Sep 2, 2008
Executives
John Crowley – President and CEO Matt Patterson – COO Jim Dentzer – CFO
Analysts
Terry Coyne – J.P. Morgan Matthew Osborne – Lazard Steven Harr – Morgan Stanley
Operator
Good afternoon, everyone. My name is Dana and I will be your conference facilitator today.
At this time, I’d like to welcome everyone to the Amicus Therapeutics conference call. All lines have been placed on mute to prevent any background noise.
After Amicus remarks, there will be a question-and-answer period. (Operator instructions).
During this call, Amicus may make various remarks about the company's future expectations, plans, and prospects that constitute forward-looking statements for purposes of the Safe Harbor Provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the company's most recent Annual Report on Form 10-K and in our periodic reports on Form 10-Q.
These documents are available from the SEC, the Amicus website, or from our Investor Relations representative. In addition, any forward looking statements represent our estimates only as of today and should not be relied upon as representing our estimates as of any subsequent date.
While we may like to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our estimates change. Before we begin, we would ask everyone to go to the Investor Relations section of the company's website, amicustherapeutics.com, and print out the press release and related financial tables.
These will be particularly useful when the company reviews the financial results and reconciliation to non-GAAP financial measures discussed today. Today’s call also is being recorded.
And now I’m happy to turn the call over to Mr. John F.
Crowley, President and CEO of Amicus Therapeutics. Please go ahead, sir.
John Crowley
Great. Thank you.
And good afternoon everyone and welcome to Amicus’ second quarter 2008 conference call. I am joined on this call by other members of our executive team here at Amicus, including Matt Patterson, our Chief Operating Officer.
Matt will provide an overview and update on our lead lysosomal storage disease program. I’m also joined by Jim Dentzer, our Chief Financial Officer.
And Jim will provide an overview of the financial results for the quarter. And David Lockhart, our CSO, is also here and available to participate in the Q&A portion of the call.
As you all know, Amicus is a bio-pharmaceutical company and we are focused on developing pharmacological chaperones, which are small molecule therapeutics for the treatment of a broad range of human genetic diseases. We are currently performing clinical trials for three unit products intended to treat the lysosomal storage diseases, Fabry, Gaucher, and Pompe respectively.
In addition, we continue to evaluate the potential for new treatments based on chaperone technology for a range of other disease, including diseases of neurodegeneration and other metabolic disorders. Our clinical programs are also progressing nicely, and I will highlight two major accomplishments for the quarter.
First, in our Amigal program for Fabry disease, as we noted in our press release earlier this week, we recently completed a successful end of Phase 2 meeting with the FDA. Matt is here and will provide a more detailed summary of the outcome, but overall I want to say that we are very encouraged by these results and that we look forward to continue to work it closely with the agency in the coming months as we finalize the Phase 3 plan for Amigal.
Second clinical advancement I’d like to highlight for the quarter is with respect to our Phase 2 program for Pompe disease. Here we initiated a Phase 2 development of our pharmacologic chaperone AT2220 for Pompe.
This is a very significant milestone, both because it represents the first investigational oral therapy in development for people with Pompe disease, but also because it is the third compound coming out of our pharmacological chaperon platform to enter the clinic. I’d also like to add, as many of you have seen from our press release earlier today, we are tightening our guidance range for anticipated 2008 cash burn, which Jim will discuss in more detail later in the call.
I would now like to turn the call over to COO, Matt Patterson to review our progress in the lysosomal storage disease programs.
Matt Patterson
Thanks, John, and good afternoon everyone. I’ll start with an update regarding Amigal for Fabry disease.
As a reminder, we’ve previously stated that our primary goal for the Fabry program this year is to meet with both the FDA and the European regulatory authorities to share the results of our Phase 2 studies and to obtain feedback on our vision for Phase 3 clinical program with the goal of determining our global plan for Phase 3 by the end of 2008. And as John mentioned, earlier this week we announced that we’ve recently completed an important milestone with the successful completion of an end of Phase 2 meeting with the FDA.
The key result for this meeting where the FDA indicated that the data from the completed Phase 2 clinical studies of Amigal support the start of Phase 3 development and that FDA agrees Amigal meets the criteria to be considered for accelerated approval. In addition, the agency indicated that it is not opposed to the use of a surrogate primary endpoint, pending further discussion and final agreement on the Phase 3 trial design.
