SSB: Abgenix (ABGX, Hold, Speculative)
Reporting date: Tuesday, February 22nd, after market close with a conference
call.
We expect Abgenix to report Q4 2004 EPS of a loss of $0.53 compared with the
consensus estimate of a loss of $0.50 while our fiscal 2004 EPS estimate is a
loss of $1.96 compared with the consensus estimate of a loss of $1.94. Our
revenue estimate is $6.4 million for the fourth quarter, reflective primarily
of contract revenues, and $18.2 million for fiscal 2004. We expect the company
to provide its financial guidance for operating expenses and burn rate for
fiscal 2005. In November, Abgenix announced it received a milestone payment
from partner CuraGen, related to the advancement of CR002 into a Phase I
clinical study. CR002 is fully human monoclonal antibody to PDGF-D, a mediator
that stimulates mesangial cell proliferation that is implicated in certain
forms of kidney inflammation that can lead to kidney failure. CR002 has
received orphan drug designation as a potential treatment to slow the
progression of IgA nephropathy. In January, Abgenix announced it has received
a milestone payment from Human Genome Sciences for the IND filing for a fully
human monoclonal antibody to the CCR5 receptor (CCR5 mAb), a co-receptor to CD4
that mediates the binding of HIV. In the same month, Abgenix also announced it
has received milestone payments from partner, Amgen, for the advancement of an
undisclosed antibody into the clinic, and from Chiron, for the IND filing of a
novel oncology compound CHIR-12.12, a fully human antagonist antibody targeting
CD40. Each of these antibodies was created using Abgenix's proprietary
XenoMouse technology. With these announcements, Abgenix had indicated that
there are now 11 of its fully human monoclonal antibodies in the clinic, six
under collaborations. In our view, given the company's stage of development,
quarterly earnings results are not the primary driver for the shares.
Continued progress of the company's late-stage clinical pipeline remains the
key focus. In this regard, positive news on the development of Panitumumab
(ABX-EGF), a fully human monoclonal antibody targeted to the EGF receptor for
cancer, will be critical for significant appreciation of the stock. In our
opinion, Abgenix's stock is appropriate for long-term investors with a high-
risk tolerance.
Abgenix's Panitumumab, in conjunction with partner Amgen, has moved into
advanced stages of clinical development. Specifically, pivotal Phase III
studies of Panitumumab as a third-line therapy in advanced colorectal cancer
patients are ongoing in the U.S. and Europe. Amgen is conducting the U.S.
pivotal study under an SPA (Special Protocol Assessment) with the plan to
submit an application under accelerated approval guidelines. Enrollment in the
U.S. Phase III study slowed with the approval of ImClone/Bristol-Myers Squibb's
Erbitux while patient enrollment in the European Phase III study remains on
track. We now expect Abgenix to announce the completion of enrollment in the
U.S. trial in the first half of this year, representing a delay over our
original estimate of a 2004 year-end completion. Abgenix and partner, Amgen,
are still targeting a regulatory filing in Q4 2005. Data from Phase II studies
of Panitumumab in lung cancer, colorectal cancer (frontline with FOLFIRI), and
renal cell carcinoma are expected to be released in the second half of 2005.
ABGENIX Q4 2004E 2004E
Total Revenues $6.4 million $18.2 million
G&A Expense $9.7 million $30.7 million
R&D Expense $42.0 million $153.1 million
Net Loss $46.7 million $173.9 million
EPS ($0.53) ($1.96)
Source: SB estimates.
In terms of newsflow related to internal pipeline projects, clinical data from
a Phase I dose-ranging study in 19 late-stage melanoma patients with another
Abgenix fully human antibody, ABX-MA1, have been submitted to AstraZeneca for
review as a potential in-licensed compound with a decision expected in Q1 2005.
In addition, given promising preliminary data from an ongoing Phase I study for
the treatment of secondary hyperparathyroidism (SHPT), Abgenix plans to
initiate a Phase I multi-dose study in Q1 2005. These results showed that ABX-
PTH reduced serum ionized calcium and parathyroid hormone levels (PTH) over a
24-hour period compared to placebo, with high doses suppressing PTH to within
the desired normal uremic range for up to 7 days after a single dose. |
