Targeted Genetics 2001 Annual Stockholder's Meeting notes
Here I go again with my attempt to chronicle what I could gleam from a biotech presentation. Because this was my third year attending the meeting I might be getting better at it. Maybe I have just give up and have bought into letting some of the jargon pass me by.
I showed up early as usual. It is interesting seeing them set things up and is a good time to assess how comfortable and confident they are. This is a good crew. Besides, showing up early means no line at the buffet table. By the way, this year's token was a flashlight with the company's name on it.
The room was set up for about 140 folks but by the time things got started it was standing room only. More chairs magically appeared. A lot of the crowd was younger and a large portion of them were probably employees. During the introductions the employees got the biggest round of applause. My neighbor and I weren't sure if the crowd reflected enthusiasm or fear.
The CEO started off with the introductions. She got a good response when she introduced the "very independent" accountants. There are a lot of ENRON jokes in this year's annual meetings. There was quorum but only 77% of the shares were represented. That sounded small to me; though I write it off to the foreign owners. Not all of the directors were present even though they evidently were available for the board meeting that was later in the day. I guess the Annual Stockholder's Meeting isn't important enough for them.
While the votes and official business were being handled, the CEO made her overview presentation of the company.
Evidently this is the 10th anniversary of the company though I can't remember if that is from spin-off, IPO or something else. She is more enthused now than ever. The Big Picture is to be the delivery system of choice and she mentioned treating diseases that can't be treated otherwise. They continue to work both the product and the process. Working the process of producing large quantities is evidently overlooked or under-emphasized in other companies. The pipeline will be improved by 3 NIDs in 2003. I'm pretty sure that is early phase stuff but I can't remember what the acronym stands for.
The 2001 achievements were strengthened partnerships, the completion of a clinical manufacturing facility (two 100 liter lines?) and progress in the clinical trials. Not surprisingly the pipeline and clinical trial news was covered in much greater detail.
The Cystic Fibrosis treatment is progressing well enough that the minimum age for the applicants has been dropped twice. It is now available to 12 year olds. It is evidently the first repeated dosing of any AAV product. Is this a major hurdle or just bragging rights? There are 36 patients with mild CF in the study. It is an aerosol administered once a month for three months with a 90 day followup. They are checking for safety and efficacy.
Data from the improvement to Ovarian cancer treatment will be presented later this month around May 21. This treatment is conducted as an aid to chemotherapy. Up to 21 patients will be signed up and they are expected to receive three cycles of treatment. A new trial with a different chemo product will begin in mid-2002. There could be a basis for a phase 3 trial.
The Head and Neck Cancer treatment is also as an aid but in this case it is aiding radiation therapy. It is a crowded market so they will be establishing a go/no-go benchmark to decide whether to continue directing resources this way. Up to 50 patients could be enrolled for twice weekly treatments with a 12 week followup. I think mid-2002 is when the benchmark will be evaluated.
In the pre-clinical trial phase she mentioned two of the three INDs planned for 2003. She probably mentioned the other one too and I missed it. The arthritis treatment is doing well in rat test. The HIV vaccine has been tested well against the simian version of HIV: SIV, ad may be useful against other viral targets too.
The 2002 news is summarized by continued expansion and growth though I don't find many details in my scribbles. Maybe she didn't provide much more. She did emphasize the $52 million cash position ($17M cash, $16M &RD payments, $19M equity). Even though more shares were authorized in today's vote she said they didn't have a plan to use them but wanted them available for future deal making. She considers them the leader in AAV manufacturing and owner of a strong synthetic delivery system. I'll take her word on that.
Beyond 2002 she asked us to keep in mind that developing any technology is a roller coaster. They continue to investigate other avenues and she mentioned a couple of academic arrangements that they have established. The individuals mentioned didn't ring a bell with me but I have not read up on the specific people doing the research.
That was the close of the formal part of the meeting. What a surprise, everything passed.
There was a short Question and Answer session. I've paraphrased the question and the response.
> There are about 25,000 people in the US with Cystic Fibrosis and another 25,000 outside the US. It is mostly a Caucasian ailment. Parents can test for it but that hasn't changed the incidence of affected births.
> Even though the pipeline looks good compared to other companies and the stock price doesn't, she isn't allowed to elaborate on any issue regarding stock price.
> CellExSys was spun off so it could get some value. Targeted Genetics could have either maintained complete control over a technology they couldn't fund, which makes it not worth much, or they could spin it off and let someone else fund and develop it. A fractional ownership of something that is growing is worth more than total ownership of something neglected on the shelf.
> Targeted Genetics' AIDs vaccine expresses longer than VaxGen who I assume is a competitor.
> She didn't know what effect the Immunex merger with Amgen will have on the TGEN shares owned by Immunex.
> There is no specific plan for the increased limit of 120,000,000 shares. It is just there to aid deal making.
CONCLUSION
The meeting was as understated as usual. I have yet to decide if it is because they are cautious and conservative or because the data doesn't look as good as they would like. I am not planning on selling so I guess I am betting they are just cautious. It is early in the clinical trial process and a new technology so caution is called for. As always she handled the meeting in a good business like fashion which helps my impression. (The entire meeting took only 40 minutes.) On the other hand I am not pumped up either. In previous years it sounded like there might be a product in 2005. My reading of the annual report and associated documents leads me to think that 2006 is more likely. The financing is already in place for funds into 2004. But I don't know how far into 2004, whether more favorable finances will be available when financing becomes necessary, and how likely other slides are. The pipeline is nice but if the first product slips for some reason, then the financing is stretched out more. Stock dilution is already happening and looks like it might happen some more.
All of that leaves me with the probability that I will continue to hold the stock for the long term but not necessarily load up the truck at this time. I might buy more if I exit some other company but it is not a sure thing.
DISCLAIMER
I buy and hold for years when I can. This one I've had for about 3 years now and have added more as I could. I do not have proper biology or medical training so am not surprised if I get major details wrong. Feel free to correct me. Pass along any corrections. |
