Exhibit 99.1
ARADIGM CORP August 6, 2003
Aradigm Corporation Conference Call with host Richard Thompson on August 6, 2003
at 1:30 P.M. Central Time. Confirmation #7558149.
Operator: Good afternoon ladies and gentlemen and welcome to the
Aradigm Conference Call. At this time all participants
are in a listen-only mode. Later we will conduct a
question and answer session. I would now like to turn
the call over to Mr. Rick Thompson, Chairman and CEO of
Aradigm. Mr. Thompson, you may begin.
Richard Thompson: Hello and thank you for joining us. I am Rick Thompson,
Chairman and CEO and with me on this call is Dr. Bryan
Lawlis, Aradigm's President and Chief Operating Officer
and Tom Chesterman, Chief Financial Officer.
Before I read the prepared statement I would like to
remind you that certain information contained in this
conference call will constitute forward-looking
statements. As all of our programs are still in the
development stage Aradigm's actual results may differ
materially from those suggested here today. Additional
information concerning factors that would cause such a
difference are contained in the Company's annual report
on Form 10-K and its quarterly reports on Form 10-Q.
This morning in their second quarter financial
communication our partner Novo Nordisk provided guidance
on the start of additional Phase 3 clinical trials
associated with the AERx insulin Diabetes Management
System (iDMS). The purpose of this call is to provide
additional perspective on the status of manufacturing at
Aradigm to support ongoing and future clinical trials
and commercial scale-up.
In September 2002 Aradigm and Novo Nordisk initiated the
first in a series of Phase 3 trials of the AERx insulin
Diabetes Management System. This trial is progressing as
planned with no safety or efficacy issues evident in the
more than six months since initiation. Final evaluation
of the data will await completion of the study. Early in
our product development process we identified the need
to incorporate aseptic methods in our manufacturing to
produce a sterile product. This was completed
successfully several years in advance of the FDA/
requirements that went into effect earlier in 2003.
However, a sterilization method used in our process,
although perfectly acceptable in the United States, was
found to be unacceptable by the Danish Medical
Authority. Since
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ARADIGM CORP August 6, 2003
Novo Nordisk is a Danish company they required that we
change the sterilization method to comply with DMA
standards. As we reported in our first quarter
conference call, implementing this change took longer
than expected. Now after completing the changes we have
discovered a cosmetic blemish on a certain percentage of
AERx strips. Through extensive testing we verified that
this blemish has no detrimental effect on performance
but have agreed with Novo Nordisk that further trials
should wait until this problem is eliminated. Our mutual
goal is to have a clean regulatory filing process and
efficient high yield commercial manufacturing. Therefore
elimination of this blemish is on the critical path for
initiation of additional clinical study. During the same
time period Novo has asked that we evaluate additional
device improvements. These improvements will make AERx
even more competitive and we believe that they can be
completed by the time the strip process changes are in
place. It is important to note that Aradigm has never
had a sterility problem. No Aradigm product has ever
failed sterility testing and there is nothing in our
sterilization process that relates specifically to the
timing of further Phase 3 iDMS trials.
Once the changes we are discussing have been implemented
the product performance will be retested and validated.
At that time Novo Nordisk and Aradigm will determine
what impact, if any, the changes will have to our
ongoing clinical program. Neither Novo Nordisk nor
Aradigm is guiding investors to expect that the current
Phase 3 trial will be affected by these issues.
Recently in a speech given to 15,000 pharmaceutical and
biotechnology industry leaders President Bush sited the
prospect of inhaled insulin as a key advancement in
medicine. This pulmonary delivery product will not only
change the lives of people with diabetes but also
heralds a new era in non-invasive systemic delivery of
other biologics with similarly compelling patient
benefits. Novo Nordisk shares in our commitment to
improving the quality of life for people with diabetes.
