Q2 2003 Neurogen Corporation Earnings Conference Call
Boston, Aug 7, 2003 (CCBN StreetEvents) -- Event Transcript of Neurogen
Corporation conference call, 5-Aug-03 10:00am ET.
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Corporate Participants
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* Elaine Beckwith
Neurogen Corporation - Asst. Director of Investor and Public Relations
* William Koster
Neurogen Corporation - President, CEO
* Stephen Davis
Neurogen Corporation - EVP, CBO
* James Cassella
Neurogen Corporation - SVP of Clinical Research & Development
* Company Representative
Neurogen Corporation - Speaker
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Conference Call Participants
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* Greg Wade
Pacific Growth Equity - Analyst
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Presentation
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Operator [1]
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Please standby, your conference is about to begin. Good day. All sides are now
online. Welcome to the Neurogen Corporation second-quarter 2003 financial
results and pipeline update. At this time, I'd like to turn the conference over
to Ms. Elaine Beckwith (ph) Associate Director of Investor and Public Relations.
Please go ahead.
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Elaine Beckwith, Neurogen Corporation - Asst. Director of Investor and Public
Relations [2]
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Thank you Holly. Good morning. Today, in addition to discussing Neurogen's
second-quarter 2003 financial results we'll be updating the status of the
Company's drug candidate pipeline. This morning's news release is posted on our
web site www.neurogen.com for your reference during the call. Today's conference
call and the webcast will be available for replay after the conclusion of the
call. Please see our news release for details on this. I'd like to take just
minutes to point your attention to Neurogen's Safe Harbor statement as included
in this morning's release. Please note the information in the release and the
conference call may contain forward-looking statements that involve risks and
uncertainties. Please reference Neurogen's SEC filings for complete information
regarding these risks. Presenting this morning are Bill Koster, President and
CEO; Steve Davis, Executive Vice President and Chief Business Officer; and Jim
Cassella, Senior Vice President of Clinical Research and Development. The agenda
for
today's call is as follows. Bill give a brief overview of the quarter. Steve
will discuss financial results. Following Steve's comments, Jim Cassella will
review our clinical trials. And then Bill will comment on the rest of our
pipeline. Following that we'll open the call for questions. At this time, I'll
turn the agenda over to Bill.
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William Koster, Neurogen Corporation - President, CEO [3]
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Okay. Thank you Elaine. Let me begin with an update on our progress made this
quarter in R&D efforts, starting with our clinical programs. Our insomnia
program is in mid-Phase I trials with NGD 96-3. And the trials are being run by
our partner, Pfizer. 96-3 is a GABA agent, with a unique profile that
selectively actives specific receptor subtypes in the brain, with the potential
to eliminate the next-day side-effects of the first generation compounds, based
upon our animal models. In Phase I studies, we're extremely pleased with reports
of sleepiness by treated subjects, consistent with the expected action of the
drug. Confirming these observations, a single dose sleep latency study
demonstrated the drug significantly reduced time to onset of sleep. Pfizer's
continuing to intensively evaluate safety. And safety is a very high hurdle in
insomnia, where drugs may have usage in a wide population. So, to sum up here,
while we're still relatively early in the game, the efficacy results seem today
to suggest our
unique GABA profile can put people to sleep. This is something we could not have
taken for granted.
In the C-5a inflammation program, enrollment and dosing are continuing in Phase
II trials -- in rheumatoid arthritis and asthma. And we anticipate results for
both trials by the end of the year. There are three key elements to remember
with our approach through a small-molecule C-5a Antagonists. Number one, we have
the potential for disease modification. That is, by blocking activation of
inflammatory cells, we may impact progression of the disease. Secondly, the ease
of administration, since we have an oral agent, doesn't require perennial
administration in the hospital or the doctors office. And thirdly, the cost of
goods are likely to be much less, relative to biologics. We'll hear more on
these clinical trials from Jim Cassella in a moment.
Also, we've been pleased with progress we have made during the quarter in our
pre-clinical programs. One asset of that has moved very quickly in our shop is
our VR-1 program. We've developed a comprehensive intellectual property
possession, including an issued U.S. patent on the genetic sequence of a
principal human polymorph. And we filed applications on broad utility and
composition of matter claims. We have also identified a development candidate
NGD 8695, which is undergoing scale-up synthesis and formulation studies in
preparation for pre-IND toxicology.
