Sarepta Therapeutics Inc (SRPT) 2005 Q2 法說會逐字稿

Welcome to the AVI BioPharma 2005 second-quarter financial results conference call. At this time, all participants are in listen-only mode. Following management's prepared remarks, we will hold a Q&A session. At that time professional investors may ask a question. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded August 8, 2005. I would now like to turn the call 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 Berger, 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 second quarter of 2005. If you have not received this news release or if you would 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 Guertin. This call is also being broadcast live over the Internet at www.AVIbio.com and a replay of the call 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 Federal Securities laws. These forward-looking statements involve 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. Furthermore the content of this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, August 8, 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 Berger.

Thank you, Jody, and thank you all for joining us today. 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 programs.

We stated earlier last quarter that we believe 2005 will be a year of significant clinical milestones. To that end I would like to highlight two clinical programs. First I am pleased to report that in late June we filed an IND with the FDA to begin clinical testing of our third generation NeuGene antisense compound, AVI-4065, for the treatment of hepatitis C. The IND has now been accepted by the FDA and we will initiate the clinical programs this quarter.

While AVI-4065 is not the first of our NeuGene based antiviral compounds to enter the clinic, we view our hepatitis C program as key for several reasons. First HCV represents a difficult indication to pursue because none of the HCV preclinical models appear very accurate or predictive. In addition this virus has a high rate of mutation, making development of drug to treat it extremely challenging. As a single-stranded RNA virus, HCV is an attractive candidate for our NeuGene technology which is designed to target conserved portions of the viral genetic code that are not likely to mutate over time.

Second over the past three years we have been carefully assembling scientific evidence that supports our ability to target HCV. From these efforts we now have the valuable insights on dosing, administration, and pharmacokinetic data. Additionally our NeuGene compounds have an excellent safety record which is among the features that set our third generation antisense technology apart from earlier generations of compounds used by other companies. NeuGene compounds have been tested in more than 300 patients with no drug-related serious adverse events.

Third, our HCV program supports our corporate goal of developing drugs for unmet medical needs with large market potential. According to the World Health Organization, about 170 million people worldwide suffer from chronic HCV infection, representing a sizable market that is estimated in the 10 to $20 billion range. Of the approximate 3.9 million Americans who have been infected with HCV, 2.7 million are chronically infected.

The current standard of care for HCV is 24 to 48 weeks of therapy with interferon and ribavirin. The success rate for this therapy is less than 50% for patients infected with the most common form of the virus in the U.S. Further, interferon and ribavirin therapy has numerous side effects, some of them severe, which make it difficult for many patients to tolerate the recommended dosages and duration of treatment.

Our clinical trial design is for a multicenter Phase I-B clinical trial with up to 60 subjects. These subjects will be divided into three treatment groups. The first will be healthy volunteers and the other two groups will comprise of chronic active HCV patients including those who are newly diagnosed and those to have failed interferon and ribavirin therapy. We expect to begin patient dosing this quarter with preliminary data as early as year end.

We are exceptionally pleased that Dr. Mark Holodniy, at Stanford University School of Medicine and Director of the HIV Clinical Program and AIDS Research Center at the Veterans Administration Medical center in Palo Alto, will serve as principal investigator for this study.

The second clinical program that I would like to discuss is our cardiovascular program. We anticipate enrolling patients later this quarter in the first of our proposed European based trials with AVI-4126 for the treatment of cardiovascular restenosis. In this trial our microparticle formulation of AVI-4126 or Resten-MP will be delivered systemically in our microparticle formulation of AVI-4126. In preparation for this trial we have received approval from the European regulatory agency, we have selected clinical sites in Germany, and are now cleared to export Resten-MP to those sites.

We see a tremendous opportunity for Resten-MP in Europe and especially in countries like Germany, where about two-thirds of the stents placed during balloon angioplasty are bare metal, largely based on concerns of cost-effectiveness and long-term issues with drug-eluting stents.