So, this is a very positive step forward for the Amigal program and we are very pleased with the results of the meeting, as John mentioned. Let me elaborate just a little bit on the last point related to the surrogate endpoint.
Out of respect for the FDA and the ongoing nature of our discussions toward the final Phase 3 protocol, we’re not going to go into more detail about the specific endpoints and study designs currently under discussion with the agency. But we can say that the end of Phase 2 meeting was a productive positive discussion, centered in particular on what we observed in the Phase 2 studies, specifically related to GL-3 reduction and of course what endpoints are most appropriate for that trial, the Phase 3 trial on Fabry disease, and patients who may benefit from treatment with Amigal.
So, to finish the update regarding the regulatory process, we’ll be working closely with the FDA in the coming months to finalize the appropriate Phase 3 trial for Amigal. In addition, we are in the process of working with the European authorities and look forward to obtaining their feedback on the Phase 3 trial design as well.
And as I mentioned earlier, our goal is to complete both these interactions and determine and share our Phase 3 plan publicly by the end of this year. Finally, I’d like to remind you that in parallel with the regulatory process, 23 of the original 26 patients who completed the Phase 2 studies continue to be treated with Amigal, and a voluntary Phase 2 extension study that’s designed to monitor long-term safety and efficacy, and to evaluate potentially optimized doses and dose regimens in Amigal.
Data from this extension study are expected to be available by Q1 of next year. And in addition, Amicus expects to conduct standard clinical pharmacology studies to support the design of the Phase 3 program, specifically we planned to perform a thorough QTc study, which is a common study done for many small molecule drugs and a study we believe will help us through the strong safety database for Amigal prior to a future NDA filing.
So in summary, we’re very pleased with the progress on the Amigal program, and we’re on track for the three major milestones we’ve discussed previously; guidance on the Phase 3 trial design by the end of the year, extension study data in Q1, and initiation of the Phase 3 clinical trial in the first half of 2009. So with that, I’m going to turn to our Pompe program, which, as John noted earlier in the call, also saw significant progress in the second quarter.
Specifically, we initiated Phase 2 clinical trial of AT2220 as anticipated. This is an important milestone for the reasons John talked about earlier and we’re very excited about bringing this third compound into the clinic and into treating subjects with Pompe disease.
The trial is a multi-national open-label design with a plan to enroll 18 adult patients diagnosed with Pompe. The primary objective of the study is to evaluate the safety and tolerability of different dosing regimens of AT2220 over a 12-week period.
The study will also explore certain pharmacodynamic and pharmacokinetic measures, including the effect of treatment with AT2220 on the activity of the enzyme deficient in Pompe disease, abbreviated as GAA, and on glycogen levels in various solid tissue types. And glycogen, of course, is the substrate that builds up as a result of the enzyme deficiency in Pompe.
Participants who complete the study may be eligible to participate in a voluntary extension study that will further evaluate the effect of AT2220 on functional parameters. As in the Amigal program, the extension study is design to provide us with additional information useful for evaluating the drug and helping us design the Phase 3 program for the future.
Also I’d like to point out that in addition to looking at AT2220 as a monotherapy in the ongoing Phase 2 trial, we also are continuing to conduct a series of preclinical studies designed to evaluate the therapeutic effects of administering AT2220 in combination treatment with Myozyme, the existing enzyme replacement therapy approved for Pompe disease. Based on the preclinical study results, we will continue to evaluate the possibility of an AT2220-ERT combination treatment clinical trial in subjects – in people with Pompe in the future.
So with that, let me turn finally to the Gaucher program. As previously disclosed, based largely on the work done in our Fabry program, earlier this year we amended the protocol for the Phase 2 clinical trial of Plicera in patients naive to ERT and that study is ongoing.
This is a six-month study designed to evaluate two dose regimens, which we’ve described previously. Those are repeating cycles of 225 milligrams for three days on Plicera and four days off, or the second group is the same dose, 225 milligrams, but for seven days on Plicera and seven days off.
And as John mentioned earlier, we expect the results of this study to be available next year. Also in parallel with our execution on the six-month study, we’ve continued to advance our thinking on the appropriate next steps for the development of Plicera.
