GTC Biotherapeutics, Inc. Q4 2007 Earnings Call Transcript

Mar.31.08 | About: GTC Biotherapeutics (GTCB)

GTC Biotherapeutics, Inc.(GTCB) Q4 2007 Earnings Call March 6, 2008 10:00 AM ET

Executives

Geoffrey F. Cox PhD – Chairman of the Board, President, Chief Executive Officer

Jack B. Green – Chief Financial Officer, Senior Vice President, Treasurer

Analysts

Stephen Dunn – Dawson James Securities

Navdeep Jaikaria – Rodman and Renshaw

Roy Friedman – Edith C. Blum

Donald Hudson – Hudson Associates

Steve Turner – Due Diligence

Operator

Good day ladies and gentlemen and welcome to the Q4 2007 GTC Biotherapeutics Inc. earnings conference call. My name is Heather and I will be your coordinator for today.

(Operator’s Instruction)

Now I turn the presentation over to your host for today’s conference, Dr. Geoffrey Cox, Chairman and CEO of GTC Biotherapeutics. Please proceed, sir.

Dr. Geoffrey Cox

Thank you very much and good morning everyone. Welcome to the conference call webcast to discuss the financial results for the fourth quarter and for the full year 2007 for GTC Biotherapeutics Inc. NASDAQ ticket symbol, GTCB.

I’m Geoffrey Cox, Chairman and Chief Executive Officer of GTC Biotherapeutics. With me today are Jack Green, our Chief Financial Officer and Tom Newberry, Vice President of Corporate Communications.

Our results from the fourth quarter were released earlier this morning and I hope that you have had the opportunity to review this release prior to our call. I want to begin this call by making a few comments regarding our progress in 2007 and our strategic goals including developments in our partnering strategy. Jack will then provide an overview of the financial results for the 4th quarter and full year and discuss our cautious projection for 2008.

I will then some further prepared remarks prior to open the call to questions. First of all, as usual, let me remind you about Safe Harbor Statement for this call and the SEC Safe Harbor Provisions, please note the certain comments stated about future events and potential developments are forward looking statements based on management’s current expectations. We urge you to read the Safe Harbor Statement noted on our most recent Form 10-K filed with the SEC entitled “Important Risk Factors Regarding Forward Looking Statements”.

As you know, due to the risks inherent in our business, which are described in detail in Item 1-A of our 10-K and subsequent 10-Qs, our actual results may differ materially from our current expectations.

I want to take some time to start this call to remind you of the strategy that GTC has been falling over the last year and the significant progress we have made during that time particularly over the last quarter.

The production technology and infrastructure which GTC has developed has some unique characteristics which provide a significant competitive advantage in the production of certain class of therapeutic proteins.

The ability to produce proteins which are difficult to express in other manufacturing systems has been the foundation of the development of a portfolio of recombinant plasma proteins which is unique in itself even in comparison of large companies in this space. Our production technology also enables us to produce large volumes of therapeutic proteins at competitive costs and with the fraction of the capital investments normally associated with the production of biologics.

These characteristics are not only important for the production of commercial potential to recombinant plasma proteins but also to the production of monoclonal antibodies. We’re exploiting this capability not only in the development for proprietary monoclonal antibodies but also in the development of our portfolio following biologics also known as “Biosimilars” in Europe which we believe have the potential to be a very important contributor to the future GTC and which is largely unrecognized at this time.

This strategy is supported by an established commercial scale production infrastructure which has been validated as a result of the approval of action in Europe. We all recognized that the first therapeutic indication for action is a modest market opportunity. But actions approval in Europe was a major step in unlocking the value of this production technology across the broad range of opportunities now available to us.

Since our last call, we have achieved another major milestone with a success for completion of the pivotal clinical study for action in the United States which is providing the basis for our biologic slice and application as submission to Food and Drug Administration.

We’ve obtained permission in the second half of 2007 to submit the BLA on what is known as a rolling basis where sections are submitted as they are ready rather than normal procedure waiting until everything is complete before submitting the filing.

The rolling submission is divided into two parts. Part one includes the pre-clinical manufacturing sections. The part two includes the clinical efficacy and safety data. We filed part one in late January. We did this entirely with our own regulatory resources and made a submission electronically of the single disc where subjects across link to expedite review. This is tremendous progress from our European submission where rely that to a large degree on the resources of the outside service providers which required submitting 60 volumes of paper.

We request the priority review in conjunction with our part one submission and we are awaiting a response. The granting of a priority review would provide for a six months review time as to completion of the entire BLA submission.

We look forward to working with the FDA during the review process. Many of you regard the improvement of action by the FDA as a significant and important validation in addition to be approved in Europe. And we believe that we are well placed to achieve that objective.

You remember that in second half of last year, we received so called fast track status for action from the FDA along with the permission to file action using a role in BLA. We are actually pleased of the FDA has also recognized the unique therapeutic value of action as the only potential recombinant antithrombin by granting it all from drug status.

Clinical trial which is the basis of our BLA submission builds on the 14 patients’ study which forms the basis of approval in Europe. The study in the United States required us to recruit a further 17 patients in the active arm in addition to these 14 patients.

All of these patients have low levels of antithrombin in their bloodstream and the requirement of the study was that all patients had to have suffered a previous thrombosis as a result of that condition. These were high risk patients, therefore, and published research indicates that 40%-50% of these patients could develop thrombosis in the absence of prophylactic treatment when undergoing surgery or child delivery.

The primary endpoint of the study was the prevention of signs and symptoms of deep vein thrombosis, or DVT, or other thromboembolisms while these patients underwent surgery or childbirth. The protocol for the study was to remove these patients from that blood thinners, such as Warfarin prior to surgery or childbirth and to bring that antithrombin levels to the normal 80%-120% plasma levels and sustain them at that level throughout the procedure for a minimum of three days or up to 14 days according to the physician or the treating physician.

