Jenene Thomas - Director, IR
John Crowley - Chairman & CEO
Matt Patterson - COO
Daphne Quimi - Corporate Controller
Ritu Baral - Canaccord
Amicus Therapeutics Inc. (FOLD) Q3 2010 Earnings Call November 8, 2010 5:00 PM ET
Good afternoon and welcome to the Amicus third quarter earnings conference call. My name is Sean and I will be your facilitator today. 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). I will now turn the call over to Jenene Thomas, Director, Investor Relations. Please begin.
Good afternoon and thank you for joining our third quarter 2010 financial results conference call. I am joined on the call by a number of our executive team including John Crowley, our Chairman and CEO; Matt Patterson, our Chief Operating Officer; David Lockhart, our Chief Scientific Officer and Daphne Quimi, our Corporate Controller.
Before I turn the call over to John I have to remind you of the following. This conference call contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 relating to the business operations and financial condition of Amicus including, but not limited to preclinical and clinical development of Amicus’ candidate drug products, the timing and reporting of both, from preclinical studies and clinical trials evaluating Amicus’ candidate drug product, the projected cash position for the company including achievement of development and commercialization milestone payments and sales royalties under our collaboration with GlaxoSmithKline of business development and other transactional activities. Word such as, but not limited to look forward to, believe, expect, anticipate, estimate and plan like we should incurred and some [work expressions] words identifying forward-looking statement.
Although Amicus believes we have [13 shares] reflected in such forward-looking statements are based upon reasonable assumptions, there can be no assurance that this expectations will be available at.
Actual results could differ materially from those projected in Amicus’s forward looking statement due to numeric known and unknown risks and uncertainties including the risk factors that thrive in our annual report on Form-10k for the year ended December 31, 2009. Amicus does not undertake any obligation to public update any forward looking statement to reflect events or circumstances after the date on which any such statement is made, or to reflect the occurrence of unanticipated investment.
At this time it is my pleasure to turn the call over to John Crowley, Chairman and CEO of Amicus Therapeutics.
Great thanks Janine, and good evening to all. I’ll start today’s call with just a few opening remarks and then had it over to Matt for a review of our development program as well as the third quarter financial. Third quarter was very strong for Amicus and we continued our significant momentum really in four key areas: First, we finalized a worldwide exclusive license and collaboration agreement which as you all know we announced about 10 days ago. Relating to Amigal for separating these with our partner Choice and GSK rare diseases. The second we saw continued strong execution of our ongoing Phase III clinical study for Amigal, the study we refer to for US approval study of 1 to 1. Thirdly also continue to prepare for the commencement of study 012 the EMEA study for Amigal, as well as the fourth I think significant piece of momentum in the quarter which was the preparation for the commencement of our Phase II study with Amigal co-administered with enzyme replacement therapy.
Let me just comment briefly to our products that GSK is a terrific partner for Amicus and the deal that we announced the end of the week before last years transformational for Amicus in a number of ways I think it strongly supports our strategic focus for the company by number 1 adding significant support to our global Amigal Phase III program and indicates confidence more broadly we hope in our chaperone technology. And secondly to with our partnership with GSK we think that the collaboration will firmly position us for the leader in research and development of technologies and products for the rare diseases.
We also believe that the partnership with GSK will enable us to very judiciously drive our pipeline and to opportunistically seeks products that we think will be complimentary in development to our focus and the rare diseases. And finally the deal what we have with GSK we see strong financial component that will continue to provided added financial strength to the company, while also giving us the research just to fund our operation and capital investment, through the anticipated US commercial launch of Amigal.
So in summary upfront Amigal remains our number one priority and we will work closely with pour partners at GSK where diseases to aggressively advance this program, we will judiciously advance our earlier stage programs specifically Pompe and Gaucher programs co-administered with ERT in those disease areas.
As well as our neurodegenerative genetic disease programs for Parkinson’s and Alzheimer’s disease. We remain committed to being the leader in the research and development of drugs for these rare diseases and as I stated briefly before, we will certainly evaluate and pursue new rare disease opportunities where we see a strategic fit with the Amicus business plan, and we believe that we will significant strategic flexibility to continue developing new treatment for rare diseases. So, let me turn it over to Matt.
Great. Thanks John and good evening. Well, first I’ll start by just spending a minute for viewing terms of the GSK deal we spoke to these and when we now set deals, John’s mentioned about 10 days ago. First, I’ll just go back through it for everyone.
