Douglas Swirsky - Chief Financial Officer
Paul Fischer - President and Chief Executive Officer
Mark Thornton - Senior Vice President of Product Development
Debjit Chattopadhyay - Boenning & Scattergood
Ren Benjamin - Rodman
GenVec, Inc. (GNVC) Q2 2008 Earnings Call August 8, 2008 10:00 AM ET
Good morning, ladies and gentlemen. Welcome to GenVec 2008 Second Quarter Earnings Conference Call. My name is Eric and I will be your conference facilitator today. At this time, all participants are in a listen-only mode. After GenVec management concludes their remarks, there will be a question-and-answer period. [Operator instructions].
We would like to remind the conference participants that this call is being recorded today, Friday, 8 of August, 2008. If you do not wish to continue your participation, you may disconnect at any time.
I would now like to turn the call over to Mr. Douglas Swirsky, Chief Financial Officer of GenVec. Please proceed.
Douglas Swirsky - Chief Financial Officer
Thank you and good morning. Joining me on this call is Dr. Paul Fischer, President and CEO and Dr. Mark Thornton, Senior Vice President of Product Development.
During this call we will make forward-looking statements, which involve risks and uncertainties inherent in our business. Actual results may differ materially from our expectations and you should consult cautionary statements made in our SEC filings and yesterday’s press release for a complete statement of these risks.
This conference call will be available for replay after the conclusion of the call. Please see the press release issued yesterday for more details.
Today you will hear a business update and a review of the financial results for the second quarter. First, Paul will review GenVec’s second quarter highlights. Next, you will hear about our financial results and about the progress we have made in many of our programs. Following these updates, Mark, Paul, and I will be glad to take your questions.
Now, I will turn the call over to Paul.
Paul Fischer - President and Chief Executive Officer
Thank you for joining us this morning.
During the second quarter of 2008, we remained focused on TNFerade and the PACT trial. At the end of July, 42 sites were participating in the Phase III PACT study. As you might recall we anticipated enrollment to exceed 200 patients by the end of 2008.
As of July 31, 181 patients with locally advanced pancreatic cancer were involved in the study indicating that we should exceed 200 patients by year’s end.
We expect the first interim analysis of survival data from the PACT study to take place in the fourth quarter of this year. This analysis to be initiated after 92 events or deaths have occurred will provide an important opportunity to asses the affects of TNFerade. It also includes parameters to stop the trial for overwhelming efficacy or futility.
In anticipation of the interim analysis we are making sure we are operationally prepared for the data. This process involves the cleaning and freezing of the relevant death and demographic data on all the patients currently in the study. The tests are being performed by an outside vendor. So, GenVec employees do not posses information that could bias the process. Following the 97 event the goal is to produce a high quality package of clinical information. We believe the data will be of significant interest to our stakeholders and to our potential partners. As you are aware manufacturing is an important component of our regulatory and commercial strategies for TNFerade, through our agreement with Cobra Biomanufacturing, we have the ability to cost effectively manufacture TNFerade in an FDA approved facility.
During this quarter we made progress in our efforts to scale up the manufacturing process for TNFerade to the 100 leader scale, continued progress and manufacturing reduces the risk profile of the product and increases the appeal of TNFerade to potential partners. We continue to explore the potential of TNFerade and other indications. Last quarter data from our Phase I clinical trial of TNFerade in patients with head/neck cancers were presented at ASCO. Not only did 9 out of 10 patients have their tumor [shrink] but four of these tumors disappeared completely. These encouraging data are important because they support the use of TNFerade in multiple indications broadening the products potential.
Similarly, encouraging long term data presented on TNFerade and patients with respectable stage II and III esophageal cancer also support the potential use of TNFerade in multiple settings.
Like the head/neck data, these data speak to the value of the assets. Of course, we remain laser focus on that PACT study and TNFerade in locally advanced pancreatic cancer.
I will now turn the call over to Doug, who will review our financial results and provide an update on additional GenVec programs.
Douglas Swirsky – Chief Financial Officer
Thank you, Paul. As you may have read in our press release issued yesterday, we reported a net loss of $6.6 million or $0.08 per share for the past quarter compared to a net loss of $4.2 million or $0.06 per share in the second quarter of 2007. Revenues for the second quarter increased to $3.9 million from $3.7 million in the same period last year. Revenues were derived primarily from our collaborations with the Department of Homeland Security and the National Institutes of Health for the development of vaccines.
You may be wondering whether the recent cancellation by the NIH of their HIV vaccine study PAVE 100 will effect GenVec’s revenue. To be clear GenVec’s previously delivered the clinical supplies for this trial and therefore the cancellation of the study will not affect our financial outlook.
