Executives
Michele Boudreau – Director, Investor and Public Relations
Russell Howard – Chief Executive Officer
Lawrence Briscoe – Chief Financial Officer
Analysts
May-Kin Ho – Goldman Sachs
Hanzhong Li – Stanford Group Company
Marshall Urist – Morgan Stanley
Eric Schmidt – Cowen and Company
Michael King – Rodman and Renshaw
Maxygen, Inc. (MAXY) Q1 2008 Earnings Call May 6, 2008 11:30 AM ET
Operator
Good day ladies and gentlemen and welcome to the first quarter 2008 Maxygen, Incorporated earnings call. My name’s Ematee and I’ll be your coordinator for today. (Operator Instructions) I’d now like to turn the presentation over to your host of today’s call, Director, Investor and Public Relations, Ms. Michele Boudreau. Please proceed ma’am.
Michele Boudreau
Thank you Ematee. Good morning and welcome to Maxygen’s first quarter 2008 financial results conference call. Before we get started I would like to remind you that the matters discussed on this call contain forward looking statements that involve risks and uncertainties including those related to the potential results of future research, our ability to commercialize products and the timing and commercialization of such products.
Actual results may differ materially from the results predicted and reported results should not be considered an indication of future performance. The potential risks and uncertainties include among others our ability to produce viable product candidates and to commercialize those candidates. These and other risk factors are more fully discussed in our form 10K for the year ended December 31, 2007 including under the caption risk factors and in our other periodic reports, all of which are available from Maxygen at www.maxygen.com.
Maxygen disclaims any obligation to update or revise any forward looking statement made on this call as a result of new information or future developments. I’ll now turn the call over to Russell Howard, Maxygen’s Chief Executive Officer.
Russell Howard
Good morning and thank you for joining us. I’ll start today’s call by briefly reviewing the status of Maxygen’s key programs then turn it over to Larry Briscoe, our CFO to discuss the financials. After that we’ll open up the call for Q&A.
Our lead program, Maxy-G34 for the treatment of neutropenia continues on schedule in Phase IIa. Last week at the Morgan Stanley healthcare conference we advised on the latest DSMB meeting which included review of data from the first cohort of three patients at 60 µg/kg. To date we have seen no serious adverse events at any of the doses and no immunogenicity has been observed.
We are seeing a robust drug response at the 30 and 60 µg/kg doses and the decision was made to explore an interim dose of Maxy-G34 at 45 µg/kg. The DSMB has approved adding the full cohort of six patients at the 45 µg/kg dose as well as another three patients to fill out the second cohort at 60 µg/kg.
We have now enrolled all nine of these new patients and the trial continues at a good pace. We remain on schedule to give you a more complete update on the trail in Q3 and to start Phase IIb in 2009.
Our MAXY-VII program for the treatment of hemophelia also continues to move forward as planned. During the first quarter we closed operations at Maxygen’s Denmark facility. Particularly with respect to our effective VII program I’ll start putting extra time and energy to transfer knowledge, procedures and equipment from Denmark to our Redwood City, California headquarters.
I’m pleased to report that the consolidation has gone smoothly and that our progress on MAXY-VII was unaffected by the extra activity. Operations have now ceased in Denmark and we remain on track to meet our goals of filing a clinical trial application – that is a CTA – for MAXY-VII in one or more countries in the first half of this year and also to start our first clinical trial in hemophelia patients in the second half of this year with MAXY-VII.
Lastly as a reminder, we have a preclinical program, MAXY-4, our next generation CTLA4-Ig for rheumatoid arthritis. In 2008 we intend to complete in vivo proof of concept studies for MAXY-4 in animal models with the goal of demonstrating subcutaneous delivery of MAXY-4 that suppresses the targeted immune system responses.
I’d now like to turn the call over to Larry who’ll review the financials for the quarter. Larry.
Lawrence Briscoe
Thank you Russell. Maxygen reported a net loss of $13.7 million or $.37 per share for the first quarter of 2008. This compares to a net loss of 7.7 million or $.21 per share in the first quarter of 2007. The difference was primarily due to the loss of revenues from a collaboration with Roche to develop Factor VIIa for trauma which ended in the second quarter of 2007.
Revenues for the quarter were 1.4 million compared to 9.1 million in Q107. Total operating expenses for the quarter were 17.2 million, down 9% from the 18.9 million in the first quarter of 2007. This decrease was due to the fact that we ceased operations in Denmark as of February 29th and was slightly offset by a $.5 million restructuring charge.
Our cash, cash equivalents and marketable securities as of March 31st totaled $133.6 million compared to $145.8 million at the end of Q4. Now I’ll turn the call back over to Russell.
Russell Howard
Thanks Larry. In summary we’re pleased to have kept all of our programs on track while successfully closing our Denmark operations. The Maxy-G34 trial continues to look good. So far we have a potent drug with no serious adverse events or immunogenicity.
