Sarepta Therapeutics Inc (SRPT) 2005 Q1 法說會逐字稿

Welcome to the AVI BioPharma 2005 first-quarter conference call. At this time all participants are in a listen-only mode. Following management's prepared remarks we will hold a Q&A session. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded today, May 9, 2005. I would now like to turn the conference over to Ms. Jody Cain. Please go ahead, ma'am.

This is Jody Cain with Lippert/Heilshorn & Associates. Thank you for participating in today's call. Joining me from AVI BioPharma are Denis Burger, Chairman and Chief Executive Officer; Alan Timmins, President and Chief Operating Officer; and Mark Webber, Chief Financial Officer. This morning AVI BioPharma released financial results for the first quarter of 2005. If you have not received this news release or you'd like to be added to the Company's distribution list, please call Lippert/Heilshorn in Los Angeles at 310-691-7100 and speak with Cheryl Gurton (ph). This call is also been broadcast live over the Internet at www.AVIbio.com, and a replay of the call will be available on the Company's website for the next two weeks.

Before we begin I would like to note that comments made by management during this conference call will include forward-looking statements within the meaning of the federal securities laws. These forward-looking statements involved material risks and uncertainties. For a discussion of risk factors, I encourage you to review the AVI BioPharma annual report on Form 10-K and subsequent reports as filed with the Securities and Exchange Commission.

The content of this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, May 9, 2005. The Company undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. With that said, I would like to turn the call over to Denis Burger. Denis?

Thank you, Jody; and thank you all for joining us. Following my opening comments on today's call, Mark Webber will summarize our financial results. Alan Timmins will then discuss recent developments, and I will conclude the prepared remarks with a review of our milestones.

As we have stated before, at AVI we believe that our third-generation NEUGENE antisense technology has the ability to revolutionize drug development. Based on the highly versatile nature of this technology, we are developing several very promising drug candidates for the treatment of viral diseases, cardiovascular disease, cancer, and other life-threatening diseases, some of which have no treatment alternatives.

We designed our third-generation antisense technology more than a decade ago to overcome what we believe to be perceived shortcomings with second-generation technologies. As you may know, several high-profile Phase III clinical trial failures by other companies based on drugs developed with earlier generations of antisense technologies were reported last year. Our third-generation NEUGENE antisense agents have a mechanism of action that is completely distinct from other antisense compounds and avoids the side effects, off-target effects, and toxicities that have plagued other antisense chemistries.

Advantages in stability, specificity, potency, delivery, and importantly safety have been demonstrated extensively in animals and confirmed in 11 human clinical trials involving more than 300 patients. AVI is the only company that we know of today that is in clinical studies with third-generation antisense drug candidates.

Among the areas where our technology has proven most useful is in developing drug candidates that address RNA viruses. We demonstrated the ability to produce drug candidates expeditiously, in some cases in a matter of days after receiving gene sequencing information. The implications of this rapid-response technology are substantial, as NEUGENE technology may be used to effectively counter bioterrorism threats, emerging viral diseases, and even for infectious disease outbreaks such as the recent Marburg virus epidemic in Angola.

Further, unlike vaccines that target the protein coat of a virus our NEUGENE compounds target the genetic core of the virus. The likelihood that a virus can mutate at the genetic sites that we target are extremely low. This means, for example, that a single influenza drug based on our NEUGENE technology could be used through multiple flu seasons without the need for annual reinvention. We believe that this will prove extremely important as we address upcoming concerns over the reemergence of avian flu.

We have numerous drug candidates that target multiple indications within our pipeline. Our business strategy is to enhance shareholder value by dedicating internal resources to drug candidates that can be developed relatively quickly and target large-market opportunities while seeking collaborations and partnerships with scientists, institutions, government agencies, and large pharmaceutical companies to support longer-term opportunities.