We’ve previously disclosed our plan to conduct an additional longer-term Phase 2 study in patients switching from ERT to Plicera. However, after further discussion with our outside experts and our partners at Shire, who importantly have very recent experience designing a Phase 3 program in Gaucher for their ERT drug candidate, we’ve decided to modify the plan and instead perform a study in Gaucher patients to examine the pharmacokinetics of Plicera.
The specifics of this study are still in development, but we expect it to give a standard, straightforward design and to run in parallel with the ongoing six-month study. In total, we believe the combined results of our previously completed four-week switching study, the six-month study in ERT naïve patients, and this new pharmacokinetic study will allow the design of a robust Phase 3 program and allow us to advance Plicera into Phase 3 more rapidly.
So, just to wrap up, in the Gaucher program, we are very pleased with the continued progress and advancing the program, as I described, in particular attempting to streamline the steps needed to complete Phase 2 and move into Phase 3. So with that summary of a clinical development programs, I’ll turn the call over to Jim Dentzer, who will give you a review of the financial results for the second quarter.
Following that John will provide a few final additional comments before we go to Q&A. Jim?
Jim Dentzer
Thanks, Matt. And welcome everyone.
I’ll provide a brief summary of the financial results for the second quarter. Overall, we continue to have a strong cash position.
In Q2, we use $10 million of cash, ending the quarter with approximately $145 million in cash and marketable securities as compared to $155 million at the end of Q1 and $162 million at the end of 2007. Our cash burn for the year-to-date through June 30 was approximately $17 million.
As we move to the P&L, I’ll be referring to the tables in our press release, which use the same format as last quarter. Please note that GAAP financials are provided in Table 1.
Table 2 and Table 3 are reconciliation of the GAAP and non-GAAP financial results, highlighting charges for three non-cash items; stock-based compensation, preferred stock accretion, and changes in fair value for warrants. As with last quarter, the charges for preferred stock and warrants do not impact the current period, as they were converted to common stock in connection with our May 2007 IPO.
Total revenue for the second quarter of 2008 was $3.8 million, comprising $0.7 million of collaboration revenue on the upfront payment and $3.1 million in research revenue for the reimbursement of R&D costs associated with our three lead programs. For the six-month period, total revenue was $7.0 million ending June 30.
On a non-GAAP basis, the net loss for the quarter was $7.4 million as compared to $8.3 million for the same period in 2007. the reduction in operating loss was driven primarily by revenue resulting from our collaboration with Shire, under which, as many of you know, Shire pays 50% of global development costs in each of our three lead LSD programs.
As a reminder, Amicus retains all US rights to these programs as well as rights to all other programs in our pipeline. Now to the R&D investment.
We spent $8.2 million on R&D in the second quarter. This is higher than the $6.4 million in the comparable quarter last year as expected.
And consistent with what we mentioned on our last quarterly call, we expected R&D to ramp up through the remainder of 2008 as we initiate and enroll additional clinical trials, invest in clinical drug supply, and expand our discovery research activities. Our G&A expense was $4.0 million compared to $2.6 million in the second quarter of 2007.
This increase was primarily due to hiring in key areas and other administrative costs associated with being a public company. Our interest income for the second quarter was $1.3 million as compared to $1.1 million in the comparable quarter last year.
This increase is primarily due to higher cash balances attributable to our 2007 initial public offering and the upfront payment we received from Shire last November. Our updated financial guidance for 2008 is as follows.
As John noted earlier, we are tightening our cash burn guidance for the remainder of 2008. Specifically we had previously provided guidance on 2008 net cash burn in the range of $40 million to $60 million.
Our new updated guidance is for cash burn to be in the range of $40 million to $50 million, taking into account our burn for the first six months in conjunction with our forecast for the remaining two quarters. As a reminder, our net cash burn guidance includes reimbursement of R&D costs, but excludes any milestones received from Shire.
We’ll continue to recognize the $50 million upfront payment from Shire on a straight line basis over an 18-year period from the date of the agreement last November. And we do not expect to raise cash from any equity financings in 2008.
So, that covers the balance sheet and income statement update with $145 million in cash, the potential for an additional $150 million in clinical milestones, and Shire’s commitment to fund half of our LSD development costs, we are well positioned to fund further advancement of our clinical and preclinical programs. If there are any other areas you want to cover, I’ll be happy to address them during the Q&A part of the call.
