Amicus Therapeutics, Inc. Q4 2008 Earnings Call Transcript

Feb.11.09 | About: Amicus Therapeutics, (FOLD)

Amicus Therapeutics, Inc. (NASDAQ:FOLD)

Q4 2008 Earnings Call Transcript

February 5, 2009 5:00 pm ET

Executives

John Crowley – President and CEO

Matt Patterson – COO

Jim Dentzer – CFO

Analysts

Geoff Meacham – JP Morgan

Greg Wade – Pacific Growth

Matt Osborne – Lazard Capital

Operator

Good afternoon. My name is Gwen and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Amicus Therapeutics conference call. All lines have been placed on mute to prevent any background noise. After Amicus' remarks, there will be a question-and-answer period. (Operator instructions)

During this call, Amicus may make various remarks about the company’s future expectations, plans and prospects that constitute forward-looking statements for purposes of the Safe Harbor Provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors including those discussed in the company’s most recent Annual Report on Form 10-K and our periodic reports on Form 10-Q. These documents are available from the SEC, the Amicus website, or from our Investor Relations representatives.

In addition, any forward-looking statements represent our estimates only as of today and should not be relied upon as representing our estimates as of any subsequent date. While we may look to update forward-looking statements at some point in the future, we specifically disclaim any obligations to do so even if our estimates change.

Before we begin, we would ask everyone to go to the Investor Relations section of the company’s website, amicustherapeutics.com, and print out the press release and related financial tables. These will be particularly useful when the company reviews the financial results and reconciliation to non-GAAP financial measures discussed today.

Now, I’m happy to turn the call over to John F. Crowley, President and CEO. Please go ahead sir.

John Crowley

Thank you and good afternoon everyone, and welcome to our fourth quarter full-year 2008 conference call. I am joined on this call by other members of our management team including Matt Patterson, Chief Operating Officer. Matt will provide an update on our lead lysosomal disease program. I’m also joined by Jim Dentzer, Chief Financial Officer, and Jim will be providing an overview of the financial results for the quarter and for the full-year 2008. David Lockhart is also here, our Chief Scientific Officer. And David, as always, will be available to participate in the Q&A portion of the call that will follow our remarks.

Let me begin by saying we’re very pleased with 2008. We think it was an excellent year for Amicus. We achieved our planned development milestones. And by doing so, we made significant regulatory and clinical progress in each of our three lead programs in the lysosomal storage diseases, and this is consistent with our guidance. In addition, we also continued to invest in the pharmacological chaperone platform more broadly. In particular, we generated very encouraging preclinical data, demonstrating the potential breadth and versatility of our science, and we’ll talk more about that in a short while as Matt goes through his section. And finally, we maintained a strong financial profile, ending the year with $121 million in cash and marketable securities.

So in 2008, we continued to build a strong foundation through solid execution on multiple fronts. We expect 2009 to be a very transformational year for Amicus. This year, we expect to achieve several key development milestones in our lead programs and to transition to a late-stage biopharmaceutical company as we move to initiate our first Phase 3 clinical study. I will highlight our 2008 advancements with respect to our three lead programs, and then I’ll turn this call over to Matt to go into greater detail on each of these programs.

In 2008, we made significant progress toward the finalization of a thorough and well-designed global Phase 3 program for our product candidate Amigal, our chaperone for Fabry disease. Through multiple interactions with regulatory authorities in both the United States and in Europe, we were able to secure some very important agreements and helpful guidance. In the United States, in particular, the FDA has agreed that Amigal for Fabry can pursue an accelerated approval pathway based on a Phase 3 clinical trial comparing Amigal to placebo using a surrogate primary endpoint of kidney GL-3 level. We have been and continue to be very encouraged by the interactions to date, and look forward to our final discussions with the Agency in the coming months and to initiating our Phase 3 program in the second quarter.

Turning briefly to Gaucher, we are very pleased also with the progress in that program. We expect to have surpassed our target enrolment in our ongoing Phase 2 clinical study. A six-month clinical trial in patients naive to enzyme replacement therapy. And we now expect to report these results in the third quarter of this year for that study. It is our goal to complete this study and to, in parallel, work with our partners at Shire to advance this program into Phase 3 as rapidly as possible.