They clearly see the potential of the AERx system and
believe it is superior to any other product in
development, which is reflected in their ongoing
financial support of the program. The recent data
published at ADA confirms the importance of the patented
breath control that insures reproducible delivery and
the single unit dosing capability that provides patients
with the same ability to adjust dosing as needle
injection. With over 55 clinical trials conducted to
date using the AERx system we have had significant
success with our manufacturing strategy and are
confident in our ability to execute the plan process
optimization
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ARADIGM CORP August 6, 2003
in a manner consistent with both Aradigm and Novo
Nordisk quality focus.
We will now answer any manufacturing related questions
you may have. Please remember that questions pertaining
to clinical and regulatory product plans must be
referred to Novo Nordisk. Operator, you may now open the
call for questions.
Operator: Thank you. We will now begin the question and answer
session. If you have a question you will need to press
star then one on your touchtone phone. You will hear an
acknowledgment that you have been placed in queue. If
your question has been answered and you wish to be
removed from the queue please press the pound sign. Your
questions will be queued in the order that they are
received. If you are using a speakerphone please pickup
the handset before pressing the numbers. Once again, if
there are any questions please press star then one on
your touchtone phone. We have a question from Patrick
Schnegels from Mahta Partners. Please go ahead with your
question.
Patrick Schnegels: Thanks for taking my question. I have fundamentally two
questions. One, can you elaborate a little bit on the
cosmetic blemish? And two, let us assume the sterility
issue by the Danish authorities would not have taken
place, would the cosmetic blemish cause that? Would that
also have caused the delay? Thank you.
Richard Thompson: Patrick, thanks for your question. The answer... Well
first of all on the blemish, we are not going to get
into the specifics of what we are seeing but we will
just reiterate that it is a cosmetic issue only. It has
no impact on the functionality of the product. We see it
in varying degrees in our production process. It is
specifically related to the changes that were
implemented to accommodate the Danish Medical
Authority's requirements and I do not think we can say
with certainty we would not have seen it if we had not
made those changes. But we certainly were not seeing it
before we implemented those changes, so it maybe that we
would not have seen the delay. However that would be a
hypothetical situation. We are where we are. We are now
going to work to eliminate that blemish.
Patrick Schnegels: A quick follow-up, if I may. How long... So you are
making still further modification, I guess. Assuming
that goes reasonably well with respect to you being able
to execute this smoothly; what kind of additional
testing do you envision the device will have to go
through, specifically what timeframe are we looking at?
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Richard Thompson: I think the way we will answer that is that the start of
the additional Phase 3 trials will be determined by the
timing of this process and Novo has given you the
guidance on the start of those trials toward the end of
2004. The process that we will go through though starts
with an investigation where we will be looking at the
cause of the blemish. Then we will look at a variety of
solutions, select the best one. We will implement that
solution and then we will go through and revalidate our
manufacturing methods to make sure that the product is
still working the way that it is supposed to. That is an
extensive process and it does take some time to
implement and must be completed before we can start
manufacturing for those additional clinical trials.
Operator: Our next question comes from Matthew Kaplin from Punk
Ziegel. Please go ahead with your question.
Matthew Kaplin: Hi guys. Thanks for having the call.
Richard Thompson: Sure Matt.
Matthew Kaplin: During the Novo Nordisk conference call this morning
they indicated that there is a chance or slight chance
that the ongoing Phase 3 long-term safety study could be
repeated, could have to be repeated. Could you give us
some idea with respect to the chance from your
perspective that that would have to occur?
Richard Thompson: Yes. At this time Novo Nordisk is not advising investors
to expect that that will have to be repeated. But there
always is such a chance when you are making changes to a
manufacturing process. Our responsibility here is to do
our best in making the changes to avoid having to repeat
any studies. One of the reasons however that we are
waiting before starting additional studies is that we do
not want to increase any exposure that these changes
might cause. So there always is a risk that through
these changes we would see the need to repeat the
original study. So I cannot give you any probability. We
are not expecting that to be the case, but there always
is that possibility.
Matthew Kaplin: And then a couple of follow-up questions. With respect
to the sterility issue, number one, is there a sterility
issue? Are those engineering changes already
incorporated? Are you past that? And maybe one more
follow-up after you answer that.