So to recap the near term milestones to watch for, first for Maxy-G34 expect a Phase IIa progress update in Q3 and Phase IIb initiation in 2009. For MAXY-VII expect we will file a CTA for hemophelia in the first half of this year and begin dosing hemophelia patients in the second half of this year. And for MAXY-4 in the second half of this year we plan to report proof of concept data in animal models.
Thank you for your time today and I’m happy now to take questions.
Question-and-Answer Session
Operator
(Operator Instructions) And your first question comes from the line of May-Kin Ho of Goldman Sachs. Please proceed.
May-Kin Ho – Goldman Sachs
Hi Russell.
Russell Howard
Good morning May-Kin.
May-Kin Ho – Goldman Sachs
Can you discuss the sensitivity of your assay for immunogenicity for G34?
Russell Howard
Not in specific quantitative terms, May-Kin. But what I can say is that the assay is state of the art, approved by the FDA in the pre-IND meeting as appropriate to measure both antibodies against Maxy-G34 and separately antibodies against endogenous G-CSF. That’s a highly sensitive assay, appropriate to take us all the way through clinical trials and into Phase IV.
May-Kin Ho – Goldman Sachs
Yes. And with the Phase IIb, are you going to use one dose based on the data from Phase IIa and can you discuss a little bit about this design that you’re thinking? I know that it might be a bit early.
Russell Howard
Yes, it is a bit early. I mean our optimum would be for both financial efficiency time reasons to go into IIb with one dose. Of course it’s always possible to go in with two but it’s too early to give you a heads up on that.
May-Kin Ho – Goldman Sachs
And any update on the manufacturing side of things?
Russell Howard
No, all’s under control. We have a good process. It’s scalable. No issues. As you know it’s a multi-step process in which we have expression and purification from CHO cells. In that respect it’s different from both Neupagin and Neulasta which are expressed in e. coli. So it’s expressed from CHO cells, purified and then as a separate chemical step after purification, picalated and repurified. But we have a good scalable process with good yield.
May-Kin Ho – Goldman Sachs
For Factor VII manufacturing?
Russell Howard
For Factor VII basically the same situation. Factor VII actually is more difficult to take forward in terms of manufacture. It’s a CHO-based process as well involving continuous profusion, similar in its overall design to the Nova Nordisk process wherein with this highly active zymogene you need to purify the enzyme away from the cultrosymponaden so it doesn’t auto activate. So it’s continuously removed by profusion from CHO cells and purified in a multi-step process.
We have good yield, good purity, good quality and a consistent product. And it’s scalable as well.
May-Kin Ho – Goldman Sachs
So at this point you think that you have the commercial process or very close to it.
Russell Howard
Correct. For both molecules. Clearly as they progress from the volume requirements sufficient to support Phase I in the case of Factor VII and Phase II as in the case of G34, we need to take that process into manufacturing scale for commercialization Phase II and that obviously is an additional step. But from everything we know about the properties at lower volume we believe it will be fully scalable with minimal adaptation.
May-Kin Ho – Goldman Sachs
All right. Well thank you very much.
Russell Howard
Sure.
Operator
Your next question comes from the line of Han Li with Stanford Group. Please proceed.
Hanzhong Li – Stanford Group Company
Yes good morning Russell.
Russell Howard
Hello Han.
Hanzhong Li – Stanford Group Company
Questions on the G34. So far how many patients have been on G34 and how many patients have been on the Neulasta?
Russell Howard
We haven’t described the number on G34. Back in March, I believe, we described that there had been 91 doses given, and I will give an exact number by that time in Q3 of the number of doses given. But you can appreciate that already we have taken practically all the people through on 10, most of them through on 30 µg/kg, and we clearly had three women initiated through more than two cycles now on 40 µg/kg.
And as you know now, we’ve got six individuals on 45 and an additional three on 60, so we’ve got a lot of doses running through, and the number of people has to be a number of—let me just add that up. We’ve got six on 10, 6 on 30, three on the original 60, so that makes 15. And then another three on 60 makes 18, and so then add up the additional six on 45. We now have 24 individuals —
Hanzhang Li – The Stanford Group
Twenty-four.
Russell Howard
— that I’d warrant at this time given the exact number of doses that are given. From the last call we’ve already described that we’ve done all of our six individuals in the original planned cohort of your last at 6 milligram fixed dose.
Hanzhang Li – The Stanford Group
Okay so you already have 30 patients enrolled for the trial of the drug for treatment.
Russell Howard
Correct, 24 plus 6.
Hanzhang Li – The Stanford Group
Yes, 24 plus 6, yes. Can you remind us of the rationale to try 45 milligrams?
