Annual Stockholders Meeting 5/8/06
CAVEAT
I’m an amateur. I am human. Mistakes will be made. When in doubt, call Investor Relations. Keep in mind that some of the claims are simply me passing along what I thought I heard at the meeting. I’m not in the industry so I can’t challenge them.
PRE-MEETING
Same place, different year. The meeting was held in a rented conference room in downtown Seattle. There were about 120 seats but only about a third of them were occupied. Of those, about half were “suits” and employees. So for a company with over 10,000 shareholders there were 20 independent observers.
FORMAL MEETING
As usual everything passed. It only took a few minutes and things swept on to the real meeting: the business presentation.
BUSINESS PRESENTATION
The CEO ran the entire show.
She started off by recognizing that 2005 was a challenging year (my note: haven’t they all been challenging?). They continue to make sure they have sufficient resources while making real progress on treatments.
Their core technology remains the ability to use AAV ( a natural virus ) to administer protein-based therapies. (my note: Is that different from a genetic therapy? I mean the name is “Targeted Genetics”. Of course it is probably that the gene therapy results in the body creating an improved production of proteins.) They are seeing increased partnership interest in their technology, which potentially means double-digit royalties. Their existing infrastructure is also handy: two cGMP 100 liter bioreactor production trains (my note: and good luck translating that one. I’m simply glad I was able to write it down before the next slide came up.) Their production facilities are similar to those used for monoclonals, which provides a sense of familiarity with potential partners. A significant advantage to TGEN’s approach is that is should take fewer doses than conventional treatments.
PIPELINE - INFLAMMATORY ARTHRITIS
This treatment is totally in-house, there are no partnerships, (my note: though there have been questions in the past about Amgen’s claims to some ownership rights).
The phase 1 study was expanded to a phase 1/2 study, which will include a third dose and 120 patients. Data will be presented in early June.
Targeted Genetics’ potential market is potentially more than $2B, which is a subset of the larger market and represents the 15% to 40% of current patients who do not respond to today’s treatments. Targeted’s treatments are complementary, entail less bone and cartilage loss, and an injection in one joint MAY help another joint.
In addition to the interim results, the complete results should be presented in mid-2007.
PIPELINE - AIDS/HIV VACCINE
This is a partnered program with IAVI (developing world) and NIAID (affiliated with NIH for work in the US). Phase 1 results are expected 3Q06. Phase 2 has started in South Africa. All of the R&D work is paid for by the partners (my note: though it seems that there is some question about who pays for some of the trails. Also, the IAVI works is for the developing world to be non-profit with Targeted retaining commercialization rights within the developed world, but I can’t remember of NAIAD would encroach on that possible revenue stream.) This works should cost and generate about $18.2M within the next five years.
PRE-CLINICAL
Congestive Heart Failure is being worked on via a new partnership with Celedon. There is revenue sharing but Celedon retains the commercialization rights.
Huntington’s is being worked on with Sirna with cost and revenue sharing. There will probably be profit sharing if they partner.
RESULTS REPORTING
There will be various interim reports. Completion reports for phase 1 arthritis work will be in 2Q06 and phase 1/2 will be in the first half of 2007.
FINANCIALS
As of the end of March they have $16M with $9M from partnerships and an annual burn rate of $13M to $16M. They are working to bring down the burn rate.
QUESTIONS & ANSWERS (paraphrased and simplified for my benefit)
? The stock split will be determined in a vote later in the day at a board meeting.
? Amgen’s tie to the arthritis treatment hasn’t recently been an issue. Their communications have been cordial.
? Contract manufacturing may be a source of revenue, but is not a focus.
SUMMARY (what I heard)
The company is getting by, but they have to watch the money, work on the technology and continue the trials. The results are encouraging but will take years before commercialization.
CONCLUSION (what I thought)
The company had great potential but has many years to go, many trials to run, and maybe has enough cash and financing opportunities to get there. The stock price is merely one indication that there is a lot of risk here. Besides the biotech risk, there is cash flow, Amgen uncertainties, and competition. If they pull this through, then it will be an impressive success story, but they have a long time to go before significant late stage results can reported.
If they produce a good treatment for arthritis or AIDS, the stock will do startling things, but I have to admit that the risk has gotten too much for me. I’ve held the stock long enough to see the pipeline narrow and the cash diminish. I’ll continue to hold but would only buy after a sustained upward move in the stock due to significant news. At least that is the way I feel less than three hours after the meeting.
DISCLAIMER LTBH since about 2000 and have actually sold some to claim the losses. |
