Hello Folks,
I have some random thoughts on LGND from the shareholder meeting, intertwined with some general musings on the company ...
1 - breadth of research
LGND has a stunning array of technology, albeit mostly early stage. I suspect there are several large pharmas whose basic research has much less long term potential than LGND. However, this isn't meant to under-estimate the value of later-stage clinical products, marketing and sales infrastructure, and earnings in company value ... all of which are lean or non-existent with LGND at this time.
On the subject of LGND basic research, Robinson mentioned LGND is getting issued patents in the US at the rate of 3-5 per month. They consider about 100 molecular targets their "sandbox", and of those, they have 30-40 under active discovery research.
He expects LGND and its partners to be able to put 3-5 compounds per year into the clinic.
2 - David Robinson
Very impressive guy. I was wondering about his compensation before the shareholder meeting ... he's highly paid compared to his peers as CEO's of mid-range biotechs (>$500K in salary, 100K options granted per year).
What appears striking in Robinson is his bandwidth (and I'm sure his span of control). This came through in his presentation, and in the Q&A. He seems to have a grasp of the issues in breadth and depth across the areas of LGND's technology and business. There is a ton of stuff going on in this company ... and he's on top of things.
In addition, as others have commented on this thread, he appears to be a good negotiator ... a real plus in dealing with pharma companies, which are not only tough negotiators in their own right, but are ponderous, complex bureaucracies.
He was also even-handed in setting expectations, as any good biopharma executive would be. Not every collaboration will lead to a marketed product, not every research initiative will be successful, not all of products in the clinic will be commercial successes, or even marketed products, not all indications tested will prove fruitful. Lots of people have commented on threads like this that this is the nature of drug development, for everyone ... but big pharma shields us from their dry holes, while biotechs' inevitable disappointments and failures are played out in press releases and share price declines.
3 - profitability in 1999
Robinson said something like "it's not a slam dunk, but it's the right goal at the right time." This seemed to be the right thing to say about the issue. He also walked through the later stage pipeline (Panretin topical and oral, Targretin topical and oral, Ontak), and presented information on market sizes, target market penetration, competitive products - attributes and pricing, and possible price range for LGND products. Apparently the 1999 profitability shakes out from those assumptions: if, say, 2 or 3 of the 5 products are on the market for most of 1999, and achieve the market penetration at the pricing levels suggested (neither of which appear to be over-aggressive), then LGND has a few cents in earnings for the year (probably where the analysts' c. $0.10/share come from. Two points to make on this. There appears to be upside here if a) most or all products are on the market for most or all of the year, and b) if the market penetration expectations turns out to be conservative (the numbers were 3-7% penetration depending on the product, first year). On the other hand, there are lots of "ifs" here ...
4 - Alliances with news (all were mentioned, I'm just pulling out what I thought was news)
AHP - expects a second IND for an estrogen modulator in breast cancer later in 1998, with two more compounds queued up
ABT - expects a development decision whether to proceed with a glucocorticoid agonist 3Q or 4Q 1998
SBH - publishing some interesting progress in the hematopoietic growth factor area in the near future ... Robinson just dropped this without much comment. My personal opinion is this could make a big splash.
PFE - expects to hear c. 6/98 whether droloxifene will proceed to PIII in breast cancer
LLY - Targetin PII European diabetes data later 1998
5 - SERM market
Robinson expects this to be one of the top 3 pharmaceutical markets in the 1st decade of the 21st century.
6 - Androgen agonists and antagonists
Robinson feels this is an area with enormous potential. This is the second largest research program within LGND. Believes that LGND has the largest effort in this area in the pharmaceutical world, and is the leading company in patent position on male androgen receptors.
Expects an androgen antagonist (1331) to enter the clinic by mid-1999. Currently pre-clinical testing for benign prostatic hyperplasia, with potential in prostate cancer, acne, and hirsutism.
Expects to have compounds in the next two years which could be active in male hormone replacement therapy, male osteoporosis, and possibly even rebuilding bone in female osteoporosis.
7 - Targretin (comments limited to oral, I think)
Most optimistic about psoriasis, breast cancer, and CTCL. Hopeful about diabetes, but doesn't know the answer yet.
CTCL:
don't remember if he said this, but optimism is obvious, based on clinical data.
Breast cancer:
didn't really drill down here, other than that there's a lot of data supporting Vitamin A derivatives' (retinoids) activity in breast cancer. Robinson didn't mention, but there's obviously the exciting pre-clinical data vs. and in conjunction with Tamoxifen in prevention and treatment.
