Just my ASM notes and don't forget that I am an amateur.
Targeted Genetics Annual Stockholder's Meeting - May 8, 2001
Without intending to be, I was the first person there that wasn't an employee. It was fun and painful watching them set things up. At least I got to meet H. Stewart Parker, CEO and some of the folks that were setting things up. By the way, they were passing out baseball hats with the company's logo. I think that was my first dividend from the company unless you count my run past the breakfast bar. The room was big enough for 200 but it looked to only have a bit over 100 sitting there. A nice sized portion were employees. They seemed to be upbeat folks. The crowd was younger than some of the other meetings I attend. If anyone listened to the streaming media presentation I can tell you how much trouble they had setting it up. I am so glad I don't have to do that job.
FORMAL ASPECTS
The formal aspects of the meeting were nothing particularly dramatic. There was the stuff related to the Genovo integration, the stock option plan, and the typical election of directors. There were only 84% of the votes represented which seemed low. By the end of the meeting they reported that everything had passed. Not exactly a surprise.
COMPANY PROGRESS
The CEO spent the majority of the time describing the company's progress in 2000 and where it plans on going in 2001.
The notes I captured from her overview include the $30,300,000 in revenue for the year, the spin off of CellExSys, the initiation of 2 phase two clinical trials and the eight partnerships that are in place.
The AIDS vaccine was her lead off topic. It is initially being steered towards use in sub-Saharan Africa where there is a strong need for a simple drug that only has to be taken once. That is quite noble. It is also a stepping stone towards use in the developed world where I am guessing that there would be more profit potential and tougher regulatory review. They have $6,000,000 in funding over the next 3 years.
The Biogen partnership is worth potentially $125,000,000 and can encompass 4 products. The one I remember her talking about is the beta-interferon product. Looking at my notes I realize I didn't write fast enough to record what it would be used for but the annual report mentions it's use for brain cancer.
Genzyme looks to be about $4,000,000. Maybe someone out there can clue me in on "lysosemal". Even after reading the annual report I can't say that it rings a bell.
American Home Products partnership is working on blood clotting agents specifically related to hemophilia. The partnership is worth $80,000,000.
The sum total of the partnerships is worth over $275,000,000 over 5 to 8 years and $100,000,000 is already committed. These funds are just the beginning as they do not include monies from royalties or sales. She described TGEN's portion as a nice double digit percentage of sales.
The company plans to continue acquisitions so they can own the waterfront of cell-based something or other. Probably the delivery system. Don't forget folks with these notes you're working with an amateur who can't write very fast.
The spin off of CellExSys sounds like it will be the only place the company does work on cell therapy programs. The initial focus will be Hepatitis B and should be in initial trials shortly.
While CellExSys becomes the cell therapy leader, Targeted Genetics will focus on becoming the gene therapy leader. Ex-vivo Vs In-vivo I think is how she put it. The idea within Targeted Genetics is to use various technology platforms and worry more about applying existing basic research rather than embarking on much of their own basic research. It is more about product development and good manufacturing processes. The partnerships are looked at as a way of handling the last component which is sales, marketing and distribution. She made a good analogy to other medical and biological technologies over the years. There is the initial euphoria that a panacea has been found, then there is the disillusionment when the limitations are recognized, then lastly there is the successful products that are profitable to those that stayed with it the whole time. In light of that she emphasized that by 2005 she expects to see the first successful gene therapy being applied. The technology will go through all of those stages but she expects the cycle time to be shorter for this technology.
PRODUCT PIPELINE
Cystic Fibrosis affects about 30,000 people in the U.S. and about 60,000 people worldwide. This represents a $500,000,000 market. There are 75 patients in clinical trials and there have been no (or no appreciable?) adverse side effects. This has been with a single dose that seems to last about 90 days. There has been some functional improvement though I get the impression that the early trials are only there to find how safe it is, not how good it is. Targeted Genetics is the only gene therapy company working with the Cystic Fibrosis organization ( is there more than one?). The phase one aerosol study looked good and the phase two trial started late last year with once a month doses and will continue through this year with a report out in the first half of 2002.
The anticancer work with E1A is being studied both as a stand alone therapy and combined with either chemo- or radiation. They have at least shown good gene delivery to the tumor. This work is targeting head and neck cancers. I hadn't thought of it before but evidently the medical community would like to find solutions that don't require cutting in and around the carotid artery. One of the trials is directed towards that and is coupled with radiation treatments. The trial that is coupled with chemo- is for ovarian cancer treatments. That is a phase one study.
There is lots of stuff in pre-clinical trials like AIDS vaccine, arthritis treatments, cholesterol treatments, stuff for metastatic cancers, and the beta-interferon study described above.
She feels that they have the best pipeline in the gene delivery sector. I also noticed that even though it is the best pipeline, there was still no mention of the term "Phase thee clinical trials". It sounds like things are still a long way off.
She said that they are positioned for success. Even without additional funding they can last into 2003. They will still be looking for more partnerships and have the good fortune of expecting to report on good data for the next 12-18 months. Aside from that the other goal in 2001 was to complete enrollment in the clinical trials this year.
QUESTIONS & ANSWERS
I will paraphrase the questions and answers as best I can.
> Though it is a long term to a product, they will maintain their cash burn through partnerships while being mindful of dilution.
> There are about 150 employees and about 75% to 80% of them are working on research. She also pointed out that there are various ways of defining research.
> The customized gene therapy companies, the genomics, don't have much in the way of products yet. There are lots of opportunities for TGEN. Maybe there will be some alliances.
> Ten years from now she wants the company to be the deliverer of choice for genes and the partner of choice as well. It also sounds like she wouldn't mind a waterfront campus. I don't own Immunex but that seems to ring a bell.
> While all of the current products are being developed through partnerships, it would be desirable to develop some products independently in the long term.
> The AAV manufacturing process may be sellable but it would be hard to translate it to a product such as Immunex's Embrel.
> The chances of a takeover are limited through the shareholder protection plan. There is no one knocking on the door, but they would listen if it was in the shareholder's best interest.
> They are actively looking for a new CFO and are pleased with the potential candidates.
MY CONCLUSIONS
The company sounds like it is being run well and given that it is a new technology that will have to get past the FDA, will require lots of patience. They have promising data but they are so early in clinical trials that I'm not going to get too worked up about them. If being the gene and cell delivery leader pans out as they hope, then there is a lot of potential here. I like the fact that they are running the show as a business more than a research lab. There are some companies out there that have trouble looking past the lab bench. I don't think they have that problem. One measure of the business like quality may have no real bearing on things but she had the meeting completed within 45 minutes. Despite the streaming media problems, it was a well run show. The main hesitation I have is based on the fact that this is a business that can't just succeed based on charisma and marketing. The biology and chemistry has to work. I don't have the right degree to assess that one. Any help along those lines would be appreciated. If anyone else was there and has something to add please do so. I couldn't write fast enough to keep up with her presentation. She wasn't fast. I was just slow.
DISCLAIMER
We've owned shares for a little over a year now. We tend to buy and hold for years. I can't say that I fully understand the technology or terminology so the notes might have more than their share of errors. I'll answer what I can but I suspect Investor Relations can do an even better job. |