This German trial is intended to support our ongoing U.S. trial with Resten-MP at the University of Nebraska Medical center. We expect trial enrollment in Germany to proceed at a much faster pace than it has domestically based on our selection of prestigious clinical sites that treat significantly more cardiovascular patients.

With those opening remarks, I will ask Mark Webber to review our financial performance.

Thanks, Denis. Today would like to review our 2005 second-quarter results, our cash position, and our financial guidance for 2005. Our revenues from license fees, grants, and research contracts increased slightly in the second quarter of 2005 to approximately $39,000 from revenues of approximately $36,000 reported in the second quarter of 2004.

Operating expenses in the 2005 second quarter decreased to $5.2 million, compared with $7.3 million in the comparable 2004 quarter. The decrease was due to lower research and development expenses of $3.9 million this year compared with $6.2 million last year. Approximately $2.7 million of this decrease was due to lower contracting costs for the production of GNP subunits but was partially offset by increases in laboratory supplies, employee costs, and clinical trial insurance.

General and administrative expenses were $1.2 million for the 2005 second quarter versus $1.1 million reported in the 2004 second quarter. We reported a net loss for the second quarter of 2005 or $4.9 million or $0.11 per share, which compared to net loss of $7.1 million or $0.20 per share for the second quarter of 2004.

Revenues for the first six months of 2005 were approximately $85,000, compared with revenues of approximately $136,000 reported in the first six months of 2004 reflecting lower research contract revenues, partially offset by increases in grant revenues.

Operating expenses the first half of 2005 decreased to $10.8 million from $15.1 million for the first half of 2004. The decrease in operating expenses was due primarily to a decrease in R&D costs to $8.1 million, compared with $12.8 million in the 2004 period. Our 2005 year-to-date net loss was $10.4 million or $0.24 per share, which compares to a net loss of $14.7 million or $0.41 (ph) per share for the first six months of 2004.

Reviewing our balance sheet. As of June 30, 2005, we reported cash, cash equivalents, and short-term securities of $32.2 million, an increase of $12.7 million from December 31, 2004. This increase is attributed primarily to the completion other direct equity placement with separate institutional investors for the purchase of eight million shares of AVI common stock at $3.00 per share resulting in net proceeds to the Company of $22.3 million which we announced in January of this year. This was offset by $9.1 million used in operations and approximately $771,000 used for purchase of property and equipment and patent related 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 statement.

We are modifying our financial guidance for the full 2005 year. We expect cash burn for the year to be a little less than originally estimated, in the range of 23 to $25 million.

With that overview, I'd 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. I'm pleased to report that our antisense technology continues to receive favorable attention from the medical community. This is evidenced by the many presentations at recent conferences based on NeuGene studies conducted by AVI and by our various collaborators including scientists, institutions, government agencies, and large pharmaceutical companies.

I would like to briefly describe several of these that serve as an example of the broad range of applications for which our technology is being studied. They represent just a few of our many collaboration arrangements. In early June, results from two preclinical cancer studies were presented at the annual meeting of the Endocrine Society. The first study, which was sponsored in part by the National Cancer Institute, demonstrates the ability of our NeuGene antisense technology to down regulate the androgen receptor which plays a pivotal role in the growth and proliferation of prostate cancer.

The other preclinical study in ovarian cancer conducted in collaboration with scientists at Oregon State University builds on our previous experience targeting the XIAP gene. This gene has been found to protect cancer cells from the effects of radiation. Our NeuGene negated the radiation resistance brought on by the XIAP gene, thereby giving the cancer cells enhanced susceptibility to radiation therapy. Radiation therapy plays an important role in the management of a majority of cancers and resistance to radiotherapy can be a significant treatment hurdle.

Later in June we were exceptionally pleased that positive results from seven collaborative projects were presented at the American Society for Virology meeting. Five of these were oral presentations. Dr. Richard Kenney (ph), of the Division of Vector-Borne Infectious Diseases of the Centers for Disease Control provided an update on the ongoing collaborative dengue virus investigation between AVI and the CDC, demonstrating our NeuGene's ability to extend the lives of dengue virus infected mice in a statistically significant manner.