I’ll comment here, finally, in the introductory remarks about our Pompe program and also note continuing excellent progress on that front. Our Phase 2 trial of AT2220 is ongoing and we expect to report results in the second half of this year. In addition, we have recently reported on some interesting preclinical data, evaluating the potential for the combination of our chaperone AT2220 and an enzyme replacement therapy to be a potential new treatment option for people living with Pompe disease. And we continue this preclinical work, and we will additional data over the course of 2009 to discuss with all of you.

So that’s my introduction and I will turn the call over now to Matt Patterson who will provide a more in-depth update on our lysosomal disease programs. Matt?

Matt Patterson

Thanks, John, and good afternoon everyone. I’ll just take a few minutes to expand a bit on the summary John just provided for our lead programs.

First, starting with Amigal for Fabry. As many of you know, our focus over the last quarter has been to continue discussions with the FDA and the EMEA regarding our global Phase 3 development program. And as John mentioned, we are very pleased with the progress to date. And our update last month confirmed some important aspects of the Phase 3 program and plan based on our recent discussions with the Agency here in the United States. As John mentioned, we know that they support a clinical trial comparing Amigal to placebo based on the surrogate primary endpoint of the change in the amount of kidney GL-3 which, as a reminder, is the substrate that accumulates in cells in Fabry patients and that’s the biomarker used for the approval of the existing approved treatment. A positive result from this trial would result in an accelerated approval pathway mechanism for our future New Drug Application for Amigal.

So we continue to have discussions with the Agency in the context of a special protocol assessment procedure or an SPA procedure which we started back in the fourth quarter of last year. We plan to continue to collaborate with the Agency in the coming months to determine exactly what measure of kidney GL-3 will be use for the primary endpoint of the study, as well as other endpoints and details of the protocol, and it remains our goal to reach agreement with the Agency and to initiate the study in the second quarter of the year through a submission of the protocol to the investigation sites globally, in which would result in the commencement treatment subjects in the second half of the year.

In Europe, we’ve also continued to have productive discussion with the European authorities. Based on these interactions, as announced last month, we expect to initiate a separate clinical study designed to evaluate the safety and efficacy of Amigal compared to enzyme replacement therapy. Along with Shire, we continue to work on the design of this study through discussions with the EMEA and we will continue that progress and finalize the design of that trial as soon as possible.

So in parallel with the regulatory process related to Phase 3, we continue to treat patients in a voluntary Phase 2 extension study. In this study, we’re collecting long-term safety and efficacy data and evaluating additional doses and dosing regimens of Amigal in 23 patients, who’ve elected to continue treatment. This is particularly interesting and important because the majority of these patients have been receiving Amigal for more than two years now and some for more than three years. And we expect to update the data from the study in the first quarter of 2009.

So turning to Gaucher, as John mentioned, we’re also very pleased with the progress of our investigational drug, Plicera for Gaucher. Last month, we were very pleased to announce that we expect to surpass our target enrolment of 16 patients. And as John mentioned, we tightened our guidance that we expect to have data from this study in Q3 of this year. As a reminder, this is a six-month study, looking at evaluation of safety as well as looking at trends of efficacy in the standard endpoints of Gaucher disease. Given how well understood the measures of Gaucher are, we expect our Phase 2 clinical trial will provide us with a clear view of the potential for Plicera in Gaucher. In addition, because of the clear endpoints and the recent history of our partner Shire and others working in this disease, we believe we can move rapidly from Phase 2 to Phase 3 if the data are encouraging. To this end, we’re working with Shire now to prepare for Phase 3 as soon as possible.

And turning to Pompe, as you know, the Pompe disease is a severe neuromuscular disease that continues to have significant unmet medical need. In the second quarter of last year, we initiated our Phase 2 clinical trial of AT2220 representing the first investigational oral therapy in development for Pompe patients, and of course, the third chaperone from Amicus to enter Phase 2 studies. This is a multinational trial with an 11-week treatment period and an open label design, enrolling 18 adult patients diagnosed with Pompe disease. The objectives of the trial include evaluation of safety and pharmacodynamics of multiple doses and regimens of AT2220. And as John mentioned, we expect the result of this study to be available in the second half of 2009.

