GS: ABGX (IL/N):Q2 update, lung data minor
negative, key data Q3/Q4
52-Week Range US$11-7
YTD Price Change 3.58%
Market Cap US$951.5mn
Current Yield —
Long Term Growth Rate
EPS Growth Estimate NA
Fiscal Year (ending in Dec)
2004 2005E 2006E
US$-1.92 US$-2.05 US$-2.00
Key items from ABGX Q2 1) ABGX has decided to co-promote Panitumumab (partnered
50/50 w/ AMGN), assuming approval 2) Phase III data from Panitumumab in 3rd line
colorectal cancer could be available in Q3/Q4 (data now locked) and 3) Phase II data in
1st line advanced lung cancer did not show efficacy. Given failures of other EGF
inhibitors in this setting, we do not regard this as a major setback. Several other studies are
underway to support potential expansion. With the exception of a $25M 1X charge,
financial results of ($0.49) p/s non-GAAP were in line with our ($0.50) est. We have
adjusted our 2005 loss est. to reflect the $25M charge and our 2005 GAAP l/p/s est. is
now ($2.49) from ($2.22). On a non-GAAP basis our ($2.05) est is unchanged. The key
valuation driver is Panitumumab. We maintain an In-Line rating and Neutral coverage
view. Key risks are clinical failures/delays.
I. Investment view
We maintain an In-Line rating on Abgenix and Neutral coverage view. We regard progress
with Panitumumab is the primary valuation driver. We look for potential BLA submission
in H205 or early 2006, assuming positive data. Although Panitumumab will enter an already
competitive market, we believe it may address a $500M plus commercial opportunity over time, as
the label is potentially expanded with combination therapy and in settings beyond third line
colorectal cancer monotherapy. Phase I dose escalation studies with ABX-PTH, for secondary
hyperparathyroidism are underway. Partnered antibodies that are gaining visibility include Amgen's
AMG-162 for osteoporosis, in Phase III studies, and Pfizer's CTLA4 antibody for cancer, in Phase I.
We note that in addition to these, Amgen has an additional antibody in the clinic, Pfizer has 3,
Curagen, Chiron, Human Genome Sciences and Agensys each have an antibody in the clinic. Key
risks include potential clinical failures and/or delays.
II. Quarter review and model adjustments
On a non-GAAP basis, the quarter was essentially in line with our estimates, at a loss of $44.4
million, or ($0.49) per share, vs our $45 million, or ($0.50) per share estimate. In addition to a $15
million charge for restructuring, which we had factored into our estimates, Abgenix reported a $25
million charge for impairment of intangible assets. With the one time charges, reported results on a
GAAP basis were $84 million or ($0.94) per share, vs our $60 million, or ($0.67) per share
estimate. We have adjusted our 2005 GAAP estimate to reflect the $25 million charge and our
GAAP loss estimate is adjusted to ($2.49) per share from ($2.22). Our non-GAAP EPS estimate is
unchanged at ($2.05) per share. Our Q3 and Q4 estimates are unchanged at ($0.50) and ($0.57) per
share. Management maintains previously provided operating guidance of revenues approximating
2003-2004 levels ($17-$18 million), operating expenses in the $185-$200 million range, and cash
use approximating $105 to $120 million.
Abgenix ended the second quarter with $378 million in cash and marketable securities. The
company has convertible debt of $463 million, including $300 million, 1.75% debt due 2011, and
the remainder at 3.5% due 2007. The company's goal is to manage operating expenses such that at
any given time it has at least two years of cash.
III. Panitumumab - Phase III results Q3/Q4 timeframe, lung data minor setback
A. Clinical update
Colorectal data
Panitumumab, in development through a 50/50 agreement with Amgen (OP/N), appears on track for
potential BLA submission in H2 2005 (assuming data are positive). Data from the ex U.S. study will
be used as the basis for filing, and the U.S study will be supplemental. Patients in the pivotal studies
have 3rd line colon cancer and will have been exposed to 5-FU, leucovorin, oxaliplatin and/or
irinotecan. Management indicated that the cut off point for data collection has been met, with results
potentially available at the end of the third quarter.
Enrollment in the PACCE study, which potentially may enable Panitumumab's use as part of first
line treatment with Genentech's (OP/N) Avastin, is underway, with data possibly available in 2006.
Combination studies with Amgen's VEGF inhibitor, AMG-706, are also underway.
Phase II data in first line advanced non-small cell a minor setback
Abgenix indicated that there was no difference relative to chemotherapy alone of Panitumumab plus
chemotherapy in the primary endpoint of time to disease progression, in a Phase II, 175 patient
study. Given the results of other EGF inhibitors in this setting, and the fact that this study was
started long before the results of the large lung studies with oral EGF inhibitors, we do not believe
the results are too surprising. Full details of this study are expected in October at the European
College of Oncology meeting.
Two additional studies in the lung cancer setting are underway, including a Phase II study in
combination with Amgen's AMG706, (a VEGF inhibitor) and a multiple tumor type study also with
AMG706. Assessment of biomarkers, including EGF gene amplification may be important to
targeting the right patients.
B. Commercial update.
Abgenix decides to co-promote
Abgenix indicated that they do plan to co-promote Panitumumab with Amgen, assuming it is
approved. Details on potential number of reps will be provided as potential launch gets closer. We
regard this as a logical strategic decision for Abgenix, potentially laying the commercial foundation
for other programs.
Manufacturing on track - four conformance lots produced
IV. Pipeline highlights:
* Start of Phase III 1st line colorectal studies with Avastin
* Panitumumab data assessment point
reached in international colorectal study * ABX-PTH to Phase dose escalation studies in secondary
hyperparathyroidism o Panitumumab BLA submission on track for H2 2005/early 2006, w/ positive
data o Phase II lung data at October European College of Oncology meeting o Phase II data in the
renal and colorectal settings expected in H2 2005
* Completed
I, Meg Malloy, hereby certify >>> |
