we have received from the NIH and specific charities. The rest of the R&D budget is associated with RG2833 and RG3039 into clinical trials which will support their value as out licensing assets as will be described shortly. Thus, there has been a significant rotation of our R&D expenditures to activities which directly impact the advancement of RG1068 to market, and expansion of our bioprocessing business.

SG&A spending is projected to be about $11 million to $12 million as we increase our sales and marketing efforts in our bioprocessing business and to begin to build a commercial organization to support the potential launch of RG1068 in 2012. We now expect a net loss of $3 million, versus our $5 million loss projection in April, and a cash burn of $2 million for the year, excluding the impact of potential acquisitions.

Cash and investments on March 31, 2012, are projected to be approximately $59 million to $60 million. These projections do not account for any revenues associated with the commercial partnership for marketing RG1068 in Europe, or the out licensing of one of our CNS pipeline projects. We are pursuing both of these goals and should either occur, we'd expect to be profitable for the year. At this point, I would like to turn the call over to Walter Herlihy for an update on our goals and strategy.

Thank you, Bill. Today, I would like to outline for you some changes in our strategy and describe our plans to transition the company to a commercial organization in 2012. In the past few months, we have made the decision not to in license any additional therapeutic research programs and to seek out licensing partners for both of our early stage CNS programs in Friedreich's ataxia and spinal muscular atrophy. We will continue to develop these programs prior licensing and will likely be involved in their advancement after licensing under a fee for services arrangement.

In constructing an out licensing deal, we will seek to retain a significant share of the US commercial rights to provide us an opportunity to meaningly participate in the up side should either program be successful. These transactions often involve substantial milestone payments, payable upon the achievement of specific clinical development and commercial milestones, as well as royalties on net sales, which if we retain a share of the US commercial rights, would be for sales of products outside of the United States.

Going forward, we intend to focus our immediate efforts on expanding our bioprocessing business and developing an imaging business around RG1068, our product candidate for pancreatic imaging. We define our bioprocessing business as a development, manufacture and sale of products which enable the production of biologic pharmaceutical products, including monoclonal antibodies, other protein therapeutics, and vaccines.

Over the past decade biologics have been the fastest growing segment of the pharmaceutical industry with aggregate sales of biologic products now exceeding $100 billion annually. The biologic segment is expected to grow at double-digit rates for the next five years. Within the bioprocessing segment, the fastest growing products are plug and play, or disposable products, which improve manufacturing efficiencies. Our Opus product line is an example of this type of product and it has received enthusiastic response from customers. We believe that we can position ourselves to benefit from the continued growth of the biologics market and trend towards disposable products through internal development and acquisition of additional products, which can be sold to customers in the biologic product development and manufacturing, which includes every major pharmaceutical company.

Our financial goal for this business is to increase the sales of bioprocessing products from $15 million in the year just ended, to $17 million in the current year, to a run rate of $25 million in our next fiscal year, which begins on April 1, 2012. Second, we will strive to gain approval of our imaging agent RG1068 in all major markets and secure the commercial partners or distributors to sell the product outside of the United States. If approved, RG1068 will be sold to gastroenterologists and radiologists. And we are seeking to acquire other imaging products which our sales force can sell to those customers.

Assuming timely approval from the FDA, our goal is to sell approximately $5 million of RG1068 and related products in our next fiscal year, fiscal year 2013, which reflects less than a full year of sales. If we can achieve these goals for our bioprocessing and imaging businesses, and have success on the out licensing of our CNS pipeline assets which I just described, we have an opportunity to increase revenues to $40 million or $50 million next fiscal year.

Our goal is to maintain gross margins in the 60% to 70% range, which would allow us to generate approximately $10 million in free cash flow next fiscal year, despite spending significant resources to support the launch of RG1068, and insure its longer-term growth potential is fully realized. We should also note that we currently have $57 million in net operating loss credits, which we expect will reduce our effective tax rate for the next several years to less than 5%.

In our models, we assume we will utilize $15 million to $25 million of our cash, for acquisitions to enable us to reach these goals. Assuming we achieve significant positive cash flow next year, we will be in position to roll up additional acquisitions in either the bioprocessing or imaging businesses in the following year.

Note that I am describing financial goals not a specific financial forecast for next year. And meeting these goals is dependant on establishing licensing and commercial partnerships as well as the approval of RG1068 by the FDA and EMA without requests for additional clinical data, and the ability to acquire additional assets at attractive prices. It is clear that the Company is at a potential inflection point, as we prepare to transition from a product development dominated organization to a commercially-focused company with capabilities in product development, manufacturing and sales and marketing.

In summary, our key goals for this fiscal year are one, expand our bioprocessing business to investment in our Opus chromatography platform and through the acquisition of products which can be sold to our existing customers. Two, complete the regulatory filings for RG1068 in the US and Europe and prepare to launch the product in the US, while securing a commercial product partner in Europe. And we will also seek to acquire other products which can be sold to radiologists.

Three, assess the potential use of RG1068 and pancreatic cancer and identify other uses to expand its market potential. And four, advance our orphan CNS products to phase one clinical trials and seek partnerships with pharmaceutical companies to provide the resources and geographic reach to accelerate further development. If we can achieve these goals in the current fiscal year, we will have set the stage for rapid growth in revenues and profits in the following year. We look forward to providing updates on our progress towards these goals and invite any investor with questions about our strategy to contact investor relations at the Company. That concludes our remarks for today. Thank you.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a great day.