As a reminder, this is an exclusive license to worldwide rights to develop, manufacture and commercialize Amigal which is a product currently in Phase III for Fabry disease. As a priority agreement, GSK will also have rights to a program evaluating Amigal co-administration with ERT for Fabry, but to be clear the agreement was strictly related to Amigal and no other programs in our pipeline.
According to the terms of the agreement we will receive an upfront and non-refundable license payment of $30 million from GSK, and we will also receive further development and commercialization milestone payments of up to $170 million, as well as tier double-digit royalties on global sales of Amigal.
So that means that we achieved certain milestones. We have the potential to receive $230 million in upfront and milestone payments for the product. Also as a part of the agreement, we will fund development costs for the remainder of 2010, Amicus will, but beginning in 2011 we will jointly fund development costs of the global program with GSK based on an agreed-upon development plan. And in this case I can provide you a few more specifics than we were able to share the last time we spoke.
Specifically, the development plan provides that Amicus and GSK will share costs on a 50-50 basis in 2011 and on a 25-75 basis respectively in 2012 and beyond through the regulatory approvals from both the US and European regulatory authorities. In addition, our obligation is to join a fund development cost that are subject to both annual and an aggregate cap. So this an important fact that we didn’t share last time, but obviously our sharing costs in particular when Amicus is just bearing the 25% of the cost of the program is a significant component of this deal for Amicus and we will contribute very nicely to reducing our cash burn on this program in the coming years.
Additionally finally, GSK is purchasing 6.9 million shares of our common stock at a price of $4.56 per share. So the total value of GSK’s equity investment in the company is $31 million and represents a 19.9% ownership position in our company. That’s making the total cash upfront to us from the cash upfront licensing payment and the equity investment to be just over $60 million.
We believe assigning of this agreement not only provides strong support for all the potential success of the program, but more broadly the chaperone technology approach and importantly we also think it recognizes our team’s scientific and clinical expertise in rare diseases and in particular on the equity side, it really highlights GSK’s commitment to Amicus with a very significant investment in the company and their desire to work closely with us moving forward on this program.
So let me turn then to from the deal to talking a little bit about the program specifics. First on the Amigal Phase 3 program, we did in our previous announcement about the GSK deal will provide further guidance on enrollment for study 011 which as John mentioned is our study intended to support approval in the United States. We made significant progress today. We are very pleased with the traction on enrollment, but we do now expect enrollment to complete in Q1 rather than end of this year. We have good momentum but we think that’s more reasonable asset understand base and all the way to Sachs and that will give us topline results from the study in the second half of next year. If there are tremendous operational efforts which spoken about that before this trial is en-rolling patients at over 40 sites around the world and we are pleased to add GSK to that project which will allow us to really continue to focus on solid execution going forward.
Additionally, we are on track for our activities to support to start 012 Amigal 012 is a study intended to support two on the European Union, the protocol has been and those sites will be initiative as we speak that guess in-patient starting treatment is perhaps at the very end of this year, but it may be beginning the next year when patients are clearly going to receive drug but we are pleased with the progress and the momentum on this. This study is going to look a lot like study 011 from the logistics prospective its global study it’s going to involve a similar number of sites many of those are the same what we are working with on.
Additional momentum is on study 013 that’s our number for the study where we will evaluate Amigal co-administered with ERT it’s the phase II study and we are working closely with GSK on this one as well its really at a similar point after say 012 to the protocol is final in terms the sites are being initiated and again our patient commencement on treatment is possible probably over the year, but we likely will be the very beginning next year.
So moving on to (inaudible) as John mentioned about our other programs we are evaluating the potential for chaperones for Pompe and Gaucher is used to be used in combination with enzyme replacement therapy and we are currently in preclinical development with full we are looking closely at the appropriate next step for how to advance those programs and look forward to providing additional guidance as we go forward to providing additional values as we go forward for those programs.
Now finally I’ll finish on the programs side on a note to genitive programs. We remain very excited about these based on our continued progress in preclinical studies. Now as a reminder we are looking at these in genetically defined sub-populations within Parkinson’s and Alzheimer’s.
Starting with Parkinson’s; our strategy is to focus on patients who are carriers for Gaucher disease. This is clearly consistent with our overall corporate strategy of focusing on rare diseases, reminding that we have initial group of concept in studies of our molecule AT2101 in animal models for Parkinson’s, but there is significant medicinal chemistry efforts. In 2009 we identified new modules that we believed improved significantly on the properties of AT2101 and that we believe will have better potential for future clinical development. So we are focused on those in our preclinical studies today. And we will continue to advance those studies and expect that to continue this year and into next year. And we are hopeful that we can provide more specific guidance on the next steps for this program I think in 2011.