With that, I’ll turn things back over to John for closing comments.
John Crowley
Great. Thank you, Jim.
We are now well into the third quarter. And as you all know, the focus for 2008 has been on executing against our plan to advance each of our three lysosomal storage disease development programs.
We have had a very productive first half of the year with a number of key accomplishments and we look forward to continuing to execute for the balance of 2008 and into 2009. In the months ahead of us, we will be focused on a number of items, including continuing to process with the US and EU regulatory authorities to finalize the global regulatory path for Amigal Phase 3 development and we plan to have an update on this for you by the end of the year.
We also expect to generate and announce new data for the Amigal Phase 2 extension study by Q1 2009. And we plan to initiate a Phase 3 study in Amigal in the first half of 2009.
We also have a great deal of confidence in the value of our drug Plicera for Gaucher disease. Over the next several months, as we continue to execute on our six-month naïve patient study, we will work with our partners at Shire to advance the Gaucher program on the most efficient path to Phase 3 and toward approval.
And in addition to initiating our Pompe Phase 2 study of AT2220 in Q2, we will also be evaluating the potential of using our Pompe chaperone in combination with enzyme replacement therapy. So, as we look forward, we see tremendous opportunity beyond lysosomal storage disorders.
Just to update you briefly on our R&D progress, we do continue to invest in research and development to assess the potential for using the pharmacological chaperone to treat a broad range of human genetic diseases. And we also continue to invest in new research aimed at evaluating disease targets, primarily focused in the areas of neurodegenerative diseases such as Parkinson’s and metabolic disorders.
So that’s all I’ve got. Thank you for listening.
And as a reminder, the team is here together with David Lockhart for the Q&A. And with that, we’d like to open up the call to questions.
And Dana, we’ll turn the call back to you. Thank you.
Operator
Thank you, sir. (Operator instructions) And we’ll go first today to Geoffrey Meacham of J.P.
Morgan.
Terry Coyne – J.P. Morgan
Hi, guys, can you hear me?
John Crowley
I sure can.
Terry Coyne – J.P. Morgan
This is Terry Coyne for Geoff today. Thanks for taking the question.
John Crowley
Sure, Terry.
Terry Coyne – J.P. Morgan
I was just hoping maybe you could expand a little more on why you will no longer conduct a long-term Phase 2 switching study, and maybe give us some explanation on the insights that Shire was able to provide?
John Crowley
Well, let me be specific, Terry. We had previously given guidance that we would do a longer term, meaning longer than the previous four-week study.
And again, I’ll just reiterate what Matt had previously said is that, as we looked at that data, as we’re now into executing on the naïve patient study, as we’ve understood the experience of Shire in the Gaucher disease area, we think there may be a more efficient path to getting to Phase 3 and toward approval, which would obviate the need for doing that interim Phase 2 study and put us on a better path toward Phase 3. So that’s what something we spent a lot of time thinking through and we think is smart drug development.
Terry Coyne – J.P. Morgan
Okay. So just to follow up on that, does that have any implications for potential switching study for the Fabry Phase 3 program?
John Crowley
I’m sorry, I –
Terry Coyne – J.P. Morgan
As you’ve changed your thoughts about switching studies in general?
John Crowley
No, no. I think we still believe that there is a lot of value to switching studies and see that obviously as the primary vision for how our drugs will be used commercially in the future.
So, no, it doesn’t mean to suggest that at all. It simply means that specific to the Plicera program and the data we feel we need to collect in Phase 2 to get to Phase 3 that this is a smart decision, that the dataset we’re going to have with the studies we’ve described, we believe it will be adequate to get us into Phase 3.
And we base that based on the combination of our data as well as speaking with our outside experts and our folks at Shire. Yes.
Just to be clear, we view that as a very positive development as we continue to develop our plans to move into and through the pivotal studies for Gaucher.
Terry Coyne – J.P. Morgan
Okay. And then just a follow-up.
In terms of the dose ranging study, can you just give us an idea of how that’s going? And then are you confident that you will have a dose confirmed before you move to the Phase 3 study?
John Crowley
You are talking about Amigal?
