Tengion, Inc. (TNGN) Q3 2012 Results Earnings Call November 13, 2012 8:30 AM ET
Brian Davis - Chief Financial Officer
John Miclot - President and CEO
Dr. Tim Bertram - Chief Scientific Officer and President, Research and Development
Good day, ladies and gentlemen. And welcome to the Q3 2012 Tengion Earnings Conference Call. My name is Alison, and I’ll be your operated for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (Operator Instructions)
Just as a reminder, this call is being recorded for replay purposes. I’d now like to turn the call over to Mr. Brian Davis, Chief Financial Officer for Tengion. Please proceed.
Good morning, everyone. And thank you for joining us on our third quarter 2012 earnings call. Today I’m here with John Miclot, our President and Chief Executive Officer; and Dr. Tim Bertram, our Chief Scientific Officer and President of Research and Development.
John will begin the call by reviewing the recent highlights for lead programs. Tim will then discuss these programs in more detail. And I will summarize our financial results for the quarter. We will then open up the call for your questions.
This morning we issued a press release that provides a business update, as well as details of our financial results for the quarter ended September 30, 2012. Press release is available on our website at www.tengion.com.
Before we begin, I would like to remind you that certain statements made in today’s call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are based on management’s current beliefs and expectations concerning future events and are subject to change. All forward-looking statements involve risks and uncertainties that could cause the company’s actual results to differ materially than currently expected.
These risk factors set forth risks regarding our plans to develop and commercialize our product candidates, including the Neo-Urinary Conduit and the Neo-Kidney Augment, and expectations regarding ongoing and planned preclinical studies and clinical trials.
Although, we believe that these statements are based upon reasonable assumptions within the bounds of our knowledge of the company’s business operations, there are number of factors that may cause our actual results to differ from these statements. You should refer to the Risk Factors section of the company’s periodic reports filed with the SEC for discussion of these risks and uncertainties.
Forward-looking statements made on the call are made only as of the date hereof and Tengion disclaims any intention or responsibility for updating predictions or expectations made on today’s call.
With that, I will now turn the call over to John.
Thanks, Brian, and good morning, everyone. I’m very pleased with our progress at the company. We continue to remain focused on executing on the key value inflection points for our two lead programs, the Neo-Urinary Conduit and the Neo-Kidney Augment program.
On the Neo-Urinary Conduit, we are actively enrolling the remaining four patients in the Phase 1 trial, with the aim to implant up to 10 patients by the end of the year, enrolling our seventh patient is critical to achieving this objective and we hope to accomplish that within this month.
Turning to the NKA program, we are currently conducting the GLP study -- we are currently conducting GLP studies required by the FDA to support our IND filing and we remain very focused on assuring that we achieve the objective with the goal to complete that by the first half of next year.
We also recently received two Notices of Allowance from U.S. Patent and Trademark Office for our patent applications covering our novel technologies and Tim will go into more detail regarding these Notices of Allowance.
We are also very pleased with our continued execution all of our corporate objectives, we are dedicated to advancing our two lead programs. For that reason we’re especially pleased to have announced -- previously announced last month the successful completion of $15 million private placement, which will provide us sufficient funding to achieve the objectives I just outlined.
With that, I’m going to turn it over to Tim [Audio Dip]
Dr. Tim Bertram
Let me begin today with the Neo-Urinary Conduit program then I will update all of you the development progress of our Neo-Kidney Augment program. In terms of the Neo-Urinary Conduit, this is a novel product candidate that utilizes the patient’s own cells, the bioabsorbable scaffold to create a native-like urinary tissue conduit.
This can be a highly beneficial bladder cancer patients requiring urinary diversion following a bladder removal. We believe the Neo-Urinary Conduit has the potential reduce the side effects associated with current standard of care. This standard of care uses bowel tissue to construct the conduit for urine to exit from the body.
In addition to requiring extensive post-operative recovery times, these patients undergoing today’s standard of care procedure are at risk of complications associated with the use of bowel [Audio Dip] upsetting both the urinary and digestive systems.
