The GS take on the recent quarter:
I.INVESTMENT OPINION & OUTLOOK
Tularik is focused on developing novel oral agents to address multiple
diseases that represent large commercial opportunities. While the most
advanced agents are in the oncology area, we believe some of the more
promising candidates are in preclinical development. Several of these
candidates may represent first in class therapeutics. We look for new INDs
to be filed in 2002. Tularik is a development stage company most suitable
for investors with a long-term time frame.
II. FINANCIAL REVIEW AND OUTLOOK
Tularik reported a second quarter net loss of $24.4 million or ($0.48) per
share, above our forecast of a loss of $23 million or ($0.45) per share. We
are maintianing loss projection of $93 million per year, or ($1.83) per
share, slightly above management’s guidance of around $90 million. Tularik
ended the quarter with $206 million in cash and marketable securities.
II. CLINICAL DEVELOPMENT PROGRAMS
** Oncology **
Tularik’s most advanced programs are in the oncology field. Phase II
studies have been conducted for T67, a non-reversible beta tubilin binder
with low resistance potential.
At the American Society of Clinical Oncology, data were presented from a
Phase II study of T67 in patients with unresectable hepatocellular
carcinoma as first or second line therapy. Because T67 is metabolized by
the liver, it is thought that this may be a potential indication. Dosing in
the study was low, 165mg/m2, administered intravenously every week. Partial
responses were observed in 3/34 first line patients and one second line
patient. Stable disease was reported in 38% and 24% of first and second
line treated patients respectively. A reduction in alpha fetoprotein, a
marker for hepatocellular cancer, was observed in 19% of patients. We
believe that the data suggest that additional studies, at higher doses, are
warranted to better assess the potential of T67 to address hepatocellular
cancer.
Tularik has announced its intent to pursue Phase III studies with T67 as
well as to perform additional trials designed to assess pharmacokinetics,
higher dosing, and the effects of a shorter infusion times, to optimize the
dose for Phase III studies. The company will meet with the FDA in the third
quarter to discuss the Phase III study design. In Phase III studies,
Tularik hopes to increase the dose by 50%. It is difficult for us to
predict the likelihood of success in Phase III studies, based on the Phase
II data.
Although the total market for similar anticancer compounds exceeds $2
billion, we have not factored potential revenues into our model because of
the early development stage of the candidates.
Phase II studies have been initiated with T607, an analog of T67 designed
not to cross the blood brain barrier. T67 is being studied in
hepatocellular carcinoma, non-Hodgkin’s lymphoma, gastric/esophageal
cancer, and ovarian cancer.
III. Preclinical programs - new INDS in 2002
Tularik indicated that they have filed to begin clinical studies with an
undisclosed agent in the U.K. As discussed in our 6/12/02 note, Tularik has
currently selected five oral compounds as advanced preclinical candidates.
Two candidates target immunological/inflammatory disorders. T6487 has shown
preclinical activity in transplant rejection and T6204, which targets the
IL-1/TNF pathway, has shown preclinical efficacy in animal models of
ulcerative colitis and collagen-induced arthritis. Three candidates target
metabolic disorders. T659 is an oral agent, which increases HDL
cholesterol, T792 is an oral agent that acts through the central nervous
system to effect weight loss. Additional leads have been identified with
potential application in diabetes. They target the PPAR gamma receptor, the
same target as the glitizone class of diabetes drugs. Candidates in
development may obviate the fluid retention and weight gain side effects
commonly associated with this class.
IV. SANKYO PARTNERSHIP
In June, Tularik formed a collaboration with Sankyo to develop therapeutics
that act on orphan G-protein coupled receptors (GCPRs). These are membrane
bound receptors that have diverse biological functions. Tularik will
receive an undisclosed cash payment. After one year, Sankyo will have the
option to select up to 5 targets for further development. The companies
will share development costs and potential profits on these compounds in
the U.S. and Europe, and Tularik is entitled to milestone and royalty
payments for potential commercialization outside these territories.
2002 Milestones
- Announce new pharmaceutical alliances
- File up to 3 INDs in 2002, potentially 1-2 each year going forward
H1
* Initiate additional Phase II studies of T611 (dropped program)
* Initiate Phase II studies with T607
* Present Phase II results for T67 (ASCO, May)
* Present Phase II results for T64 (ASCO, May)
* Present Phase I results for T607 (ASCO, May)
H2
- Two new IND filings
- Initiate Phase III T67
- Partner T64
* = Milestone attained
Tularik consolidated income statement
$ millions, except per-share data
2001 2002E 2003E
Total Revenues $33 $28 $40
Expenses
R&D $90 $112 $139
SG&A 11 13 16
Amort defd stck 1 1 1
Total Expenses $103 $126 $155
Operating inc ($70) ($98) ($115)
Int & other inc 23 7 8
Interest expense 2 2 2
Int inc, net 22 6 7
Pretax inc (49) (93) (108)
Net Income ($49) ($93) ($108)
EPS ($0.99) ($1.83)($1.97)
Shrs Out 49 51 55
Source: Company reports and Goldman Sachs Research estimates |