Terry Coyne – J.P. Morgan
Yes, Amigal.
John Crowley
Sure. So, Matt, if you want to fill it up?
Matt Patterson
Sure. So, things are going well.
As I mentioned, in the extension study, patients are continuing. And we are on track to have results from that work in Q1.
I think it’s important to remind everyone that we came out of the Phase 2 studies very comfortable with 150 milligrams every other day as a dose that’s appropriate for Phase 3. But we have continued to learn through some preclinical work that there may be optimized doses and regimens beyond 150 every other day.
And we have the luxury of patients who continue on drug and thus are willing to participate in a study of those potentially optimized doses. So we are going to look at those and we are doing that in parallel.
It doesn’t slow the program down. And so, as I mentioned, we expect to have those results in Q1 ’09.
And our intention thus is to basically reach agreement on the Phase 3 design and then we get the extension data in Q1, and determine should we go forward with 150 every other day or one of the doses or regimens we’re looking at now in extension study and drop that into the Phase 3 protocol and initiate the study in the first half of the year, as we mentioned.
Terry Coyne – J.P. Morgan
Okay. Thank you.
Matt Patterson
Sure.
John Crowley
Thank you, Terry.
Operator
And we’ll take our next question from Matthew Osborne of Lazard.
Matthew Osborne – Lazard
Hi, guys, thanks for taking the questions. I have a few.
Can you comment – would it be too early to anticipate a Phase 3 trial to begin for Plicera by the end of 2009, given this PK study further could speed the timing to Phase 3?
John Crowley
I think we’ll just stay with our guidance that we think that this is smart drug development. We think the way that we are structuring is provides the more efficient path to Phase 3, but we’re not giving guidance as to when the Phase 3 will start yet.
Matthew Osborne – Lazard
Okay. And what are you looking at in this additional PK study that you haven’t looked at before for Plicera?
John Crowley
Sure. Matt?
Matt Patterson
You know, Matt, we haven’t finalized the study design, which is part of what I mentioned earlier. So it would be inappropriate to go into greater detail than that.
But I think you can expect that it will be a study of pretty straightforward fast design, as I mentioned. And just looking at typical pharmacokinetics data for a small molecule drug, which for Plicera we haven’t reported on in the past, as you know, from knowing our four-week data.
So this would be a new dataset, but pretty typical stuff for drug development and wanting to complete this in Phase 2 before moving into Phase 3.
Matthew Osborne – Lazard
Okay, great. And then on Amigal, patients in the open label extension, where some of those the same patients that you obtained GL-3 levels from biopsies?
And is the FDA interested in the extension data before they come back to you with the agreement of a Phase 3 trial?
Matt Patterson
All 23 patients that – as I mentioned, 23 out of the 26 patients are continuing the extensions. So that certainly includes patients that have biopsies performed as a part of the Phase 2 trial.
And FDA is aware of the extension study and our work going on there. But as we’ve mentioned, it’s our intention to work with them on the Phase 3 plan and attempt to reach agreement by the end of the year.
So they understand the vision that we have for the program and that was part of our discussion. But beyond that, I don’t have more to say except that, like we said, we expect to reach agreement on Phase 3 by the end of the year and then we’ll determine the final dose based on our extension study and move forward from there.
Matthew Osborne – Lazard
And on AT2220, have you disclosed what the doses for the Phase 2 trial?
Matt Patterson
No, we did not. We appreciate that that’s the difference than what we’ve done on Fabry and Gaucher.
But for this program, we’ve decided to keep the specific doses and regimens confidential.
Matthew Osborne – Lazard
And just in the proposed combination trial with enzyme replacement, would you propose in an instant form too or juvenile adult forms, or is it too early to contemplate that?
Matt Patterson
Yes, I think it’s too early to contemplate. Right now, we’re doing all the preclinical work to assess the safety as a combination and also to assess what the potential benefit to people living with Pompe may be.
So, once we understand the preclinical data better, again, primarily looking to see can we increase the stability and half life of the enzyme replacement therapy and can we increase its cellular uptick. Once we have those answers and answers to a couple of other key preclinical questions, I think we’ll be able to assess if we should take it into the clinic in a combination.
And if so, what the best patient population to study it in is.
