Arrowhead Pharmaceuticals, Inc.
Q4 2009 Earnings Call Transcript

Published: 29 Dec 2009

[Operator:]

Welcome to the Arrowhead Research fiscal 2009 fourth quarter and year-end financial results conference call (Operator Instructions) I would now like to turn the conference over to Brandi Floberg. Please go ahead.

[Brandi Floberg:]

Thank you, operator. Good afternoon everyone, and thank you for joining us today to discuss Arrowhead’s financial results for fiscal 2009 fourth quarter and full year ended September 30, 2009. With us today from management are President and CEO, Dr. Christopher Anzalone and Interim Chief Financial Officer, Ted Kingsley. The management will provide a brief overview of the quarter and will then open the call up to your questions. Also on the call for participation in the Q&A session is John Currie R. Miller Adams from Unidym and Dr. Thomas Schluep, from Calando. Before we begin, I would like to remind you that comments made during today’s call may contain certain forward-looking statements within the meaning of Section 27a of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact including without limitation those with respect to Arrowhead’s goals, plans, and strategies are forward-looking statements. Without limiting the generality of the foregoing words such as may, will, expect, believe, anticipate, intend, could, estimate, or continue or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. In addition, any statements that refer to projections of Arrowhead’s future financial performance, trends in businesses, or other characterizations of future events or circumstances are forward-looking statements. Forward-looking statements represent managements’ current expectations and are inherently uncertain. You should also refer to the discussions under Risk Factors in Arrowhead’s annual report on Form 10-K and the Company’s quarterly reports on Form 10-Q for additional matters to be considered in this regard. Thus, actual results may differ materially. Arrowhead undertakes no duty to update any of the forward-looking statements discussed on today’s call. With that said, I would like to turn over the call to Dr. Chris Anzalone, President and CEO of the company. Chris?

[Dr. Christopher Anzalone:]

Thanks Brandi. Good afternoon everyone, and thank you for joining us on our call today. I believe we have accomplished a great deal during fiscal 2009 and recent months and I will address some of these accomplishments in the following categories

[Joseph T. Kingsley:]

Thank you Chris. As we reported earlier today, on a consolidated basis, Arrowhead finished fiscal 2009 with a net loss of $22.3 million compared to a loss of $27.1 million in the prior year, a 28.8% decrease in loss. The reduction in spending across the board resulted in the fourth quarter loss of $3.5 million and we expect this trend to continue in fiscal 2010. On a consolidated basis, net cash used in operating activities during the year totaled $15.3 million compared to $27.6 million in the prior year. Cash as of the end of the year 2009 totaled approximately $2 million compared to $10.1 million at the end of the prior fiscal year. However, the cash position has been supplemented by the financing of $3.2 million which we announced last week. Revenues increased to $3.8 million in fiscal 2009 compared to $1.3 million in the prior year. This increase is primarily attributable to $2.4 million received through the licensing of the IT101 platform to a third party. During the year, the company had consolidated operating expenses of $23.5 million compared to $36.3 million in the prior year, a decrease of 35.3%. Operating expenses for fiscal 2009 included approximately $6 million in non-cash items. The non-cash items were as follows

[Dr. Christopher Anzalone:]

