Stephen Hill – President & CEO
Alan Musso – CFO
David Hosford – VP of Clinical Development & Regulatory Affairs
Steve Toler – VP of Translational Sciences & Emerging Opportunities
Robyn Karnauskas – Deutsche Bank
Targacept, Inc. (TRGT) Q4 2012 Earnings Conference Call February 13, 2013 5:00 PM ET
Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2012 Targacept Incorporated Earnings Conference Call. My name is Ayeesha and I will be your coordinator for today’s call. (Operator Instructions) As a reminder, this call is being recorded for replay purposes.
Now I would like to turn the call over to your host for today, Dr. Stephen Hill. Please proceed.
Thank you, Ayeesha. My name is Stephen Hill and I’m the President and CEO of Targacept. And with me this evening I have Alan Musso, who is our Chief Financial Officer; David Hosford, who is our Vice President of Clinical Development and Regulatory Affairs, and Steve Toler, who is our Vice President of Translational Sciences and Emerging Opportunities.
Before summarizing our results for the quarter and for the year, let me first inform you that comments made today may include forward-looking statements made under the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to future events, plans, expectations, objectives, or financial results or conditions, including for any of Targacept’s product candidates, the design, the scope or order of details of clinical trials, the timing for initiation or completion of or for reporting of results from clinical trials or for submission or approval of regulatory filings, target indications or commercial opportunities, as well as any payments Targacept may receive from AstraZeneca, AstraZeneca’s development plans for product candidates licensed from Targacept, cash runway, revenues or expenses, plans, expectations or any other matter that is not a historical fact.
Actual results may differ materially from those expressed or implied by any forward-looking statements as a result of many factors, including those described under the heading Forward-Looking Statements in Targacept’s press release from earlier today or under the heading Risk Factors in the company’s most recent Form 10-K or in later filings with the SEC.
Targacept cautions you not to place undue reliance on any forward-looking statements. Also any forward-looking statement that is made speaks only as of today and should not be relied upon as representing Targacept’s views as of any future date. Targacept disclaims any obligation to update any forward-looking statement except as required by applicable law.
And with that, I’ll now turn to our progress for the last quarter and recent events.
As you know, I joined Targacept as CEO in December of last year, and my time to date here has only reinforced my enthusiasm to Targacept and for its future. I believe that Targacept is in an enviable position. First, we have a promising pipeline with multiple Phase IIb candidates in development for patients in desperate need of novel treatment options. Second, we have a talented team in place to move these programs forward, and a team that is passionate, resilient and determined to make a difference in the lives of patients and their caregivers.
Each of our current and former product candidates had a distinct mechanism targeted to a distinct underlying pathology. Consequently, each combination of receptor subtype and disease pathology represents an independent clinical initiative and a negative outcome in the past does not I believe predict our future results.
Finally, we have the cash necessary to see us through to potentially value creating clinical outcomes. That cash is a precious resource and we’ll be careful stewards of its use.
Now let me provide a brief update on each of our clinical programs. TC-5619 a wholly owned alpha 7 modulator is a treatment for negative symptoms and cognitive dysfunctions in schizophrenia. Published scientific evidence and clinical experience to date support the potential of alpha 7 modulators to impact these so called residual symptoms in patients with schizophrenia. Millions of patients with schizophrenia are adverse affected, impacting their ability to function in society.
We have designated the scale for the assessment of negative symptoms or SANS as the primary end point in our trial, but have chosen cognitive dysfunction and overall everyday functioning as key secondary assessments. We plan to enroll 450 patients in this study at sites in Eastern Europe and the US. And this enrollment continues to track at it’s current rate, we expect to report topline results by the end of this year.
Let me turn now to our program in overactive bladder. Current treatments for overactive bladder have limited efficacy and for many tolerability issues like excessive dry mouth. TC-5214 is a potent modulator of alpha3beta4 NNRs located in and around the bladder. Based on pre-clinical studies and signal seen in a previous clinical program, as well as a well established safety and tolerability profile arising from that program, we’re enthusiastic about pursuing this indication.
We are moving forward with plans to initiate the Phase IIb clinical trial in the second quarter of this year. With our contract research organization, we are currently identifying study sites and finalizing our protocols.
Finally, AZD3480 is our alpha4beta2 modulator in development for the treatment of mild to moderate Alzheimer’s disease. We’re conducting a 12-month Phase IIb study as monotherapy. We have designed this study to evaluate 3480 head to head against donepezil which is the market leader. And we anticipate top-line data in the middle of 2014.
Before we move to the financial update, let me close my section by saying that I joined Targacept because the company represents I think a unique opportunity. Our company has a current pipeline that includes three Phase IIb programs, any one of which could transform our future as positive.
We have a balance sheet that will see the company through to those important clinical outcomes and beyond. We have smart and dedicated people, people who have lived through the turbulence of 2012 and are still here not because they have to be but because they want to be and because they remain committed to positively impacting patient’s lives.