The patients were observed for clinical signs and symptoms of thrombosis during the course of treatment and for seven days following completion of treatment during which period patients will return their normal blood venous. Eighteen patients were recruited into the study, six surgical patients and 12 pregnancies of which 17 are considered cannot be evaluated. The unevaluable patient was a mother who gave birth so quickly that the physician was unable to achieve the protocol dosing requirements in time. Further, the mother continued to be treated and the mother and baby were fine. No patients in the active arm with the study showed signs or symptoms of DVT; remember again, these are all high risk patients and procedures.

In the US trials, the FDA asked us to conduct a non-inferiority study with the comparative arm and it was agreed that this comparative arm would be a retrospective study with data collective under a protocol and with HD patients with the clinical history of thrombosis having treated with plasma-derived antithrombin while undergoing similar high-risk procedures in surgery and childbirth.

A minimum of 35 patients required in these study and we obtained 38 evaluable patients. Most of these patients were in Europe since plasma-derived antithrombin has been in short supply over the years in the United States. There were no observations of clinical signs or symptoms of DVT in these patients, representing a high bar for ATryn comparison that I am very pleased we met.

We believe that this comparison forms a strong platform for our BLA filing. The FDA has asked us to collect plasma samples for our patients for up to 90 days after the treatment for antibody assessment and that is an important element in the time line for completing our filing with the FDA, collection of antibody data standard practice for clinical trials for recombinant proteins. Remember that we also look for the generation of antibodies 90 days after the administration of ATryn(NYSE:R) in the study we performed for our success from European filing.

We are planning to complete the clinical sections of the BLA with statistical efficacy analysis and the safety data including antibody results around mid-year. We are also preparing the inspection of our production facilities used in the production, purification and fill/finish of ATryn, although the FDA has not provided any guidance regarding with timing of these inspections and at this stage.

We made progress in our partnering discussions for ATryn development and commercialization in the United States and we have initiated similar discussions with potential partners for our broader recombinant plasma-protein portfolio.

The focus of discussions for action in the US is on the clinical and market opportunities available for the broader acquired deficiency indications. While Leo continues to develop with DIC acquired deficiency in their territories, we will have access to that data for the US. We expect to be working with our US partner on additional acquired deficiency indication broadening the development program of this product.

Partnering discussions have progressed to the exchange of term sheets. We are looking for a collaboration where the partner is committed both to the commercialization and further clearer for development of action.

We are expecting an over-all structure seemed as the one which we have with Leo with an upfront payments, sales and clinical milestones, financial support of clinical development, transfer price for the product and the royalty of the sales. We are working to bring these negotiations to a successful conclusion over the next few weeks but I was sure you are aware of the timelines to negotiations such as this can be unpredictable.

Commercialization further development of action in Europe is occurring through our collaboration with LEO Pharma. Leo is issuing at premium pricing strategy recognizing the ATryn(R) as the only antithrombin that is a recombinant and the only antithrombin product that has been approved for use throughout the European Union under the centralized EMEA procedure.

Pricing has been established in the UK, in the Ireland and Greece, and launched activities will continue as pricing is set on the country-by-country basis. In the light of the premium pricing strategy, we expect growth in the commercial revenue to be slow in 2008. Remember that our action revenues consist of product payments from LEO for both action that will be sold commercially and for the clinical supply that will be use in the DIC study.

Leo began a phase two dose ranging study in 2007 for the DIC indication. In our last call, we reported the study was progressing most slowly than originally planned and LEO has made a number of adjustments including expanding the number sights to increase the rate of recruitment. Leo’s objective is to have top line results in he first half of 2009. We plan to provide the more definitive update on the rate of recruitment around the middle of 2008. We believe that the DIC indication is a significant market opportunity.

The recent research published in the letter in Nature authored by independent scientists at the Scripps Research Institute and Johnson & Johnson Pharmaceutical Research & Development, supports the view we shared with you in earlier conference calls that DIC and sepsis result in both a coagulation and an inflammatory response and that both these must be addressed.

Antithrombin is both anticoagulant and anti-inflammatory properties. Previous reports have indicated antithrombin has a potential to provide a significant reduction in mortality for DIC patients as long as anti-inflammatory properties are not compromised by concurrent administration of heparin.

During the last quarter we have made good progress with expanding our portfolio recombinant plasma proteins by licensing Factor IX and Factor VIII and fibrinogen from ProGenetics.

The license covers Europe and North America and Japan. ProGenetics is a small private company that we have known for many years and have been developing recombinant plasma proteins and the milk of transgenic pigs. The most advance program is Factor IX where pigs already exist that produces this product in their milk.

Our plans this year include the transfer of the purification of Factor IX 2GGC and initiation of preclinical studies with the objective of venturing the clinic in 2009. This program has already been brought under the umbrella of our joint collaboration with LFD, our existing partner for Factor VIIa and CD 20 monoclonal antibody.

The clinical development plan for Factor IX is expected to follow a similar pattern to that use for the existing recombinant Factor IX product, BeneFIX, resulting with an estimated 80 adult patients to complete pharmacokinetic as well as safety and efficacy studies. We provided ProGenetics with the cross slices to our broad patent for the production of therapeutic proteins in the milk of transgenic mammals to enable them to commercially develop the Factor IX, Factor VIII and fibrinogen products in territories outside of Europe, North America and Japan. We will receive a royalty on any sales ProGenetics generates in these territories.

The license agreement ProGenetics surrounds out GTC’s access to all three major coagulation factors, Factor VIIa, Factor VIII and Factor IX. The only company we believe with that claim and one that we hope to build into a broad franchise serving the hemophiliac community.

All of our coagulation factor programs are targeted on the establishing larger supplies of recombinant products at more rational prices to improve patient usage. For hemophiliac patients in affordable prophylactic treatment strategy we will directly improve their clinical outcomes.

Rational pricing with these products will also encourage expanded use in a broader range of potential indications. The recombinant Factor VIIa program with LFB has developed production atoms which we are now establishing stable integration of the transgene and progressing through downstream process development. We are targeting completion of preclinical work and submission of an I&D in the second half of 2009.

