Repligen Corporation F3Q09 (Qtr End 12/31/08) Earnings Call Transcript

Feb.11.09 | About: Repligen Corporation (RGEN)

Repligen Corporation (NASDAQ:RGEN)

F3Q09 (Qtr End 12/31/08) Earnings Call Transcript

February 5, 2009 10:00 am ET

Executives

William Kelly – CFO

Walter Herlihy – President and CEO

Analysts

Elemer Piros [ph] – Rodman & Renshaw

Ronald Orphan [ph]

Operator

Good day, ladies and gentlemen, and welcome to the Repligen Third Quarter Fiscal Year 2009 Results Conference Call. My name is Matrice and I will be your coordinator for today's conference. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this call. (Operator instructions)

And at this time, I would like to turn the presentation over to your host for today's call, Mr. William Kelly, Chief Financial Officer. Mr. Kelly, please proceed sir.

William Kelly

Thank you and good morning. The purpose of today's call is to briefly review our financial results for Q2 fiscal year 2009, update our financial projections for fiscal year 2009 and to provide additional information on our development programs. Joining me today is Walter Herlihy, our President and CEO.

At the outset, I would like to state that this discussion will contain forward-looking statements which are not guarantees of future performance, such as our financial projections and projections for the US sales of Orencia, opportunities for licensing, our intellectual property portfolio and our plans and projections for clinical trials.

These statements are subject to certain factors which may cause Repligen's plans to materially differ or results to materially vary from those expected, including market acceptance of our products, unexpected pre-clinical or clinical results or delays, delays in manufacturing by us or partners, failure to receive adequate supply of clinical materials from our partners, timing of product orders, delays in or failure of regulatory approval, adverse changes in commercial relationships and a variety of other risks set forth in our filings with the Securities and Exchange Commission, including but not limited to, our annual report on Form 10-K.

Except in circumstances in which prior disclosure becomes materially misleading in light of subsequent events, we do not intend to update any of these forward-looking statements.

This morning, we released our financial results for the third quarter of FY 2009, which ended on December 31, 2008. For the quarter, we recorded total revenue of $6 million, including product sales of $3.3 million and royalty and other revenue of $2.7 million. Our net income for the quarter was $18,000 and our cash and investments on December 31 were $64.5 million.

Total revenue for the nine-month period ended December 31, 2008 was $24.8 million and we expect to record revenue of approximately $5 million in the fourth quarter. This projection would result in total revenues for FY 2009, which ends on March 31, 2009, at the high end of our previous projection of $28 million to $30 million.

For FY 2009, we are projecting a GAAP net profit of between $5 million and $6 million, slightly higher than our prior expectation. As previously announced, our Board of Directors has authorized the repurchase of 1.25 million shares of our stock. As of December 31, we have repurchased approximately 493,000 shares at an aggregate cost of approximately $2 million. Excluding the impact of additional share repurchase activity, we expect to end this fiscal year on March 31 with approximately $62 million in cash and investments.

We continue to be pleased with the fact that, particularly through this credit crisis where many companies are facing serious liquidity concerns, Repligen has no outstanding debt, a strong balance sheet and a conservative investment portfolio with no auction rate securities or other liquidity concerns. While we are not currently providing revenue or earnings guidance for FY 2010, we believe it is possible that the current economic environment may translate into slightly softer Protein A sales.

However, we expect royalties we receive from Bristol-Myers' sales of Orencia to remain strong. Bristol's US net sales of Orencia have grown from $66 million for the three-month period ended December 31, 2007 to over $106 million for the three-month period ended December 31, 2008, representing a growth rate of 12.8% per quarter. We expect continued growth in Orencia royalties into FY 2010.

At this point, I would like to turn the call over to Walter Herlihy for an update on Orencia and our development programs.

Walter Herlihy

Thank you, Bill. As a final point on Orencia, I would note that Bristol filed new clinical data with the FDA last quarter to support approval of its use in patients with early erosive rheumatoid arthritis. The application was based on a recently published study in 509 patients who had rheumatoid arthritis for less than two years and who had not previously received Methotrexate. Study compared one year of treatment with Orencia plus Methotrexate versus Methotrexate alone. At the end of the year, 41% of the Orencia plus Methotrexate treated patients achieved disease remission compared to only 23% of the Methotrexate group. Similarly, the Orencia group showed a significant reduction in disease progression based on radiographic assessment of selected joints. These data may enable Bristol to market Orencia for patients earlier in their disease pending FDA approval.

Bristol has also recently indicated that Phase II data evaluating Orencia in psoriatic arthritis will be released at the American College of Rheumatology Meeting this year. We expect that an expanded label and continued news flow will support Orencia's continued sales growth.

Turning now to our own pipeline, our Phase 3 trial of secretin in MRI imaging of pancreatic abnormalities is currently recruiting patients at 24 sites and there are approximately 135 patients in various stages of the trial. During the quarter, enrollment was somewhat slower than anticipated. In response, we have dropped several non-performing sites and added eight new sites which would help increase the enrollment rate. We believe we will complete enrollment in about six months.

One of the critical assumptions powering our trial is the percentage of enrolled patients who actually have a pancreatic structural abnormality. Based on our Phase IIa data, we assumed that 55% to 60% of enrolled patients would have a structural abnormality. A review of the first 119 patients enrolled in the Phase III trial indicates that 64% have an abnormality which suggests that the Phase III is continuing to enroll the appropriate type of patients for MRI imaging.