Russell Howard
Yes. The rationale is led by the DSMB whose criteria in the IIb are first safety, second efficacy and third what is the correct dose to invest in with safety and efficacy in order to have a successful IIb and beyond.
And so they looked at the results at 30 in which we have potency, efficacy, and I have described those general terms to you. We have the same situation with the first three individuals at 60, no SAEs. The AEs indistinguishable qualitatively and quantitatively to Neulasta, albeit with the small numbers of individuals we have, would be 6 at 30 and the 3 at 60.
Based on that, the DSMB had absolute confidence to add another three individuals at 60, so that should give you comfort that we do not have issues at 60. And since their mission is safety, efficacy and third dosing, they looked at all of the data, which at this time you don’t have the privilege of looking at, and said you know what?
The right dose could be somewhere between 30 and 60. It might be 30. It might be 60, but it might be somewhere in between. And so they advised let’s immediately go to 45. That was the reason for that choice.
Second note, as I described just a few days ago at the Morgan Stanley conference in Florida, it is possible that we will proceed at a later time to a higher dose, and I didn’t say we will. I said it is possible we may go to a higher dose above 60. The dose could be any number above 60, including the 100 that was originally in the plans.
Remind you that we have no issue with safety in human volunteers up to a150 microgram per kilogram. The protocol already on file with the DSMB allows us to go up to 150 µg/kg, assuming that in dose ascending we don’t have toxicity and safety issues.
So at this time we’re going to collect the data on 45 because our mission is to find the right dose. Subsequently, we may decide to go to a higher dose in order to explore other [inaudible] of the drug.
Hanzhang Li – The Stanford Group
Okay. And then the timing of your update you mentioned in 3Q, is it in the conference or —
Russell Howard
Yes, it’ll most likely be in a conference format.
Hanzhang Li – The Stanford Group
Okay, lastly quickly a question on the financial side. Any expense guidance for ’08?
Lawrence Briscoe
We gave guidance early in the year of a burn of $50 to $55 million, and we’ve not revised that.
Hanzhang Li – The Stanford Group
Got it. Thank you very much.
Russell Howard
Sure.
Operator
Your next question comes from the line of Marshall Urist with Morgan Stanley. Please proceed.
Marshall Urist – Morgan Stanley
Hey, guys. Good morning. Couple of questions. So first on the 3Q update, are you guys comfortable that at that point we might be able to see some neutrophil curves?
Russell Howard
No. I originally gave guidance that we would do that in Q1 of 2009. We may make that faster or not. It’ll depend what the data is that we have at that time and whether our regulatory and auditing folk will allow me to talk about the data. We’re not going to talk about something that isn’t bolted down.
Marshall Urist – Morgan Stanley
Okay, great.
Russell Howard
So wait and see, Marshall.
Marshall Urist – Morgan Stanley
All right and then on the—so on this last DSMB meeting just to, you know, have a little bit more detail on, you know, given the factors that you’ve described for what the DSMB considers, was it part of their mission and do you think it’s important for this kind of drug to absolutely nail down the minimally efficacious dose?
Russell Howard
We’d always like to know the minimally efficacious dose. Separately we’d like to know are there any hints—and I triple underline hints—that the drug might be differentiated from Neulasta. And if there are triple-underlined hints, then we would like to both determine the minimal efficacious dose and explore those hints.
Marshall Urist – Morgan Stanley
Okay. I got you. Thanks, Russell.
Operator
Your next question comes from the line of Eric Schmidt with Cowen and Company. Please proceed.
Eric Schmidt – Cowen and Company
Good morning. In terms of the DSMB’s decision to move to the 45-microgram dose based on the efficacy scene that you characterized as a robust response, Russell, in terms of the endpoint there, are we talking neutrophil counts or duration of neutropenia or some other metric?
Russell Howard
We’re looking at all the properties, Eric. You appreciate that the described public criteria for “efficacy” is that we have days of severe neutropenia less than or equal to five, and that’s the criterion.
If we fail at that criterion with any individual, then the DSMB would look at the entire picture, but that would be a very strong criteria for them to consider moving that individual onto Neulasta, right?
You’ll also appreciate that days of severe neutropenia of less than or equal to five is not as exciting. It’s not the potency of Neulasta as currently used in this indication. And so that’s a broad criterion.
Under that broad criterion of “efficacy” in this dosing study, we have several factors that we are obviously looking at. They are the days of severe neutropenia, the depth of neutropenia, the number of cycles in which individuals have zero or few days of neutropenia. We’re looking at the total picture.
Eric Schmidt – Cowen and Company
Okay.
Russell Howard
And trying to look for triple-underlined hints of differentiation. That’s our challenge.
Eric Schmidt – Cowen and Company
Okay, that’s helpful. Thanks. In terms of the immunogenicity experience that you have now with the drug, can you talk about the number of patients that have had multiple immunogenicity tests post follow-up —
Russell Howard
Yes, I’ll give you a general guideline. We’ve got a lot of data from 10. We’ve got a lot of data from 30. And we’re now collecting data from 60.