Along with the Parkinson’s program, we are advancing in the Alzheimer’s program; it has good momentum as well. In this program, we are evaluating several different enzyme targets, each of which represents a novel treatment approach to Alzheimer’s, and again we are focusing only on genetically defined sub populations. But I don’t have to work this down to the last side here is to understand the chaperone mechanism of action diseases of misfolded proteins and lysosomal enzymes, we think this program has very solid potential and we look forward to continuing to work, continue to preclinical studies going on today, keeping you posted on our progress.
Finally, also note that in addition to executing on our plans to advance Amigal in partnership with GSK, we do intend to remain active on the business development front and to continue to evaluate opportunities for possible partnerships on these early stage programs. So we will very forward, we will keep those, we will be continuing to evaluate different options with the goal of building on our terms strategic and financial foundation that John described earlier.
And with that, I’ll just wrap up by saying again what John shared earlier and that is our vision to be a leader in the R&D of drugs related to or intended to treat rare diseases and we believe the global partnership with GSK is a huge step forward in this effort, and we believe this gives Amicus, the deal gives Amicus significant strategic flexibility to advance our pipeline, to continue developing new treatments for rare diseases and provides tremendous opportunity to build further shareholder value.
With that, I’ll turn the call over to Daphne, who will review of the financial results for the quarter.
Thanks Matt. Good evening to everyone. I’m going to review the third quarter financial results. I will comment briefly on our cash position and reiterate our financial guidance.
The end of the third quarter was $57.6 million in cash and marketable securities. In light of this GSK deal for Amigal we updated our financial guidance. We believe that our current cash and marketable securities along with 2010 and future anticipated payments for GSK will be sufficient to fund operations in capital expenditure requirements through the anticipated US commercial launch of Amigal.
Now, as I move to the financial results I will be referring to table 1 in our press release.
Net loss for the quarter was $15.4 million as compared to a net loss of $13.4 million for the same period in 2009. Reductions in operating expenses resulting from our Q4 2009 restructuring and refocused operating priorities largely offset the $4.9 million year-over-year revenue impact of terminating the Shire collaboration agreement.
R&D expense in the third quarter of 2010 was $8.9 million representing a decrease of approximately $3.7 million or 29% from $12.6 million for the same period in 2009. The variance was primarily attributable to lower personnel costs associated with the workforce reduction completed in the fourth quarter of 2009, a decrease in consulting costs and a decrease in contract research and manufacturing costs due to the reduced activity within the Gaucher program.
Our third quarter 2010 G&A expense was $3.9 million representing a decrease of $1.3 million or 25% from $5.2 million for the same period in 2009. The variance was primarily due to lower personnel costs associated with the workforce reduction completed in the fourth quarter of 2009 and a decrease in third party legal and consulting fees. Interest income for the third quarter was $0.03 million as compared to $0.13 million in the comparable quarter last year.
The decrease of 77% was due to lower effected interest rate and decreased cash and cash equivalents balances. As we previously announced in the first quarter of 2010, we raised $17.1 million of net proceeds through a registered direct offering of 4.95 million of shares of common stock and warrants to purchase an additional 1.85 million common shares. We allocated $3.3 million of our net proceeds to the ones which we classified as a liability on our balance sheet. Each quarter, the warrant liability will be mark-to-market with changes recorded as a non-cash non-operating item in our P&L.
The change in fair value of our warrant liability during the third quarter was $2.1 million. So that covers the financial update for the third quarter. I will be available to address any questions during the Q&A part of the call. With that, I will turn things back over to John.
Great. Thanks Daphne. When we had our call announcing the GSK deal a week and half ago or so, I began the call by noting that these are the days that it's good to be a biotech CEO and those days certainly continue and we look forward to continuing executing on our programs and working very closely continued now with our partners at GSK. With that, let me turn it over to the operator and see if there are any questions.
Thank you ladies and gentlemen. (Operator Instructions). Our first question comes from Geoff Meacham with JPMorgan. Please go ahead with your question.
Hi, this is [Anupam Rama] in for Geoff. A quick question on the phase II extension study, I think the last time we got an update was in February. Just wondering when we might get another update and remind us how many patients are still in the extension study and how long the longest patient has been exposed to drugs. Thanks.