Major disadvantages of today’s standard of care, include long surgical time, approaching approximately four to six hours, standard recovery times post-operatively which can range from weeks to months. In addition, the use of bowel creates absorption challenges and can lead to multiple metabolic disorders.
To date, we have implanted six patients in the ongoing Phase 1 clinical trial. Trial is an open-label, single-arm study, which is expected to enroll up to 10 patients.
Recent events are noteworthy. Last month, we were deeply saddened to announce that two patients in the trial passed away due to afflictions unrelated to the conduit or its surgical procedure. Fourth patient enrolled in the trial died of the metastatic bladder cancer and the sixth patient passed away from a cardiopulmonary arrest, following a myocardial infarction.
We’re very grateful for their participation in this trial, as they provided key insights to the safety and potential effectiveness of the Neo-Urinary Conduit, including its patency and functionality.
We successfully redefined surgical procedure, a robust post-operative recovery and the resiliency of this product candidate, very aggressive chemotherapeutic regimens. All of these learnings led to deep understanding and it is important to note that until their deaths, both of these patients had functioning Neo-Urinary Conduits, which generated urinary tissue from our product and they maintained normal renal function over their demise.
In the case of the patient four, functionality of the Neo-Urinary Conduit facilitated a post-operative recovery that was strong enough to actually allow him to begin life extending chemotherapy and radiation four weeks earlier than would have been possible for today’s standard of care.
So these two reported death are unrelated to the Neo-Urinary Conduit or the surgical procedure. We continue to focus on enrolling the remaining four patients in the Phase 1 trial at all clinical sites by the end of the year.
In fact, following positive meetings with the Data Safety Monitoring Board and the FDA, during which we updated both groups on patient progress in the definitive surgical procedure. We are proceeding with concurrent enrollment of the remaining four patients involve.
However, as John mentioned, the timing of enrolling the seventh patient in the trial, which serves as the training case for only centers, as well as possible slowing of recruitment commonly seen during the holiday season. Collectively, these may result in completing enrollment of this trial in the first quarter of 2013.
We are working closely with our clinical sites to enroll the remaining patients in the trial before the end of the year. However, we recognized that the seasonality and the critical nature of number seven patient may have an effect on our timelines.
We now have four clinical trials active -- clinical trial sites actively recruiting patients, including the original centers, the University of Chicago Medical Center and Johns Hopkins Hospital.
We’ve also added Baylor College of Medicine in Houston, Texas and the University of Michigan Comprehensive Cancer Center in Ann Arbor, Michigan. And additional two clinical trial sites are open for enrollment, but not yet actively recruiting patients.
I would now like to turn to our Neo-Kidney Augment program. Progress we’ve made for our lead preclinical program, the Neo-Kidney Augment program is intended to advance and prevent the delay of the need for dialysis or kidney transplant by catalyzing the regeneration of functional kidney tissue in patients with advanced chronic kidney.
Our Neo-Kidney Augment is a selected cell population of a patient’s own kidney cells, which are selected for the regenerative properties and expanded in our laboratories, and then combined with the biomaterial.
This product is then injected into the cortex of the kidney using laparoscopic methods. If successful, as we have seen in our preclinical pharmacology studies, we would then expect to see stabilization or improvement of renal function in patients with chronic kidney disease, and the elimination of many comorbidities of that particular disease.
We expect to submit an IND filing for the Neo-Kidney Augment to the FDA during the first half of 2013. And we anticipate that the potential Phase 1 clinical trial in chronic kidney disease patients will provide initial human proof-of-concept data in 2013.
In order to support the IND filing and initiation of a Phase 1 trial, we are currently conducting a GLP program. Interim results from these studies are consistent with pharmacology studies, we have already conducted.
Pharmacology studies yielded positive data demonstrating slowing kidney disease progression and improved survival. Assuming the GLP program is successful, we plan to evaluate the safety and initial efficacy and delivery of the Neo-Kidney Augment, and a dose escalation, repeat dose setting or potential biological licensed application with the FDA.
In our press release this morning, we also announced that we are progressing our plans toward opening a clinical trial on the safety and delivery of the Neo-Kidney Augment in patients’ chronic disease in Sweden.
