GenVec (NASDAQ:GNVC) Q4 2012 Earnings Results March 22, 2013 10:00 AM ET
Douglas Swirsky - SVP & CFO
Cindy Collins - President & CEO
Joe Pantginis - Roth Capital
Good morning ladies and gentlemen, welcome to GenVec’s 2012 Fourth Quarter and Year-End Earnings Conference Call. My name is Bonny and I will be your conference facilitator today. (Operator Instructions). We would like to remind the conference participants that this call is being recorded today Friday March, 22nd 2013. If you do not wish to continue your participation you may disconnect at any time. I would now turn the call over to Mr. Douglas Swirsky, GenVec’s Senior Vice President and Chief Financial Officer.
Thank you for participating in this call. Joining me this morning is Ms. Cindy Collins, GenVec’s President and CEO. During this call we will make forward-looking statements within the meaning of the Private Securities Litigation Reform Act involving risks and uncertainties and our actual results may differ materially from our expectations.
For a complete statement of these risks, please review statements made in our SEC filings and this morning’s press release. Today, you will hear Cindy review GenVec’s strategy and discuss the progress we are making. I will then provide you with an overview of GenVec’s fourth quarter financial results.
After these remarks, Cindy and I will be happy to take your questions. Cindy?
Thank you Doug, on today’s call I will provide an overview of our key programs and highlight some of the progress we made over the past 12 months. We continue to believe that a key element of GenVec’s future success will be at strategy to develop products through collaboration. This strategy reduces our risk associated with drug development and allows us pursue new opportunities while keeping our cash burn rate low. We have established partnerships with leading organizations including Novartis and Sanofi which are experts in taking drugs through development and into commercialization and will bear the financial burden that is required. Collaborations and partnerships like these bring the skills and capabilities that increase the probability of success while reducing our need to access additional capital. Our team is actively seeking other partnerships for our pipeline of novel vaccines. Our lead program which is partnered with Novartis addresses a potential multi-billion dollar market. There are over 30 million people in the United States with some kind of hearing problem and the market is dominated by devices that do not address the root cause of the problem. Our program which is being developed in collaboration with Novartis addresses the root cause of hearing loss through the regeneration of critical cells in the inner ear.
Our unique approach offers the promise of restoring loss function and allowing people to once again hear well and enjoy a much improved quality of life. The current focus of this collaboration is Novartis’s advancement of our lead candidate into clinical testing which will trigger additional milestone payments to GenVec.
We’re still not able to provide guidance as to when an investigational new drug application will be submitted by Novartis although this may occur this year. Once in the clinic this program could provide an early indication of not only safety but also a first indication of efficacy.
This fully funded highly innovative program is a great example of our successful partnership strategy. We recently extended the research collaboration with Novartis for another year and we continue to work closely with our partner on this program.
Our versatile platform technology that we use to target and express the ATOH protein and cells in the inner ear and cells in the inner ear can also be used to deliver Anagen intended to provoke an immune response thus we have leveraged our core technology to create a pipeline of vaccine opportunities. Our RSV, HSV and malaria vaccine candidates utilize GenVec novel proprietary non-human primate adenovector delivery system which is capable of generating strong immune responses while avoiding vector specific immunity that has tampered other vectored vaccines.
Presenting RSV infections is a significant unmet medical need that we’re addressing with our proprietary technology. RSV infection is a significant cause of resistor illness in Children, the elderly and high risk adults resulting in more than a 100,000 hospitalizations annually in the United States.
Natural RSV infection does not provide durable immunity and therefore reinfection can occur throughout life. Novartis’s RSV is currently available and the market is only partially addressed through a passive non-clonal antibody a product that generates sales in excess of a billion dollars annually is only indicated for high risk in-funds.
GenVec’s RSV vaccine, GV2311 has being designed to overcome key efficacy and safety hurdles playing other vaccine approaches. We’re particularly excited about data we presented at two important industry conferences in 2012. Preclinical studies in accepted animal models show that our vaccine candidate has the desired efficacy and safety attributes required for a successful RSV vaccine. Specifically results from these studies demonstrated that GenVec’s universal RSV vaccine candidate is highly immunogenic and produces durable and broad protection from a single intramuscular administration. High levels of neutralizing anti-bodies were generated with titers comparable to live RSV infection, protection was observed in the upper end lower respiratory track and this protection was durable lasting for a minimum of six months and industry accepted preclinical models of RSV.
Importantly no disease potentiation was observed which has been a limitation of other vaccine approaches, during the third quarter of 2012 we met with the FDA to discuss the manufacturing and clinical development plan for our RSV vaccine, we were encouraged by positive feedback we received from the agency, including acceptance of our Phase I clinical plan beginning in healthy adults culminating in SIRO (ph) negative children. To be clear however there is no current plan or the resources to advance the program into the clinic without a partner. We’re continuing to explore opportunities to move this program forward. Last year we were awarded an SPIR grant of approximately $590,000 from the National Institute of Allergy and Infectious Diseases or NIAID of the NIH to support our RSV efforts.