Dr. Rene Rejnbrand of the University of Texas Medical Branch in Galveston presented data on Sindbis virus as a model virus for the alphavirus group which contains the highly pathogenic and weaponizable Eastern, Western, and Venezuelan equine encephalitis viruses. Alphaviruses are included on the national Institute of Allergy and Infectious Diseases Category A priority pathogen list.

Dr. Rheba Watkins of the Center for Pediatrics Research at Eastern Virginia Medical School discussed data from human herpes virus 8 and its association with several malignant distorters such as Kaposi's sarcoma, primary effusion lymphoma, and Castleman's disease. Dr. Elizabeth Reider from the United States Department of Agriculture's Plum Island Animal Disease Center presented data about the inhibition of foot and mouth disease virus in vitro with our NeuGene antisense.

Additionally Dr. Erwin van den Born from the laboratory of Dr. Eric Snijder at Leiden University Medical center in the Netherlands presented research demonstrating that virus replication could be completely inhibited by morpholino concentrations in the low micromolar range. At last month's International Congress of Virology, positive results from five collaborative projects using NeuGene antisense drugs were presented. These projects explore the fundamental mechanisms by which our NeuGene antisense drugs can reduce or eliminate viral infections that can cause diseases such as dengue fever, SARS, and even the common cold.

Among those presentations, Dr. Rene Rijnbrand discussed how NeuGene antisense drugs inhibit rhinovirus, a various known to cause a large percentage of the incidence of the common cold. The studies also identified broader potential applications to a larger group of viruses called enteroviruses, which infect 10 to 15 million people in the United States each year. Dr. Rijnbrand also presented significant data regarding the use of NeuGene to combat Sindbis virus.

Dr. Catherine Holden (ph) from the School of Public Health at the University of California Berkeley discussed an expansion of the efforts in dengue virus previously performed by the CDC. Results in this study corroborated earlier CDC findings while providing new pathways for targeting NeuGenes against the virus. Two additional presentations provide updates of previously reported results describing successful studies using NeuGene drugs designed to inhibit Rift Valley fever, a virus in the NIAID Category A priority pathogen list and the SARS coronavirus.

We also announced a publication of an article in the August issue of the Journal of Virology, describing preclinical studies of NeuGene compounds in inhibiting SARS conducted at the Scripps Research institute. This article emphasizes the robust antiviral potential of our antisense drugs, which demonstrates again that our NeuGene antisense agents are highly promising as therapies to treat SARS as well as a variety of other viruses. This recognition from presentations to the scientific community and the publication of peer reviewed articles in well-regarded medical journals showcase the versatility of our NeuGene technology as well as our ability to develop collaborative programs with respected institutions.

These activities are serving to promote clinical development by adding to our knowledgebase without the need of AVI to dedicate full resources to conduct these studies.

With that, I would like to turn the call back to Denis.

Thanks, Alan. Before opening the call to your questions I would like to provide an update on our clinical program now. First, reviewing our cardiovascular programs, as discussed we plan to begin patient enrollment in our European trial with Resten-MP in combination with bare metal stents for the treatment of restenosis this quarter. We're also moving forward with our Resten-NG program on drug-eluting stent. We're finishing our development work on our DES system and are currently initiating confirmatory pig studies before moving into human trials to receive CE Mark approval in Europe.

In a short nine months since we initiated this program, we have achieved more than our collaboration with a major medical device company achieved in three years.

Turning to our infectious disease programs, as discussed, our IND application to initiate a clinical trial with our NeuGene drug for HCV has been accepted by the FDA. We are actively completing preparations for patient enrollment this quarter.

In our West Nile virus program, enrollment of patients exhibiting presumptive neural invasive disease caused by this virus is open in our Phase I-B/II study with our NeuGene drug, AVI-4020. This study is being conducted in several Western states and cases of West Nile disease are increasingly being reported as we come into the full swing of the 2005 mosquito season at this time. Details on this study can be found on the CDC website.