Finally, within the medical community potential use of VR-1 antagonists, for
not only treatment of pain, but also for urinary incontinence and pulmonary
disease, is becoming more widely recognized. Let me switch to our research
pipeline. And we continue to make progress there. We continue to support both
our C-5a and BR-1 programs to develop multiple clinical candidates. And in our
CRF-1 and MCH-1 programs for depression and obesity, respectively. We continue
to refine the drug-like properties of molecules having potent activity. We are
in the late stages of lead-optimization there. This year is certainly shaping up
to be an important time for Neurogen. We're on the verge of knowing for the
first time ever how blockade of the C-5a Receptor with a small molecule will
affect inflammation in patients. We're learning, for the first time ever, that
our GABA -- the novel GABA profile has the ability to induce sleep, with a
potential to reduce next day side-effects. And we're bringing forward a novel
VR-1 modulato
r where we have established an early broad intellectual property position for
the use of VR-1 antagonist for the treatment of pain.
Overall, as we meet with investors, we certainly continue to hear comments that
we have a lot of interesting programs going on at Neurogen. And that's what we
do. That's our business -- discovering novel drugs for uncertain medical need --
moving them through the clinic. And you will be hearing more about them this
morning. But first, I'll turn the call over to Steve, who will update you on the
financials, followed by Jim, who will give you more detail on our clinical
studies. And then I'll close with a few comments regarding our early-phase
programs. So, over to you, Steve.
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Stephen Davis, Neurogen Corporation - EVP, CBO [4]
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Thanks Bill. As he indicated in the release, our net loss for the second
quarter of 2003 was $7.8 million or 44 cents per share. This compares to a net
loss for the second quarter of 2002 of $2.9 million or 15 cents per share.
Operating revenue, as we indicated was $1.6 million versus $8.3 million for the
year-ago quarter. This decrease is due primarily to the conclusion in the second
quarter of '02 of technology -- our technology transfer agreement with Pfizer
for AIDD-related technology services. On the conclusion of that agreement we
recognized that about $5.5 million -- this is in the second quarter of '02 -- of
non-recurring revenues, most of which were funds that were received in prior
periods and deferred until conclusion of the agreement.
R&D expenses for the second quarter of 2003, excluding our non-cash
compensation charges, were down 18 percent $8.1 million versus 9.8 million for
2002. This decrease is due to slightly lower staff levels in our operational
excellence program and the adoption of new technologies developed at Neurogen,
such as our medium speed synthesis program which enables our chemists to make
greater use of our robotics and automated processes. G&A expenses for the
quarter, again have excluding non-cash comp charges, decreased 21 percent to
$1.3 million as opposed to $1.7 million for the year-ago quarter. Again, this
decrease is due largely to implementation of our operational excellence program.
In both R&D in G&A, we're very pleased with reduced spending while continuing
to advance the pipeline, as Bill indicated, and further leverage the very, very
efficient AIDD discovery engine we have. Cash marketable securities in June --
at the end of the quarter -- was $64.6 million. We previously indicated that we
anticipated a burn rate for 2003 in the range of 36 to $39 million. We believe
we'll come in at the lower end of that range -- that is, closer to the mid $30
million range. Expect earnings for this year to be in the range of $1.90 to $2
per share. This is down slightly from our previous estimate of 2 to 2.05. We
project our current cash will take us through the first quarter of 2005. And
this is based on some pretty conservative assumptions, which assumes no
additional cash from milestone payments, partnerships, etc. As we've indicated
previously, we're exploring interest from the pharmaceutical community in both
our C-5a and our VR-1 programs. Partnering is an important part of our strategy.
And
while we're not promising we'll conclude a deal in either program, we are
exploring the options. That kind of sums up the financials. At this point, I'll
turn things over to Jim.