You’ll appreciate that when we do neutropenia measurements and all other blood element measurements, they’re immediate, being in the hospital and they’re confirmed the next day after shipment at a central lab. So we immediately know the course of neutropenia and the overall symptoms and potential toxicology of the drug from the clinical work-up that’s every day.
For measurements of antibody against G34 or against endogenous G-CSF, those samples have to be shipped and then as they’re grouped together, they’re efficiently measured against a group of controls at a distant site from the individual hospitals.
And obviously they’re measured in a highly-sensitive assay as was brought up before by highly-qualified personnel, so this is not something done at the hospital. It’s not something done sample by sample. That would be bad science.
So there is a delay between the collection of neutrophil data on an individual and the measurement of antibodies in that individual or potential antibodies that they might have. But at this time we have, as I said, lots of data 10, lots of data on 30, and we’re now beginning to accumulate the data on 60.
There is so far no evidence of binding antibodies. Therefore, we have not wasted on time or money on trying to measure neutralizing antibodies. And what I can tell you that over all of the cycles and doses in all individuals of 10, 30 or 60, there is no evidence yet for a diminution in pharmaco-dynamic response through whether the person has had three, five or six cycles.
So that information on neutrophil levels and pharmaco-dynamic response we have is immediate and current. The antibody levels come later, but so far, no binding antibodies and no diminution of response.
Eric Schmidt – Cowen and Company
Okay. Got it, thanks. Last question, it seems that in the last three months you’ve gotten a lot of data, both on safety and proof of concept efficacy, so I guess the question relates to your partnering activities.
You were always going to gear those up as you came toward a conclusion in this study. It seems that we’ve got a lot of, you know, what we wanted to know already. You have a lot of what you wanted to know. We’re still lacking in some of the details, but when do you gear up the partnership activities?
Russell Howard
We’re pounding the pavement. You can appreciate.
Eric Schmidt – Cowen and Company
So —
Russell Howard
Because we [inaudible] the program.
Eric Schmidt – Cowen and Company
You’re in full swing with the partner activities.
Russell Howard
Yes, we’re out there. Yes.
Eric Schmidt – Cowen and Company
Okay, thank you.
Russell Howard
You bet.
Operator
(Operator Instructions) And your next question comes from the line of Mike King with Rodman and Renshaw. Please proceed.
Michael King – Rodman and Renshaw
Hi. Good morning, everyone. Thanks for taking my question. Most of them have been answered. Let me just maybe start with a financial question to get Larry in the show. How will you carry Codexis, presuming that they successfully complete their initial public offering? Will we see a one-time write-up of the value on Maxygen’s balance sheet? Or maybe walk us through how that will be handled?
Lawrence Briscoe
I think we’ll just continue to carry it at its current level. I wouldn’t anticipate that we would mark it up.
Michael King – Rodman and Renshaw
Okay.
Lawrence Briscoe
A question that hadn’t occurred to me is it FAS-151 of mark to market? I mean we may have to make some disclosure, but I don’t think there’s a basis to write it up on.
Michael King – Rodman and Renshaw
But isn’t it—I mean do you have a cost basis? Does Maxygen have a cost basis in it or how is it exactly?
Lawrence Briscoe
Per cost basis is zero.
Michael King – Rodman and Renshaw
Okay so zero cost basis and you own something in the, let’s say, high teens of a company that will have a market cap of X hundred to millions. You know, if your cost basis is now zero, won’t you have to account for it somehow or —
Lawrence Briscoe
I don’t think so until we sell it. I mean I think you continue to carry it just at cost. I mean typically you wouldn’t get the write-up in investment.
Michael King – Rodman and Renshaw
Okay, fair enough. And then Russell I guess maybe, you know, nitpickety and you may wait until you present all the data, but I was just wondering if you could comment about bone pain with G34 and anything about consistency of effect. You’re getting the same kind of neutrophil response with subsequent doses.
Russell Howard
Well, there’s two questions there. We’re basically, Mike, getting indistinguishable toxicology adverse events from Neulasta, so frequency of bone pain, intensity of bone pain is indistinguishable to Neulasta and then death of neutropenia, we haven’t commented on that.
But that’s one of the issues along with time of neutropenia and number of cycles in which you have zero or fewer days of neutropenia. There’s no story yet on bone pain absolutely.
Michael King – Rodman and Renshaw
Thank you.
Russell Howard
You bet.
Operator
You have no further questions at this time.
Russell Howard
Well, thank you, everyone for being on the presentation. There’s a lot of hard work going on here, and as you can see, this is a very exciting second half of the year for us for each of our three public programs, so thank you.
Operator
Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Good day.
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