Memory Pharmaceutical Q4 2007 Earnings Call Transcript

Memory Pharmaceutical (MEMY)

Q4 2007 Earnings Call

March 06, 2008 9:00 am ET

Executives

Vaughn M. Kailian - President and Chief Executive Officer

James R. Sulat - Chief Financial Officer

David Lowe, Ph.D. - Chief Scientific Officer

Stephen Murray, M.D., Ph.D. - Chief Medical Officer

Michael P. Smith - VP of Business Development.

Analysts

Terence C. Flynn, Ph.D. - Lazard Capital Markets

Presentation

Operator

Ladies and gentleman, thank you for standing by and welcome to the Memory Pharmaceutical Conference Call to discuss the company’s 4^th quarter and year-end 2007 results.  There will be a question and answer session to follow.

I will now return the call over to Jzaneen Lalani, the General Counsel of Memory Pharmaceutical please proceed.

Jzaneen Lalani

Good morning and thank you for joining us to discuss Memory Pharmaceutical results for the 4^th quarter and full year 2007 with me today are Vaughn M. Kailian, President and Chief Executive Officer, James R. Sulat, Chief Financial Officer, Dr. David Lowe, Ph.D., Chief Scientific Officer, Dr. Stephen Murray, M.D., Ph.D., Chief Medical Officer, and

Michael P. Smith, our VP of Business Development.

Before we begin, let me remind you that some of the information presents today regarding the company’s future expectations, plans, and prospects are considered forward-looking statements under the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on our current expectations and actual event may differ materially from those expectations.  We will refer you to our filings with the Security and Exchange Commission including our annual report on Form 10-K and our quarterly report on Form 10-Q which identified important risk factors that can cause actual results to differ materially from those contained in our projections or forward-looking statements.  We disclaim any intent or obligation to update any forward-looking statements as a result of developments occurring up to date call.

 With that let me now have the call over to Vaughn.

Vaughn M. Kailian

Thank you Jzaneen and good morning everybody out there. As of many of you know I was recently appointed interim CEO and President of Memory and it is really exciting for me to get back in the saddle again, to be part of a Memory’s Management Team at this point in the company’s growth. Memory has a diverse pipeline with multiple programs and each of them have potential utility in more than one indication and that makes memory, in my opinion one of the most compelling and promising CNS stories in BIOTECH sector today and the further testimony to that is the fine collaborations we have had and we had had, we have now with Roche and Amgen and others and I want to take some time today to briefly discuss recent developments and give you all an update on the company.

The past few months have been extremely productive at Memory. We have made progress on both the clinical and the business development front and particularly with respect to our nicotinic alpha-7 program. Memory 3454 which I am just going to call “3454” from now on, is our lead nicotinic alpha-7 receptor agonist and in November of last we announced part of the top-line date from our Phase 2a study in Alzheimer’s disease which demonstrated statistically significant positive effect in multiple measures of cognition results that were consistent with our pre-clinical and a Phase1 studies of this drug candidate.

These results demonstrated the potential benefit of 3454 pretty clearly and we have advanced 3454 into a Phase 2a trial on a second indication, cognitive impairment associated with schizophrenia or CIAS. Cognitive impairment is increasingly recognized as a core feature of schizophrenia and it is estimated that over 75 percent of schizophrenics suffer from CIAS and although there are drugs approved to treat both the positive and negative symptoms associated with schizophrenia, there are not any currently available treatments that address the cognitive deficits associated with that disorder.

There is a strong scientific rationale for the potential use of nicotinic alpha agonist and CIAS and in fact in a 2004 study conducted in connection with an NIH Initiative known as Measurement and Treatment Research to improve Cognition in Schizophrenia, or MATRICS, nicotinic receptor agonists targeting the alpha-7 subtype were selected as one of the more interesting targets in the development of treatment for cognitive deficits of schizophrenia, specifically in the areas of attention and vigilance.

We began our CIAS trial this past December and we are pleased with the initial rate of enrolment and the investigators interest in participating in the trial and we expect to report top-line data from this trial at the end of this year in the fourth quarter of 2008. Roche session has an option to license 3454 following our submission of the report on the Phase 2a Alzheimer clinical trial which I just talked about and certain other reports and should Roche choose to exercises its option. It would be required to make a milestone payment immediately to Memory followed by an additional larger milestone payment to maintain its license following the completion of the CIAS trial and the some of these two milestones would total over $22 million and while we cannot predict the Roche decision I can say that we remained impressed by their enthusiasm and commitment to the program.

We have had an active dialogue and open dialogue about the entire nicotinic program with our colleagues at Roche and 3454 program in particular and in the last year we have amended our agreement twice to support the continued development of 3454, specifically in schizophrenia. The first amendment was to expand the scope with the collaboration to include the CIAS trial which we just discussed and the second was to support an important bio-marker study and additional formulation in manufacturing activities for 3454.