Our objective for the recombinant Alpha-1 antitrypsin program is to initiate establishing intravenous product for the prophylactic treatment of the patients with the genetic deficiency of Alpha-1 antitrypsin. Remember that we have established high levels of production of this difficult to express protein at 20 gm per liter of milk. Hereditary deficiency patients who are not treated prophylactically suffer from a build up of elastase in the lung that may lead to emphysema or other respiratory conditions.

We believe we have identified appropriate techniques to extend the half-life of our Alpha-1 antitrypsin product to enable it to be dosed in similar manners plasma-derived products. Once we established an appropriate formulation of our Alpha-1 antitrypsin product, we can complete our pre-plan for development over the next 12 months.

We recently met with representatives of the Alpha-1 Foundation where they describe the very real concerned their members have with managing their treatment plasma-derived product and they encourage us in our efforts to develop a robust supply of our recombinant product to help these patients maintained as much lung function as possible. LFB has also been a participant in our monoclonal antibody portfolio. During 2007, we brought into the collaboration a monoclonal antibody to the CD20 immune system receptor that LFB have been developing initially in cell culture.

The CD20 receptor is the same target is for the currently marketed product Rituxan. Development of this antibody in our transgenic production system has the potential to result in enhanced antibody dependent cell cytotoxicity compared to Rituxan. We anticipate developing CD20 antibody for indication similar to those approved for Rituxan. We plan to have animals with this transgene by the end of this year.

And I want to take some time to talk about our developing strategy for a portfolio follow-on biologics or biosimilars. I believe it is a very important opportunity and valid value drive for GTC over the coming years.

We all recognize that the present time legislation has to be passed in Congress to enable the FDA to review and approve so called generic versions of biologics. The timetable of this to occur is not certain but there is a reasonable consensus that should take place over the next year to 18 months. And clearly the upcoming presidential elections will be a factor in the timing where there has been significant investment in time and effort on both sides of the hour to bring this about.

In Europe, the procedures for reviewing biosimilars have already been adapted. And the driving issue is the same in all geographies namely greater patient access to biologicals in a time of rising healthcare costs.

As I have stated earlier, our production technology is particularly well-suited to the production of the large volumes of monoclonal antibodies at competitive cost of goods required for the expanded use of these products in the treatment of chronic diseases and large therapeutic indications.

Today, the manufacturing capacity from the cell-based production of monoclonal antibodies in Europe and North America is largely owned and controlled by innovative companies. Capital investment in independent cell-manufacturing capacity will be of the order of hundreds of millions of dollars versus transgenic production systems which require fraction of this investment.

Today however, a number of production companies are, often partnered with generic companies, are developing products such as EPO gene, human growth hormone and interferon, which are highly active but small-volume products. These are highly competitive markets which do not require significant production capacities for entrance.

As such, we do not see these markets as attractive opportunities for us since they do not exploit the key competitive advantages of our technology.

Our focus is on a group of monoclonal antibodies which are coming off patent over the next six to eight years. We have identified four or five of these products which today have a combined market of approximately $16 billion and are expected to double to approximately $30 billion over the next five to six years.

We have already started to move forward with the initial development into some of these products. And this can be achieved with minimal additional expenditure at this stage by leveraging our existing infrastructure. We believe that our existing commercial production facilities and infrastructure are sufficient to support the commercial scale of production for these programs. Clearly, we do not plan to commercialize these products ourselves and we’re seeking partnering opportunities with companies able to support this type of commercialization activity.

Before I hand over the call to Jack Green, let me make a few comments about our financial status. As you know, we completed a modest financing in early February which was important in maintaining the financial stability of the company. We had intentionally waited until we were able to disclose the results of our pivotal ATryn, study before attempting to refinance. Unfortunately, the capital markets continue to be very challenging with the cause and the solutions being well outside our ability to control. However, we have very consciously developed portfolios of products which we can leverage in a number of ways through partnering. It is our intention to focus on these partnering activities to support the financing of the company and the development and commercialization of our products so that we’re not wholly dependent on the equity markets for sources of cash. This is a strength for the company in the current financial climate.

To illustrate the growing impact of our partnering efforts, today we have already booked and included in our forecast $15 million in respective cash receipts from our currently contracted partners indicating another year of significant revenue growth ahead of us.

We will continue to build on this strong base as we add new and expanded collaborations. I’ll now ask Jack to review our financial results.

Jack Green

Thank you, Geoff. Revenues were $3.1 million for the 4th quarter of 2007, compared with $2.8 million in the 4th quarter of 2006. For the year, revenues more than doubled the 2006 levels as we continue to expand our revenue base through our partnering strategy. Revenues for the year were $13.9 million, a $7.8 million increase from the $6.1 million in 2006. The year to year increase reflects payments from Leo for the supply of ATryn and the services provided the PharmAthene for the development of their Protexia product. Cost of revenue and operating expenses were $50.3 million for 2007, 20% higher than $41.8 million in 2006. The year to year increase included the cost of goods sold to Leo supporting the increased revenues and the cost of advancing our Factor VIIa, Factor IX and CD20 programs with LFB. In the inventory write-off of $2.9 million related to the ATryn batches that were rendered unusable at a US-based fill/finish contractor, which we disclosed in our 2nd quarter press release and earnings call, one result of the loss ATryn batches is that $3.7 million of revenue from the sale of product to Leo is now anticipated in the first half of 2008. We have not been able to reach an equitable settlement with the US-based fill/finish contractor that caused the lost inventory and have advanced the matter into the arbitration process. Obviously, we have not included any potential recovery in our financial forecast nor is there any assurance of a recovery.

The net loss for the 4th quarter of 2007 was $9.8 million or $0.13 per share compared to $7.4 million or a $0.10 per share in the 4th quarter of 2006. The net loss for the 2007 financial year was $36.3 million or $0.47 per share compared to $35.3 million or $0.53 per share for 2006.

The weighted average number of shares outstanding increased from $73.6 million shares for the 4th quarter of 2006 to $78.1 million shares on the 4th quarter of 2007. And for the full year, the weighted average number shares outstanding increased from $66.9 million shares in 2006 to $77.9 million shares in 2007.

