Wall Street Journal Interview...here's the link avantimmune.com
TWST: Would you begin with a brief historical sketch of
AVANT Immunotherapeutics and a picture of things as
they are now?
Dr. Ryan: AVANT Immunotherapeutics was founded in
1998 when its predecessor company, T Cell Sciences, acquired
Virus Research Institute (VRI). Each of these companies contributed broad strengths in microbiology and immunology. When
we put the two companies together, we changed the name of T Cell Sciences to AVANT Immunotherapeutics. Both T Cell and VRI were public companies, and AVANT is a public company. In December 2000 we acquired another company, Megan Health, a St. Louis-based company, and it remains our wholly owned subsidiary in St. Louis. Megan contributed particular strengths in the areas of Food Safety and Animal Health. Finally, in January 2003, we closed on the acquisition of the assets of a third company, Universal Preservation Technologies (UPT), and acquired an important technology for us called VitriLife®. We had actually been working with this technology for more than a year prior to the closing, and
believe this method of preserving biological material will allow us to reduce manufacturing costs and allow our live bacterial vaccines to remain potent after prolonged storage at room temperature. In this way we have built a strong vaccines company focused on a new generation of vaccines based on the innovative technologies we acquired from VRI and Megan, coupled with this new manufacturing technology. We believe this provides a new generation of innovative vaccines.
TWST: Tell us about your products.
Dr. Ryan: Our pipeline is both broad and deep; we
have found ways to leverage our technology with help from
partners. We have five vaccines in the clinic and one product
on the market. With such a broad well-staged pipeline acquired from the various acquisitions, we couldn’t possibly be developing as many products as we are were it not for our partnerships. We have nine partnerships, which include big pharma companies, the Department of Defense and the National Institutes of Health (NIH).
UNA S. RYAN is President and Chief Executive Officer
of AVANT Immunotherapeutics, Inc. She is also Research
Professor of Medicine at the Whitaker Cardiovascular Institute of the Boston University School of Medicine, and
currently serves on the Boards of both the Biotechnology
Industry Organization and the Massachusetts Biotechnology
Council, as well as the Whitehead Institute Board of
Associates. Dr. Ryan held the position of Director of
Health Sciences at Monsanto Company from 1990 to
1993 and was Research Professor of Surgery, Medicine
and Cell Biology at Washington University School of
Medicine from 1990 to 1993. Dr. Ryan was on the faculty
of the University of Miami as Chief, Division of Vascular
Cell Biology from 1986 to 1989 and as Professor of Medicine
from 1980 to 1989. In 2002 Her Majesty Queen Elizabeth
II awarded Dr. Ryan the Order of the British Empire
(OBE) for her services to research, development and promotion
of biotechnology.
The broadly defined product areas in which we work include
a vaccine for cholesterol management, a vaccine against Rotavirus disease, partnered with GlaxoSmithKline, and bacterial vaccines. Our bacterial vaccines program takes us into four important business franchises: biodefense, global health, travelers’ vaccines, and food safety. For biodefense, we have an injectable vaccine against anthrax and an oral combination against anthrax and plague. For global health, we have vaccines for worldwide health threats including
cholera and typhoid fever. For travelers’ vaccines, we have
vaccines to protect travelers against ETEC (E. coli) and shigella, which are found in contaminated food and water. And for food safety and animal health we have a program which, in one example, protects poultry from salmonella infection which could be passed on to human consumers of chicken or eggs; increased use of such vaccines may allow farmers to use fewer antibiotics and reduce the likelihood that antibiotic-resistant bacteria will be passed on to consumers.
TWST: I read that your technologies are complementary.
Does that mean that the work you do on one can enhance
the work you’re doing on another?
Dr. Ryan: Very good question. In the category of bacterial
vaccines, the synergies are tremendous. Each of our bacterial vaccines is based on the same technology platform, the use of bacteria modified to reduce their ability to cause disease but still capable of generating protective immunity when given orally. They also all benefit from our new manufacturing technology, VitriLife®. Taking these two
things together, we’ve come up with an arsenal of vaccines that are needle-free (everybody hates shots!) and thermostable; this means we don’t have to refrigerate our vaccines and not only do we avoid the added distribution costs of the cold chain, but also we can develop vaccines for developing nations where refrigeration is simply not an
option. So the profile of an AVANT vaccine is safe, effective, singledose, oral, rapidly protecting and not requiring refrigeration. And that’s true for each of the four, to use your word, complementary business areas that are served by this platform of technologies.
TWST: How many of them would have to succeed for the company to do well?
Dr. Ryan: It depends on which; if the cholesterol management
vaccine succeeds, it alone would be sufficient to sustain profitability. If the rotavirus vaccine were to be successful, we would still need an additional revenue source because that is a royalty stream from GlaxoSmithKline (GSK). Nevertheless, since they estimate it to be a $1 billion market, it’s a nice royalty stream! If the next product approved were Rotarix™, the rotavirus vaccine, or one
of the bacterial vaccines we would expect to need approval of at least one more to get to sustainable profitability.