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Richard Thompson: Well I can say emphatically there is no sterility issue.
We are not having problems with our aseptic procedures
or with the sterilization of our product. We have not
had any failures in our sterilization testing or the
validation of our methods for sterility. There is
absolutely nothing in those areas that are causing any
concerns. I think there was some confusion caused around
this in Novo's call because they refer to this whole
issue as relating back to the changes required for the
sterilization method. I think people from that have
inferred that somehow sterility might have been
compromised. But that is absolutely not the case.
Matthew Kaplin: Great. And just one final question. With respect to
what... What are the device improvements that you intend
to make? Can you give us some detail on that beyond the
changes obviously in the cosmetic packet defect?
Richard Thompson: Well we are not going to go into any of the real details
of it, just to say that the nature of the changes are
those things that can better assure that high volume
manufacturing can be done smoothly and efficiently. We
have an opportunity to do that at this time. We do not
expect that these would take place outside the timeframe
of the cosmetic problem correction, so it is an
opportune time to go in and make some strategic changes.
Matthew Kaplin: Great. Just to follow-up on the previous question. How
long do you think it will take to implement these
engineering changes to eliminate the cosmetic defect?
Can you give us any sense of that?
Richard Thompson: I do not think I can really give any additional detail
other than to describe the process that I did on the
earlier question and that process will take us to a
point where we can supply materials for further clinical
trials. Once that material has been manufactured here
there is work, there is processing of that material,
packaging for example, that is done at Novo and then
shipment to clinical sites and readiness of those
clinical sites. When you add all those things up it ends
up taking a fair amount of time to actually implement a
change of this nature and that is why there guiding
people to not expect that before the end of next year.
Matthew Kaplin: Great. Thank you.
Operator: Our next question comes from Dave Wallace from Value
Capital Management. Please go ahead with your question.
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Dave Wallace: Rick, just to clarify here, the changes that are being
discussed here are changes that are being brought at the
behest of Novo or is the FDA or any other regulatory
issue here involved? Is it strictly just Novo?
Richard Thompson: Yes, all of the changes that we are implementing at this
time are changes that we and Novo have agreed need to be
made before we initiate additional trials. We have not
had anything come from FDA that has caused us to do
this.
Dave Wallace: Great. Just as a follow-up. With regard to Novo's
announcement today then how does this affect your burn
rate going forward?
Richard Thompson: Well Novo is responsible for payment for most of the
funds required for the insulin development program, so
they will be continue to support the program financially
the way that they have been. Aradigm's responsibility
has to do with supplying the high volume manufacturing
capacity, which is primarily a capital spend which we
probably will be evaluating but will be putting some of
those expenditures off into the future because of this
delay. So we will a reduction in capital spend in the
near term. As you probably already know, Dave, we have
reduced our burn rate recently substantially over where
we were beginning of the year. So the $28 million in
cash that we announced at the end of last quarter gives
us more than a year's worth of cash. Plus we still have
the $20 million in put* options with Novo Nordisk
available to us. So the two together and our lower burn
rate really gives us a pretty good visibility on cash
for quite some time.
Dave Wallace: With regards to these changes, had you known about any
of these changes from Novo previously or is this just
something that has been made known to you here just
recently?
Richard Thompson: Well clearly the existence of the cosmetic issue we have
seen for a little while now and have been working on
that. However the real news is that the decision had
been made that we will wait for the solution to the
cosmetic issue before the new trials will begin. I think
that is the reason this is being announced now by Novo.
Dave Wallace: Thanks Rick.
Richard Thompson: You bet.
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Operator: Once again, if there are any questions please press star
then one on your touchtone phone. We have a question
from Stanley Brenner. He is a shareholder. Please go
ahead with your question.
Stanley Brenner: Yes. Hi. I think in May you bought some assets from
Weston Technology and some valuable, I think, close $150
million (Inaudible) and you bought it for like $2
million. (Inaudible) some intraject needles with
injection technology, I was wondering how that is all
going?