The increases in the weighted average shares outstanding primarily reflect the issuance of common stock financing transactions. We ended 2007 with approximately $15.8 million of cash in marketable securities on the balance sheet.

In February 2008, we completed the registered direct placement of $6.9 million shares of common stock with warrants at market or $0.87 per share raising net proceeds of approximately $5.5 million.

We used approximately $28 million of cash in 2007. Net of the $4.4 million of financing proceeds we received from LFB in January 2007. We expect the similar cash use for 2008 and this excludes the impact of any upfront or milestone payments for new or expanded partnerships not currently signed.

Any upfront payments from newer expanded partnering arrangements that result from the ongoing discussions will reduce the net cash used for 2008. We anticipate that our cash on hand in current contracted receipts should be sufficient to support our operations into the 3rd quarter of 2008 because our cash runway is not at least 12 months. They added opinion to be included in our form 10-K which will be filed in the next few days. We’ll include a paragraph referring to substantial doubt to our ability to continuous of going concern.

This is an audit requirement based upon our existing cash balances and projected cash used but this not include projected receipts from the agreements that are unsigned as the state.

As Geoff have mentioned, we are focusing on partnering as effort first so as of additional funding for the company. We are in active discussions with potential partners for ATryn as well as for other products in our plasma protein and follow on biologics portfolios. Geoff.

Geoffrey Cox

Thank you, Jack. Now, let me take a few moments to make some additional comments on other programs and upcoming events.

We continuing with the evaluation frequent to development program for our CD137 monoclonal antibody, we have developed animals which express both glycosylated and non-glycoyolated versions of this protein, in order for us to assess the potential differences or advantages in the immune-modulation capability. CD 130 monoclonal antibody of course is a new chemical entity and this work is an essential part of our preparation for meeting with the FDA to discuss an appropriate clinical development plan and indications. We hope to have this information around the middle of this year. Our work with CD137 is being supported by an SBIR grant.

Our external program contracts have been important contributors to our cash receipts over the last year and expected to also make important contributions in 2008 based on contracts already in place. Our contract with PharmAthene has continued to expand and support their development program for their Protexia product, albuterol cholinesterase, for the potential treatment of nerve gas exposure. We are providing both manufacturing and regulatory support in addition to enabling intellectual property under our broad patent. And, today, PharmAthene announced successful completion of a PK study for Protexia and their plans to file an IND in the 3rd quarter and to commence phase one human safety testing in the 4th quarter of this year.

Looking back over the company as a whole, ATryn remains a key driver near-term events. While we have expanded our involvement in a broad portfolio of recombinant plasma proteins and initiated development of a portfolio of monoclonal antibodies including follow-on biologics, the focus of our therapeutic development in both portfolios is on known chemical entities where clinical risks are low and where there are large market opportunities.

Upcoming potential news events are always an important consideration for investors, so let me remind you of some of our strategic objectives, including, first of all, the completion of a partnering agreement for commercialization and development of ATryn in the United States. Submission of the final section of the rolling BLA for ATryn, which we anticipate to be around the middle of 2008. Achievement of priority review status for ATryn. Approval of ATryn in the United States around the end of 2008 or early 2009 assuming priority review is granted. Launch of ATryn in the United States in the first half of 2009. Leo’s obtaining top-line results for the phase-2 DIC study in the first half of 2009. And completion of preclinical studies for the alpha 1 antitrypsin and CD137 monoclonal antibody programs around the end of 2008 with the potential for both programs to enter clinical studies in 2009.

And, finally, before I close my prepared remarks, I want to make some comments which have not been part of my prepared remarks until yesterday. As you know, yesterday we suffered a significant decline in our share price which I believe in no way reflects the significant progress which this company has continued to make on many fronts. I am personally frustrated and even angry on behalf of our loyal investors and our employees. GTC has developed a resilience and tenacity over the years which will continue to serve us well. You have my personal commitment, together with the commitment of our entire management team and employees, to continue to pursue our key objectives and secure the financial help of the company. Thank you for your time today. We are living in challenging times. Your support and your encouragement is both important and appreciated. Thank you for listening to my remarks and now here is the operator to ask many questions which you may have.

Question-and-Answer Session

Operator

(Operator’s Instruction)

Your first question is Stephen Dunn, with Dawson James. Please proceed.

Stephen Dunn – Dawson James

Good morning Geoff, Jack and Tom. Congratulations on the progress so far! You have done what you said you were going to do.

Dr. Geoffrey Cox

Thank you very much, Stephen.

Stephen Dunn – Dawson James

Well the first question is a little bit of housekeeping. I did not hear or maybe I missed it…. Leo’s Canadian submission, are we expecting that in 2008?

Geoffrey Cox

Thank you for bringing that point up, Steve. Leo is actually making the submission to Canada and we obviously want to be able to use the data which we are submitting to the FDA for our BLA filing to form the basis of the Canadian submission. So we’re waiting to get all of the clinical data in as we’re required for the FDA as well. So that Canadian submission we hope will be made in the second half in 2008 and all being well that could put us into an approval situation in Canada in the second half of 2009.

Stephen Dunn – Dawson James

Okay. So, to summarize, theoretically, we could have all of North America covered in 2009?

Geoffrey Cox

That is correct.

Stephen Dunn – Dawson James

Okay. Also in 2009, I guess to summarize, I have got a number of candidates that will begin human clinical trials in 2009, hopefully. I am counting four of them. Am I counting that right?

Dr. Geoffrey Cox

I think, well, you tell me what you have on your list and I’ll…

Stephen Dunn – Dawson James

Well, Factor VIIa.

Geoffrey Cox

Yes.

Stephen Dunn – Dawson James

I have alpha 1 anti-trypsin.

Geoffrey Cox

Yes.

Stephen Dunn – Dawson James

CD137.

Geoffrey Cox

Yes. Factor IX, alpha 1 anti-trypsin, FVIIa and CD137 I think are the once which are probably the most advanced in terms of entering the clinic-likely to be the latter part of 2009 in the way in which we see our current plans.