In addition, the National Institute and Infectious Disease is considering testing the vaccine in a smaller, more focused clinical study and work continues under our multiyear collaboration with the NIAID to develop vaccines against HIV. As we continue to accelerate the late stage development of TNFerade, operation expenses for the second quarter increased 25% to $10.6 million from $8.5 million in the same period last year, expanded clinical and manufacturing efforts drove the higher expenditures.
GenVec ended the second quarter with approximately $31 million in cash and investment. In June, GenVec completed a $17 million registered direct offering to new and existing investors resulting in net proceeds of approximately $15.8 million. We completed this financing with quality investors on better than expected terms particularly given current market conditions. If no additional cash is received from partnerships, additional collaborations or the capital markets, our current cash and investments should be sufficient to fund the company’s operations into the fourth quarter of 2009. We estimate revenues for 2008 will total between $14 million and $16 million and our cash burn will be approximately $10 million to $12 million for the second half of 2008.
You will now hear about our recent progress in vaccine development. In June, GenVec and our collaborators presented encouraging clinical and preclinical data on malaria vaccine candidates that use GenVec’s adenovector technology. Data from the second cohort of volunteers in a [Phase I/IIa] clinical trial showed in malaria vaccine candidate induced strong T-cell responses against the target antigens in all volunteers. We are encouraged by the safety and immunogenicity data presented, in addition enrollment in the malaria challenge trial is now underway. The first group of volunteers has been vaccinated and will be challenged following a booster immunization later this year. As you know the ability to safely challenge human volunteers provided the unique opportunity for the assessing the efficacy of candidate vaccines prior to the initiation of field trials.
Also during the second quarter GenVec received a grant from the National Institute of Allergy and Infectious Diseases to support the company’s efforts to develop vaccines for the prevention of RSV, the grant value that $600,000 over two years will allow GenVec to continue work in a program that addresses a significant unmet medical need among infants, children and the elderly. RSV is an attractive opportunity for GenVec, which like HSB2 vaccine program addresses a significant unmet medical need and represents a potential commercial opportunity for the company.
Another important vaccine program at GenVec targeting foot and mouth disease has received additional funding. Last month the US Department of Homeland Security executed the second option period under a three year agreement with GenVec to support the development of vaccines for the prevention of FMD. GenVec will receive up to $6 million to complete development activities under the option period, which include the development, production and regulatory approval of the vaccine.
As you can see we have made important progress this quarter in several programs. We will continue to prepare for the PACT trials, interim data analysis expected to take later this year and we look forward to keeping you updated as we approach key milestones for TNFerade and other programs.
This concludes our prepared remarks and we welcome your participation in question and answers. Operator, please proceed.
Thank you. [Operator instructions]. Your first question comes from the line of Debjit Chattopadhyay with Boenning & Scattergood. Please proceed.
Hi, good morning gentlemen and thank you for taking the question.
Given your stated position that you really don’t want to be below one year’s cash, so by and sometime in the fourth quarter you would be roughly with one year’s cash position. So, why delay in licensing either the TNFerade program or the FMD program?
Thanks for the question. I think in this case, we never really want to below year’s cash. In this cash we have a unique opportunity to see a real robust amount of data from the program later this year and we have to make some decisions about the company at that time. So, in general would not want to get below year’s cash, if that situation happens I’m comforted by the fact that by the time we receive the data, which we are comfortable that will take place in the fourth quarter that we’ll have a significant amount of time to move the business forward in whatever directions dictated by the data. So, I’m not overly concerned by that, this is inline with our expectations about how we would form the company going into that milestone.
Could you go over some of the contingency plans in case that data doesn’t live up to expectations in terms of potential licensing or in case you need to increase the trial size or whatever?
Debjit, I’m not sure, this is Paul, I am not sure I fully understood that could you rephrase that?
Well, I was just wondering if you have any or what the contingency plans are, supposing the data does not live up to expectations, supposing you have to increase your trial size, I mean, how does that plan or play out in terms of licensing the product?
I understand. Well, first of all, we will look at the data and understand a lot about it, when Mark has the chance to get the full analysis from the outside vendor. So, there are many different ways that data could come out, certainly if for some unexpected reason, it was clearly negative and there was evidence of a futility here and we would stop the trial as you know GenVec has substantial efforts in other areas. Well funded programs in the areas of vaccine development primarily but also we have other important programs. So, I think we are in a fortunate position compared to many companies in which the technology is broadly ample. So, we are not just focused on TNFerade as it relates to the future but the pipeline, which is driven by the vaccine programs, Doug, actually highlighted couple of important points. One, is the RSV and the HSV-2 program, which we will notice as the company is beginning to build through outside funding, proprietary programs which could also drive the value of the company.
