Aspreva revenue rockets to $76.5m

Victoria biotech firm even more bullish for 2006, projecting revenues over $175 million

Gillian Shaw
Vancouver Sun; Canadian Press
February 9, 2006

Revenues at Aspreva Pharmaceuticals rocketed from zero to $76.5 million US in 2005 and the Victoria company is even more bullish on 2006, projecting its revenues should climb to more than $175 million.

The Victoria-based drug company, which reports its results in U.S. dollars, said Wednesday its net earnings were $24.3 million US or 68 cents per diluted share for the three months ended Dec. 31, 2005. That compared with a loss of $10.3 million or 79 cents per share a year ago.

Quarterly revenue was $45 million, compared with no reported revenue in the last quarter of 2004.

The projections for a lucrative year are based on the company's current collaboration with Hoffmann-La Roche and don't include potential revenue from a new partnership the company had been hoping to announce early this year which could push revenues higher.

Shares in the company, which had already jumped last week on the release of unaudited results for the year, rose $1 Wednesday on the Toronto Stock Exchange to close at $31.

"Two-thousand-and-five was a great year for the company," Aspreva CEO Richard Glickman said in a conference call announcing the results Wednesday. "We have achieved significant progress in all key areas."

The fast-climbing revenue figures are thanks to royalty payments from Aspreva's deal with Roche. Under the terms of the agreement Aspreva has the rights to use the transplant drug CellCept for autoimmune disease applications.

Glickman also pointed out Wednesday that the company is looking at the potential of CellCept in the treatment of cardiovascular diseases and multiple sclerosis.

While Wednesday's fourth-quarter and year-end results were greater than the company's earlier expectations, Aspreva failed to come through on its earlier promises of a second deal to be announced early this year. Initially the company expected to announce the deal in 2005 and then pushed that target date to early this year.

Investors were given no indication Wednesday of what the long promised second deal would be and Glickman said the company will no longer be providing guidance on business development, but will simply announce a deal when it happens.

"We recognize we did not hit our target of a second partnership in 2005, we are committed to securing that this year," Glickman said.

Fourth quarter revenues were $45 million with earnings of $.68 per fully diluted share, a jump from earlier reported guidance and one, along with the release of Roche's year-end results that prompted Aspreva to release preliminary unaudited results last week.

The company reported $76.5 million in revenue, with earnings of $.62 per fully diluted share, for the year ended Dec. 31, 2005, a success that exceeded its own projections.

In its first profitable quarter, the second quarter of last year, the company reported revenues of $14.7 million, based on royalty revenues from its sales of CellCept which was originally developed as a transplant drug. At that time Aspreva issued revenue guidance for 2005 of $50 million, up from earlier guidance of $45 million. Later in the year, Aspreva boosted that guidance to $65 million to $70 million.

In an interview, Glickman said the year-end results also exceeded market expectations.

"It was higher than the street consensus," said Glickman. "I think our investors are pleased with our progress."

"We are pleased with the results, but for us as an organization, the question is how we best put this money to work to help build us as an organization.

"I do expect continued strong growth in our company."

Wednesday's results cap a successful year for Aspreva, which is based on an innovative business model that allows it to bypass the long and costly phase of initial drug development by taking existing drugs and finding new applications for them among diseases that are under served in treatments and cures.

During the year, the company:

- Completed an initial public offering on both the Nasdaq and the Toronto Stock Exchange, raising $91 million US ($113 million Cdn) and in short order vaulted into the ranks of the top 10 Canadian companies in its sector.

- Established a global presence with offices in Canada, the U.S. and Europe.

- Started earning revenue and became profitable, a status enjoyed by barely 20 biotechs worldwide.

- Advanced phase III clinical trials for CellCept, in various programs in targeting various autoimmune diseases, including lupus nephritis and others.

The company's strategy is one that is indicative of a trend in the biotech sector where investors don't want to wait long years for a company to start churning out revenues.

John Delucchi, national leader, life sciences practice at PricewaterhouseCoopers, said the business strategy meets changing investor expectations.

"In the last five or six years, investors want to come in at a later stage in development," Delucchi said in an interview at this week's BioPartnering North America, where a company that is following Aspreva's lead, iCo Therapeutics Inc., was pitching to investors and potential partners. "Particularly in areas like Vancouver or Canada, where we have very early stage companies, unless a company is in the clinic or farther along, they won't even get a meeting.

"I think it is a trend in the sense of the focus on later stage. I think you'll see more and more companies trying to do this."

Delucchi said the investors' preference for later-stage companies could also mean that drug research will stay longer at universities before being spun off into companies.

"I think it is a good thing personally," he said. "It will force research at the university level, to look at developing that research so it is far enough along to make sense to take it out of the university and get into a company.

"A lot of companies were formed, not that they shouldn't have been formed, but they were formed too early. Innovation isn't going to stop but this puts more rational thought around when it's the right time to take a research project and develop into a robust company."