During the short time period since our last conference call, we have announced the presentation of favorable data from several NEUGENE-based studies at two highly respected scientific conferences and in two peer-reviewed journal articles. Among our collaborators for these studies are the United States Army Medical Research Institute of Infectious Diseases and the Centers for Disease Control and Prevention. These presentations serve as important scientific validation for our drug development programs and are a key to our objective of increasing visibility of our NEUGENE technology's potential within the scientific community. We believe that heightened awareness of this supportive data could lead to additional collaborations and partnering opportunities.

With those opening remarks, I now ask Mark Webber to review our recent financial performance. Mark?

Thanks, Denis. Today I'd like to review our 2005 first-quarter results and our cash position, and reiterate our financial guidance for 2005. Our revenues for the first quarter of 2005 were approximately $45,000, (indiscernible) compares with revenues of approximately $99,000 reported in the first quarter of 2004.

Operating expenses for the 2005 first quarter were $5.6 million, compared with $7.9 million in the comparable quarter of 2004. The decrease was due to lower research and development expenses, which were $4.1 million for the 2005 first quarter, down from $6.6 million reported in the first quarter of 2004. Approximately $2.4 million of this decrease in research and development was due to lower contracting costs for the production of GMP subunits.

Our net loss for the first quarter of 2005 was $5.5 million or $0.13 per share, which compares to the net loss of $7.5 million or $0.21 per share for the first quarter of 2004.

Reviewing our balance sheet, at March 31, 2005, we reported cash, cash equivalents, and short-term securities of $37.2 million, an increase of $17.7 million from December 31, 2004. This increase is attributed primarily to the completion of a direct equity placement with several institutional investors, resulting in net proceeds of $22.3 million, which we announced in January of this year. This was offset by $4.4 million used in operations, and approximately $400,000 used for purchases of property and equipment and pact-related (ph) costs.

Additionally, we were informed in 2004 that AVI would be allocated $5 million in government funding for the 2005 fiscal year for work on two viral disease research projects. These funds have yet to be received and are not reflected in our financial statements.

As for our 2005 financial guidance we expect cash burn for the year to be in the range of 25 to $27 million. With that overview I would like now to turn the call over to Alan Timmins.

Thanks, Mark; and let me add my welcome to those of you joining us this morning on the call and on the Internet. As Denis mentioned, I'll discuss some recent presentations and publication of data based on our NEUGENE technology.

Two peer-reviewed manuscripts reporting favorable data from antiviral collaborative studies appeared in the April issue of the Journal of Virology. The first of these articles, called Inhibition of Dengue Virus Serotypes 1 to 4 in Vero Cell Cultures with Morpholino Oligomers, covered impressive data from a study that demonstrated the ability of several NEUGENE drug candidates to effectively inhibit dengue viral replication up to a million-fold, and in some cases reduced the amount of virus in the cells to undetectable levels.

Dengue virus produces a spectrum of illnesses, ranging from a nonspecific viral syndrome to severe and fatal hemorrhagic disease. Dengue fever and dengue hemorrhagic fever are caused by one of the four closely related but distinct viral serotypes. Infection with one of these serotypes does not provide cross-protection to the other three. Viral inhibition reported from this study was specific, dose-dependent, and extended to all four dengue serotypes, which appears critical in developing an effective clinical agent for this disease.

This study was based on our close collaboration with the Centers for Disease Control. We have an active, cooperative research and development agreement, or CRADA, with the CDC for dengue virus drug development.

In the second study, called Inhibition of Flavivirus Infections by Antisense Oligomers Specifically Suppressing Viral Translation and RNA Replication, an epidemic strain of West Nile virus was treated with specific NEUGENE drug candidates. This resulted in up to a million-fold reduction in viral levels without any apparent cell toxicity. One specific NEUGENE candidate was identified that inhibited other mosquito-borne flaviviruses, which is very important in developing a single clinical drug candidates that could treat potentially most of the viruses, if not all of the viruses, in this group.

Dengue and West Nile virus are both members of the single-strand RNA flavivirus genus, a group of mosquito-borne viruses that cause significant human diseases. This viral family includes Japanese encephalitis, yellow fever, Murray Valley encephalitis, and tick-borne encephalitis. No drug therapies are currently available to treat any flavivirus infections.