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James Cassella, Neurogen Corporation - SVP of Clinical Research & Development
[5]
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Thanks Steve. I'm very pleased with -- regarding the progress made in our
clinical program. We have two drugs in the clinic which with two Phase II trials
in our inflammation program and a Phase I trial in our insomnia program,
partnered with Pfizer. Let me begin today with our insomnia program, where we
are very excited at the report by sleepiness by treated subjects were consistent
with the expected action of NGD 96-3. Pfizer is in the process of conducting
Phase I studies to explore the safety, tolerability, pharmacokinetics, and
pharmacology profiles of NGD 96-3. This drugs is our lead candidate from our
collaboration with Pfizer to develop drugs for the treatment of insomnia. NGD
96-3 differs from existing therapies by selectively modulating certain subtypes
of the GABA Receptor in the brain. Based on data collected in animals, we
believe this unique approach may offer a much improved side-effect profile,
compared to currently available therapies -- especially in regards to next-day
hangover and sedati
ve effects, memory and motor skill impairment, and alcohol interactions. Pfizer
has completed two single-dose studies exploring the safety PK, or
pharmacokinetics, and preliminary efficacy of 96-3 and is further assessing the
safety profile of the compound. In a Phase I, placebo-controlled, single-rising
dose study of the safety and pharmacokinetics of the compound, it was discovered
that it's well-tolerated in healthy volunteers. As I mentioned earlier, reports
of sleepiness by treated subjects in this study were consistent with the
expected action of the drug. And since this drug represents a novel way to
modulate GABA transmitter systems, these observations were very encouraging.
Subsequently Pfizer has performed a separate human efficacy study of two dose
levels of NGD 96-3 in healthy volunteers, using the marketed drug Zolbidan (ph)
or Ambien and placebo as control. In that study, when compared to subjects
taking a placebo, both doses of NGD 96-3 significantly reduced the latency for
the amount of time required for healthy subjects to fall into an EEG-defined
sleep-state during the day. To further assess the safety profile of NGD 96-3,
Pfizer is currently conducting an additional single-dose study in healthy
volunteers. Given the broad patient population eligible for treatment and the
availability of existing therapies, assessing the safety profile is an important
step in the development of drugs for the treatment of insomnia. Insomnia affects
approximately one-third to one-half of American adults.
Turning to our other clinical program -- our C-5a program -- we're continuing
dosing and enrollment of patients in our two Phase II programs with NGD 2000-1,
which is our orally available C5a Receptor Antagonist. The C-5a Receptor is a
key component of the complement cascade (ph) and complement is an important
pathway in the immune system. The Phase II trial in rheumatoid arthritis is an
exploratory proof of content trial, designed to test the safety and preliminary
efficacy of NGD 2000-1 in patients with mild to moderate rheumatoid arthritis.
The study will enroll approximately 48 adult rheumatoid arthritis patients in
eight U.S. clinical centers. It is double-blinded and placebo-controlled,
exploring multiple doses of NGD 2000-1. In a parallel group design, patients
will receive either placebo, 10 mg, 60 milligrams, or 100 mg of NGD 2000-1
orally, twice a day, for a 14 day period. Primary end-point of the trial will
examine the ability of NGD 2000-1 to lower level of C-reactive proteins,
otherwise known a
s CRP, which is an important inflammatory bio-marker that correlates with the
status of disease. At secondary endpoints we're looking for signs and symptoms
of the disease.
The prudent concept Phase II trial in asthma is designed to test the safety and
preliminary efficacy of NGD 2000-1 in patients with mild to moderate asthma. The
study will involve approximately 128 asthma patients in 16 clinical centers in
the US. It also is double-blinded and placebo-controlled, exploring multiple
doses of NGD 2000-1. In a parallel group design, patients will receive either
placebo, 10 milligrams, 60 milligrams, or 100 milligrams, of NGD 2000-1 orally,
twice a day, for a 28 day treatment period. The primary end-point will examine
improvement in lung-capacity, as measured by forced expiratory volume, or FEV1.
Secondary end-point will look at clinical symptoms. Our inflammatory program has
the potential to open an entirely new line of oral therapy, suited to chronic
administration for patients with rheumatoid arthritis, asthma, and other
inflammatory diseases. This program illustrates our strategic moves to create
clinical candidates with multiple utilities. We believe Neurogen is the first
of the clinics with an orally-active C-5a compound. And we hope to have results
of both Phase II studies around the end of the year. Now, I will turn the mic
back over to Bill. |