Debjit, its Doug. I think more important than contingency planning because we can’t control what the data is going to be. But, we are preparing and moving the company forward with the expectation and hope that the data will be positive and that will be able to keep moving the company forward. Every decision we make is about maximizing the value of the opportunity for our investors and I can assure you that decisions we are making speak to that. In the unfortunate event that we were in a different position, where we evaluated, certainly there are certain plans we can’t take, just don’t think it’s productive to get to every scenario because there is several different shades that the data could come in.
As far as I remember the end point would be roughly the four month improvement in overall survival. Now, if the interim look comes in at around four months or maybe slightly less than four months. What’s the recourse of that point? I mean, would you consider having increasing the trial size slightly or would you just keep on pressing forward with the 330 patient drug?
Hi, this is Mark. I think, I can speak to that at least technically. The first interim analysis is a futility analysis but the second interim analysis does allow an option to resize the trial.
Okay, so, there is no, I mean, depending on the data you won’t really need to resize the trial after the first interim look?
No, there is no contingency for that.
Okay. And the other promising data that we have from the esophageal and the head and neck at what point does that those two -- I mean, what point do you move those programs forward, I understand I mean, you are basically conserving cash and putting everything in the pancreatic program. But, at the expense of not moving couple of other pretty promising data in some other areas?
The general feeling is we need to get the ball across go line with pancreatic, that’s very important for shareholder value and we agree with you, the other data are very exciting, which you also made a very good point. There is limited signs and those fronts need to be focused on making sure we are successful in pancreatic, we’ve done a reasonable job of engaging others in support of the trial, NIH has been helpful in rectal and head/neck. We want to continue that and then of course are thinking about partners would be an excellent way to expand the activity in other indications. So, Doug and his team is very focused on being sure that we have the option with partners to potentially expand utility in esophageal rectal head/neck and other cancers.
And then, Mark I think we are also in a unfortunate position to have NCI funded study with the head/neck program because that does allow all the development ongoing to be done on someone else’s time and we can just sort of see how the data is emerging and to be clear, we are finding time to be thinking about head/neck even as are aggressively pursuing pancreas and we’re definitely having a lot of plans on the drawing board for the contingency so that all talked about.
One final question, the stressing of the TNFerade with chemo on either gem side have been anything else as supposed to radiation how far along is that in the planning process now?
Well, we were actively engaged with Dr. Riley at the Sun catering to talk about this very interesting design as you heard, I think earlier in the year we do have this very exciting data about the ability of gemcitabine being alone to release TNFerade in the pancreas. So, we are developing the protocol with her coming up with the various features of that and then our goal is to have to her take that and shepherd it through the internal processes there at Sun Catering.
Are you going to go after the metastatic patients or are you still going to go after combination of metastatic and locally advanced?
That trial is a metastatic trial.
Okay. Thank you so much, and good luck.
Your next question comes from the line of Ren Benjamin with Rodman. Please proceed.
Hi, good morning and thanks for taking the questions.
Good morning. Can you just give us an update, I think you mentioned in the press release that a 181 patients have been enrolled as of July, how is the enrollment, I mean, is it tracking according to your projections, is it going slower, going faster, is there enthusiasm among the investigators? When do you anticipate based on this rate of enrollment that the complete trial will be completed or a norm will be completed and then also can you just review for me when the next set of interim analysis, after the end of the analysis will occur?
Ren, thanks for the question this is Paul. The enrollment we have looked at the beginning of the year within the six date patients per month range and actually for the first seven months of this year we’ve been at that higher ends so we actually average about 8 patients per month in the first seven months. So, we think that enrollment is good but lot of people think enrollment is kind of like an assembly line and a patient comes in on Tuesday and then another one Thursday and then another one on the next Tuesday, next Thursday and it’s actually not that way at all. So, what really happens is you will get patient coming in maybe none for a couple of weeks and then you get couple of weeks we have several each week. So, its important for us to look at the bigger picture which is a quarter or two quarters enrollment, which we see nice steady progress compared to last year. The other thing is we view it as a benchmark, the genuine tech study in pancreatic cancer, which of course, is a high quality company and we’ve been consistently this year outperforming that benchmark. So, we think taken in all the things together enrollment is doing well.