TWST: What about other market potential? You mentioned
$1 billion for one product. What about the other?
Dr. Ryan: Sales of the statins, the most widely used cholesterol management agents, are currently in excess of $15 billion. We don’t expect to dominate that core market, but peak sales in the area of $2 billion are not impossible. Our CETi-1 vaccine is designed to raise HDL (“good cholesterol”); the statins primarily lower LDL (“bad cholesterol”), and while the importance of raising HDL has been known for decades there simply haven’t been any drugs developed
that patients are willing to take on a long-term basis. Our current Phase II trial of the CETi-1 vaccine, the results of which we expect in 4Q03, is testing twice-annual administration; we anticipate that this treatment could be used as monotherapy in some patients and in combination with statins in others. Global health is clearly a market of special circumstances; targeted populations in developing nations clearly do not have access to HMOs and may have little or no personal funds with which they might pay for vaccines. I have been working with the Biotechnology
Industry Organization, the Bill and Melinda Gates Foundation, and other interested parties to help develop realistic market-based incentives that enable companies with applicable technologies to reasonably pursue these opportunities in developing countries. As I’ve mentioned, the same technology platform is applicable to the development of our traveler’s vaccines, which will be marketed to the wealthiest segments of the global population; if we are able to develop a combination vaccine to protect against most causes of travelers’ diarrhea following a single oral dose, we can expect to charge an attractive premium for this, but we would expect market uptake to be much more gradual. So our bacterial vaccines are targeting two very different markets here; the global health market which will involve huge populations, reimbursed at a low rate per dose by non-traditional payors, and the travelers’ vaccine market
with a smaller number of doses sold at a higher rate.
We are very happy to have quite considerable development
money from the Department of Defense through their contractor
DynPort Vaccine Company (DVC), but until we know exactly how
the country will stockpile and when we’ll see product revenues, it’s difficult for us to model the revenues from biodefense. So we’re taking the conservative view that before we can model revenues, we see this money as reducing burn to the point where we would expect that we would not be obliged to go back to the capital markets for two years, that we have in excess of two years of cash.
TWST: What are you worrying about? What concerns you?
Dr. Ryan: I’m concerned that the focus will change, that the
government will go with what they have rather than with what they ought to have as vaccines. I’m concerned that development may be slow, and that there may be unrealistic expectations in this regard. I’m concerned that it’s difficult for us to tell Wall Street in the terms that Wall Street is used to that AVANT has very special characteristics that may not be reflected in their models and by many of the metrics people use. We feel that our various partnerships and development contracts have leveraged our value and viability beyond what is reflected in our current market cap. We expect to perform on our contracts and we hope to win new ones; we expect our partnerships to continue to defray the costs of moving our products forward. In the case of Rotarix, we’ve already done all of our work and placed the product in
the hands of GSK, and so any investment in AVANT includes an investment in that potential royalty stream. Additionally, we hope to capitalize on a variety of outlicensing opportunities for our VitriLife technology outside of our key business areas.
TWST: Could you sketch out a rough timetable for the next couple of years?
Dr. Ryan: We would expect to see our partner GSK move
the rotavirus vaccine into Phase III trials in 2003. We would expect to complete and report results from our two-year Phase II study of our CETi-1 cholesterol management vaccine. We expect to continue to develop CholeraGarde™, which is our cholera vaccine being developed with the International Vaccine Institute (IVI), that is funded by The Gates Foundation. Clinical trials of CholeraGarde™ are currently
being run in Bangladesh. We are also very pleased that the National Institutes of Health has taken a great interest in our typhoid fever vaccine, and they will be funding pre-clinical work, manufacturing and clinical trials. However, when they do it, they are in charge of the program’s timeline. So I’m hoping that those trials will move forward in 2003. But again, if they fall into 2004, we’re still
very grateful because the NIH is picking up the cost of this program. And we’re delighted that we may see completion of a Phase I clinical trial of an injectable anthrax vaccine stemming from our first deal with the Department of Defense, a technology licensing deal we completed in October 2001.
So those are our 12-month goals. Over the next 24 months
we expect to complete the preclinical work on the oral anthrax/plague vaccine, which is a combination vaccine, based on AVANT’s vectored vaccine technology, and move on to manufacturing and clinical. We will continue to sell our salmonella vaccine for poultry, Megan®Vac. We’ve moved into a new distribution agreement for sales of that marketed
product with Lohmann Animal Health, a leading presence in the
industry. We also expect to move forward with Megan®Egg, which is the salmonella vaccine for laying hens as opposed to broilers. That’s in field studies now, so I think within 12 months we would expect to get Megan®Egg to at least a market application.