Just to be clear, we are also measuring efficacy endpoints that have been evaluated in previous studies of adult Pompe patients, but we would not expect to see changes in each measure in the first few months. However, upon completion of the 11-week study protocol, patients will have the option of continuing on this treatment in an voluntary extension study, and this will hopefully allow us to evaluate the longer term effects of AT2220 including result that’s measured by some of these clinical measures that had been used in past trials.

In addition to our work evaluating AT2220 as a monotherapy treatment option for Pompe, we continue to conduct preclinical studies to determine the potential therapeutic effects of administering AT2220 in combination with enzyme replacement therapy. As John mentioned, we presented encouraging results at the ASHG conference in November of 2008. And specifically, we presented data showing that the presence of AT2220 increases the stability and tissue uptake of recombinant human GAA, which is the enzyme deficient in Pompe disease.

These data while early are encouraging and highlight the versatility of our platform, as John mentioned. And to help understand the potential role for this combination approach, it is important to remember that we expect that the majority of, but not all, Pompe patients will be treatable with AT2220 as a monotherapy. So for some patient, enzyme replacement therapy will remain the only treatment option. If we can, through a combination approach improve ERT, we can not only improve treatment for those patients, but also give ourselves a chance to treat the entire Pompe patient population with AT2220 rather than just a portion.

So we’re continuing those preclinical experiments and expect to generate additional data throughout the course of the year. And it’s our plan to share those data at the relevant scientific conferences over the course of 2009. So hopefully, that’s helpful. With that, I’ll turn the conversation over to Jim Dentzer who’s going to give us a review of the financial results for the fourth quarter. Jim?

Jim Dentzer

Thanks, Matt, and welcome everyone.

I’ll provide a brief summary of the financial results for the fourth quarter and full year. We ended 2008 with a strong cash position. In Q4, we burned $15 million of cash, ending the quarter and the year with $121 million in cash and marketable securities as compared to $162 million at the end of 2007. In this difficult economic environment, our focus is on building value in our pipeline while continuing to manage our cash prudently. We expect that our current cash, together with expected reimbursement from Shire, will enable us to fund our operations at least until 2011. This is exclusive of any milestones, some of which we expect to receive this year.

As we move to the P&L, I’ll be referring to the tables in our press release. Please note that GAAP financials are provided in table one. Tables two through five are a reconciliation of the GAAP and non-GAAP financial results, highlighting charges for three non-cash items: stock-based compensation, preferred stock accretion and changes in fair value for warrants. As with last quarter, the charges for preferred stock and warrants do not impact the current period as they were converted to common stock in connection with our May 2007 IPO.

Total revenue for the fourth quarter was $4.3 million, comprising $0.7 million of collaboration revenue on the upfront payment and $3.7 million in research revenue for the reimbursement of R&D costs associated with our three lead programs partnered with Shire. For the full year, total revenue was $15 million.

On a non-GAAP basis, the net loss for the quarter was $12.5 million as compared to $10.7 million for the same period in 2007. The increase in the operating loss in the fourth quarter of 2008 versus the quarter last year was driven primarily by increased R&D investment in our clinical programs and research pipeline.

Now to R&D investment, on a non-GAAP basis, we spent $13.1 million in R&D in the fourth quarter. This is higher than the $9.2 million in the comparable quarter last year, as we expected. We initiated and enrolled additional Phase 2 and Phase 3 clinical trials, invested in clinical drug supply and expanded our discovery research activities. In addition, we paid Mount Sinai $2.6 million to amend our license agreement with them, so that Amicus would obtain the sole right to and control over the prosecution of patent rights. Our non-GAAP G&A expense was $4 million in the fourth quarter of 2008, as compared to $4.6 million in the fourth quarter of 2007. Fourth quarter 2007 costs were higher primarily due to non-recurring costs associated with completing our Shire collaboration agreement in November of 2007.

Our interest income for the fourth quarter was $0.8 million, as compared to $1.8 million in the comparable quarter last year. This decrease is primarily due to lower prevailing interest rates.

I’ll now turn to our financial guidance for 2009. We expect that our net cash burn for 2009 will be $20 million. This assumes we have a gross cash burn of approximately $70 million, which we expect will be partially offset by an anticipated $50 million in program cost-sharing reimbursements and clinical milestone payments from Shire. Note that this cash burn guidance includes both reimbursement of R&D costs and milestones from Shire. We anticipate ending 2009 with approximately $100 million in cash, compared with $120 million in cash at December 31, 2008. We will continue to recognize the $50 million upfront payment from Shire on a straight-line basis over an 18-year period from the date of the agreement last November.