As we progress into 2013 and beyond I look forward to working with these dedicated individuals to build on the foundation that has been laid at Targacept and to bring new patients, new medicines to patients.
I must also at this point thank all of those Targacept employees who left the company, during 2012 and before. Their past contribution and hard work will be no small part of the success that we’re building towards.
And with that, I’ll turn the call over to Alan for our financial update. And then we’ll be happy to take your questions.
Thank you, Steve. Let me just take a few minutes to review our financial results for the fourth quarter of 2012 and the full year which we released earlier today.
For the fourth quarter of 2012 we had a net loss of $15.9 million compared to a net loss of $9.8 million for the fourth quarter of 2011. The change was due principally to a decrease of $18.4 million in deferred revenue recognition and $1.4 million in charges related to a workforce reduction completed during the fourth quarter of 2012, partially offset by a decrease in research and development expenses of $13.7 million.
For the year ended December 31, 2012, we reported a net loss of $7 million compared to a net loss of $8.5 million for 2011, with the change due primarily to a decrease of $46.1 million in R&D expenses partially offset by a decrease of $39.8 million in the recognition of deferred revenues and $3.7 million in charges related to two work-force reductions completed during 2012. We ended the year with over $184 million in cash and investments and marketable securities.
Moving to our financial guidance, based on our current operating plans, we expect for the year ending December 31, 2013, our net operating revenues to be approximately $2.4 million and our operating expenses to be in the range of $48 million to $54 million.
We also expect our cash, cash equivalents and investment balance at the end of 2013 to be at least $135 million. We continue to expect our current cash resources will be sufficient to meet our operating requirements for at least the end of 2015.
And with that, we’ll open up the call for your questions.
Ayeesha, we’re ready to take any questions.
(Operator Instructions). Your first question comes from the line of Robyn Karnauskas with Deutsche Bank. Please proceed.
Robyn Karnauskas – Deutsche Bank
Hi guys, thanks for taking my question. Two quick ones, can you comment first on any updates you’ve had with the FDA regarding your OAB regulatory strategy, and second, can you talk a little bit about 5619 enrollment trends and what needs to occur as far as those trends to be on track for this year? Thanks.
Yeah, so, it’s Stephen Hill speaking. So, we have met with the FDA, I think the simple summary of that is that we did not get any surprises. We felt we had a pretty good handle on the regulatory pathway for an overactive bladder program. We had a very collegial interaction. And we’re able to confirm our expectations of the basics of the study design which we put in place. And we feel that we remain on track to conduct that study along the timeframes that we’d internally planned.
With regards to the recruitment for 5619, we believe that we’re on track for a year-end readout. We’re always cautious about promising recruitment rates into studies. So, we’ll simply keep you informed on an ongoing basis. There are a lot of variables as you know in that process. As of today we monitor this weekly. We’re tracking towards the trend-line, we’re going to read that the end of the year. And don’t anticipate or expect any deviations from that but we can imagine certain circumstances that may occur. But we believe we put in place appropriate plans to keep that on track as is.
Robyn Karnauskas – Deutsche Bank
From your discussion with the FDA, just a follow-up on your OAB commentary, like how much clarity did you get regarding the pivotal regulatory strategy, the filing strategy versus just the Phase IIb design?
I think our primary focus was obviously was to have a discussion about our particular design for the Phase II study. But we believe that the regulatory pathway in terms of the end-points for such studies is very clear and our conversation with the FDA really confirms what we believe we already understood about appropriate end-points, not just for a Phase II study but also for ready pivotal study, which by the way I believe to be the same. So the end-points that we would anticipate using a Phase II study would be the same as the end-points we would expect would be appropriate for a regulatory submission.
Robyn Karnauskas – Deutsche Bank
All right, thank you.
(Operator Instructions). And your next question comes from the line of Alan Carr with Needham. Please proceed.
Hi, thanks for taking my question, this is actually Mark on for Alan. I was wondering if you guys had any updates on 1446, what’s going on there, is it something you guys, anticipate getting back from AstraZeneca? Is there any timing associated with updates on 1446? Thanks.
Yeah, it’s tough to give you an answer to that because really in the hands of AZ, and we will share with you as soon as they share with us what their intent is for that, our understanding is that they are in the process of deciding an appropriate indication. As you know, as a company as a whole, they are going through a lot of transition with the new CEO. So, my guess is they may not be completely clear on when they can make their own internal decisions within the (US)[ph] science group.
We’ve had a very collegial relationship with them. They are very transparent with us and I have no doubt they will share with us as soon as they’ve made their decision which direction they wish to take that compound and we’ll share that with you when we know.
Great. Thanks very much.
(Operator Instructions). There are no further questions in the queue at this time. I will now like to turn the call back over to Dr. Stephen Hill for closing remarks. Please proceed.
So, once again, thanks to everybody on the call. We appreciate your interest. We are excited by the year ahead of us. We got a lot of work to do and we have some great people and some great science to pursue that. So, thank you. We look forward to working with you during the course of 2013. Have a great day.
Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Have a great day.
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