He did comment that breast cancer work is early stage, and that trials here tend to be big and long in duration. My inference: don't expect too much too soon.
Psoriasis:
Apparently products that work in CTCL tend to work in psoriasis. Both are T cell mediated, with inflammatory involvement. Panretin oral showed good efficacy in PII trials in psoriasis, but didn't like side effect profile for this indication. Should have PII Targetin oral results later this year, and will choose between the two for further development.
Diabetes:
Began by dose escalating, saw drug effect, but toxicity was unacceptable for chronic indication, now dose de-escalating. Toxicities were typical retinoid side effects (mucal and cutaneous irritation, headache and triglycerides), with triglyceride elevation the most important to get rid of.
My personal opinion is that Targretin oral as a marketable product in diabetes is possible, but unlikely. If it moves to PIII, I'll be pleasantly surprised. However, I don't know how the financial markets will respond, at least in the short run, if it didn't move forward.
The Nature article showed sketchy pre-clinical data for Targretin (modest glucose lowering, but significant reduction in insulin levels), while mostly focusing on 268 (significant glucose, insulin, and triglyceride lowering + additive effect with TZD's). At least based on this information, the follow-on compounds are much more promising for diabetes.
Non-Small Cell Lung Cancer (NSCLC):
Robinson was not overly optimistic here, but didn't make any inferences because he doesn't have the data.
He did comment that NSCLC would be a big win since it's a big market and poorly served by existing therapies, but it's a difficult indication to develop a drug in. They are testing as a single agent in later stage patients ... given the nature of cancer trials, they need to test in late stage patients who have failed all other therapies ... but Targretin is expected to be a growth slowing agent which should be more effective in earlier stage patients.
The trial is less than 1/2 accrued. My personal opinion is that accruals that are this much slower than expectation are big caution flag for expectations for success.
8 - Targretin gel
Actinic keratoses:
Completed 60 patient PII trial, will know unblinded results in June or July of this year. Optimistic about possibility of success because 1st generation retinoids have been shown to prevent progression to malignancy of actinic keratoses. Good results in this PII trial could bode well for off-label use, since of course Targretin gel is finishing up PII/III trials in CTCL.
Next indication:
A logical next indication for Targretin gel would be squamous or basal cell skin cancers, especially ones where large body surfaces are involved, hence unamenable to surgery.
9 - CTCL
Targretin oral, Targretin gel, and Ontak cover overlapping, but distinct segments of the CTCL market, and together offer a LGND-owned therapy for the whole life cycle of the disease.
Targretin gel, with its limited toxicity, would be used in early stage patients (market of about 8,000, I think just in the US), and would probably be priced between $6-9K per year. Targretin oral would be targeted at intermediate stage patients (didn't catch the market size - it overlaps quite a bit with the gel and Ontak), and would probably sell for between $15-20K per year. Ontak would be the later stage patients (market size, 16,000), and would probably sell for $32-60K per year. As I mentioned above, both the pricing and the efficacy/side effect profiles should be highly competitive with alternative therapies currently used.
10 - Sales force / product launches
Expects a cost of $8-10M to launch in the US, same in Europe. Complete marketing and sales management is in place, total of 15 people. Expects 22-25 sales reps in the US, with maybe a full complement of 35 oncology sales reps by 2002 or 2003 in the US. If FDA's ODAC responds favorably to Ontak June 2, will begin to add the sales reps in Q3 of this year.
11 - Seragen buyout
Robinson was very positive on the deal. Based on his experience looking at similar, late stage products available for sale in the last couple of years, Ontak would be worth 2-3x what LGND is paying for SRGN, if the product were on the open market (e.g., without the unique circumstances of SRGN's cash position and tangled up ownership).
Next indication for Ontak would be to test it in relapsed non-Hodgkins lymphoma patients. He's not optimistic on the psoriasis indication, based I'm sure on toxicity.
SRGN has an improved formulation of Ontak, close to the IND stage. It's a lypholized product, which should improve the side effect profile. It also will be easier to handle and administer, as it won't require cold storage, and can be used subcutaneously (Ontak has to be administered intravenously).
When asked about the rest of SRGN's pipeline and its core technology, Robinson was quite diplomatic, but my impression is that those assets aren't worth much, were not central to the deal, and would be highly unlikely to meet the development hurdle to compete against the very promising products elsewhere in LGND's pipeline.
Peter |
