Targeted Genetics Annual Shareholders Meeting 5/17/07
CAVEAT I am human, an amateur investor, and NOT a biotech professional. Mistakes will be made, so remember the official word is always the SEC and Investor Relations. But I do what I can.
PRE-MEETING
Same room - different year. How many of these have I attended? The room was a rented conference room with seats for almost 100 people. Only about half of the seats were occupied and half of them were suits; i.e. financial types and management. The rest were casual independent investors and familiar faces with a few employees as well.
The attendance was low enough that it was easy to talk to official types. Everyone seemed to know about Dendreon's problems (DNDN). I won't go into them here except to disclose that I own shares in both and that Dendreon and Targeted Genetics share a similar set of hurdles as they introduce he FDA to new technologies.
FORMAL MEETING
Everything passed. As if anything else ever happens.
BUSINESS PRESENTATION
The CEO ran the show as usual. She does a good job considering the complexity of the material and the tenuous nature of the company's finances. Biotech ain't simple and they don't have years worth of cash. Glad I don't have her job.
In general they are focussing on a few treatments (AIDS, Arthritis, Huntington's, and congestive heart failure) as they are treating with an AAV vector, but are also reminding the investment community and the biotech industry that Targeted Genetics also has unique abilities to deliver proteins and RNAi with high throughput manufacturing processes. (paraphrased by me - revenue can come from treatments which are farther out there, or from helping manufacture someone else's product).
Arthritis
The company is conducting a phase I/II study for treating inflammatory arthritis (though I keep getting confused about the various types, so check). The study works with about 120 patients, about a quarter of whom get the placebo. They expect to be fully enrolled by mid-year with data presentations in June and November (but I can't remember which study will provide the data). The affected joint receives an injection three times and is checked over the course of about 12 - 30 weeks. Data so far are encouraging because 1) 10 years of AAV trials have proven safe, 2) there is an appropriate immune response, 3) increased dosages increase the time that a benefit is apparent.
For those coming to the company late here is a brief description of the technology. Some treatments rely on getting molecules into the inside of the cell. Many drugs get digested wrong, or cleaned out of the blood by the kidneys, or for whatever reason, never make it past the cell wall. Targeted Genetics manages to deliver the medication by introducing it through a benign virus know as AAV. As I understand it ( and being an amateur means that I could be wrong ) the cell can then generate the appropriate protein or RNAi as if it had learned how. While I might have the specifics wrong, the upside is that the treatment is delivered in a sustained low-dosage fashion directly where it is needed, which is why the side effects can be so benign. Fortunately, an injection in one joint can sometimes spark a similar response in the opposite joint (i.e. right knee gets better after the left knee gets a shot).
The current market is about 2,000,000 patients and $8B, but about 40% of those patients have some remaining issues. Targeted Genetics can then market to that approximately $3B market (though I suspect that the true market value will not be as simple as 40% of $8B, but more based on how many patients want the additional treatment and how much they are willing to pay.)
There was a nice video that describes it better. Maybe they'll release copies to those that ask.
HUNTINGTON'S DISEASE
Sirna ( which was bought by Merck) is using Targeted Genetics' AAV vector to deliver and RNAi treatment. the plan is to silence and regulate specific genes.
The patient population is smaller with about 50,000 - 200,000 at risk and with about 10,000 of them contracting the disease. They tend to die from it quickly and there is no existing treatment. The partnership is aiming for an IND submittal in the second half of 2008.
AIDS
The phase one trial in Belgium, Germany, and India was completed. The phase two trial is continuing in Africa and it sounds like there will be safety immune response data to report sometime late this year. The work within the US is pre-clinical (though I suspect that is more a function of resource allocation and not a technological holdup).
The non-US work is fully funded by IAVI and is operated as a not-for-profit. NIAID is funding the US and developed world trials, and as I recall, Targeted Genetics retains the commercialization rights.
CONGESTIVE HEART FAILURE
The treatment moved from pre-clinical to phase one as of today (5/17/07). Celedon is fully funding the activity but they also retain commercialization rights. Targeted Genetics should see revenue sharing (but I don't know how formal the sharing agreement is).
They will have more news in the second half of this year (preclinical results?) and in the first half of 2008.
2007 PLANS
Arthritis treatment is their prime focus, and hopefully partnerships will become more valuable. (There was a GOALS chart that looked good but was so busy that I never quite figured out what to get from it.)
As for cash, they had about $11.3M as of 3/31/07 with an expected extra $10M coming in from partners, but the burn rate is about $13M-$16M, so there will be a need for some financing; i.e. dilution, debt, partnerships, etc. No one source looks to be sufficient. Currently, institutional plus biopharma ownership sits at about 50%.
QUESTIONS & ANSWERS (paraphrased for simplicity)
? They were congratulated on holding the company together.
? Hopefully, getting a full phase two study in operation will help attract partners.
? The next step after a phase I/II study can be phase II/III depending on the data.
? The FDA wants to approve a gene based therapy. Conducting clinical trials in third world countries is politically tricky.
SUMMARY & CONCLUSION
They are making progress, but they aren't making much money. They have a lot of potential, but a phase three clinical trial is far away. Until then they are heartened by the ten years of safety data, but shackled with tight budgets.
One factoid demonstrates their situation for me. If their arthritis treatment succeeds and generates 40% of $8B in revenue, and if they have a price/sales of about 6; then the company's future worth would be $19.2B, but right now they have less than a year's worth of cash in the bank and many years to go. High risk and high reward - it is hard to find more extreme cases. They are out there, but there are far less risky investments.
I'll continue to hold, though I will sell a bit for tax purposes. If things get better for them there should be sufficient time to get on board.
DISCLAIMER
LTBH since late 2000 with multiple purchases along the way, though I've sold some for the tax losses. |