With approximately 50 to 100 million human cases of dengue virus infection occurring annually, and with the disease spreading into the United States, we are targeting dengue fever and dengue hemorrhagic fever in upcoming internal drug development programs. West Nile virus outbreaks have caused significant morbidity and mortality in the United States during the past several years. We currently have an ongoing trial for the treatment of patients with acute West Nile virus disease who have serious neurological impairment, known as West Nile virus neuroinvasive disease.

Also last month we presented preclinical data from our studies evaluating the effectiveness of our NEUGENE antisense drugs at the American Association for Cancer Research's annual meeting. Two presentations -- the first called C-myc Antisense Phosphorodiamidate Morpholino Oligomer Inhibits Lung Metastasis in a Syngeneic Lung Tumor Model, and the second, called WT1: A Novel Target for Antisense Mediated Prostate Tumor Therapy -- evaluated studies conducted by our scientists in collaboration with Oregon Health and Sciences (sic) University.

Findings in the first study indicated that our antisense drug AVI-4126 decreased the formation of lung metastases in an aggressive lung tumor model. AVI-4126 has been studied in other cancer settings based on its ability to inhibit c-myc overexpression, which has been correlated with cancer progression and chemotherapy resistance in several solid tumor models.

In the second study, inhibition of WT1 led to a reduced tumor volume in a prostate cancer model.

We also presented a study entitled Inhibition of XIAP, an Anti-Apoptotic Molecular Target Potentiates Radiation-Induced Cell Death in Cancer. This study evaluates a novel approach of using NEUGENE drugs to target the XIAP gene, which has been found to protect cancer cells from the effects of radiation, which of course is a common therapy that plays an important role in the management of a majority of cancers.

Earlier in April, we announced the release of extensive data from Ebola, influenza, dengue, SARS coronavirus, and Bunyavirus studies at the 18th International Conference on Antiviral Research. Our Senior Vice President of Research and Development, Dr. Patrick Iversen, delivered an oral presentation highlighting experiments performed at the U.S. Army Medical Research Institute of Infectious Disease, also known as USAMRIID, which are part of our ongoing research in biodefense with the Chemical and Biological Defense Program of the Office of the Secretary of Defense.

Our studies in collaboration with scientists at USAMRIID have established that our antisense drug candidates are efficacious in protecting and treating multiple animal species from the lethal challenges from Ebola. These results represent both an exciting alternative to current antiviral drug therapies and a real possibility of treating the currently untreatable Ebola virus.

In a second presentation, Dr. Benjamin Neuman of the Scripps Research Institute presented findings from SARS studies undertaken in collaboration with AVI scientists. Data from these studies demonstrated that our NEUGENE antisense drug candidates reduced all three parameters of the SARS viral infection, including cytopathic effects, viral titer, and viral spread. In addition, one antisense candidate was found to be particularly effective at reducing viral titer to undetectable levels; while another that was designed to affect the same target of a related virus reduced viral titer by 10,000-fold in mice.

Additionally, three of our scientific reports were included in a poster presentation. The first was drawn from a collaborative study with scientists at the Massachusetts Institute of Technology. In this study NEUGENE antisense agents targeted influenza strain H1N1 and exhibited up to a 1,000-fold reduction in viral titer in infected cells, and further suggested that a single antisense agent could be developed targeting both influenza A and avian influenza strains.

The second poster encompassed the results of the collaborative study with the CDC facility in Fort Collins, Colorado, where NEUGENE compounds in the study were found to be highly efficacious in cell culture by reducing viral activity up to 1 million-fold and, most importantly, inhibiting all four disease serotypes.

The third poster presentation was the result of a collaboration with Dr. Ramon Flick and his colleagues at the University of Texas Medical Branch in Galveston and at the Institute Pasteur in Paris. More than 60 members of the Bunyavirus family can cause severe disease in humans and in livestock. Several members of this viral family are classified in the bioterrorism category A list as those that are easily disseminated and highly contagious, and they can induce a high rate of mortality. Our NEUGENE agents were highly effective at inhibiting transcription as well as translation of these viruses.

