Cambridge Antibody Technology Announces Interim Results for the Six Months Ended 31 March 2005
Monday May 16, 2:00 am ET
CAMBRIDGE, England, May 16 /PRNewswire-FirstCall/ -- Cambridge Antibody Technology (Nasdaq: CATG - News; LSE: CAT - News) today announces financial results for the six months ended 31 March 2005 and a business update.
Summary of News
-- On target to commence initial five discovery programmes with
AstraZeneca
-- GC-1008 to enter Phase I clinical trials in idiopathic pulmonary
fibrosis in second quarter of 2005 (Genzyme)
-- No further development of CAT-192 in scleroderma (Genzyme)
-- LymphoStat-B(TM) Phase II clinical trial met primary endpoint (HGSI)
-- Decision to seek partner for CAT-354
-- Net cash and liquid resources of 178.2 pounds Sterling million at 31
March 2005 (93.7 million pounds at 30 September 2004)
-- Net cash inflow before management of liquid resources and financing:
8.8 million pounds for the six months ended 31 March 2005 compared
with 14.2 million pounds outflow for the six months ended 31 March
2004
-- Updated guidance for the future
AstraZeneca Strategic Alliance
In November 2004, CAT announced a major strategic alliance with AstraZeneca for the joint discovery and development of human monoclonal antibody therapeutics, principally in the field of inflammatory disorders. Since that time, the joint infrastructure to manage the alliance has been established, AstraZeneca has already adopted one pre-existing CAT Discovery Programme into the Alliance and work is on track to start the anticipated initial five 2005 Discovery projects.
Abbott Litigation Update
In November 2003, CAT commenced legal proceedings against Abbott Biotechnology Limited and Abbott GmbH in the High Court in London concerning the level of HUMIRA® royalties due to CAT. On 20 December 2004, the judge, Mr Justice Laddie, ruled in CAT's favour stating that "Abbott was in error when it made its first royalty payment to CAT calculated on the basis that only two per cent of Net Sales was due. It should have calculated on the basis of the full royalty of just over five per cent and should have paid and continue to pay CAT accordingly."
In January 2005, Mr Justice Laddie announced his decision on various procedural matters arising from this Judgment and ruled in CAT's favour on all counts. The Judge denied Abbott's request for permission to appeal and further ordered that Abbott pay CAT's costs of the case (to be assessed in due course) and that these costs should be assessed on a higher basis than the norm to reflect the Judge's view of the merits of that part of the case.
Following Mr Justice Laddie's refusal to give permission to appeal, in February 2005, Abbott made a written application directly to the Court of Appeal. In March 2005, the Rt Hon Lord Justice Jacob, in the Court of Appeal, Civil Division, decided to grant Abbott permission to appeal. In the Order from the Court of Appeal, the reasons for the decision were stated as follows: "The points raised in [Abbott's] notice of appeal appear, just, to raise a real prospect of success and the commercial importance of the agreements is sufficient in the circumstances to provide a compelling reason for an appeal." CAT continues to believe in the strength of its position.
In January 2005, Abbott paid to CAT US$23.73 million, representing royalty arrears due to CAT arising from the original Judgment, and an additional sum of US$1.29 million, representing interest and compensation for currency loss on this amount. Abbott also paid CAT 2.85 million pounds representing an interim payment of legal costs due. Were Abbott to be successful on its appeal CAT would have to reimburse Abbott in respect of these payments.
Product Development
CAT Product Candidates
CAT-354 is a fully human anti-IL13 monoclonal antibody being developed by CAT, initially as a potential treatment for severe asthma. CAT commenced a Phase I clinical trial in the UK in September 2004 to assess the safety and tolerability of CAT-354, and preliminary results are expected to be available at the end of the second quarter of 2005. If this initial trial meets its primary objectives, CAT intends to progress CAT-354 in a further, Phase II, clinical trial later in 2005. It is currently expected that this trial will be a clinical pharmacology study involving allergen challenge in approximately 80 patients with mild asthma, and that it will be designed to evaluate the effects of different doses of CAT-354 on their response to allergen challenge, compared with placebo.
Given the size of the market and complexity of the potential disease indications for CAT-354, CAT has decided that the programme will benefit from having a partner experienced in developing drugs for major respiratory indications prior to commencing Phase III clinical trials. Accordingly, CAT has started to assess interest in the product candidate from a limited number of potential licensees.