Stephen Dunn – Dawson James

Okay. I was a little fuzzy on DIC and severe sepsis. Now, we expect a phase-3 to initiate in EU in 2009. When do we foresee human trials in the US?

Geoffrey Cox

Well, because the current DIC study, we need to get those the phase-2 results. We need to get those and we are hoping that Leo will complete that so we can give data in the first half of 2009 and that will enable us to be able to go both to the EMEA and also to the FDA with our proposals for the design of the phase-3 study. Remember, the phase-2 study, the principal of that is a dose-ranging study with the objective of identifying the dose which is most appropriate for the design of a phase-3 study.

And so the phase two study is not statistically powered to demonstrate efficacy although clearly Leo is looking and we are looking to demonstrate trends to improvements in survival for these patients. The objective, if we can do this, is to carry out a single phase-3 study or a combined US and European study. And the important part there, of course, is to make sure that we can address the general way in which these patients are treated in the two geographies.

And that is something which we have got to make sure that we can meet the requirements both to the EMEA and the FDA, if you understand. So, a single study needs to make sure that physician can treat their patients in both US and Europe in a way which is appropriate with standard of care. So, that is the plan of action at this moment. And we assume that those discussions will take place in the second half of 2009 and then progress to the phase-3 study.

Stephen Dunn – Dawson James

Okay. So, put another way, in reality, we are going to have another first in human DIC trial in the United States but we will go -- we are hoping for it to go directly into a phase-3 trial?

Geoffrey Cox

That is certainly the objective. Of course, the first stepping stone is to make sure we get the results of the phase-2 study. And then that will form that basis.

Stephen Dunn – Dawson James

Right, now we – it sounded like you were pretty far along on the US partnership for DIC indication and you indicated the parameters would be somewhat similar to agreements in the past. If you could remind us, you know what kind of parameters, with that kind of ranges in dollars, what you are looking for?

Geoffrey Cox

In a number of these discussions which we have had in the United States, we have also encouraged partners to look at the option or the alternative or the additional opportunity of being able to develop ATryn in other acquired deficiency indications. At this moment, of course, Leo is paying entirely for the phase-2 study which we will get access to those results.

So, the interesting thing for us is the possibility of being able to pursue, through a partner, other indications and as you know we have done work in the past in coronary artery bypass surgery and that is certainly an area which we continue to look as a possible area of further clinical development and that could also, if we are able to secure a partner in the way in which we are working to at this moment, that could put us into a clinical development program which we would expect our partner to pay for and again in 2009 and could bring us into the market more quickly than the DIC itself in an acquired deficiency.

So, it is something which is an important feature of what we are trying to negotiate in our partnering but in terms to general structure, I think we have one should assume that an up-front payment is probably going to be in the single digit millions of dollars and then payment for the clinical study would include not only payment for the clinical work itself but also payment for product. And then there would also be a negotiated price for commercial product and also a royalty on sales.

And yet the way in which we negotiated this with Leo was also that there was a series of milestones related to progress and success on the clinical programs and also sales milestones further down the track. So, I think we are looking at the same similar sort of structure. The main objective is to take the costs of the commercialization and clinical development of ATryn off our P&L and make sure the partner is bearing the cost of the further development and that is also very important for us.

Stephen Dunn – Dawson James

Okay. I want to squeeze one more in before I jump in the queue. The follow-on biologics or biosimilars sector reminds me very much of the all of the stem cell sector about four or five years ago. Well, when I started covering it and before it was a really well-known on Wall Street. And what I am seeing here is a convergence of factors, both regulatory, political and the science, are all kind of converging in GTC’s favor.

And, you know, in January, the statement that biogenetics are a major key long-term growth opportunity for that company. And we have seen the White House and the senate approve FDA funding and requirements for approval of biogenerics. But, I guess, if you could give some color on what you are seeing -- you are on the board of BIO. What you are seeing both in the US and Europe?

Geoffrey Cox

Well, I think actually there is a growing recognition by the entire industry that follow-on biologics are absolutely going to be a reality and so I think it is a question of when rather than if. And I think BIO in their public statements have stated, and I do sit on the main board of BIO, that they would like to try to see legislation passed before President Bush leaves the White House.

And I think that there has been a significant shift amongst the companies within BIO in a reasonable consensus to come up with a set of conditions which would enable follow-on biologics to be supported by the entire industry, providing that there is sufficient time period embraced in any legislation which would enable innovative companies to be able to protect their intellectual property for a reasonable period of time. I actually have no problems with that whatsoever and I do not think that is any constraint on anything that we are planning to do.

We also have propriety products and we expect to we expect to observe other people’s intellectual property and we expect people to observe ours as well. So, I think that the whole principle of the pharmaceutical development is that innovation should have a reasonable period to be able to gain profits on their innovation and to be able to get a true win from those products. But most companies would be expected to be developing second- and third-generation products as normal part of the development of those programs.

So, I think that I follow-on biologic strategy is one which actually can sit in an appropriate fashion with all these companies and I think it is very important that the biotech industry should not be seen to be adversarial with the needs and the requirements of the patient population of the United States, but looking to ways in which we can contribute to the management of a broader range of patients but also bring through further innovation, new products into the marketplace as well. And I think all of these things can work perfectly satisfactorily together.

So, I think that BIO is working in that fashion and we ourselves have actually had quite a lot of input into BIO. We have also had the opportunity to work with the local Massachusetts Biotechnology Council and also with Senator Kennedy’s office and I think I am somewhat encouraged that legislation will get passed this year. And I would actually since you have raise at this point and I would just like to take the opportunity to point out to investors that the opportunity for us is a timing issue as much as anything.

We have the infrastructure already existing to be able to do this within our own production operations here in Massachusetts. It is not costing us anything in the current circumstances to be able to develop these products at this present time. It is important though from a timing point of view that you get on the road to actually moving these programs forward because, otherwise, the opportunity is missed and it is no good if you are going to be in the follow-on biologics space being way down the track.