As Denis mentioned, presenting study dated conducted with well-respected researchers at top-level institutions and government agencies, and presented in peer review publications and at respected scientific conferences, creates additional awareness of the advances in our developing antiviral drug candidates. Further, these activities create continued validation for our NEUGENE technology and support our efforts to develop additional collaborations and partnerships. Now I will turn the call back to Denis for some further remarks. Denis?

Thanks, Alan. Before opening the call to your questions, I would like to provide an update on clinical programs. In reviewing progress with our cardiovascular program, we are pursuing two distinct approaches with our NEUGENE drug candidate AVI-4126 to treat restenosis, both of which we believe represent large market opportunities.

First, with our Resten-MP micro-particle technology for the systemic delivery of AVI-4126, we plan to initiate a European trial in combination with bare metal stents around midyear to support our ongoing U.S. trial underway at the University of Nebraska Medical Center. Enrollment for this trial should approximate 50 patients. In preclinical studies Resten-MP was as effective in preventing restenosis as either using a drug-eluting stent or delivering the drug with a catheter.

We also intend to initiate later this year a 200-patient European late-stage study with Resten-NG delivered on our drug-eluting stent platform, or DES. If this trial is successful it should lead to CE Mark approval. As previously announced we have developed and assembled the components that we believe will be the next generation of drug-eluting stent or DES. The most important component is Resten-NG, which has advantageous characteristics compared with the drug components in Cypher or Taxis DES.

Our drug-eluting stent involves a non-polymer loading and elution system for Resten-NG. We believe this is the proper approach to DES considering healthcare issues concerning all polymer-based systems. We have taken extra time this year to develop this system; but again we believe we could reap medical and economic advantages by commercializing the first polymer-free DES in the marketplace.

We see a tremendous opportunity for Resten-MP and Resten-NG in countries like Germany, where about one-third of the stents placed during balloon angioplasty are drug-eluting stents, and two-thirds are bare metal stents, largely based on concerns with cost effectiveness with the polymer-based systems.

Turning to our infectious disease programs, we plan to report preclinical results from our HCV program in the second quarter of this year and file an IND application to initiate clinical trials with our NEUGENE drug for HCV around midyear. HCV is the principal cause of chronic liver disease, the number one cause of liver failure, and the tenth leading cause of death among U.S. adults. As Alan mentioned earlier the market for HCV is sizable, with estimates ranging from 10 to $20 billion worldwide.

Also we are moving forward with our dengue virus program in collaboration with the CDC; and we expect this to be the next viral program to move into the clinic, into clinical development following HCV.

We have completed clinical preparations to support our 50-patient Phase Ib/II West Nile virus clinical trial, including selection of the sites, study approvals in several western states. West Nile disease is just now emerging in the West as we enter the 2005 mosquito season. Details on this study are found on the CDC website.

With our oncology program we plan to initiate an additional cancer study in the next few months using AVI-4126 in a safety and efficacy trial in bladder cancer. As cancer clinical studies are typically lengthy and costly, we are actively seeking pharmaceutical partners to advance our oncology program into later-stage development.

Some of you have asked us about the possibility of developing NEUGENE-based compounds that address the avian flu. We currently have incorporated avian flu research into our influenza program, as avian flu is an RNA virus in the influenza family.

In closing, this promises to be an exceptional year for AVI as we gain additional recognition through our collaboration with well-respected institutions and presentations of study data in well-regarded medical journals and at conferences. Positive results from our preclinical and clinical data continued to be corroborated by numerous outside sources. Importantly, we are prepared to advance into late-stage studies with our lead programs with our near-term opportunities in cardiovascular and viral diseases, while looking to partner in collaborative opportunities with our longer-term opportunities in cancer, PKD, drug metabolism, among others. At this point I'd like to open the call to questions. Operator?

(OPERATOR INSTRUCTIONS) Ren Benjamin with Rodman & Renshaw.