Specifically this grant provides funding to further understand the impact of maternal immunity against RSV on the generation of a protective immune response in newborns. This is an important factor in the development of an effective vaccine for the pediatric population. So to summarize the key attributes of our RSV program it is protective of both the upper and lower respiratory tracks, it is durable providing at least six months of protection, the response is rapid with protection seen within two weeks, it is safe and we believe that it will be effective in infants even in the presence of anti-RSV maternal anti-bodies. To our knowledge there are only two companies with RSV vaccines in the clinical both of these companies utilize a different technological approach than GenVec.
Turning to another key program we’re developing a therapeutic vaccine for the treatment of herpes simplex virus infections including HSV2, the virus responsible for most cases of genital herpes. There is no approved vaccine for HSV2 and the estimated cost of treating HSV2 in the United States alone are close to a $1 billion primarily for drugs and outpatient medical care. These drugs only address a subset of the afflicted population and do not prevent future infections. A 2008 world health organization bulletin estimated that in 2003 there were 535.5 million individuals worldwide with HSV2 and approximately 30 million of these cases were in the United States. In 2008 the centers for disease control and prevention the CDC reported a (inaudible) prevalence of this disease in the U.S. population had grown to approximately one in every six individuals. HSV2 infections are symptomatic approximately 20% of the time presenting with painful herpetic liaison near the side of the infection.
Infected persons may suffer 9 to 12 outbreaks in the first year with time these outbreaks typically become fewer and less severe. However viral shedding and infectivity occurs whether symptoms are present or absent and the transmission of the virus from person to person often occurs without the knowledge of the infected individual.
This further increases the overall spread of herpes within the population in addition herpes infections predisposed individuals to HIV infections currently no drug permanently cures herpes infections. There are however various anti-viral therapies available that alleviate painful symptoms of the infection. The current anti-viral drugs are all utilized to suppress symptoms when they manifest, acyclovir developed by GSK is a virex and valacyclovir developed by GSK is Valtrex both achieved commercial success and both are now off patent along with Novartis’s famciclovir or famvir.
These drugs can cause drug related toxicities and often require multiple doses per day. A growing body of knowledge in the field points toward a vigorous t-cell response has been critical both for our HSV viral clearance and containment. GenVec HSV Canada is a genetic vaccine intended as a therapeutic for the treatment of genital herpes. A second indication as a prophylactic for young adults for protection against herpes infections is also being contemplated. GenVec focus is to induce sufficiently high levels of HSV specific t-cells to result in a reduction of symptoms faster clearance of virus from infected areas and reduced recurrence of disease. Preclinical data presented last year demonstrated that a single administration of GenVec genetic vaccine was effective against HSV2 in two industry accepted HSV disease models specifically immunization was shown to reduce viral shedding and the recurrence and severity of liaisons.
We had a productive interaction with the FDA in the fourth quarter regarding this program, we were encouraged by the positive feedback we received from the agency and feel a regulatory path the clinic is clear. As is the case with our RSV program there is not a current plan or the resources to advance the program into the clinic with other partner.
We’re continuing to explore opportunities to move this program forward. To further our vaccine development efforts we have a program focused on the identification of novel antigens. The initial focus of this program is to identify novel highly protective antigens for malaria vaccine development. We have received over $1 million in funding from the NIH to support our efforts including an SPIR grant from the NIAID which was awarded in 2012.
This has enabled us to develop a novel high throughput genomics screening approach to identify new antigen targets for vaccine development. Last year we presented data at the American society of Tropical Medicine and Hygiene’s Annual Meeting that highlighted our success in identifying novel antigens for use in our malarial vaccine development program. Using our proprietary screening technology we identified new antigens that are as protective as the gold standard circumsporozoite protein, CSP in an industry accepted mouse model of malaria. Recent data suggests that new antigens are needed and that CSP used in vaccines developed by others may not be sufficient to generate a protective response in an adequate percentage of people.
Since our adenovirus vaccine candidate which expressed CSP and another malaria antigen AMA1 induced 27% protect efficacy in a human trial when coupled with DNA plasmin priming (ph) we believe that adding superior newly identified antigens to the vaccine will help increase efficacy to the 80% threshold necessary for advancement as a military and traveller’s vaccines.
Malaria is well suited initial target application for our antigen discovery technology because there is good evidence that novel antigens with the capacity for inducing protective CD8 positive t-cell response exist and there is a clear need for a new highly protective antigens. The proof of principle established in the malaria model leaves us to consider using this technology for the identification of new antigens and other infectious diseases and cancer.