In addition NeuGene drugs are being tested against a variety of hemorrhagic infectious and toxin producing agents in collaboration with the U.S. Army Medical Research Institute of Infectious Diseases, The Walter Reed Institute of Research, and the CDC.

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 clinical development following HCV.

With our oncology program now we plan to initiate an additional study in the upcoming 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.

Our strategy for drug development is to dedicate internal resources to drug candidates that can be developed relatively quickly and target large market opportunities while seeking collaborations and partnerships to support smaller market and longer-term opportunities.

Before we open this call to your questions, I'd like to mention that we were recently asked for the third time to testify before Congress regarding bio terrorism. We believe that our ability to produce drug candidates extremely quickly, even in a matter of days after receiving genetic sequence information is being recognized by our government as having the potential implications to counter threats of bio terrorism. In his testimony, Alan discussed our perspective as one of the small number of companies with technology applicable to bio defense and other serious public health issues.

Additionally he described our work with NeuGene technology to combat viruses and other toxins as well as insights into how government can streamline the advance of this and other promising technologies in the public interest.

In closing, this promises to be an exceptional year for AVI as we gain additional recognition within the medical community and move into the clinic with several novel drugs to treat major unmet medical needs.

At this time, we would like to open the call to your questions.

(OPERATOR INSTRUCTIONS)

While we are waiting for a couple of questions I might add that we are continually asked about applying our antiviral efforts to influenza and particularly avian flu. And I would like to state that this time that we have quite an active program in all of influenza and we are taking a specific interest in avian flu. And we expect that at our November conference call we will be able to update our avian flu progress with you.

Hal Zhao (ph), Rodman Renshaw.

First question I have is for the HCV program you're going to initiate coming very soon this quarter. Can you give us additional colors on the specific design of this Phase I trial such as how long is the Phase I going to be and whether the multidose studies may be a monotherapy versus -- or in combination with interferon or ribavirin? And any endpoints besides safety and adverse events that you can assess for this Phase I? And lastly, if you will, could you give us additional guideline as to how long these patient enrollments can be recruit?

Thank you for the question. I can provide you with some additional details on the HCV trial. It is both a Phase I safety study and a Phase I-B study involving two different categories of patients, ones that are naive and have not yet received interferon or ribavirin therapy and an additional group that have failed ribavirin interferon therapy. So part of the study will involve strictly safety in normal individuals.

Then there are two treatment groups; one naive patients where the endpoint for evaluation of initial efficacy will be a reduction in viral titers. And finally a study group which includes treatment failures; patients that could not tolerate or failed on ribavirin interferon. And once again the endpoint for clinical -- early signs of clinical efficacy will be reduction in viral titers.

It will take a couple of months to enroll the first cohorts in that group, but as I said in my initial remarks, we expect to have not only safety and pharmacokinetics, but also early indications of efficacy data by the end of the year.

Great, thanks. Another quick question on the cardiovascular programs. How did the ongoing Phase II Resten-MP being (indiscernible) going so far? Are you still on target to complete patient enrollment by the end of this year?

I think we will complete patient enrollment by the end of this year. As we had indicated previously on calls, the enrollment at the center is relatively slow because it is not a large active center. It was a key study to initiate there because they had great experience and were codevelopers with us in the microparticle technology, and that is one of the reasons that the trial was initiated at that site. It has given us great comfort in -- with their ability to develop the subtleties around the delivery mechanism and the safety and pharmacokinetics with drug delivered that way.

We have been recently pleased with the number of patients that have been enrolled. We expect that that study will wind up sometime around the end of the year. And as a reminder that use of Resten-MP in combination with DES, a drug-eluting stent, versus our German study, which is Resten-MP, done with bare metal stents. Thanks for the question.

Richard McCarey (ph) with Collectibles LLC (ph).

