citi/ssb q3 preview:
Abgenix (ABGX, Hold, Speculative)
Reporting date: Tuesday, October 25th, after market close with a conference
call.
We expect Abgenix to report Q3 2005 EPS of a loss of $0.49, in-line with
consensus. Our revenue estimate is $4.5 million for the third quarter,
reflective primarily of contract revenues. Our total operating expense
estimate is $46.8 million. We remind investors that the company indicated that
it plans to control its operating expenses in advance of a potential market
launch for panitumumab (ABX-EGF) in 2006. In June 2005, Abgenix announced the
consolidation of its research and pre-clinical activities into the company's
Canadian facility in British Columbia as a means to generate near-term
operating efficiencies. Following this restructuring, Abgenix exercised its
co-promotion option with Amgen for panitumumab indicating its intention to
shift its infrastructure focus towards building a commercial entity. We would
expect an update on Abgenix's commerical plans related to panitumumab in the
near term.
In our view, quarterly results are not the primary driver for the shares as the
focus remains on the clinical progress of panitumumab. Panitumumab is a fully
human monoclonal antibody targeted to the EGF receptor for cancer and is in
advanced stages of clinical development. Top-line results (i.e., progression-
free survival) from the pivotal Phase III international study in advanced
colorectal cancer (CRC) are expected in the near-term. We believe there is a
high likelihood of positive top-line results from the Phase III international
panitumumab study given data from prior clinical studies and from clinical
studies of ImClone's Erbitux in similar settings. In addition, we note both
Amgen and Abgenix have made relatively positive comments to date about the
international trial, which is designed as an open-label study comparing
panitumumab plus best supportive care (BSC) to BSC. Amgen has indicated at a
minimum, it expects response rates similar to those seen in the Phase II trial
(about 9%). In addition to releasing top-line data for the Phase III
international study, Amgen indicated at a recent investor conference it also
may release interim results from ongoing U.S. studies in third-line CRC and in
low EGFR expression third-line CRC later this year (enrollment is greater than
130 patients for both U.S. studies). The primary endpoint in these U.S.
studies is response rate. Importantly, Amgen also indicated it may release
interim results later this year from approximately 150 patients enrolled out of
a targeted 1,000 patients in the PACCE study, which is assessing the use of
Avastin plus standard chemotherapy with or without panitumumab as a first-line
treatment for metastatic colorectal cancer. The primary endpoint in this study
is progression-free survival. If the international pivotal trial is
successful, Amgen is planning on initiating a rolling regulatory filing for
panitumumab as a third-line treatment in metastatic colorectal cancer by year-
end with a potential completion of the filing in Q1 2006 with data from select
U.S. studies. The companies met with the FDA in December 2004 and received
positive reinforcement that a regulatory submission based on one pivotal study
augmented by data from other studies, such as the two U.S. studies in third-
line CRC would be sufficient. If the clinical data suggests panitumumab is
equivalent in efficacy to ImClone/Bristol-Myers Squibb's Erbitux, we believe
panitumumab has the opportunity to become the EGFR monoclonal antibody of
choice based on its better safety profile and greater flexibility.
Specifically, panitumumab has shown lower infusion reactions with no need for
premedication (better safety profile) and greater administration flexibility
(every two weeks). In our opinion, positive top-line results and a regulatory
submission would be key catalysts for the stock. Specifically, we view the
release of the top-line results from the international pivotal study for
panitumumab as a potential trading opportunity. The only caveat is that with
the 50-50 sharing arrangement, Abgenix will continue to have to spend
significantly to support its share of the program pushing profitability out to
fiscal 2009, by our analysis.
ABGENIX Q3 2005E 2005E
Total Revenues $4.5 million $15.1 million
G&A Expense $5.4 million $21.8 million
R&D Expense $40.0 million $160 million
Net Loss $43.7 million $177 million
EPS ($0.49) ($1.97)
Source: Citigroup estimates.
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