All of these activities will be funded by Roche. We plan to initiate the biomarker study by the middle of this year and we believe that the data will provide important insights into this line of larger more advanced schizophrenia trials.

The second product in our compound in our nicotinic alpha-7 agonist collaboration with Roche is R4996 a.k.a Memory 63908 and that program is progressing to a Phase 1 program. This morning, we reported that we have successfully completed the single ascending dose portion of the Phase 1 program and we are advancing the compound into additional Phase 1 study and our current expectation is we will complete those studies by the end of this year in fourth quarter 2008.

We believe that are nicotinic program is one of strongest in the industry and has a potential to create significant near-term value for U.S. shareholders over the course of this year. Let me turn for a couple of minutes now for a brief review of the rest of our pipeline.

First, PDE10 we remain excited about the potential of our PDE10 program which is partnered with Amgen and focus on the development of PDE10 inhibitors for certain neurological and psychiatric disorders. PDE10 is a target that generated a high level of interests in the scientific community and together with Amgen we have made good progress to identify potential drug candidates against its target.

Our team science is also working on two other exciting programs are PDE4 inhibitors program and 5HT6 antagonists program. On PDE4, we have been working on to better understand the potential utility of our clinical stage PDE4 inhibitors, Memory 1414 and 1917. PDE4 inhibitors have a therapeutic utility in a broad range of indications from CNS diseases such as Alzheimer and schizophrenia, to respiratory diseases, and drug abuse. 1414 is producing impressive data in both CNS and anti-inflammatory models and we are continuing to evaluate the development path forward for this program.

Also we re advancing our 5HT6 antagonists program, 5HT6 receptors are almost exclusively expressed in the CNS. The compounds acting on the receptor have therapeutic potential treatments for a number of CNS disorder including Alzheimer's disease, schizophrenia, attention deficit disorder, and obesity. We possess a number of compounds with diverse and pharmacological profiles and we are evaluating potential development candidates for the 5HT6 program.

During the fourth quarter of 2007, we also reported top-line data from a Phase 2a study of memory 1003 in Alzheimer disease as we previously discussed the data from the trial were mixed with the negative result in the overall population but positive signals in the subgroup of patients receiving stable doses of cholinesterase inhibitors.  We were continuing to analyze the data and to evaluate the potential for future development to this compound.

We have made solid progress with our clinical pipeline and we reversed partnership in recent months and a key goal for us is to create value for our shareholders of the both the near and the long term and since joining Memory I have initiated a process to conduct a thorough review of our programs and operational and financial structure to ensure that they are all crossing the line with our goals. We expect to complete that review shortly and I look forward to discussing our plans with you at that time.

On that note, I will turn the call over now to Jim for discussion of our financials.

James R. Sulat

Thanks Vaughn. I hope everybody has had a chance to review the press release we issued today with our financials so rather than take the time to review the release in detail, I would like to provide just a brief high level or review the numbers.

For the year end of December 31, 2007, we reported a net loss of $35.3 million or $0.49 per share. For the fourth quarter net loss was $9.6 million, or $0.13 per share. For the full year, we reported $11.5 million revenue. This included $2.2 million received from the Stanley Medical Research Institute related to the completion of our Phase 2a trial of MEM 1003 and bipolar disorder early in 2007. We recognized those revenues in the third quarter, as well as the amortization of upfront non-refundable fees and milestone payments, in addition to payments received for research and development funding under our agreement with Roche and with Amgen.

For the fourth quarter, we reported revenue of $1.1 million, which is primarily related to revenues received in connection with our partnerships with Roche and Amgen. Research and development expenses for the full year 2007 were $38.4 million reflecting our increased investment in clinical development activities. During the year, we completed 3 Phase 2a trials initiated the Phase 1 clinical program for MEM 63908 and commenced the 4^th Phase2a trial run.

For the fourth quarter of 2007, research and development expenses are $8.3 million this is lower than each of the first three quarter of 2007 due primarily to a reduction in expenses related to MEM 1003 and MEM 3454 following the completion of a Phase 2a trials in Alzheimer disease for those drug candidates. SG&A expenses were $9.3 million for the full year 2007 and $2.2 million for the fourth quarter of 2007.

On December 31 2007, we have $38.2 million in cash, cash equivalents, and marketable securities, compared to $43.2 million at the end of the third quarter. Our quarterly cash burn reflects our investment and our development activities in operation off set by the final $4.0 million we received under debt financing agreement with Hercules.

We now expected our cash balance, together with payments expected to be made by our collaboration partners will be sufficient to fund operating expenses and capital equipment requirements and make all scheduled payments on our debt obligations into the first half of 2009.

Let me now return the call back over to Vaughn for a review of our upcoming milestones and closing remarks.