So, that covers the income statement and balance sheet update on 2008. With $120 million in cash at year-end, the potential for up to $150 million of additional cash in clinical milestones between now and regulatory approval, and Shire’s commitment to fund half of our LSD development costs, we are well positioned to fund further advancement of our clinical and preclinical programs. If there are any other areas you would like to cover, I’ll be happy to address them during the Q&A part of the call.

With that, I’ll turn things back to John for closing comments. John?

John Crowley

Okay. Thank you, Jim. So as we begin 2009, we remain as committed as we ever have been to our mission of developing new and better therapies, to improve the lives of people and their families touched by these serious genetic disorders. Our vision at Amicus is to become one of the leaders in the industry and to achieve that, we will have to stay focused on executing our lead clinical programs that will generate data and build value, while also continuing to innovate and to explore new applications of our chaperone technology. We expect 2009 to be a transformational year for Amicus and we expect it to be one that will bring us closer to achieving that vision.

To summarize, we’ll be focused on achieving several significant milestones across our programs. For Amigal, we will report data from the ongoing extension study in the first quarter. We will then also complete discussions with the regulatory agencies to finalize the trial designs and endpoints. We plan to initiate the Phase 3 program for Amigal for the treatment of Fabry in the second quarter of this year.

For Plicera, a program with increasing importance to our company and our shareholders, we will report data from the ongoing Phase 2 clinical trial in third quarter and we will develop plans with Shire for the Phase 3 in Gaucher disease.

For AT2220, we will report the data on that study in the second half of 2009. That’s the study in adult people living with Pompe disease, with our chaperone AT2220. We will also continue to generate additional preclinical data on AT2220 in combination with ERT and we will report results throughout the year at relevant scientific conferences.

And lastly, we will maintain our strong financial profile in 2009 while continuing to invest and to build value in our lead programs. We are excited about the year and certainly looking forward to updating all of you on our progress throughout 2009.

Thanks for your time and thanks for listening. We are happy to take your questions and as a reminder, David Lockhart is here with us as well. So with that, operator, we’ll turn it over to your questions.

Question-and-Answer Session

Operator

(Operator instructions) We’ll go first to Geoff Meacham with JP Morgan.

Geoff Meacham – JP Morgan

Hi, guys. Thanks for taking the question. I have a couple of them. First on Fabry, I know we’ll have a little bit more detail on the design of the US and European studies, sounds like in a few months, but can you talk a little bit about how you potentially may have to reconcile results between these two studies if Europe is a head to head, and the US is (inaudible).

John Crowley

No, it’s a very good question, Geoff. We actually think it will set us up for a terrific development paradigm for the program. I’ll turn it over to Matt to answer the question specifically.

Matt Patterson

Hey, Geoff. I think reconcile, I guess – I mean, you’re welcome to give me a little more clarification there, but I think if I have you correctly, the real focus based on our feedbacks from FDA, is they’re very interested in a comparison to placebo, that that’s what’s going to get them to a license application and, of course, because it's accelerated approval based on the surrogate endpoint, they’re interested in working with us on a Phase 4 study that would validate that surrogate over a longer period of time. And the vision that we’d like to accomplish is to make that trial that I mentioned for Europe also meet the needs for the Phase 4 requirement for the US, so as far as that trial supporting US regulatory needs, it’s really more of a Phase 4 commitment that would be available post approval.

Geoff Meacham – JP Morgan

I got you. Okay, that makes a lot more sense. It doesn’t sound like you’re going to have to file with the European study.

Matt Patterson

No, not in the United States. I mean, just it would be common practice to give them everything that you have available that might be relevant, but their focus is absolutely on the placebo control trial and we’ve already initiated discussions around the Phase 4 vision. And as I said, the vision we have today is that European trial also meets our needs for Phase 4 obligation for the US.

Geoff Meacham – JP Morgan

And just as a follow-up, would you expect, just generally speaking – I know, again, you haven’t finalized design, but the size of both those studies to be roughly the same?