Thanks Ted. As I outlined earlier, we have reached a critical stage in our development and have laid a solid foundation for 2010 and beyond. Our near-term goals for 2010 will be focused on three core initiatives; First, we plan to enroll new patients in Calando’s clinical trial and believe that if our initial data set holds it will generate important implications for the future of RNAi therapeutics. We believe that as the trial proceeds we will be well positioned to monetize Calando’s delivery system and drug candidates through partnering, licensing or M&A activities. Second, we will continue to work to gain market traction with Unidym’s CNT in the large touch panel and LCD markets where we see considerable opportunities to drive value and growth. We have made exceptional progress on this front as evidenced by our initial market introduction as well as our continued and new partnerships with leading LCD manufacturers. Third, we will begin looking to other opportunities beyond Unidym and Calando by moving forward with our earlier stage companies; Nanotope and Leonardo. In addition we have begun exploring new opportunities. After a long suspension of efforts instituted to preserve capital we are prepared to keep a keen eye out for new projects that will drive our near-term value. We remain focused on keeping our costs low but as our bandwidth increases and additional capital becomes available we are excited about the prospects of building and acquiring new nano tech companies. We have high quality core competency here and view this as a uniquely attractive time to do new deals. Disruptions in the capital markets have caused a bulging in the supply of relatively late stage technologies that have yet to be commercialized. We see multiple opportunities to acquire later stage technologies for less capital than at any time in recent history. If we are able to capitalize on this it potentially means less time to market, less time to a liquidity event and lower capital consumption. We are extremely excited about our progress in 2009 and our prospects as we move into 2010. We believe we have some very valuable assets that are maturing well and we look forward to begin monetizing them. As we look ahead we are delighted by our near and longer-term prospects and believe we are well positioned to drive increasing value for our company and our shareholders. With that I would like to wish you all a wonderful and peaceful holiday season and a very happy New Year. I will now open the call to questions.

[Operator:]

(Operator Instructions) The first question comes from the line of Julia [Griese] – No Company Listed.

[Julia [Griese]:]

I am really excited about some of the things that you outlined in today’s call. I was looking for a bit more detail if you can help me on some of the cash burn question. Obviously you reduced the burn quite a bit. Can you give us some insight as to what you would expect it to be either in the coming quarter or what it was in the past quarter?

[Joseph T. Kingsley:]

Our run rate is now approximately $580,000 per month. This is really the result of a fairly long process of cost cutting and we frankly don’t expect it to go down much lower than that. So about $580,000 per month is what we expect.

[Julia [Griese]:]

So that should be a pretty stable number including any additional opportunities?

[Joseph T. Kingsley:]

Yes. That is correct.

[Julia [Griese]:]

You mentioned the Calando clinical results and something about a manuscript that was prepared but isn’t currently published but it has been submitted. Is there anything regarding the data that is currently available?

[Dr. Christopher Anzalone:]

There is not much I can tell you on that. We have prepared a manuscript as I mentioned describing some of the data. We are very excited about it and we will have to wait and see when it gets published.

[Julia [Griese]:]

The technology with the siRNA and the RONDEL delivery are there other larger pharma companies in that space right now that are currently either trying to replicate or do something very similar to what the RONDEL platform does that you could talk to sort of for a competitive landscape?

[Dr. Christopher Anzalone:]

Good question. The way I look at these types of questions is if there are no competitors in the field you are likely in the wrong field. You are likely chasing a problem that doesn’t exist. We have a lot of competitors. This problem of systemic delivery of siRNA for RNAi is a nagging one. There are many academic labs that are working on this problem. Virtually every large pharmaceutical company and maybe every large pharmaceutical company has an active program in this and a well funded program in this because this RNAi field is potentially a revolutionary new field and it is generally thought the one thing holding us back is the effective systemic delivery of these [plasma] molecules. So there is a number of folks trying to solve this problem. We view ourselves as a leader in the field. As I mentioned, we believe we are the first one to use siRNA against cancer in humans. We are the first ones we believe to systemically deliver siRNA with a delivery vehicle, so we are the first mover we believe in this field. With this new data that is starting to come out and we hope will be published shortly I think we will be able to demonstrate that the technology is indeed quite powerful.

[Julia [Griese]:]

Given you just completed an offering on the 11th can you update us on what the total share count is currently?

[Joseph T. Kingsley:]

It is approximately 57 million.

[Julia [Griese]:]

Is that fully diluted or is that basic?

[Joseph T. Kingsley:]

No, that is basic.

[Julia [Griese]:]

Do you have a sense on what the fully diluted number might be?

[Joseph T. Kingsley:]

I don’t. I can’t give you something I’m not absolutely sure about.

[Operator:]

At this time I am showing no further questions in the queue. I would like to turn the call back over to management for closing remarks.

[Dr. Christopher Anzalone:]

I think that is it. I wish everyone a happy holiday season.

[Operator:]

Ladies and gentlemen this concludes the Arrowhead Research Corporation’s fiscal 2009 fourth quarter and year-end financial results conference. We would like to thank you for your participation. You may now disconnect.