GS: ABGX(IL/N) Q2 update - Panitumumab
(ABX-EGF) and pipeline key drivers
52-Week Range US$19-9
YTD Price Change -30.12%
Market Cap US$762.6mn
Fiscal Year (ending in Dec)
2003 2004E 2005E
US$-2.14 US$-2.04 US$-1.95
Abgenix reported a Q2 loss of $61M or ($0.68), per share, which included $17M, ($0.19)
p/s in one time items. Without the one time items the operating loss was roughly $0.04
better than our ($0.53) estimate. We are reducing our 2004 operating loss projection by
$0.04 to ($2.04) per share. The primary valuation driver will be progress with lead
candidate, ABX-EGF, in Phase III studies with Amgen, as well as pipeline and partner
progress. As discussed last week, CEO Dr. Ray Withy will be stepping down in August,
to be replaced by William Ringo, who has over 25 years experience at Eli Lilly and
experience in the biotech sector. We believe the change is part of a planned transition.
With the significant pullback in biotech shares in July, we believe that Abgenix is trading
at reasonable asset value levels. We maintain IL rating and Neutral coverage view. Key
risks include potential clinical failures or delays.
I. Investment Outlook
We believe that Abgenix is best suited for risk tolerant investors with a long time
horizon. Abgenix is distinguished by its ability to make fully human antibodies to a broad
range of targets, a platform technology that can fuel a diversified pipeline. Abgenix has established
a blue chip partner list and a growing roster of proprietary therapeutic antibodies. We believe that
the main valuation driver will likely be clinical progress with lead antibody ABX-EGF, in Phase III
studies. Abgenix is developing ABX- EGF through a 50/50 profit share agreement with Amgen.
Amgen controls clinical studies. Abgenix hopes to be in position to submit a BLA application in
the second half of 2005. Behind ABX-EGF, the pipeline is relatively early stage. Partnered
antibodies that are gaining visibility include Amgen's AMG-162 for osteoporosis, slated for Phase
III studies by year end 2004, and Pfizer's CTLA4 antibody in Phase I.
II. Financial review and outlook:
Abgenix reported a Q2 loss of $60.6M or ($0.68), per share, which included $17.3M, ($0.19) per
share in one time items. Without the one time items the operating loss was roughly $0.04 better
than our($0.53) estimate. We are reducing our 2004 operating loss projection by $0.04 to ($2.04)
per share. One time items included a write off for technology (catalytic antibody technology
acquired in 2001). We maintain our Q3 loss estimate of ($0.53) per share and have lowered our Q4
loss estimate by $0.01 to ($0.55) per share.
Abgenix ended the quarter with $269.1 million in cash and marketable securities. Abgenix has
$249 million in convertible debt. Cash burn for the quarter was $37.3 million. Cash burn is
expected to decline in the second half as the $60 million credit facility from Amgen becomes
available.
III. Pipeline update
A. ABX-EGF (panitumumab)- Phase III, BLA potential H2 2005, incremental data to come
ABX-EGF is a fully human antibody to the EGF receptor, which is over- expressed in a range of
cancers. Regulatory approvals of AstraZeneca's Iressa, and more recently ImClone/Bristol Myers'
Erbitux, positive data from OSIP/DNA/Roche's Tarceva data in lung cancer, have fueled interest in
and validated the EGF mechanism. The recent approval of Genentech's Avastin, a VEGF inhibitor,
with potent impact in the colorectal setting was also a significant advance. While the market for
newer biologics has gotten more competitive, we believe that there is room for more than one
player. ABX-EGF could potentially have dosing, side effect and pricing advantages with respect to
the other EGF antibody, Erbitux.
Phase III Colorectal cancer - 2 pivotal trials underway, possible BLA in 2005
In January, two pivotal studies with ABX-EGF were started in patients with advanced metastatic
colon cancer. For competitive reasons, details on the studies with respect to size and timing, have
not been provided. Patients have 3rd line colon cancer and will have been exposed to 5-FU,
leucovorin, oxaliplatin and irinotecan. One trial will be conducted in the US and the other trial will
be outside of the US.