Matt Patterson

To be determined. I think the US study because it’s a placebo controlled trial, obviously, is shooting for superiority I think. As we’ve speculated before, we think it’ll be comparable. We expect it will be comparable in size to the previous trial done for the ERT product, which was a 58-patient Phase 3 trial. So, that ballpark is reasonable and obviously we’ll confirm that as we finalize the endpoints and the stat plan. And the European trial is a little more difficult to say because it’s not as mature as the vision for the US studies, so I’d rather not speculate on that one. But in the past, we’ve talked about non-inferiority designs and those can require a slightly larger number of patients, but this physical analysis plan could also be designed with some flexibility that would help keep those numbers down in Europe as well, so as soon as we know more there, I’ll share it with you for sure.

Geoff Meacham – JP Morgan

Great. Thanks, guys.

John Crowley

Great. Thank you, Geoff. Have a good day.

Operator

We’ll go next to Greg Wade with Pacific Growth.

Greg Wade – Pacific Growth

Hi. Good evening and thanks for taking my questions. First up for Jim, can you just break out, with respect to the $50 million you’re expecting in 2009, how much of that is going to be milestone-based and how much is cost-sharing? And then, for Matt, with respect to the methodology of measuring GL-3 kidney levels, is there any difference between the three different ways you might do this and the size of clinical studies that you would anticipate for Fabry? Thanks.

John Crowley

Yes, Greg, let me turn it over to Jim for the first part of that question about the $50 million and the breakout. Jim, go ahead and comment.

Jim Dentzer

Sure. Hi, Greg. Thanks for the question. Unfortunately, we’re going to be in the same position that we’ve been in, in prior quarters, when asked about specific milestone guidance. We’ve had an agreement with Shire that we’re actually not going to give detailed guidance on the milestones, but I would encourage you to look at our reimbursement revenue from Shire in 2008 and then use that in your logic to extrapolate forward.

John Crowley

And again, just to remind you, Greg, that the milestone that we will receive will be a portion of the $150 million in clinical milestones that we’re entitled to receive based on development advances over the next couple of years. So, let me turn it to David and Matt to comment on your second question about the different ways in which we may measure that primary surrogate endpoint of kidney GL-3.

Matt Patterson

Greg, it’s Matt. I guess, just to make sure I understood the question, so you asked about the three different ways that we’ve talked before about measuring GL-3, which of course include urine and LC-MS spec and histology through the biopsy sample. Can you help me understand the question specifically? You were wondering if we, would the size of the trial differ if we –

Greg Wade – Pacific Growth

Yes, depending on which methodology. I’m sorry it wasn’t worded well. Depending on which methodology you use, would you anticipate that any specific way the study would be designed would result in a potentially larger or smaller study? Thanks.

Matt Patterson

No, I would not. I mean, it is possible small number differences based on how the bio stats would be very specifically designed, but it wouldn’t be meaningful differences. I think that for the placebo controlled trial on GL-3 based endpoints, the size of the trial is comfortable for all those endpoints, no matter which one would be primary.

Greg Wade – Pacific Growth

If you could just bring us up-to-date as to which methodology is looking most likely? Thanks.

Matt Patterson

Well, I think where we are today is the same place we were last month when we talked about these all three methods looking at kidney GL-3, the urine, and then from a biopsy, looking at biopsy mass spec and cell type-specific histology review are all measures that, as you know, we did in Phase 2 and that we’ve always expected to do in Phase 3. And the question now is just working with the Agency to decide exactly which one should be primary and which should be secondary and exactly how each one will be measured, and we’re looking at that in great detail at the Agency, including looking at each of the techniques specifically and how those methodologies have advanced over the years. For instance, in previous trials, analyzer [ph] method was used but we are proposing LC mass spec. And so, there are advancements that happen in each of these measures and that’s true of the measurement for the urine, for the biopsy LC mass spec and for histology, and we believe there may be improved ways of looking at histology as well. So, we’re factoring all of that into our own thinking, working with our experts, and working with the FDA, and I think through that we’ll reach a good decision, a good agreement with the Agency and have a trial that has an excellent chance of success.

Greg Wade – Pacific Growth

Thanks, Matt.

Matt Patterson

Yes.

Operator

(Operator instructions) We’ll go next to Matt Osborne with Lazard Capital.

