GS take on the Q:
TLRK (IL/N): 1Q 2003 Results in line,
clinical programs on track
TLRK reported Q1 2003 loss of ($0.44), lower than our est. of ($0.52) and consensus est.
of ($0.48). We are maintaining our 2003 estimated loss of $115 million. EPS for 2003 is
changed to ($2.07) from ($2.11) based on a higher share count. The company made
progress with its clinical programs in the quarter through the initiation of Phase III trials
for primary liver cancer with T67 and the initiation of Phase I studies with T131 for the
treatment of Type II diabetes. In 2003 we look for Phase I data on T-487 and T-131, top
line Phase II data on T607, one to two IND submissions and potential new partnerships.
We maintain our IL rating for long-term investors. Tularik is an early- stage company.
Key risks include potential clinical failures, long development timeframes, need for
additional capital and negative investment sentiment toward early stage companies.
INVESTMENT 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 early clinical and preclinical development. Several of these candidates
may represent first in class therapeutics. Tularik maintains its goal of filing 1-2 new INDs
per year. Tularik is a development stage company most suitable for investors with a
long-term time frame and high risk tolerance. In January, Tularik filed a registration
statement for the resale of up to 11.4 million shares owned by ZKB Pharma Vision AG,
which could put pressure on the shares.
quarter net loss of $24 million
or ($0.44) per share, compared to our forecast of a loss of $28 million or ($0.52) per share. We
maintain our estimates for a loss of $115 million and $132 million in 2003 and 2004, respectively.
We have assumed flat revenues from 2002, which may be conservative as we expect new
collaborations and expansion of existing collaborations. We have assumed $124 million in R&D
expenses for 2003, which will depend on the number of candidates advancing in the clinic.
Tularik ended the quarter with $138.6 million in cash and marketable securities, excluding $17.7
million in cash from its subsidiary Cumbre. We project the company will spend roughly $91 million
through the end of 2003, and will need to raise additional funding in the future. However,
management may be able to increase revenues by leveraging its technology with a greater number
of collaborations over the course of the year.
I. CLINICAL DEVELOPMENT PROGRAMS
** T67 for primary liver cancer - pivotal study initiated **
Tularik's most advanced programs are in the oncology field. The company initiated Phase II/III
studies in March with T67, a beta tubulin binder, for the treatment of primary liver cancer. Phase II
study results were presented at ASCO in May 2002. Tularik plans to study the primary endpoint of
survival in approximately 750 patients who will be treated with either T67 or the current standard of
care, doxorubicin, as first line therapy. Both agents are administered by IV infusion. The trial will
be performed at centers in the US, Europe and Asia. If data from the full trial are positive, we
believe that potential approval could occur in 2006/2007. Given lack of strong evidence of efficacy
in Phase II studies we believe this program is risky. However, we believe that T67 would be
approvable with a modest improvement in survival. The average survival period for patients
diagnosed with primary liver cancer is estimated at 6 months. The study is designed to detect an
improvement of six weeks (roughly 25%) in survival over the doxorubicin arm.
** T607 for solid tumors **
Behind T67, Tularik is studying T607, an analog of T67 designed not to cross the blood brain
barrier, in cancer. The company began enrolling Phase II studies in July, 2002 for hepatocellular
carcinoma, gastric/esophageal cancer and ovarian cancer. We look for top line results potentially in
late 2003. Tularik announced that it has discontinued a study investigating the treatment of
non-Hodgkin's lymphoma (NHL). In part, this was due to the difficulty of enrolling NHL patients
because of the availability of new treatments for the disease.
** T487 for inflammatory disorders **
Phase I clinical trials are underway with a novel compound, T487, an oral anti-inflammatory agent
with potential application in rheumatoid arthritis, inflammatory bowel disease and psoriasis. The
trial will be conducted in the UK and will investigate the safety and pharmacokinetic profile of the
small molecule in up to 30 healthy adults. The compound inhibits binding of specific chemokines to
lymphocyte receptors, specifically the CXCR3 receptor, and is therefore predicted to inhibit
migration of lymphocytes to sites of inflammation. T487 has shown preclinical activity in transplant
rejection.
** T131 for Type II diabetes **
On January 27, 2003, Tularik announced it has begun Phase I studies with T131. The compound is
one of multiple leads, which 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, anemia, and weight gain side effects that have been
associated with this class.
2 Goldman Sachs Global Equity Research
Healthcare Tularik, Inc.
** Merck collaboration **
Merck has initiated Phase I studies for the potential treatment of HIV/AIDS, with a compound
resulting from collaborative research between the two companies. The compound inhibits the HIV
integrase enzyme, which is required for viral replication after the virus has infected the blood. In
addition to the viral protease and reverse transcriptase enzymes, integrase is the third HIV enzyme
required for viral replication. Inhibition of integrase would represent a novel mechanism for HIV
treatment.
II. Milestones in 2003
Tularik expects to file one to two new INDs or IND equivalents in 2003 and a like amount per year
thereafter. The company has currently selected six oral compounds as advanced preclinical
candidates. In the immunological/inflammatory category, T6204, which targets the IL-1/TNF
pathway, has shown preclinical efficacy in animal models of ulcerative colitis and collagen-induced
arthritis. Two candidates target metabolic disorders. T659 is an oral agent, which increases HDL
cholesterol, and T792 is an oral agent that acts through the central nervous system to effect weight
loss.
III. Risks
Key risks include potential clinical failures, long development timeframes and need for additional
capital. In addition, Tularik recently filed a registration statement for the possible resale of up to
11.4 million shares owned by ZKB Pharma Vision AG, which could put pressure on the shares.
===== 2003 Milestones =====
- Potential new pharmaceutical alliances
- File up to 2 INDs in 2003, potentially 1-2 each year going forward
H1
* Initiate Phase I studies with T131 in healthy volunteers
* Initiate pivotal studies with T67 in patients with primary liver cancer
H2
- Announce top line Phase II results for T607
- Present Phase I results for T487 and begin Phase IIa studies
- Present Phase I results for T131 and begin Phase IIa studies
* = Milestone attained |