Good morning, everyone, and congratulations on your ongoing progress. A couple of quick questions. Can you talk to us a little bit about AVI-4557, I believe? The last data we saw was actually quite compelling, and it was looking at the oral form. What is going on with that program?

We believe that that program accomplished a couple of things. First, when we delivered the drug either by intravenous or subcutaneous route, in a large number of patients, we were able to prove that antisense targeting the liver enzyme could be knocked down; and we could measure that reduction with two different test drugs. So, for us it proved that antisense delivered in two different ways could, in a very defined way in known systems, be shown to enter the liver, knock down the gene target, and produce the desired effect. The third study that we did showed that we could actually deliver the drug orally.

Taken together, our opportunity now and what we're aggressively pursuing is to partner that program for use with drugs that are currently approved in the marketplace. The gene target was cytochrome P450 3A4, which is responsible for the metabolism of about half of all approved drugs -- everything from aspirin and caffeine to the cancer drugs and drugs used for pain management.

So the idea is to partner with major pharma. We felt one of the key features in initiating that partnership was the oral data. So it has now been about six months since we've finally analyzed all of the oral data, and we're actively seeking partnerships.

Great. How about, if memory serves me correctly, there were two Phase II trials that were currently ongoing, utilizing the microbubble technology. Can you update us a little bit on those two trials? I believe one was in Nebraska, one was in South America. How are those progressing? When might we see some results from those studies?

The first trial is in Nebraska. We are still enrolling patients. It's in combination with a drug-eluting stent system. To support that we had always planned to initiate a second study. We looked at sites in Latin America; we looked at sites in Asia; and finally decided that the most reliable site to do this the study would be in Europe. That is the study we plan to initiate around midyear this year.

We have selected sites. We have selected principal investigators. We have a couple of more steps before the trial can begin, which involves the final approval of getting an import license into the countries where we're doing the study, which allows us to get the export license through the FDA to deliver the drug. We're well down that path, and we actually expect the study to start somewhere right around midyear.

If it starts, like you said, on time, how do you project enrollment to proceed? Can you tell us a little bit about the details of the trial?

We spent a lot of time making sure that the sites and investigators we picked were aggressively enrolling patients, and patients that were getting bare metal stents, because this is a study where we use the Resten-MP in combination with the bare metal stent. We believe that enrollment will be just a few months, certainly less than three months, and therefore we will have data in that six to nine-month window after enrollment.

Great. Can you talk to us a little bit about the hepatitis C program? You mentioned that there is going to be a publication of preclinical results potentially by sometime in the second quarter; and then the filing of an IND. What is the target that you have designed the antisense against? What are your thoughts as to how that program will proceed?

This is a key program for us. We have been in preclinical studies in various models from mice to contrived monkey models for the last three years. We have very carefully put together the scientific evidence to support the targeting of HCV.

We have looked at principally three different types of targets. Targets around the initiation of translation of the viral gene, what we have referred to as the AUG start site. We have looked at the internal ribosomal assembly sites or IRA sites. And we have looked at sites involved in the regulation of replication of the gene. We have eventually zeroed in on the AUG start site, and a particular region in that coding frame, pre-viral gene. Because of about we think we're in a very strong position both with recent patent issue and with the efficacy we've seen in comparing these targets.

We finished all of the preclinical work, including pharm tox and tox, in different species including monkeys. So we are in the final stages of putting the package together for the IND filing. Our program involves a small Phase Ia and, simultaneously, a larger Phase Ib clinical study. In the Phase Ib clinical study we're looking at both a subset of patients that are naive in turn of treatment with other drugs and patients that are ribavirin interferon failures. So there will be two initial study groups.

As I believe we have said before, we feel strongly that none of the HCV models are really very accurate and predictive. That's what makes developing a drug to HCV such a challenge. So we believe that the Phase Ib data that we will derive from the study will be the most important indication of how successful the program will be.