If the Phase III trial is successful, we plan to file an NDA and request expedited review by the FDA, which may allow us to launch this product in the second half of 2010.

Last quarter, we initiated a Phase IIb clinical trial of RG2417, our oral formulation of uridine for acute treatment of depression in patients with bipolar disorder. We plan to recruit approximately 150 patients at 25 sites. At this time, we have qualified 20 clinical sites and expect enrollment to accelerate as these sites become active. Our goal is to recruit 15 academic sites and we have been pleased with the response we have received from leading academic centers such as Yale, The Cleveland Clinic, The Mayo Clinic and others based on the Phase IIa results and the unique mechanism of action of our product candidate.

We are also developing inhibitors of specific HDAC enzymes for Friedreich's Ataxia and Huntington's disease. And in the past quarter, we have chosen a clinical candidate in this program based on encouraging results of pharmacology and toxicology studies in animals. Our product candidate appears to have good bioavailability and was well tolerated in a seven-day repeat dose animal study. Based on these results, we have initiated the development of a scalable manufacturing process and we have requested a pre-IND meeting with the FDA to discuss our pre-clinical and clinical plans. Pending FDA approval and favorable results in the 28-day toxicology study, we expect to file an IND in the second half of 2009.

The past quarter was obviously a difficult one for small-cap biotechnology companies, many of whom will be unable to finance their operations past 2009. Fortunately, Repligen is in a strong position with recurrent revenues, significant cash reserves and no debt.

The current market turmoil is generating an increasing number of opportunities to acquire assets through direct acquisition or partnering. Since October 1, we have evaluated 19 new licensing opportunities, primarily pre-clinical candidates in neurology. To respond to this opportunity, we are significantly increasing our bandwidth in business development. We recently hired a Vice President of Business Development with a strong science and product development background to improve our ability to thoroughly evaluate the increasing long list of licensing opportunities.

We also intend to seek new sales opportunities for Protein A and new product opportunities which could expand our Bioprocessing business beyond our Protein A product line. To lead this initiative, we have hired a Vice President of Bioprocessing Business Development who has 20 years of relevant commercial experience.

While 2009 may be a challenging year in some regards, we believe there is a significant opportunity to accelerate the growth of our business as our industry is restructured.

In conclusion, we are pleased with the results from the past quarter which has included strong revenue growth and cash conservation, steady progress on our Phase III MRI imaging trial, initiation of the Phase IIb trial for uridine in bipolar disorder, identification of a clinical candidate in our HDAC Inhibitor program and a significant increase in our business development capability.

That concludes our prepared remarks for today. And operator, at this point, we'd like to open the call to questions.

Question-and-Answer Session

Operator

(Operator instructions) Our first question comes from the line of Elemer Piros [ph] with Rodman & Renshaw. Please proceed.

Elemer Piros – Rodman & Renshaw

Yes, hi. Can you hear me?

Walter Herlihy

Yes, I can.

Elemer Piros – Rodman & Renshaw

Okay, I would like some guidance if possible for revenue breakdown going forward between product and royalty revenues.

William Kelly

We are not providing guidance at the moment for fiscal year 2010. However, for Q4, we see about 50/50 split of the total of about $4.8 million to $5 million in revenue.

Elemer Piros – Rodman & Renshaw

For total revenue of $4.8 million to $5 million?

William Kelly

For Q4, correct.

Elemer Piros – Rodman & Renshaw

Okay, thanks. Can you give me any expense or net loss guidance for end of '09, since you are not giving 2010 guidance?

William Kelly

We have increased our net income guidance for [ph] between $5 to $6 million and our SG&A spending, we expect to about $1.4 million and our R&D spending, we expect to be about $4.5 million.

Elemer Piros – Rodman & Renshaw

Okay. And moving on to milestones, for the RG2417 trial, when do you expect to complete enrollment for that?

Walter Herlihy

It's early days, of course, since we are just opening centers now. But, assuming we get enrollment rates that are similar to what we had in our Phase IIa trial, we expect the enrollment will take about a year to complete.

Elemer Piros – Rodman & Renshaw

So, about a year from now?

Walter Herlihy

Yes.

Elemer Piros – Rodman & Renshaw

Okay. And what about the Phase III trial, any guidance as to when you plan on completing that trial? I guess you said you want to launch in second half of 2010.

Walter Herlihy

Right. So we would expect to complete enrollment in this study in about six months. It then would take us one to two months to clean the data, lock it and then have the top line results, which would then be compiled into our NDA application either late this year or early next year.

Elemer Piros – Rodman & Renshaw

Okay. Thank you very much.

Operator

(Operator instructions) And our next question comes from the line of Ronald Orphan [ph]. Please proceed sir.

Ronald Orphan

Yes, good morning, Dr. Herlihy.

Walter Herlihy

Good morning.

Ronald Orphan

I was wondering, is there any takeover offers in the future for our company? I have been with you for about 10 years now as a private investor.

Walter Herlihy

We haven't disclosed any takeover offers that have been made. So I think that's certainly a possibility at some point in the future, but I think in the short-term that's unlikely.

Ronald Orphan

Okay. Thank you very much.

Operator

There are no further questions in queue at this time. (Operator instructions) There are no further questions. At this time, I would like to turn the call back over to Mr. William Kelly for closing remarks.

William Kelly

Thank you, again, for participating in today's call. We appreciate your continued interest. If there's any additional questions that may be directed [ph] at this time, please contact Investor Relations at the company. Thank you.

Operator

Thank you for your participation in today's conference. This concludes the presentation. Everyone have a great day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!