Vaughn M. Kailian

Thanks Jim. As our clinical programs advance there are a number of key milestones that we anticipate reporting over the course of 2008 and early in 2009, first we are preparing obviously the Phase 2a, 3454 Alzheimer trial results and other reports for submission to Roche and base on the timing of the expected submission, we anticipate a decision from Roche next quarter, in the second quarter of this year.

We look forward to continuing and completing our Phase 2a trial of 3454 in CIAS and as I indicated earlier, we will report top-line results from that in the fourth quarter of this year and as part of our development program for 3454 in schizophrenia we will commence the P50 biomarkers study this summer with results expected by early 2009.

For MEM 63908, we now expect to complete the Phase 1 program and report top-line results in the fourth quarter of this year, so we have a wealth clinical milestones coming up in addition to other milestones which we have not talked about over the course of the next twelve months. We will continue to keep you updated on our progress and developments with our pipeline.

Along those lines, we are hosting an R&D day for the investment community in New York City on May 16 to detail our preclinical and clinical programs. Our guest speakers will include Dr. Eric Kandel of Scientific Founder of Memory Pharmaceuticals and a recipient of the Nobel Prize and Dr. Herbert Meltzer, Bixler professor of psychiatry and pharmacology at Vanderbilt University and we hope to see you and all your colleagues there.

In summary, the last few months have been very productive at Memory and I am very excited about the potential for our pipeline and to be working with our team and partners to support a continued progress. Much work still needs to be done here and we are all eager to get to work.

Now, I would like to open the call for Q&A, operator.

Question-and-Answer Session

Operator

Thank you.

(Operator Instructions) Your first question comes on the line of Terence C. Flynn with Lazard Capital Markets, please proceed.

Terence C. Flynn - Lazard Capital Markets

Hi, good morning, thank for taking the questions. Just two questions, the first I am just wondering the milestones payment from Roche associated with Phase 2a trial of 3454 for AD, is that going to be recognized as revenue once it is received or there is like going to amortized?

Vaughn M. Kailian

And what is your second question?

Terence C. Flynn - Lazard Capital Markets

The second question is with respect to the ongoing Phase 2a trial of 3454 for schizophrenia, I am just wondering if you can give us a sense of higher thinking about the possible outcomes from the matrix battery, do you need to see a positive signal from all the batteries or other certain batteries and particular out of the 8 to 10 that you are focused on and you think are more important than others.

Vaughn M. Kailian

Okay, so I would like Jim answer your first question and Stephen will take your second question.

James R. Sulat

Terence we are going to recognize the revenue that we receive as part of its milestones for the same way as you recognize all of the cash that we receive from Roche under this agreement and specifically what that means is they get amortized over a period of time going into the future basically between now and when we would expect the first candidate from the program. That is true for all of the other revenue and it will true for any milestones we will receive from Roche as well. So it will get recognized by over the next six or seven years something like that.

Stephen Murray

Good morning Terence. With respect to your question about the schizophrenia study, the matrix salary as you know is composed of seven domains and the matrix is working on the domains.  The primary endpoint in that study will be this composite score which combines all of those, although obviously it is a Phase 2a  study, to prove a concept study we will be looking at all of the good domain if there is any specific areas where the compounds work better than others but the primary endpoint is the composite score.

Terence C. Flynn - Lazard Capital Markets

Okay, but then in terms of those demands, I mean are there any that you would like to call out in terms of that you think you more likely see a signal there given what you know in AD trial or given that it is an alpha-7 compound?

James R. Sulat

This is the first time we have looked at this compound in schizophrenia and this really not much dated to guide us, so everyone has of hypothesis. I would say that we are looking at the domain as more of a proof-of-concept study to actually give it the data to predict with. I think that you know individuals will have their favorite domains but we have chosen the composite score because frankly what is important in schizophrenia is having an improvement in cognition in general and which specific domains are going to be excited if not, it is predicted part of analysis.[

Terence C. Flynn - Lazard Capital Markets

Okay, thanks for taking the questions.

David Lowe

I just wanted to say of course this study design and the whole way will be interpreted in the recognition that is Phase 2a proof-of-concept that is very well recognized by Hoffmann La-Roche.

Vaughn M. Kailian

Next question.

Operator

At this time, I would like to return the call back over the Mr. Vaughn Kailian for closing remarks.

Vaughn M. Kailian

Okay, well I guess I do have a question. I got a question that I get ask all the time. I am surprised you folks are not going to ask me so I will ask myself the question which is how long you going to stay in CEO of Memory that comes from either my wife, the people inside, or investors who I have talked to and the answer to that question is we have a search underway right now for the full time CEO of Memory but this is a great teams, so I am looking forward to the… I am actually having fun here with these folks, they are a great team and we look forward to delivering on the promise of Memory. So with that, I would like to thank you all for being with us this morning and look forward to talking to you relatively shortly. Again, bye bye.

Operator

Thank you for your participation on today’s conference. This concludes the presentation you may now disconnect and have a good day.

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