Matt Osborne – Lazard Capital

Hi, guys. Thanks for taking the questions. Matt, have you chosen or selected a dose for the Phase 3 trial in the US for Amigal?

Matt Patterson

Hi, Matt. No, we have not. Our intention remains to get the data from the extension study that we mentioned that we’re still on track to report in Q1, probably in late Q1. And as you know, in that extension, we’ve got this opportunity to evaluate a couple different doses and regimens. We came out of Phase 2 feeling very good about 150 mg every other day. But in the extension, we’re looking at 250 mg and 500 mg on a regimen of three days on and four days off; and when we have those data, and we’ll hope to have it all and summarize it all in our report in Q1. It’s our intention to look at that and make some comparisons and decide what dose and regimen makes the most sense for Phase 3. So I expect we’ll share the data in Q1 that we have and probably into Q2 as we finalize the protocol and make the final call there on exactly what the dose and regimen is.

Matt Osborne – Lazard Capital

And do you have expectation in terms of the types of patients you may enroll, either severe patients with Fabry or mild disease only?

Matt Patterson

I think it’s a little difficult to say because we’re still – obviously, our inclusion criteria for the trial are intimately related to your choice of your primary endpoint and your secondary endpoints, but our expectation is to not just be focused on necessarily one, I mean, arbitrarily categorized statements of severe or mild. I think it’s going to be a range of Fabry patients, but we know for a fact that they’re going to have mutations that are responsive to the chaperone. That’s an important part of our screening. That’s the pharmacogenetics angle to our science and that’ll be important. And because we’ll have a primary endpoint that’s kidney GL-3 related, we’re certainly going to want to have some inclusion criterion that requires elevation of GL-3 at base line and just how to finalize that, we’re working out with the Agency now. So other than that, I expect you’re going to see a pretty good spectrum of Fabry disease patients in our trials just like in the Phase 2.

Matt Osborne – Lazard Capital

Great. Two more questions, if I may. Can you remind us, let's assume, if it is biopsy measuring GL-3, what are the goal posts that you see that would be measured and how would you design the trial around that? Is it simply going from a score of two or one down to zero, or are there other endpoints within that biopsy measure?

John Crowley

Hi, this is John. If I can, rather than get into some of the details, given that we’re in the midst of those discussions and finalization of the program with FDA and out of respect for the ongoing discussions and confidences, it’s probably best right now if we don’t get into that level of detail except to refer you back to our Phase 2 study and remind you and everyone that we did do those measures for all patients and to refer back to that data. And then, of course, we will have quite a bit more data here in the first quarter as we look to the extension study data, so.

Matt Osborne – Lazard Capital

Okay, great. Last question. Do you anticipate any data or any trials in patients who have switched from Fabrazyme over to Amigal?

Matt Patterson

Well, I think it’s a possibility, Matt, that the – for instance, the European trial we’ve talked about before, the trial where it is an active control versus ERT, that’s always a possibility. That will be switching study but to be determined through the final discussions. And so, I suppose that stands out as the most likely possibility in a big picture. We actually are very enthusiastic about the way this program is coming together with the placebo controlled trial as requested and working with the FDA on and the active control trial for the Europeans because in the big picture, it not only meets our regulatory needs for both regions but also results in a product label and an information package post-approval for physicians and patients that is as robust and broad as possible; meaning that we have data from both people who are naive to enzyme replacement therapy and people switching from enzyme replacement therapy, and a cost to comparison to placebo and a comparison to ERT. So I think in the end, this Phase 3 program is going to be very robust for both regulatory and, hopefully, for marketing purposes.

Matt Osborne – Lazard Capital

Great, thanks. Congrats on the progress.

John Crowley

Getting there. Thank you, thank you.

Operator

And there are no further questions at this time. I’d like to turn things back to Mr. Crowley for any closing remarks.

John Crowley

Thank you, operator, and that’s all we have. Thank you all for participating in this fourth quarter and full-year 2008 conference call. This will be a very exciting year for us and, again, will be a transformational year for Amicus. And we will keep you updated, of course, on our developments and the work that we continue to do. So thank you so much for listening. Have a good day.

Operator

Thanks, everyone. That does conclude today’s conference. You may now disconnect.

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