So, it is important that we do this but it is a value which we are able to create by leveraging our existing infrastructure at really no cost at this moment but tremendous value which we have the opportunity we have to develop further down the track and of course, a lot of opportunity for us to be able to engage companies in partnering discussions which we hope and expect will support the further development of the products and also the commercialization of these products in the market place.

Stephen Dunn – Dawson James

Alright, great, thanks. Looking forward to 2008!

Geoffrey Cox

Thank you very much indeed, Steve.

Operator

Your next question is in the line of Navdeep Jaikaria, of Rodman and Renshaw. Please proceed, sir.

Navdeep Jaikaria – Rodman and Renshaw

Hello, good morning, everybody. Thank you for taking my question. Almost all of my questions have been answered. I just have a couple more follow-ups. One is about you said from a thing you gone through [45:30] and the initiative is one study later this year. Are you expecting to receive any kind of milestone payment from them?

Dr. Geoffrey Cox

No. I do not think of that actually, the information which I gave you is actually in the PharmAthene press release this morning. So that is in the public domain. And I was simply quoting from their press release. I understand the question, we do not have milestones associated with that progress, but we are very happy that they have been able to successfully negotiate through to the next stage of development of their product. Obviously, it is a big steppingstone for them. And since they have become an important partner for us, one which we are very much enjoyed working with, we hope that that will be an important way in which we can continue to partner PharmAthene in the further successful development of their product. So, I think it is a good steppingstone and one which I think it was a helpful for our investors to know about.

Navdeep Jaikaria – Rodman and Renshaw

So, if they do secure a governmental contract for stockpiling, which kind of rate should we expect?

Dr. Geoffrey Cox

Could you just repeat that again, please for me?

Navdeep Jaikaria – Rodman and Renshaw

No, I am just saying which kind of road will they you will be charging them if they have a successful commercial product which worth thing?

Dr. Geoffrey Cox

Well, I do not think we have disclosed that actually. But it is a small single-digit royalty rate which is the normal sort of commercial rate that one would charge for this type of access of this type of intellectual property.

Navdeep Jaikaria – Rodman and Renshaw

Excellent! Thank you very much. So for this year you will be recording ATryn like your chart?

Dr. Geoffrey Cox

Excuse me? Recording what?

Navdeep Jaikaria – Rodman and Renshaw

Are we expecting you to…

Dr. Geoffrey Cox

You are actually cutting out…I do not know whether other people are having problems but you are cutting out...

Navdeep Jaikaria – Rodman and Renshaw

I think the IP phone is not working well so let me just stop here. Thanks a lot for taking my questions.

Dr. Geoffrey Cox

Okay, but if I can perhaps guess what you were asking and try and answer it, you were asking about revenues around ATryn. I think, for the foreseeable future, the revenues which we will be reporting around ATryn will be a combination both of our product supply for commercial use and also for clinical use. So that is the way in which we look at that at this present juncture. As I did comment, in order to manage people’s expectations, we are not expecting under the current pricing strategy for ATryn that this growth rate will be large in 2008. Clearly, what Leo is doing is building a franchise around this product. And as they move forward into the DIC indication, it is important to be able to establish a pricing strategy which they can then manage in relation to these other indications and so that is the process we are staying involved in at this moment.

Navdeep Jaikaria – Rodman and Renshaw

Well, thank you very much for taking my call.

Dr. Geoffrey Cox

You are welcome. Thank you.

Operator

Your next question that is on the line is Roy Friedman, with Edith C. Blum, please proceed.

Roy Friedman – Edith C. Blum

Good morning, Geoff and Jack.

Dr. Geoffrey Cox

Good morning.

Roy Friedman – Edith C. Blum

First, I have some financial questions for Jack. Can you clarify your statement about the expected 2008 cash burn excluding new sources of income? Is the number $28 million or is the number $32 million?

Jack Green

The number is $28 million. It is the projected net burn for 2008.

Roy Friedman – Edith C. Blum

Okay. Are there any covenant…?

Dr. Geoffrey Cox

But, Roy, if I can just add to that, remember what Jack said. That is just based on what our contracted revenues are and projected revenues from those contracts as they exist at this moment. So, any partnering arrangements we have round ATryn or other of our recombinant plasma proteins or follow-on biologics would reduce that figure. So, I think that is clearest way in which we could state it.

Roy Friedman – Edith C. Blum

Understood.

Geoffrey Cox

Okay.

Roy Friedman – Edith C. Blum

Are there any covenants on GTC’s debt that could come into play during 2008 if your book value or tangible net worth were to fall below some threshold?

Jack Green

No, Roy. There are no operating covenants in our GE debt that are part of the debt instrument. So we do not have specific operating covenants. Basically, GE’s security is the lien on the assets -- all assets except IP, which is part of their security. They do not have operating covenants as part of the instrument.

Roy Friedman – Edith C. Blum

Okay. Is your cash rock solid rather than in such holding as auction-rate securities, as was the case with Bristol-Myers?

Jack Green

I am happy to report that our cash is rock solid. We have no exposure to auction-rate securities at all. And we were very, very careful to make sure that we avoided that minefield.

Roy Friedman – Edith C. Blum

Okay. That is good to know. Do you plan to seek shareholder authorization for a reverse split at the 2008 annual meeting?

Geoffrey Cox

That is an excellent question, Roy. And, clearly, we are monitoring that situation quite carefully and we have under the existing notification from NASDAQ until July 15 and we would like to thank and certainly, we are working towards our share price being restored to above the dollar level through our meeting our goals including our partnering arrangements and hopefully we can get there without taking any other actions. If we are not successful in doing that in terms of getting above the $1 for the required period of time by which is required under the NASDAQ rules, then we obviously have a reverse split as a possible scenario but it is one which we would prefer to keep in our back pocket at this moment rather than making any decisions on it at this juncture. If we do reverse split, obviously we would need shareholder approval to be able to do that.

Roy Friedman – Edith C. Blum

Right, that is why I asked whether you were planning to put that to shareholders at the annual meeting.