Genzyme Alliance
CAT and Genzyme believe that the neutralisation of TGF-beta offers important and valuable opportunities for addressing unmet medical needs in a number of disease conditions.
GC-1008 is a pan-specific fully human anti-TGF-beta monoclonal antibody
being developed by CAT and Genzyme. The companies have received approval
from the US Food and Drug Administration (FDA) to begin a Phase I
clinical trial of GC-1008 in idiopathic pulmonary fibrosis (IPF).
Preparations for this trial are now underway, which is expected to
commence during the second quarter of 2005. The companies also intend to
commence a clinical trial of GC-1008 in various cancers and it is
currently anticipated that an Investigational New Drug (IND) application
will be filed for this trial by the end of 2005.
CAT-192 (metelimumab), a fully human anti-TGF-beta(1) monoclonal
antibody, has been jointly developed by CAT and Genzyme as a potential
treatment for scarring and fibrotic conditions, including scleroderma.
Following a study in 45 scleroderma patients that demonstrated that CAT-
192 was safe and well-tolerated, an analysis of all existing scleroderma
study results was undertaken to facilitate understanding of the disease
and its progression.
Following subsequent discussion with a panel of experts, suitable
endpoints for a further trial in scleroderma cannot be identified, and
Genzyme and CAT have concluded that no further development of CAT-192 in
scleroderma will take place. There are no plans to pursue study of CAT-
192 in other indications, as the companies focus their resources on the
clinical development of GC-1008.
Trabio® (lerdelimumab) is a fully human anti-TGF-beta(2) monoclonal antibody developed by CAT as a potential treatment for improving the outcome of glaucoma surgery. In March 2005, CAT announced the failure of Trabio to meet the primary endpoint in its second pivotal ('International' Phase III) clinical trial - a result consistent with the result of the first pivotal ('European' Phase III) clinical trial, announced in November 2004.
Since November 2004, CAT has been minimising all costs in connection with Trabio development, and has now terminated all further development of Trabio, subject only to continuing with its minimum obligations in completing the ongoing US clinical trial.
Licensed Products and Product Candidates
HUMIRA (adalimumab) is a fully human anti-TNF-alpha monoclonal antibody, isolated and optimised by CAT in collaboration with Abbott and now approved for marketing as a treatment for rheumatoid arthritis (RA) in 58 countries.
Abbott reported worldwide sales of HUMIRA of $852 million in 2004 and of $282 million for the first quarter of 2005. Abbott has forecast revenues from HUMIRA of more than $1.3 billion in 2005 and has recently indicated that HUMIRA has "multibillion dollar potential".
Abbott continues to develop HUMIRA as a potential treatment for a number of additional indications and reported in January that supplemental biologics license applications (sBLAs) had been made for two HUMIRA indications, early RA and psoriatic arthritis. Abbott also indicated that it expects to file applications in 2005 for ankylosing spondylitis, for RA in Japan and, possibly, for Juvenile RA. It has further indicated that a regulatory submission for Crohn's disease is expected in 2006. In psoriasis, Phase III clinical trials began at the end of 2004 and Abbott expects to submit a regulatory application for psoriasis in 2006 or early 2007.
ABT-874 is a fully human anti-IL12 monoclonal antibody, isolated and optimised by CAT in collaboration with Abbott, and licensed to Abbott. Abbott is committed to develop ABT-874 as a potential treatment for Crohn's disease, psoriasis and multiple sclerosis and continues to enroll patients in a Phase II clinical trial in multiple sclerosis. Abbott plans to begin a Phase II clinical trial in psoriasis by the end of 2005, as well as another clinical trial in Crohn's disease.
LymphoStat-B (belimumab) is a fully human anti-BLyS monoclonal antibody licensed by CAT to Human Genome Sciences, Inc (HGSI). HGSI is developing LymphoStat-B as a potential treatment for systemic lupus erythematosus (SLE), for which HGSI has Fast Track designation from the US Food and Drug Administration, and RA. In April 2005, HGSI announced that LymphoStat-B met the primary efficacy and safety endpoints in its Phase II clinical trial in 283 patients with RA: LymphoStat-B was shown to be safe and well-tolerated, biologically active and to reduce the signs and symptoms of RA at a level of statistical significance. Results of the Phase II clinical trial of LymphoStat-B in 449 patients with SLE are expected in Autumn 2005.