I just wanted to see if I can get an update on what is happening in relation to your Ebola clinical studies with USAMRIID and whether or not we could expect any further information to come out on that in the form of a press release by the company, in the form of a publication, in one of the journals? And whether or not that work is ongoing? We haven't really heard much on that.

Thanks for the question, Rich. The answer to that is that in a conference call of this type we try to highlight each time slightly different things -- this time, our two clinical programs that are ready to start. So I hope that just because we don't mention something in the call does not mean it is not high in our priority list, and certainly all of the work that is ongoing at USAMRIID and CDC are very high on our target list.

The program is very active both in terms of the two different Ebola-like viruses, Ebola Zaire and Marburg. We have been very aggressive in terms of the number of different species, three species now where we have had animal efficacy with Ebola Zaire and because of the increased interest in Marburg with the outbreaks that continue in Africa, we ramped up the Marburg program. That has now progressed to the point where we feel we have candidates that produce efficacy at the dose levels that are relevant in the more difficult guinea pig model. So the program is extremely active.

We have additionally done work at USAMRIID with two different toxins -- one anthrax, one ricin, and have initial indications that we can be with a quite different strategy, be effective in both of those.

In terms of press releases or publications, we have submitted the Ebola data for publication. We expect to hear this summer on when it will be published. We're not sitting back and just letting this opportunity to talk about this active program slip by. So we are aggressively trying to publish not only the Ebola Zaire work, but we are putting publications together on the Marburg work. And I think you could see from Alan's presentation that we have an ongoing very active effort in getting everything presented at meetings and published, as he reviewed some of that work. Rich, thanks for the question.

(OPERATOR INSTRUCTIONS) Philip Wiggins (ph), Pharm South (ph).

Recently Scripps Research Institute announced that their research team made the first cell culture systems for the hepatitis C virus. How will this event impact AVI's NeuGene HCV program?

Thanks for the question and I want to personally thank you for sending me information from time to time to keep me updated on things that you think are relevant to our program.

I think the ongoing work at Scripps is very important in that it gives an additional opportunity to test agents in relevant ways. As you know, one of our principal collaborators and one of the key people in virology on our scientific advisory board, Michael Buchmeier, his principal laboratory is at Scripps. So we are relying on him and that collaboration to keep us apprised of the ongoing developments with that new HCV system.

Thank you very much.

Richard McCarey, Collectibles LLC.

Guys, I'm back again. Just another question on the infectious disease programs. West Nile, what is happening with that program in terms of enrollment? We did see an article out in the media saying that it seems to be very difficult to get people enrolled into these emerging infectious disease programs. So I wanted to better understand where that program stands and whether or not you believe during this season that that program is going to get sufficient enrollment?

And also, if you could just elaborate a little bit more on your efforts regarding H5N1? Those are two things I wanted to follow up on.

First I think your question on enrollment in West Nile is very appropriate. I think everyone working in this area recognizes that it has been very difficult to enroll patients and we know so far this year of no patients being enrolled into the two or three experimental programs yet including ours. So -- but the season is just reaching its impact stage and we are as prepared as any company can be to take advantage of any relevant outbreak with neural invasive West Nile disease. We have spent the past year making sure we had IRB approvals and drug available in many of the western states in all the hotspots where everyone predicted the disease would be apparent this year.

We expect that if we're going to be successful in enrolling patients it's going to come between now and mid-October. That is the hot season. We can't predict whether it will happen and the numbers that will give us an enrollment. We expect to enroll patients, whether it will be enough to make clinical decisions, we can't say. It is just far more difficult than anyone anticipated and of course it is not just us. The NIH and their program has enrolled no patients yet this year.

In regards to your comment about avian flu, we are going to save that for the November conference call for an update because we are now in the process of not only targeting the A strains of influenza, more conventional influenza, but also we have had some success in picking conserved regions that allow us not only to target that but also to get the couple different strains now of avian that appear to be an issue in just in the last week in Russia and expected to move into Europe in the near term.