Geoffrey Cox

Well, if certainly if we need, if we plan to go that track, then we would probably do that through the annual meeting. And we have obviously discussed it at our board meetings and we have chosen at this moment not to take any firm decisions on that but to aim to execute on some of our key goals and if possible, restore our share price to a healthier position in its own right so to speak without having to do that. But, we do hold that in reserve as a possibility.

Roy Friedman – Edith C. Blum

Well, is not the proxy due out very soon?

Geoffrey Cox

Well, I think, actually we have 45 days ahead of the annual meeting. And so we have probably got a few more weeks yet before we need to send out the proxy.

Roy Friedman – Edith C. Blum

Okay. Switching over to the regulatory area actually in the commercial area, what is the approximate premium of ATryn relative to plasma derived antithrombin in the a countries where Atryn has already been priced?

Geoffrey Cox

That is an excellent question. And I do not want shoot from the hip because I do not know exactly in each country. What I would say is that Leo initially went into the market in the United Kingdom because, remarkably, UK tends to be rather aggressive on pricing. Actually antithrombin charges in the UK a high. And, therefore, the pricing in the United Kingdom I think is pretty well similar to a plasma-derived product. Now, if you go into some other countries, Germany, I think is a much more aggressive price situation, there are number of plasma-derived products to buy in Germany. So, it may be much more significant premium over pricing in Germany. Greece, I am not quite sure of, and the other country Ireland I think is similar to the UK. So, I think the answer to your question is it is going to be variable. But, what they are trying to look for is a fairly consistent pricing throughout Europe. The fact is that we got approval throughout Europe so many of these plasma-derived products which were grandfathered or approved in single countries have been able to maintain pricing structures which are quite different from adjoining countries because they can not actually be sold in those countries and therefore you have got a lot of differentials throughout Europe. But with our product, obviously, they can move the product across borders so they are going to probably end up with a relatively consistent pricing strategy. And that is why they having to take that step by step.

Roy Friedman – Edith C. Blum

Okay. Does the recent approval of Artisan Pharma for DIC in Japan adversely affect your partnership discussions there?

Geoffrey Cox

Not really, actually. People may not be aware of that particular piece of news. But this is a different product from antithrombin, of course. But DIC in Japan is that indications is little different from what is the way which it is referred to in the United States. Our understanding is that the trials which have taken place in Japan do not have the same end point of improvements in survival.

And, therefore, it is a less onerous or a less rigorous end point than the one which we are expecting to have to meet in the United States. Now, we have not gone into what is the clinical indication or what clinical type of program is required in Japan. But I think it is unlikely that the design of the clinical study, which was carried out in Japan for that product will be the same design that will take place in the U.S. Now, I am not the FDA.

I can only sort of guess that but that is our assessment at this point in time. Now, having said that, the market for DIC and severe sepsis is enormous market, we said we will talk about this before. There is about the quarter million of people in the United States will get the DIC and severe sepsis each year. About 50% of these people die. And, so, we believe that this is a $2 to $3 billion market place and I think there is room for competition and for us still to be able to have very successful products. But I am not sure that the Artisan product is going to be any more quickly into the market place than our own product.

Roy Friedman – Edith C. Blum

Well, what is holding up the consummation of a partnership in Japan then?

Geoffrey Cox

Japan, we have actually had some discussions in Japan and were represented we have people, at the recent Bio Asia conference in Tokyo in late January. Business development in Japan is a fairly protracted process and they tend to move quite a bit more slowly than in the United States. So, we have actually had quite a lot of interest. And it is very interesting that the whole concept of transgenically-derived therapeutic proteins has moved forward significantly as a result of the EMEA approval and also after the news out now that we have filed in the United States. And I think that is going to be very helpful to our partnering activities. But I do not think we are projecting that we would get a Japanese partner in the current year in 2008. I think that it would be great if we can get one in 2009 but it will take longer in Japan. And that is just not our experience. That is a normal experience for people.

Roy Friedman – Edith C. Blum

Okay. In your view, what is the likelihood of an FDA advisory panel for the ATryn BLA?

Geoffrey Cox

That is an interesting question as well. And I can not really give any guidance on that to be quite honest. We have not been given any guidance by the FDA at all at this juncture. Certainly, I have had people who have told us that they believe that we will have an advisory panel since it is a new technology. And if we do, I think we feel very confident of our ability to meet that challenge in a very successful fashion. But I really can not give any guidance. If it does happen, and we have a priority review status, then I guess it would be somewhere in the latter part of 2008 if everything sort of proceeds on the sort of schedule which we see at this moment. I do not have any other information on the matter at this moment, Roy.

Roy Friedman – Edith C. Blum

Okay. On priority review, is there any possibility of hearing the FDA’s decision on that before you submit the last BLA module or will that necessarily wait until the last module goes in?

Geoffrey Cox

Again, that is a good question. My guess is, to be quite honest, that we will hear sooner than submission of the last module. That is our expectation. But, again, we have heard nothing back from the FDA which is nothing bad in that respect. I think there is a normal time pattern for hearing with regard to submission proprietary review. But we are hoping that we will hear over the next few weeks in that respect.

Roy Friedman – Edith C. Blum

Okay, thank you Geoff and Jack. That is it for me.

Geoffrey Cox

Thank you, good questions, Roy. I appreciate it.

Operator

The next question is in line of Donald Hudson, with Hudson Associates. Please proceed.

Donald Hudson – Hudson Associates

Hi, Jack and Geoff.

Geoffrey Cox

Good morning.

Donald Hudson – Hudson Associates

I have a couple of questions. Number one, Factor VIII, is that a Baxter product, right?

Dr. Geoffrey Cox

Yes, Baxter. They have a very significant market with recombinant Factor VIII.

Donald Hudson – Hudson Associates

Yes, made in mammalian cells?

Dr. Geoffrey Cox

Yes.

Donald Hudson – Hudson Associates

Right, and you can be more competitive in that in transgenic animals?