HGS-ETR1 is a fully human anti-TRAIL Receptor-1 monoclonal antibody licensed by CAT to HSGI and being developed by HGSI as a potential treatment for a number of cancers.
In November 2004, HGSI announced that it had completed the enrolment and initial dosing of patients in a US Phase II clinical trial of HSG-ETR1 in patients with advanced non-small cell lung cancer. The primary objective of the study is to evaluate tumour response. The secondary objectives are to evaluate the safety and tolerability of HGS-ETR1, and to determine plasma concentrations of HGS-ETR1 for use in a population pharmacokinetic analysis.
Additional Phase II clinical trials of HGS-ETR1 in patients with advanced colorectal cancer and in patients with relapsed or refractory non-Hodgkin's lymphoma continue, and HGSI has announced the completion of enrolment and initial dosing of patients in both trials. Both trials are to evaluate the efficacy, safety and tolerability of HGS-ETR1.
HGSI expects to announce the results of all three of the Phase II studies of HGS-ETR1 in 2005.
Two Phase Ib clinical trials of HGS-ETR1 to evaluate safety and tolerability in combination with chemotherapy also continue in patients with advanced solid malignancies. HGSI plans to complete these trials in 2005.
HGSI is presenting data from a "companion Phase I study" of HGS-ETR1 at the American Society of Clinical Oncology (ASCO) meeting in Orlando, 13 - 17 May 2005.
HGS-ETR2 is a fully human anti-TRAIL Receptor-2 monoclonal antibody licensed by CAT to HGSI, and being developed by HGSI as a potential treatment for cancer. A Phase I clinical trial of HGS-ETR2 in patients with advanced solid tumours continues. In January 2005, HGSI reported plans to initiate Phase II clinical trials of HGS-ETR2 as a single agent, and to initiate Phase Ib clinical trials of HGS-ETR2 in combination with chemotherapeutic agents in 2005.
HGSI is presenting data from a "companion Phase I study" of HGS-ETR2 at the ASCO meeting in Orlando, 13 - 17 May 2005.
MYO-029 is a fully human monoclonal antibody which neutralises the effects of GDF-8 (a protein which is associated with reduced skeletal muscle mass). The antibody was discovered by CAT in collaboration with Wyeth and is licensed to Wyeth, which is studying it as a potential therapy for muscle-wasting diseases, including muscular dystrophy and age-related sarcopenia. In February 2005, Wyeth announced a Phase I/II clinical trial in adult patients with muscular dystrophy (MD). The trial, which will take place in 12 clinical sites, is a prospective, randomised, placebo-controlled study in 108 patients, including equal numbers of patients with facioscapulohumeral MD (FSHD), Becker MD (BMD) and limb-girdle MD (LGMD). Results of the study are expected to be available in late 2006.
Pre-clinical Product Candidates
There are six antibody drug candidates licensed to partners which are at the pre-clinical stage of development. In addition, there are currently seven active CAT Discovery candidates and 28 with CAT licensees (excluding the candidates being progressed at licensees of CAT's patents).
Patent Licensing Agreements
In January 2003, CAT and Dyax announced the expansion of their 1997 licensing agreement. Under the terms of this expanded agreement, CAT receives milestone and royalty payments on antibody products developed by Dyax and Dyax's licensees. In January 2005, Dyax announced that two fully human monoclonal antibodies from Dyax's proprietary phage display libraries, IMC- 11F8 and IMC-1121B, entered Phase I clinical development at ImClone Systems. Accordingly, CAT received a milestone payment from Dyax in January 2005.
In September 2003, CAT granted Micromet a patent licence for the development and commercialisation of Micromet's human therapeutic antibody candidate MT201 (adecatumumab), specific for the epithelial tumour target Ep- CAM. In December 2004, Micromet and Serono signed an exclusive collaboration and licence agreement for the development and commercialisation of MT201 which is currently being tested in two multi-centre Phase II clinical trials. CAT receives milestone and royalty payments on human antibody-based products developed against the Ep-CAM target by Micromet and its partners. The first milestone payment would be due on filing for product approval.