So I think we all view this as a real threat and a key area for us, since we can respond so quickly. So it is a very active program and we are making progress and I think by the time of the November call, we will be able to provide you with some details on the program.

Okay, thanks.

Hal Zhao, Rodman and Renshaw.

Thanks for taking my question again. I have a quick question for the HCV program. I know -- and I probably asked this question before but I was wondering if you can shed just a little bit more light on the treatment period for the treatment timeframe for the patients with Resten-NG? And also with these drugs and then if possible how long is there going to be a patient follow-up?

Yes, the treatment regimen is 14 days of subcutaneous injection of the Resten -- of the AVI-4065 divided in two doses. So at 12 hour intervals for 14 days. Follow-up is going to go -- of course you initially get some information on viral titer just after a few days but follow up will be as long as six months and we expect of course to evaluate the patients after 30 days, three months, and then finally at six months.

And you then release these interim data as the follow-up progresses, right?

We certainly plan to have preliminary -- and we call it preliminary because we don't expect all patients to be at six months but we expect to have preliminary efficacy data by the end of the year.

I have another quick follow-up question on the Resten-NG DES. In the conference call you mentioned that the pig study is ongoing and can do just give us additional light on the preplanned Phase III and the European trials if these preclinical went through?

As we get data back from our ongoing pig studies, the next decision will be to manufacture the DES in numbers and quality that would be suitable for the CE Mark trial in Europe. And if once that is completed, then we will initiate the first in man studies. Now we are a little reluctant to give any further details until particularly timelines until we have this initial data back, which will be relatively -- which will be this quarter on the progress in the pig studies.

Okay, thanks.

Rick Marques (ph), CE Unterberg Tobin.

I was wondering if you could give us an update on the Ebola Zaire virus studies that you've been doing. I know that you had some success with certain animals that were given lethal dosages. Where is that at now and how is that progressing?

In terms of Ebola Zaire, we have run a very, very large number of experiments at USAMRIID in mice. And the experiments in mice have been dramatically successful in that we have been able to put together a number of genes that we could target to be 100% efficacious in protecting mice from lethal challenges. And these were complex experiments where we looked at dosing the mice prior to getting Ebola and then dosing the mice therapeutically after getting Ebola or combinations.

We have been able to work out protocols for several different genes and several different schemes of dosage parameters. That has involved literally more than 1000 mice.

We have also then gone into the more difficult guinea pig models and been efficacious in those models. Finally we went into Rhesus monkeys and took a very aggressive dosing stance because this is a very large hurdle and with a very aggressive dosing stance, we were able to achieve survival in 75% of the animals. So a very stunning result that has never been produced before with a therapeutic regime.

Based on that, we have also gone quite aggressively into research studies with the Marburg virus. Marburg structurally is identical to Ebola Zaire, just a little bit different in the untranslated reading frame before the major structural genes. So the viruses are very, very similar. Since we target our NeuGene drugs to the untranslated regions, our drug is in fact quite different for each virus. So we basically had the start over when we started with Marburg.

We had quite a series of reiterative experiments where we looked at survival data in the guinea pigs and then went back to the lab to modify and tweak the NeuGene drugs. We are at the point now where we believe we have achieved near 100% efficacy in the guinea pigs with a variety of different genes. So once again it has been a very successful program.

We will continue with both of those programs because we believe not only is this the potential drug for further development under the Bioshield program, but also it gives us tremendous insight into how to target and deliver drugs for very, very aggressive infectious diseases. And we have learned a lot that we have able to apply to our hepatitis C program just from the work that has gone on against these hemorrhagic aggressive viruses.

There are no further questions at this time. Are there any closing remarks?

I would just like to add that I thank you all for joining us on this call and reiterate my comment that I made at the beginning that we believe this is a key year for AVI because of the clinical programs that are now in hand. Thanks so much.

Ladies and gentlemen, that concludes your conference call for today. We thank you for your participation and ask that you please disconnect your lines.