Dr. Geoffrey Cox

Yes, that is our belief. Factor VIII is from a development point of view is later in the process than FVIIa or FIX. And, it just seem to get a way of FVIII have not moved that forward as quickly and also I can now speaking a little bit of the…I believe the IP for the FVIII in the United States is later than FIX and FVIIa. So, that is certainly later in our development schedule and we have not developed a planning timetable around that at this juncture. But in terms of the products which for the hemophiliac factors, the recombinant products which are in the market place today, is probably somewhere around $3 billion of those combined factors, out of the total market of about $4 billion. And each of these products is produced from mammalian cell. And our understanding is that these are very difficult products to express in mammalian cell culture systems and we feel very confident that using our transgenic system that we will be able to produce these products at a competitive cost of goods. And we have not decided of what that pricing will be at this moment.

We do not need to make any decision as far as that is concerned. And certainly we do not plan and we do not need to give up margin that we do not need to, but the opportunity for us is to be able to be able to treat a broader patient population including patients being treated prophylactically than is possible with products today because of that price. But also potentially be able to develop in a broader range of indications and again, today, the cost of these products is so high that that is the real problem for many patients. So, I think we have got many opportunities to be able to compete in that market place and to create an important significant franchise.

Donald Hudson – Hudson Associates

Good. The other question was, I did not hear you mention in any of the product portfolios that you will be keeping some for your own selling, is your strategy still to partner everything you can?

Dr. Geoffrey Cox

That is actually a good question. And I certainly have talked in previous conference calls about developing our own commercial capability and you know, I think particularly in the United States, that was something which we would love to do at some point. I think we are being fairly pragmatic about what our current financial status is at this moment. What we are looking to do is to use the value which we are creating through these portfolio products to get partnering arrangements and to bring cash into the company which will ensure that we do not become dependent entirely on the equity markets.

And so if certainly we keep, if we are to action, if we were not able to do a partnership for ATryn commercialization development in the United States, on terms which we believe reflect the value of that product, we certainly could take that product in the hereditary-deficiency indication into the marketplace ourselves with a relatively small number of people, maybe a dozen or so people and we will keep that in our back pocket. I think in terms of our options at this moment, though, if we can find a partner who can not only help to commercialize and maximize the opportunity for the product but also support the further clinical development, that’s a very good option for us at this moment.

Donald Hudson – Hudson Associates

Okay, fine thanks.

Dr. Geoffrey Cox

Thank you, Donald.

Operator

(Operator’s instruction)

Steve Turner – Due Diligences

Well, congratulations on your results so far.

Dr. Geoffrey Cox

Thank you.

Steve Turner – Due Diligences

My question has to do with production facilities. What is the timeline for FDA approval on your actual production facilities?

Dr. Geoffrey Cox

We have not received any advice from the FDA at this moment when they plan to come in to inspect. And of course remember we have got three different pieces of this. One of this is our production operations and pharma operations which is under control. Then we do the downstream purification with Lonza in Hopkinton, (which used to be Cambrex) and they purify the product for us. And they have been inspected previously on our behalf by the EMEA.

And then we do the filling of the product at MedImmune in Leiden. I will just reiterate that MedImmune was not involved in this other issue which Jack was referring to in terms of production failure. So, I just want to make sure that MedImmune’s name is not impugned in that respect. MedImmune into the fill finish first in Leiden and so those are the three elements and our guess is that the inspection of those facilities might well take place in the first half of the year. But we do not normally announce when the dates of those inspections. But that is what we are planning for anyway, as far as the timing of those.

Steve Turner – Due Diligences

Okay. And as far as the number of patients comparative to the European theatre using your product, do you have an anticipated range? Or a target range?

Dr. Geoffrey Cox

This is for ATryn?

Steve Turner – Due Diligences

For ATryn, yes.

Geoffrey Cox

How many patients you mean are in the United States?

Steve Turner – Due Diligences

Well, how many patients are you targeting to be potential clients of yours?

Dr. Geoffrey Cox

Oh, I see. Well, again, that is a good question. There are reports to be somewhere between 1 in1, 000 to 5,000 and 1 in 1,000 to 3,000 people who have antithrombin deficiency. And, so, that would be conservatively that would mean in the United States probably 60-70,000 people who have this particular deficiency. I would say that a lot of people do not actually know they have the problem until they have first thrombosis. In the US, this patient population it has been very poorly served over the years.

Thrombate has been intermittently available on occasions and certainly it was grandfathered on rather limited clinical data originally and there has been very little clinical development done with the product in broader indications over the years. So I think this patient population is going to need to be developed. We obviously need to work with key opinion leaders. Some of these patients in the past have avoided having children because they have got the condition. People who were going to have elective surgery avoid having surgery because the product was either not available or they did not want to use a plasma-derived product. So, there is a lot of work we can do in order to be able to encourage the understanding of the products available and also for being able to treat those patients.

And, of course, once you understand where some of these patients are, you start to be able to develop the familial connections since it is obviously a genetic disorder. And so I think that we have got the opportunity when which I describe this is I believe we have got the opportunity over the next three or four years with a good partner for us being able to develop a market in the order of 30 to 40 million in the United States prior to getting an acquired deficiency-indication approved by the agency. And that is the way which we are looking at back of this juncture but it is going to be something where we were going to have work hard to uncover the patients and to make sure that we can make all of the connecting points.

Operator

(Operator’s Instruction)

There are so further questions I would like to turn the call back over to Dr. Geoffrey Cox for closing remarks, please proceed.

Dr. Geoffrey Cox

Well thank you very much indeed everyone for joining us this morning. You have asked important questions and I appreciate those questions and for you taking the time with us today. As stated earlier, we live in challenging times but the company is very confident about our ability to be able to really progress our programs and to be a successful and significant company and we appreciate you as investors, your consistency and your loyalty to the company and I am sure that we…our work can show you we are working very hard to make sure that your loyalty is well-rewarded and we will continue to do that. Thank you very much indeed everyone and we look forward to having you in our conference call for our next quarter results. Thank you.

Operator

Ladies and gentlemen, this concludes the presentation you may now disconnect, have a great day.

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