Repligen Corporation (NASDAQ:RGEN)
F3Q10 (Qtr End 12/31/09) Earnings Call
February 04, 2010, 8:15 am ET
William Kelly - CFO
Walter Herlihy - President & CEO
Good day, ladies and gentlemen and welcome to the third quarter 2010 Repligen Corporation earnings conference call. My name is [Shamita] and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of today’s conference. (Operator Instructions)
I would now like to turn the presentation over to your host for today’s call, Mr. William Kelly, Chief Financial Officer. Please proceed.
Thank you and good morning. The purpose of today’s call is to briefly review our financial results for Q3 of our fiscal year 2010, update our financial projections for the year and to update the status of our development programs. Joining me today is Walter Herlihy, our President and CEO.
At the outset, I'd like to state that this discussion will contain certain forward-looking statements which are not guarantees of future performance such as our financial projections and projections for the U.S. 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 preclinical or clinical results or delays, delays in manufacturing by us or our 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 fiscal year 2010 which ended on December 31, 2010. For the quarter, we recorded total revenue of $5.6 million, including product sales of $2.9 million and royalty and other revenue of $2.7 million. Product royalty and other revenue benefited from a 20% increase in Orencia sales versus the same quarter of last year.
Operating expenses has increased $400,000 compared to the prior year as the company continued to invest in our product pipeline and business development efforts most notably with the acquisition of our spinal muscular atrophy program announced in October.
Our cash and investments on December 31 was $61.4 million. Today, we are updating our financial expectations for fiscal year 2010 which ends on March 31, 2010, primarily to reflect the status of our secretin program which we will discuss in a moment as well as to reflect our expectations on the timing of certain other expenditures in relation to upcoming fiscal year end.
We are confirming today a total revenue projection for fiscal year 2010 between $21 and $22 million including approximately $10 million in product sales, $10 million in royalty income and $1 million in other revenues.
R&D spending is projected to be between $14 and $15 million and SG&A spending is projected to be about $6 to 7$ million. As a result, we expect our cash burn to be approximately $5 million and cash and investments on March 31, 2010 are projected to be approximately $58 to $59 million.
While we are actively evaluating additional licensing and asset acquisition opportunities to strengthen our therapeutic and bio-processing businesses, these projections exclude the impact of any such transactions.
We are also providing preliminary guidance for fiscal year 2011. We currently project double-digit growth in both product and royalty and other revenue. R&D spending should approximate $14 million and we expect net cash on hand on March 31st 2011 to be approximately $53 to $54 million. We will provide further details on our fiscal year 2011 guidance next quarter.
At this point, I like to turn the call over to Walter Herlihy for an update on our bio-processing business in our therapeutic pipeline.
Thank you, Bill. Today, I like to describe our plans to revitalize our bioprocesing business. As many of you know for years, Repligen has been selling Protein A, primarily to our commercial partners GE Healthcare and more for in applied Biosystems.
Over the years this business grows our commercial partners sold increasing amounts of Protein A based resins to end users who were producing monoclonal antibodies. Over the past year, the recession has market reduced demand from these end users which has negatively impacted our sales.
Last year, we put in place to plant to diversify our business and expand the revenue opportunity. The first step in this plan is to secure our future revenues and our bulk Protein A manufacturing business.
Last week, we announced an important step in this effort by signing a five year supply agreement with GE Healthcare, one of the worlds largest consumer of Protein A. Yesterday, we announced our Pat Allowance for our next generation Protein A product which is an exact replica of the naturally derived form of Protein A using in the production of many of the World’s monoclonal antibodies.
This recombinant product is now available in commercial qualities which allow us to compete head-to-head with naturally derived Protein A. This product will also be the basis of future collaborations or our own internal development efforts.
The second step in the diversification and growth plan is to develop a series of products which can be sold directly to end users which will allow us to address larger market opportunities, with potentially higher gross margins.
The bulk Protein A market is approximately $20 million of which we have a share of approximately 50%, when our commercial partners attach our Protein A Resin and resell to end users. Its value increases by 5 to 10 fold.
We intended to develop products for this $150 million end user market for Protein A Resins. Capturing even the small share of this market has the potential to significantly grow our business.
Finally, we also seek to acquire non Protein A base products which can be sold to the same end user customer base. And this will further increase the opportunity to expand our business.
Our vision is to provide a range of high value products to end users who are producing not just part of a land of ours but other types of biological drugs and vaccines, a report updating you on additional developments in 2010, to diversify our business and provide us new growth opportunities.
Turning now to our pipeline last quarter, we report the Phase 3 clinical trial results for RG1068, our imaging agent for MRI of the pancreas. Subsequent analysis of the trial has convinced us that it was carried out at the clinical sites, according to the protocol and that the drug performed as expected.
There were however multiple problems with analysis of the image, images which was carried out by a contract research organization. For this reason, we are requesting feedback from the FDA and the European Medicines Agency, for our proposal to reanalyze the images with three new evaluating radiologists.