Senior Management Changes
Diane Mellett, General Counsel, was appointed a Director following the Company's Annual General Meeting (AGM) on 4 February 2005. Also after the AGM, Dr David Glover, Chief Medical Officer at CAT, took early retirement from the Company and the Board. Dr Patrick Round, VP Development at CAT, has assumed responsibility for all of CAT's development activities and has joined the Executive Group (responsible for the operational management of the Company).
On 31 March 2005, Justin Hoskins was appointed as Company Secretary, succeeding Diane Mellett.
The Future
Following the achievements of the last few months, CAT is a company with strong foundations, good medium term prospects and significant opportunities for growth in the longer term.
These strong foundations arise from CAT's balance sheet strength, (at 31 March 2005 CAT had net cash and liquid resources of 178.2 million pounds) and the significant and growing revenue stream from HUMIRA royalties; especially if the Judgment of the High Court is upheld on appeal. The diversified pipeline of licensed antibody product candidates offers good prospects for growth in the medium term with no financial cost to CAT as these programmes progress through the clinic; notably ABT-874, LymphoStat-B and HGS-ETR1. Significant opportunities for the longer term are provided by CAT's proprietary programmes which, though at an early stage of development, are progressing with CAT-354 in a Phase I clinical trial and GC-1008 expected to enter Phase I trials this year, together with potential products resulting from the major Strategic Alliance with AstraZeneca.
The Strategic Alliance with AstraZeneca provides CAT with the opportunity both to build a significant pipeline of antibody therapeutics in important diseases in collaboration with a leading pharmaceutical company and to receive financial returns commensurate with its level of investment. As part of the AstraZeneca Alliance, CAT is committed to supporting and funding half of a minimum of 25 discovery programmes, jointly initiated, over the initial five- year discovery phase. This investment is fully funded by the 75 million pounds equity injection from AstraZeneca made in December 2004. CAT has the opportunity to invest in the clinical development of selected candidates that result from the joint discovery programmes and to thereby increase potential returns.
CAT believes that it is in shareholders' interests to run its business such that all its activities, excluding later stage product development, will either be pre-funded (as with the AstraZeneca discovery activities) or funded from revenues. This will ensure that the business is effectively self - financing up until the demonstration of efficacy in clinical trials. This strategy should enable CAT to continue to pursue its own carefully targeted proprietary discovery programmes. Decisions with regard to the funding of later stage clinical development activity will be taken on a case-by-case basis, in the light of circumstances at the time, but the chief criterion for further investment at this stage will be the scale of returns available to CAT's shareholders. CAT does not expect any significant increase in its current headcount.
CAT believes that it can reach this sustainable position in the near term (within three years), based on the continuing success of HUMIRA and assuming a satisfactory outcome to the appeal by Abbott against the High Court ruling in CAT's favour. Acquisition or product in-licensing is not considered necessary to achieve these goals, however CAT will continue to seek acquisition or product in-licensing opportunities where it is believed they can accelerate the development of the company without increasing its risk profile.
CAT expects this financial strategy to govern the operations of the Company for the initial five-year discovery phase of the AstraZeneca Alliance.
As a consequence of these changes, CAT does not now believe that its previously articulated goal of achieving profitability by 2008 remains in shareholders' interests, as it would severely limit the Company's capacity to invest in the opportunities available to it over the next five years. This strategy offers a sustainable business model with, as the existing pipeline of product candidates matures, good growth prospects for the future.
Financial Results
CAT made a loss after taxation for the six months ended 31 March 2005 of 16.3 million pounds (six months ended 31 March 2004 (H1) 18.0 million pounds; six months ended 30 September 2004 (H2) 20.1 million pounds). Net cash inflow before management of liquid resources and financing for the period was 8.8 million pounds (H1 - 14.2 million pounds outflow; H2 - 13.7 million pounds outflow). Net cash and liquid resources at 31 March 2005 of 178.2 million pounds, were 84.5 million pounds higher than at 30 September 2004 as a result of the receipt of the subscription monies from AstraZeneca and backdated royalty payments and costs from Abbott (net cash and liquid resources at 31 March 2004 - 107.6 million pounds; 30 September 2004 - 93.7 million pounds).