We also projected that 200 patient numbers at the end of the year and the reason for that Ren was alluded to in your question when is the next interim analysis going to be? So, it’s important for us, we felt to be sure that by the end of this year we basically had the patients enrolled that would be necessary for that second interim look and we were on track to do that. So, I think on both of those fronts we’re comfortable, having said that I know Mark and his teams are always looking at ways to improve the quality of the site and continue to focus on enrollment. So, they are doing two things now, they are working really hard to get the data ready for the analysis and to be sure that enrollment is moving forward.
Right, and then one last question besides the interim analysis at the end of the year, can you go over just any other milestones or news flow that we can expect for the remaining months of the year? Thank you.
Brian, its Doug. I think that’s the key item to look for, we’re continue to make progress in all these other programs and I think you could see some announcements come out of the collaboration on the vaccine side. But, I think to lay something outside as a milestone doesn’t give justice to the fact that we know everyone is very focused on seeing the next set of data from the PACT study and we look forward to seeing that as well.
Right. Thank you, guys and good luck.
Your next question comes from the line of David Rau. Please proceed.
With regard to the enrollment, do you anticipate that, I mean at the present enrollment for us to get the 330 we would need another 21 months of enrollment to get there, it seems like we really don’t have the cash on hand to do that. Does the company really feel that its going need to go to the potential of 330 or is there, really the goal is possibly to file for approval after this first -- after the next look?
This is Doug. Let me take a cut at this and then I’ll hand it over to Mark. In terms of the resources to fund the trial, we anticipate seeing the data from the first interim analysis later this year and just to reiterate a point we made previously this data will, I think, be much more substantial versus what was provided to us in December of 2006, in terms of number of the advance, in term of number of the patients enrolled. So, I think we’ll answer a lot of questions about the product in the partnering profile of the product. So, we expect to be able to make business decision based on the next set of data, clearly more money will need to be spent to develop, clinically develop the product. And the question is who is going to provide those dollars, is it going to be of shareholders, is it going to be partners? And we are looking at all those options always with the mindset of trying to create the most value for shareholders in the long-term. And also Mark will give a little more on this.
Okay. Well, I would just add that as Paul mentioned I think it’s, we have a certain enrollment plan. It’s been constant with the manufacturing plan both programs are designed to be in concert. So, that’s for maximum efficiency, everything sort of comes to fishing around the same time for BLA filing given that the data is along set. So, we have these various opportunities to see just where the data stands with regards to that. Certainly, the trial is sized for 330, the company is focused on the aspect of as was mentioned looking at the data, at these interim looks that is with any program I think it’s a step-by-step sort of process where you take a look at the data, you see what the opportunities are, you obtain the necessary funding to move on to the next step. And so, I’m sure that’s an aspect of things. But as Paul also mentioned we are certainly not resting on our laws with regards to be what I can say a very good enrollment especially this would be other benchmarks from other companies. And so, I don’t know exactly what 2009 pertains with regards to enrolment but we are certainly always looking for additional sites and always looking for ways to sort of shrink that timeline for the total 330, should the trial need to go that far?
Your next question is a follow-up question from the line of Debjit Chattopadhyay. Please proceed.
I was just wondering because by the time 92 events have achieved in the fourth quarter at least 75 patients would have been enrolled this year. Now, will the new patients skew the medium survival to the left? Because I don’t know how would you comfort somebody who has been on the trial for just three to four months, I mean, is that going to skew it to the left?
Well, the thing about survival analysis is that all patients are taken into account. And that adds to the robustness of the total data set. So, I don’t know necessarily whether enrollment in ‘08 matters substantially overall to what is going to come. The 92 events will be analyzed based on the survival, obviously of those 92 patients but also in comparison to the others. So, I don’t think that a wave of patients enrolled this year necessarily impacts the data all that much. I think, the upside of the trial with regards to the length of time it’s been filed for all these patients is that there has been a tremendous length of time to be able to properly analyze survival on a very substantial number of patients. And as we near the 92 events I think most of the robustness of the data has already happened. I think really, these final handfuls of patients are just probably not going to impact too substantially on the data. It’s probably already occurred or it’s not occurred based on probably the patients that gotten afraid in the last couple of years.
Okay, thank you, so much.
We currently have no more time for questions. I will now like to turn the call over to Mr. Paul Fischer, for closing remarks.
Well, thank you. Thanks for joining us on the call and to those people who came to annual shareholders meeting, we thank you for that. We look forward to updating you in the second half of this year obviously on the key objectives that Doug has mentioned which are related to the PACT trial. Mark and his team has done a great job on making sure that we are moving forward in this, both in the analysis and the preparation for those data. So, we are eagerly awaiting that event in the fourth quarter. Thank you very much and we will talk to you soon.
Thank you for your participation in today’s conference. This concludes our presentation. You may now disconnect. Have a good day.
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