The end points are easily measured. They're viral titers. What that means is in a 14-day treatment regime you actually have indications of whether or not you're getting a knock down in the virus titer, which is a surrogate marker of efficacy, within the first month. So we'd expect, if we treat people this summer, that by the early fall we will have the early clinical data.

Fair enough. I think one final question is, can you talk to us a little bit about the presentations? Any future presentations that you may have coming up at scientific conferences?

Let's see, we have a couple of conferences that are in the fall, where we are really peaking to. Of course the one important one in the cardiovascular program is the Interventional Conference in Washington D.C. in the fall. There's also toxin pharmacology conferences in the fall, and we expect that we will present an update on our viral program.

I think most importantly over the last couple of years we've really rounded out our scientific programs with our collaborators. What you'll see, as you've seen in the first quarter, you will see again in the second quarter and in the second half of this year, finally, the publications in peer-reviewed journals from all this work, which is really the formal documentation of the strength of the program. Thanks, Ren.

Perfect. Thank you.

Quynh Pham with Delafield Hambrecht.

I just have a follow-on question about the Nebraska study. So that study was supposed to enroll 50 patients, right, for the Resten-MP?

That's correct.

It's been ongoing for about a year and a half now. Is that correct?

It has been ongoing for quite some time. I don't know if it's been a year or a year and a half.

What are the issues behind that enrollment? Why is that you expect the EU study to enroll in less than three months, when this ongoing study is having such a problem with enrollment?

We would expect the European studies to enroll faster simply because they treat more patients. They are centers of excellence within Germany, and their throughput of patients is significantly higher than Nebraska's. We haven't said that Nebraska is a problem per se. I think that we would be honest in telling you that we think the enrollment has been slower than they anticipated providing. But we are moving down the road with that.

But the German study will enroll patients much faster, according to just simple numbers of how many patients they treat. That of course to be modified by the occurrence of a holiday that lasts through August. But other than that, we anticipate that they will be very rapid enrollers.

All right. How are you monitoring the restenosis in the German study?

We look at both six and nine months with angiography; and at the end of the study, at nine months, with intravascular ultrasound.

Just trying to understand some of these studies for your antiviral programs, the ones in SARS, Ebola, Bunyavirus. These are very kind of very infectious diseases. How does a program like that move forward, when you certainly have these animal models, that you can't necessarily treat them in patients?

I think that is a great question. We tried to explain in the past our overall approach. That is we feel that there is a great similarity in all of the RNA viruses. All of the RNA viruses are single-strand RNA. And we felt strongly that if we can be efficacious in some of the different families, we can probably be efficacious against the significant viruses that have large economic markets.

So we fully recognize that some of the unusual viruses that we are addressing aren't going to result in drugs going to clinic. But they teach us a great deal in both culture and in animal models about how to deliver the drug, about how to deliver the drug to various organs where the virus proliferates, and what to expect.

So it is more in a preclinical model, it is a proof of concept for you?

That is correct.

Kind of like a long learning curve.

Many of these we're not going forward clinically.

So it is more mainly the hepatitis C and then perhaps the flu?

Hepatitis C. Dengue if we get the appropriate support from the government and the military, because it is a very important virus in certain parts of the world. Influenza, obviously a very important one and a large economic market. Another one that is a large economic market is respiratory syncytial virus, the main cause of respiratory disease in children.

Are you making a lot of progress in the RSV model? Because that would be very significant.

It would, and we have we have done quite a bit in the RSV model. Influenza and RSV are the two viruses next to come along with major clinical markets.

There is a model for RSV?

Yes, there is.

Do you think you will have anything published on that anytime soon?

I know that we plan some presentations in that arena. I do not know this morning whether or not the data is yet significant enough to put into a publication.

Okay. Those presentations are upcoming this year?

Yes.

Thank you very much.

There are no further questions at this time. Please proceed with your presentation or any closing remarks.

I would just like to thank everyone for participating in the call. It has been a very short (technical difficulty) our last call, less than three months. And we really appreciate your support. Thanks and good day.

Ladies and gentlemen, that concludes your conference call for today. Again, thank you for participating. You may now disconnect.