TWST: Can you say a few brief words about prospects
in global health?
Dr. Ryan: Yes, I’m very interested in this area. We all
know that our investors recognize the need. They’re concerned about the plight of the third world nations, but they’re not willing to see us take low margins or no margins. Together with BIO (the Biotechnology Industry Organization) and The Gates Foundation, we had a meeting in Washington last December to try to find ways to make business plans, business propositions that make it worthwhile for biotech companies to go for global health markets. One of the benefits we anticipate from VitriLife® technology is lower manufacturing costs. This means that we believe we can make vaccines available for developing countries and still make a
margin, but we haven’t done it yet. We believe we can do it with the help of organizations including the IVI and others we hope to access. We also hope to work with the World Health Organization and the UN, but we haven’t yet got contracts with them. So we cannot, as a small biotech company, afford to do philanthropy. We’re not a big pharma company with multibillion dollar product revenues that allow us to donate medicines to developing countries. I want to continue to work with this network of organizations to get to the point where we have a solid expectation of revenue that will reduce the risk and costs of development for small companies like ours. We certainly have the technology and we certainly have the will to do this. But of course our job is to increase value for our investors, and that comes first, so we’ve got to continue to find ways to establish incentives including an expectation of a reasonable return on investment.
TWST: Could you tell us about the background and the
expertise of one or two of your key people at the company?
Dr. Ryan: I would say that our greatest area of expertise is
in bacterial vaccines. So both in the molecular biology and in the infectious disease understanding, we have scientists both here in Needham and in our St. Louis facility who have spent their research careers in these areas. So we have highly skilled people in these areas, and I think the government recognized this in awarding us a very nice contract to develop these technologies against anthrax and
plague. I am a vascular biologist by training myself with my biggest interest in vascular and cardiovascular disease. We’ve been able to marry this interest with these immunologic skills that we have in the company and come up with this very novel approach of having a vaccine against what most people would think of as a drug target. So for cholesterol management we are targeting CETP, which is the same molecule that Pfizer and Japan Tobacco have targeted in their pill
programs. But we have gone after this target with our particular expertise, which is in vaccines. We’re after the same target to get the same effect, but we hope to improve compliance, because it doesn’t matter how good a pill you have if people don’t take it and people are very bad at taking pills for chronic diseases. We argue if we jab a
needle in your arm every six months, you’ve complied. We’re trying to lower costs and improve compliance as well as to target the disease very effectively with an immune response as opposed to a drug.
TWST: How well understood is the company right now by the investment community?
Dr. Ryan: I think it’s very poorly understood. I think we’re
going for a new generation of large market, high margin vaccines for adults, not the traditional vaccines for babies that you sell to governments at very, very low prices and low margins. I think that the investment community is so stuck with the age old view that you can’t make money in vaccines, that they don’t really understand how exciting our company is, how broad our pipeline is, how good our partners are and how much risk diversification there is. We’ve got so many different programs all underpinned by separate patents and intellectual property, including technology licenses to GSK and DVC where our work is done and we’re entitled to royalties downstream. I think we have a very well-staged portfolio, extremely strong intellectual property and the correct partners for each program. So I believe we are undervalued compared with our peers. I really do think that AVANT has a unique and compelling story not reflected by our metrics, and it is up to us to communicate that effectively. With all of the recent flux and changes on Wall Street it’s been difficult for us to get in front of the right ears frankly. So we want to get the story out there.
TWST: What steps are you taking to get it out there?
Dr. Ryan: I’m talking to you! We will be speaking at the
BIO CEO and Investor Conference in New York City, and whenever possible we make these presentations available on our Website. We’ve got the World Vaccine Congress coming up in Montreal in April, but this is more of an opportunity to showcase our technologies to prospective partners than to communicate with investors. We’ve had good press coverage over the last year, with stories in many major newspapers
and wire services, and our CETi-1 vaccine was featured in Scientific American and on ABC News. Of course it’s nice to be able to speak with you specifically about the investment opportunity. We are also modifying our investor relations focus to try to reach out more to the retail audience and to the funds that can buy stocks below $5.
TWST: Could you give us the three or four best reasons
why the long-term investor should look at AVANT?
Dr. Ryan: We have a very impressive, well-staged product
portfolio that diversifies risk, very supportive strong partnerships and enough cash that we are not obliged to go back to the capital markets for two years.
TWST: Is there anything else you’d like to add?
Dr. Ryan: I do see a better year ahead.
TWST: Thank you.
UNA S. RYAN
President & CEO
AVANT Immunotherapeutics, Inc.
119 Fourth Avenue
Needham, MA 02494
(781) 433-0771
(781) 433-0262 - FAX
www.avantimmune.com
e-mail: info@avantimmune.com |