Phase II colorectal studies - consistent data presented at ASCO
Data was presented at ASCO (6-7-04 note) from an ongoing Phase II study in colorectal cancer.
The study included 148 patients (expanded from 100 to get more data on oxaliplatin treated
patients) who received monotherapy intravenous infusions of 2.5 mg/kg of ABX-EGF weekly over
an 8-week treatment cycle, for up to 6 cycles. A 10% response rate was reported, consistent with
data from the first 44 patients, presented at ASCO 2003. The median time to progression was 2
months and median overall survival was 7.9 months. One patient had a grade 3 infusion-related
reaction which was related to ABX-EGF treatment. The patient received premedication and ABXEGF
dosing was not interrupted.
Enrollment has completed in a separate Phase II study in colorectal cancer, initiated in January
2002, where we believe patients will receive weekly intravenous infusions of 2.5 mg/kg of
ABX-EGF in combination with standard doses of irinotecan, leucovorin, and 5-fluorouracil (Saltz
regiment) over a 6-week treatment cycle, for up to eight cycles.
Non-small cell lung cancer - early but encouraging data at ASCO, additional data in 2005
Data were reported from interim data from a trial with ABX-EGF in combination with paclitaxel
and carboplatin for first-line non-small cell lung cancer. Nineteen patients were evaluated of which
there was one complete response and four partial responses. We regard this data as encouraging
but early.
Approximately 175 patients have now been enrolled in this study. Data comparing ABX-EGF plus
chemotherapy to chemotherapy alone may be available in 2005, possibly at the 2005 ASCO
meeting.
Renal cancer - Upcoming publication
Positive initial Phase II data on ABX-EGF as monotherapy in 88 advanced kidney cancer patients
were reported at ASCO in May, 2002. At 8 weeks, stable disease was achieved in 50% of the
patients. We believe this is a strong start given the severity of the patients studied, and the fact that
ABX-EGF was studied as monotherapy. Data from this study will be published in the August issue
of the Journal of Clinical Oncology. The second part of this study will assess less heavily
pretreated patients and has enrolled 115 new patients. The dose is 2.5 mg/kg weekly over an 8
week cycle.
B. ABX-MA1 - data possible late 2004
Enrollment has been completed for Phase I studies in metastatic melanoma for ABX-MAI.
ABX-MA1 is a XenoMouse-derived fully human antibody antagonist of the MUC18 cell surface
adhesion molecule, which is expressed on metastatic melanoma cells, but not on normal skin cells.
MUC18 is also expressed on sarcomas, including smooth muscle and blood vessel-derived
sarcomas, prostate and renal cell cancers, suggesting additional potential cancer targets. Abgenix
may potentially develop this candidate with AstraZeneca. Abgenix has established a broad
oncology collaboration with AstraZeneca.
C. ABX-PTH - preclinical data and early Phase I data at October meeting
In Q1 2004, Abgenix initiated Phase I trials for ABX-PTH, for the potential treatment of secondary
hyperparathyroidism (SHPT). SHPT results from a decline in kidney function associated with
end-stage renal disease (ESRD). The ABX-PTH antibody targets and neutralizes the parathyroid
hormone (PTH). Data from preclinical studies and a Phase I study are expected at an October
medical meeting, where three abstracts have been accepted.
=== 2004 milestones ===
ASCO
* Phase II data for ABX-EGF monotherapy in second and third line colon
cancer
* Phase II safety data for ABX-EGF combination therapy in non-small cell
lung cancer
Additional Phase II data on ABX-EGF, possibly:
- Phase II ABX-EGF monotherapy time-to-progression data in renal cancer
- Phase II data for ABX-EGF combination therapy in non-small cell lung
cancer
- Phase II data for ABX-EGF combination therapy in first-line colon cancer
- Phase I data for ABX-MAI in cancer
- Phase I data for ABX-PTH for secondary hyperparathyroidism (SHPT).
* Milestone attained
I, Meg Malloy, hereby certify that all of the views expressed in this report |