We expect initial feedback from the FDA in March and from the European Medicines Agency soon or after.
In the past quarter we continued our market research and believe there is a previously unrecognized significant market opportunity in Asia, which was approximately as large as the U.S. opportunity. We now believe that more than 600,000 MRI procedures worldwide which could benefit from the use of our product.
We are also developing RG2417, our formulation of uridine for acute treatment of depression and patients with bipolar disorder. Our Phase 2b trial is actively recruiting at 15 sites and we have enrolled approximately 110 of the planned 150 patients.
At the current revolving rate, we expect to be able to report data by the end of the year. Today's numbers, series adverse events is consistent with the excellent safety profile absorb in our Phase 2a study.
There are at least five million patients worldwide with bipolar disorder. A new safe and effective drug for this population has the potential to be a blockbuster.
We are also developing inhibitors HDAC-3 for the treatment of Friedreich's ataxia. We have completed the evaluation of one of our lead compounds in two species toxicology study, which is required by the FDA prior to initiation of clinical trials. Manufacturing our clinical drug supply is in progress and we expect to found IND to initiate Phase 1 clinical trials by mid 2010.
These studies are being partially supported by the Muscular Dystrophy association, which provide us with the second research graph in December. Our [global] goal is to cross over from one of our [tool] studies to Friedreich's patients as soon as possible, to enable us to get an early lead on the potentially efficacy of our drug by moderating changes in the blood levels of frataxin, the protein missing in Friedreich's patients.
Recent data suggest that this biomarker is exposed that a consistent level and patients, which will facilitate the observation of a potential increase in frataxin in a levels following drug treatment. We believe that they are 15000 Friedreich's ataxia patients worldwide, which represents a market opportunity of more than $300 million even with very modest pricing assumptions.
Last October, we license certain intellectual property for potential treatment for Spinal Muscular Atrophy or SMA from families for SMA. SMAs are demonstrating our muscular diseases caused by defect in a single gene, which results in low levels of protein known as SMN1. Families for SMA had identified potential clinical candidate and we are making rapid progress in determining this lead has a toxicity profile suitable for clinical development.
If so, we expect to file in IND in the second half of 2010. We believe that they are more than 20,000 SMA patients worldwide, which represents market opportunity of more than $500 million again using very modest pricing assumptions.
In summary, despite the outcome of the RG1068 trial the drug is clearly active and we believe there is a path forward. In addition, we have a rich pipeline of therapeutic product candidates addressing significant market opportunities and growth plan for above processing business as well as the financial resource is to develop them. We are looking for to updating you on our progress in 2010.
Operator, at this time, I’d like to open the call to questions.
Thank you. (Operator Instructions) Thank you for your patients. Ladies and gentlemen, please stand by while we construction them. We have a question from the line of [John Bank] of BNG Capital. Please proceed.
Hey guys. We have been sure for about three years for our clients. My question, I always see you guys wanted to be a buyer. I always start to see why you guys wouldn’t want a higher investment bank or look to sale the company. It looks for me you have a better of selling for the whole stock deal to a mid-cap biotech 5 or 6 folds, we diversify the risk versus being a buyer. I just want to see what your comment on it with that question?
It's certainly a possibility. Our view is that over the next year, the outcome of the RG2417 trial in bipolar depression will be a significant determination of the value of the therapeutic pipeline and then any buyer would want to see the results of that prior to being able to really access with the value of that assets is. In addition, the two parties I mentioned in Friedreich’s ataxia and Spinal Muscular Atrophy, I think certainly a whole lot of value and inflection point in value is getting clinically enabled, another words having products that are advancing in clinical trials as opposed to being preclinical. So we kind of use those two events IND filings on the early stage products and Phase 2B results on the bipolar product to be key determinants and if in either way there is well I think early determine how we've perceived in building that of which selling them all or part of that is certainly a buyable alternative.
Okay. Thanks. That was my main question. Any comment on the stock price being down 50%. I mean, with your liquidation value of the company, are you even seeing higher? I see a couple of analysts on the street give 9 to $10 target, just staying trying to figure out why the stock's been so much on the pressure in the last 30 days. Any comment on that?
Well, I think it's the backlog from the setback on the RG1068 trial which we recorded in December, which didn’t make prime of -- for the primary endpoints set for. So that’s going to result in a delay. We get this -- rewrite approve by FDA or EMA. That will be about a year setback for that program and people are always looking for those types of the events coming up in a short term to take positions on this small biotech stocks.
(Operator Instructions) There are no further questions at this time. I would like to turn the call back over to Mr. Walter Herlihy. Please proceed.
Okay. Well, thank you everyone for attendance on today's call and as always, if there are additional questions come up over the course of the next quarter, please feel free to contact the company directly through Investor Relations. Thank you.
Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good 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: email@example.com. Thank you!