Malaria is a severe threat to the health of U.S. military personnel and travelers visiting endemic areas. Malaria is found in more than a 100 countries and there are 350 to 500 million clinical episodes per year. In the fourth quarter we announced a new $3.5 million agreement with the Navel Medical Research Center or NMRC to support malaria vaccines development. Under the terms of the agreement GenVec is responsible for producing clinical supplies of its malaria vaccine and NMRC plans to use this clinical material to access the safety and efficacy of our next generation vectored vaccines. Importantly GenVec retains the right to commercialize this novel technology.
Our contract with the navy is a Firm-6 price agreement. GenVec will build approximately $1.9 million in 2013 and $1 million in 2014. We appreciate the U.S. militaries continued support of malaria vaccine development. Turning to animal health GenVec reached an important landmark in 2012 when we announced the approval of our first product of vaccine against foot and mouth disease in cattle. This achievement demonstrates our ability to bring our technology through the regulatory review process and validates the utility of our core technology to make effective genetic vaccines. The path towards revenue in our animal health program will be through our collaboration partner Merial, the animal health division of Sanofi. Successful development and commercialization of vaccines under this program could lead to modest royalties.
In summary we made progress across all of our programs during the fourth quarter and in 2012 in general. Before we review our financial results I would like to thank the many loyal, talent and hardworking employees that we parted ways with recently. The reduction in force we announced last September and this February was difficult. However it was necessary in order to ensure our cost are more closely aligned with our resources and business strategy. The reduction enforced is an addition to other ongoing cost cutting initiatives. I will now turn the call over to Doug who will review GenVec financial performance.
Thank you Cindy. For the fourth quarter of 2012 our net loss was 3.2 million or $0.24 per share which compares to a net loss of 2.5 million or $0.19 per share for the fourth quarter of 2011. For the fourth quarter total revenue is 1.5 million compared to 3.4 million in the fourth quarter of 2011. The decrease in revenue reflects reduced (inaudible) as we’re near completion of development work under our two Novartis agreements. Operating expenses were approximately 4.7 million for the fourth quarter compared to 5.9 million for the comparable 2011 period. Our net loss in 2012 was 14.1 million or $1.09 per share which compares to a net loss of 7.4 million or $0.58 per share for 2011.
In 2012 total revenue was 9.4 million compared to 17.7 million in the prior year. As Cindy mentioned in September 2012 we imitated a cost reduction plan aimed at maximizing our cash runway for executing our strategic plan. Operating expenses in 2012 included approximately 660,000 incurred in connection with this reduction in force. GenVec ended 2012 with 15.3 million in cash, cash equivalents and short term investments; we believe that we have sufficient capital to run our operations for the very least in the next 12 months. We expect to burn between 8 million and 9 million in 2013.
Before we move on to Q&A please note that we will not be commenting or answering questions regarding ongoing litigation other than to say that we believe that litigation that is being filed in the company and certain of its officers and directors is without merit and that we’re vigorously defending ourselves from these claims. This concludes our prepared remarks and we welcome your participation in the question-and-answer session. Operator please proceed.
(Operator Instructions). Your first question comes from the line of Joe Pantginis of Roth Capital.
Joe Pantginis - Roth Capital
I’m not going to ask the obligatory question on Novartis timing but I would like to just touch upon the program in general since you did extend the collaboration for the year, maybe you can discuss based on the extension how are things going behind the scenes, are things sort of track with regard to your sort of back and forth with the company on what each is providing towards moving the program forward.
Yes the program continues to move forward as expected and the collaboration continues to be very strong. We’ve weekly meetings with the Novartis team and we’re busy finalizing many of the pre-clinical activity so we’re very pleased with the relationship and it continues to be highly collaborative.
Joe Pantginis - Roth Capital
And then can you just remind us what the milestones that will be triggered are?
The next milestone under the agreement is the non-rejection of the investigation of new drug application and then there will be a subsequent milestone for the first patient dose under that IND (ph).
Joe Pantginis - Roth Capital
And just sort of switching gears to your internal programs obviously your strategy has been laid out very clearly thank you for that and just wanted to wonder about the background activities while you’re looking for a partnership for HSV and RSV as an example and then also since you did mention several grants, has the government sequestration effected these grants at all?
Not thus far, we haven't seen a direct impact of the sequestration but we anticipate that might change overtime. We do however despite that continue to look for additional sources of non-diluted funding as well as seeking a partner for those program. So it is our intention as I stated that we will not move those programs forward without external sources of funding.
Joe Pantginis - Roth Capital
Okay and just to clarify on that like to not move forward but there are still sort of background activates that you need to do that potential partners might want to see before signing a term sheet?
Sure absolutely and in some cases we’re doing some work and that work is only being done where we do have additional grant money’s that we haven’t yet spent and there will be additional work that will be required prior to the submission of an IND (ph) and we’re very clear with that in our discussions with potential partners.
(Operator Instructions). Ladies and gentlemen that concludes the question-and-answer session with GenVec management. I would now like to turn the call back over to Ms. Collins.
Thank you for your interest in GenVec and for joining us on today’s call. We look forward to keeping you updated on our progress.
Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Good day.
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