Regulatory interactions have already taken place and filing of a clinical trial application is anticipated to occur in the first quarter of 2013, a patient enrollment to initiate upon regulatory agency approval.
In other advances, John mentioned earlier this month, we received a Notice of Allowance for our patent application that includes claims intended to protect important aspects of the Neo-Kidney Augment product. Once issued, this patent will provide broad protection for not only a selected population of regenerative renal cells capable of regenerating functional kidney tissue mass in chronically diseased kidneys but also various formulations of this selected cell population, allowing for the optimization of product formulations and delivery in the clinical setting.
We also received a Notice of Allowance earlier this month for a patent application that includes compositional claims on the construct and cellular elements of the Neo-Urinary Conduit product, as well as use claims covering this technology in additional clinical applications. Once issued, this patent will provide broad protection through 2030 for the regeneration, reconstruction, repair, augmentation or a placement of laminarly organized luminal organs or tissue structures using scaffolds and cells that are not derived from diseased organs or tissues.
In addition to providing broad intellectual property protection for the Neo-Urinary Conduit, this patent also represents a broad platform opportunity for multiple neo-organs and cell-based therapies of tubular and hollow organ regeneration.
We believe this patent technology has therapeutic applications and several additional indications. And this Notice of Allowance is another major step towards our goal to develop novel therapies for patients with limited treatment alternative.
These patents are evidenced that we are dedicated to strengthening and broadening our intellectual property portfolio in order to protect the groundbreaking novel technology behind our regenerative medical program.
Now, I will turn the call back to Brian to review our third quarter 2012 financial results. Brian?
Thank you, Tim. Before I review our results for the quarter, I would like to briefly discuss the successful financing we completed a few weeks ago. In October, we announced the closing of a private placement of $15 million of aggregate principal amount of senior secured convertible notes.
In addition, we granted to the purchasers of those notes an option to purchase the additional $20 million of these notes. The $15 million principal amount included the exchange of $1 million of debt issued in our bridge financing, which we announced in early September.
As John mentioned, we intend to use the net proceeds of the transaction primarily to fund our research and development activities in the Neo-Urinary Conduit and the Neo-Kidney Augment.
Now, turning to the results for the third quarter and nine-months ended September 30, 2012. For the nine-months ended, we reported an adjusted net loss of $13.1 million or $5.52 per basic and diluted common share, compared to an adjusted net loss of $18.2 million or $8.70 per basic and diluted common share for the same period in 2011.
The decrease in adjusted net loss was primarily due to a reduction in compensation and related expenses of $3.1 million and the decrease in depreciation expense of $2.4 million. The decreased compensation expenses of which $1.6 million were attributable to R&D personnel and $1.5 million attributable to G&A personnel were primarily due to lower headcount resulting from our restructuring in November of 2011.
The decreased depreciation expense resulted from both a change during the second quarter of 2011 in the estimated useful life of leasehold improvements at our facility in Winston-Salem and an impairment charge during the fourth quarter of 2011 of the carrying value of our leased facility in East Norriton, Pennsylvania.
For the third quarter ended September 30, 2012, we reported an adjusted net loss of $4.2 million, or $1.72 per basic and diluted common share, compared with an adjusted net loss of $5.1 million, or $2.17 per basic and diluted common share for the same period in 2011. The decreased adjusted net loss for the 2012 period was primarily due to a reduction in compensation and related expenses of $500,000 and a decrease in depreciation expense of $600,000.
Those reductions in expense were offset in part by an increase of $300,000 in interest expense related to the bridge financing announced in September 2012. As of September 30, 2012, we held $1.4 million in cash and cash equivalents, which did not include all the proceeds from our $15 million financing in October.
Now, I will turn it over to John for final remarks.
Thanks Brian. When I joined Tengion nearly a year ago, I stated that my goal as a CEO was to work with and lead the team to achieve the full potential of these highly promising programs. I feel we’ve made great strides towards achieving these goals. We remained very focused on executing to value inflection points, and we worked -- are working diligently to execute on our near-term milestones on both programs.
With that, I’ll open the call for questions. Operator?
So it appears that there are no questions. So operator we will end the call and we thank you all for your time today.
Thank you. Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect and good day.
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