Turnover in the period was 9.8 million pounds (H1- 8.5 million pounds; H2 - 7.4 million pounds). Royalty income of 5.2 million pounds was recognised as revenue in the period representing the two per cent royalty rate argued by Abbott on sales of HUMIRA for the six months ended 31 December 2004, received in March 2005. Further details are provided in the notes to the financial information.
The payment by Abbott of royalty arrears and other related payments pursuant to the High Court Judgment are not reflected in these results. Pending resolution of Abbott's appeal, the royalty arrears payment and royalty receipts in excess of the two per cent rate argued by Abbott will not be recognised as revenue. Similarly, amounts received in respect of CAT's costs will not be recognised until the resolution of Abbott's appeal. The table below details payments received from Abbott in the period and the accounting treatment adopted.
Recognised as
Date Description Amount Revenue Creditors
received $million $million $million
January 2005 Back dated royalties 23.7 -- 23.7
January 2005 Costs and interest 6.7 -- 6.7
March 2005 Royalty to 31 Dec 04 25.0 9.7 15.3
Total 55.4 9.7 45.7
Total as recognised in m pounds 29.4 pounds 5.2 pounds 24.2 pounds
Direct costs for the six months ended 31 March 2005 were 2.0 million pounds (H1 - 1.5 million pounds; H2 - 1.5 million pounds), reflecting royalties due to the Medical Research Council (MRC) and other licensors on the royalties CAT receives on product sales under its various licences and collaborations. In respect of product sales of HUMIRA, the amounts payable to the MRC and other licensors included in direct costs are consistent with the basis adopted for revenue recognition. CAT has made an additional payment on account to the MRC, out of the back dated royalty payment received from Abbott. This is reflected in prepayments.
Research and development costs for the six months ended 31 March 2005 were 18.1 million pounds (H1 - 21.5 million pounds; H2 - 22.6 million pounds). External development costs were 6.0 million pounds in the six months ended 31 March 2005 (H1 - 9.5 million pounds; H2 - 9.1 million pounds), reflecting cost savings made on the Trabio programme. The spend on Trabio for the six month period was 2.9 million pounds (H1 - 6.0 million pounds; H2 - 5.1 million pounds). Research and development staff costs and consumables were 7.4 million pounds in the period (H1 - 6.8 million pounds; H2 - 8.3 million pounds).
General and administration expenses for the period were 9.1 million pounds (H1 - 5.5 million pounds; H2 - 5.5 million pounds). Litigation expenses for the six months ended 31 March 2005 were 3.1 million pounds (H1 - 0.7 million pounds; H2 - 1.8 million pounds) due to the cost of the trial against Abbott in November 2004. CAT has received a payment on account of costs from Abbott (2.85 million pounds) which has not been credited against this cost, pending the outcome of Abbott's appeal. General and administration staff costs were 2.3 million pounds in the period (H1 1.7 million pounds; H2 2.1 million pounds). The non-cash foreign currency translation charge arising from the retranslation of CAT's trading balances with its US subsidiary, Aptein Inc and the retranslation of US dollar deposits held was 1.2 million pounds (H1 1.4 million pounds; H2 (0.3) million pounds).
During the period the Group accrued interest receivable on its cash deposits of 3.0 million pounds (H1 - 2.1 million pounds; H2 - 2.0 million pounds) reflecting the increased level of cash and liquid resources held in interest bearing securities.
The significant increase in creditors reflects the amounts received from Abbott, as detailed in the table above, not yet recognised in the profit and loss account pending the outcome of the legal proceedings with Abbott.
In the event that CAT prevails on appeal, up to approximately 10 million pounds of the 29.4 million pounds received from Abbott referred to in the table above will be payable to the MRC and other licensors.
If the payments received from Abbott not yet recognised in the profit and loss account (and the related payment on account to the MRC) are excluded from the cashflow statement for the six months ended 31 March 2005, the net cash outflow before management of liquid resources and financing for the period is 14.3 million pounds (H1 - 14.2 million pounds; H2 - 13.7 million pounds).
Outlook
Net cash outflow, before management of liquid resources and financing, for the full year (excluding the Abbott payments not yet recognised in the profit and loss account and related payments on account to the MRC), is expected to be of the order of 32 million pounds. This is consistent with guidance given in November 2004. Taking account of the Abbott and related payments, aggregate cash inflow for the year before financing is expected to be of the order of 2 million pounds (based on current exchange rates).... |