I'll ask Matt to field that question, please.
So, as far as the data update, we are working towards trying to provide that in Q1, a couple of genetics conferences that are very common for us and the reviews in the past are good form, for those announcements include world LDN conference in February and the American College of Medical Genetics which is in March. So we don't have the answer for that today but we are working towards that, so we'll be happy to update you as soon as we climb onto that plan.
But it is our goal to provide an update early next year just like we did this year. 17 patients continue in that extension study and as we talked about before it’s a really, really valuable source to continue data collection for us, both on (inaudible) side with long-term data evaluating Amigal’s impact on rare disease in particular getting function of a couple of different measures, but in particular also on the safety side and tier points as far as exposure and the time on drug, I don’t have all the numbers right in front of me, but I know that there are several patients in there maybe as many as eight or six or seven that have been on for four years, nearly four years and counting, so it’s a really great data set for us.
I think all in, we are well over 70 years of patient data now.
Our next question comes from Ritu Baral with Canaccord.
Ritu Baral - Canaccord
Looking on some trials to start that your upcoming European Phase 3 and the upcoming combo study, I noticed that you have enrichment criteria as part of the European trial. Will that be the same sort of enrichment criteria that you use in the US trial and could you just remind us what you did use?
So the reminder in the Phase 3 011 study which is focused on the US approval of the two key enrichment criteria that we use for the trial are the genetic, the occasion making sure that we are enrolling people who are likely to respond to Amigal based on what we know about their genetics and GL-3 as I mentioned in the yearend because of course the primary end points GL-3 mentioned in the kidney biopsies and we use here GL-3 as a proxy for GL-3 in the kidney and so a little bit different from the European study, the same genetic mutation criterion will be used. It’s not different, so that will still be a priority and that of course makes sense. We are only interest in enrolling patients who will benefit from this as a monotherapy treatment. We don’t have the yearend GL-3 criterion for the 012 study. There is no biopsy in the 012 study. The primary endpoint will be evaluating kidney function by glomerular filtration rate. So we will have a criterion for extensive renal disease as measured by a couple of different measures in the entry criteria, a redo, but it won’t be GL-3 in the yearend measurement.
Ritu Baral - Canaccord
And so the combo study doesn’t use any enrichment criteria, could you just go through the strategy behind that?
Sure. That’s just because it’s a different approach to using the chaperone. So in the combo approach we are intentionally dosing the two co-administering them at the same time with the goal of the chaperone interacting directly with ERT to stabilize the ERT and ideally have a positive impact on its pharmacokinetics and the amount of it that can get into the target tissues. So it’s really dosing it at a completely different way, in the monotherapy approach you are dosing it every other day with an attempt to increase the level of the patients own enzyme that’s getting to the lysosome within the cells, but in the combination approach we are intentionally dosing just once orally before they get their infusion, which happens every other week, with the goal of having a positive direct interaction on that ERT. So, it’s both are chaperoning, but in different ways of course.
Ritu Baral - Canaccord
And as far as the low dose and the high dose in the trial description, can you say what they are at least relative to the monotherapy studies?
We cannot yet share that, but we look forward to sharing it soon. Going forward we will work closely with GSK on announcing our details related to these studies and we will get that and use that at the right time in the right level of detail in partnership with them. So, I don’t have that for you today, but we’ll be happy to share that in the future and of course we spend a lot of time on the preclinical side advancing our combo approach and thinking about how best to dose it in. As I mentioned we expected just like I said which is an oral dosage ahead of the ERT infusion starting, but exactly what those level we are going to use is going to be driven by our preclinical work and we can lock it through at a later date.
Ritu Baral - Canaccord
And do you plan on taking advantage of the same centers just like you did for the 1-2 trial?
I expect there will be some overlap, there maybe some, it is not going to be nearly as big of an effort, face to (inaudible) concept approach to start off and we would expect to advance the program into a much more broad global effort going into Phase 3 of course, but for this first study, I don’t expect it will be a large number of states, but some of them will be the same that we work with in the other trials.
I am not showing any other questions at this time. I would like to turn it back over to John Crowley for closings comments.
Well that’s all we have. Great thank you all for listening and we will be in touch soon. All the best.
Thank you ladies and gentlemen, thank you for your participation in today’s conference. This does conclude the conference, you may now disconnect. Good day.