Matthew Osborne – Lazard
Great. And last question, Jim, maybe this is for you.
Can you provide us some more detail on the types of the milestone payments that you anticipate from Shire over the next 12 to 18 or 24 months? Thank you.
Jim Dentzer
No, I think – I’m sorry, we agreed with Shire when we signed the agreement that we are going to keep that sort of detail confidential. But just to remind you, it’s $150 million in clinical milestones, so – milestones we’ve received between today and the date of the three products approval.
And there is an additional 140 milestones after that in sales and commercial milestones.
Matthew Osborne – Lazard
Okay, great. Thank you very much.
John Crowley
So – but I will highlight and we’ve acknowledged publicly there, Matt, that of that $150 million in clinical and regulatory that we may be eligible to receive some of those within the next year.
Operator
And we’ll take our next question from Steven Harr of Morgan Stanley.
Steven Harr – Morgan Stanley
Yes. I was trying to understand with your change in the development pivotal price [ph] there, what are you looking to as your proof of concept to really drive your condition and spending around a Phase 3 program, now that you’re not doing the switching study?
John Crowley
It would be – Steve, we’ll look to a couple of different things primarily around the Phase 2 naïve study will be what gives us the confidence to go into that Phase 3.
Steven Harr – Morgan Stanley
So, how long will the trial be and what type of data are you looking for before we move into Phase 3?
John Crowley
Sure. That is a six-month treatment period.
And again, these are all people naïve to ERT, Steve, and they are all people who have various levels of symptom of the disease, including various hematologic parameters and spleen and liver dysfunction and enlargement. So that will be six months and we look to the standard clinical outcomes in that disease.
Steven Harr – Morgan Stanley
How doses are at study?
John Crowley
Two different dose cohorts.
Steven Harr – Morgan Stanley
Okay. And just going back to Amigal and the FDA, so – is there – could you give us some sense of – you guys have looked at different endpoints from what has been used historically as potential ways to the regulatory approval.
Is there FDA buy-in in using (inaudible) besides what Genzyme uses? Is there still review [ph] within the regulatory bodies if that’s the right endpoint for a celebrated approval pathway?
John Crowley
Right. As a respect for the ongoing and confidential nature of our talks with FDA, I’m not going to comment on the specific FDA’s feedback, Steve, except they will highlight it.
We’re actually not looking at a different endpoint. We are looking at the same substrate, that’s GL-3.
And we’re just proposing that we measure it in a different way. What I would refer to is, when you look at the GL-3 in the Phase 2 study that we’ve shown and that’s been presented publicly, we looked at it a couple of different ways.
We looked at it on biopsy in the cell type, the interstitial capillaries, and that’s, as you know, what Fabrazyme is approved on. What we saw there in the 18 patients who had biopsy that represented a broad spectrum of Fabry patients, 17 of those people didn’t have any GL-3 at baseline.
One did, and we cleared it in that patient after 12 weeks. So, that was not very informative.
And I think that’s actually very characteristic of what you see in the community today if you go back to the original Fabrazyme study that within a very severe, more classic form of the disease. So we don’t think that is very instructive to measure GL-3 that way.
Two other ways we did look at it. One we did in those biopsies look at it on that spec, and there is – as you know, we showed in a majority of patients that we did reduce the GL-3 substrate.
So we have shown that on biopsy. And we’ve also shown very convincingly in a majority of patients that we can reduce kidney GL-3 as measured in the urine.
So, I just refer to what we’ve shown before.
Steven Harr – Morgan Stanley
And when you – as part of this pathway, do you expect to study a comparable severe patient population or is the FDA open to you look at population as comparable to what you had in your Phase 2 study for an accelerated approval pathway?
John Crowley
No, I think very much we would want to study a broad patient population similar to the patient population that would be treated on our drug and, quite frankly, similar to the broad population that’s generally treated with the ERTs today.
Steven Harr – Morgan Stanley
Great, thank you.
John Crowley
Yes.
Operator
(Operator instructions) And gentlemen, we have no further questions. Mr.
Crowley, I’ll turn the call back over to for any additional or closing remarks.
John Crowley
No, that’s all I have. Thank you all for listening.
Have a nice day.
Operator
And that does conclude today’s conference call. Thank you for your participation.
You may now disconnect at this time.