Richard Thompson: Yes, thanks for the question, Stanley. The intraject
technology we purchased from Weston, we completed that
deal in May and immediately began to initiate what we
call the technology transfer from Weston in the UK to
our facilities here at Aradigm. That was a 60-day
process which we completed in the middle of July and
completed quite successfully. So now all of the key
assets, the ownership of the assets have been
transferred to Aradigm. The laboratory work has all been
brought out here to California and four of the employees
that were previously employed by Weston, key employees,
are now employed by Aradigm and are here working in our
lab. So we have been able to really bring that over and
get it moving pretty quickly on our side. Going forward
our job now is to complete the development work, which
they were nearly done with at Weston at the time we
bought these assets and to get it back to the point
where we can reinitiate clinical trials with the
existing partners that are using this technology.
Stanley Brenner: Thank you.
Richard Thompson: Thank you.
Operator: Our next question comes from Steven Seagul from Janney
Montgomery Scott. Please go ahead with your question.
Steven Seagul: I heard you say that the put* option with Novo, what are
the terms on that if you exercise it? Is that based on
the stock price, they will get shares or is that already
have the price set?
Tom Chesterman: Yes. This is Tom Chesterman. That is an at market put*
based on a trailing market rate and we can draw it down
in increments of $5 million to $10 million per quarter
at our discretion.
Steven Seagul: Thank you.
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Operator: Our next question comes from Hossein Ekrami from Stursa
Medical Research. Please go ahead with your question.
Hossein Ekrami: Hi Rick. Quick question please. On the ongoing talk
study Phase 3 for insulin are those trials in New
Zealand and Australia are going to continue to enroll
patients?
Richard Thompson: Thanks for the question Hossein. The trials in New
Zealand and Australia were started in late September
last year and were fully enrolled by the end of 2002. So
since let's say January 1 I think that is approximately
right. Those trials have been fully enrolled so there is
no enrollment expected, no additional enrollment
required or expected on those trials.
Hossein Ekrami: And with regards to improvements to the device, can you
(Inaudible) any structural changes to the device or just
electronics or any color on that?
Richard Thompson: I do not think that we are going to get into
characterizing the changes anymore to say that they are
ones that we think will help us in the high volume
manufacturing of the product and make the whole process
go more smoothly when this product is launched.
Hossein Ekrami: Great. Thank you.
Richard Thompson: Thank you Hossein.
Operator: Our next question comes from Michael Amari from Amari
Incorporated. Please go ahead with your question.
Michael Amari: Hello Rick. I have a question that is an orthodox.
Trying to find out what is (Inaudible) therapeutic
products compare to you on how they are approached
different from yours?
Richard Thompson: I can briefly characterize them with some of the known
differences. The largest and most easiest to recognize
is that the formulation method used by the two companies
is quite different and that they use a dry powder
product technology and we use liquid technology. We both
are trying to accomplish the same thing of creating very
small particles in a very consistent way so that these
particles can reach the deepest part of the lung and be
absorbed into the blood. We believe ours is superior
because the way we control the particles is through a
very precisely made micro machine nozzle technology
where at the point of delivery the liquid can be
converted into a very fine aerosol. There are other key
differences
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in that our technology uses electronics to guide the
patient to breathe in exactly the right way with every
dose that is taken so that the patient knows and the
doctor knows that they are always getting the right
dose. Then from another patient convenience point of
view, with our technology can allow the patient to
actually select their dose by pushing a button on the
device in units of one insulin unit, in increments of
one insulin unit, just like they do when they use a
syringe or a pen type delivery method. So we have a
number of key differences in the way we approach it.
They are both basically trying to do the same thing,
however and both ultimately are likely to succeed.
Michael Amari: Thank you very much sir.
Richard Thompson: Thank you.
Operator: Our next question comes from Albert Hocher, who is a
private investor. Please go ahead with your question.
Albert Hocher: Thank you very much. Rick, two questions. The first is I
am not quite clear of the impact this has on the ongoing
trials. I apologize if you have already made that clear,
if you could just reiterate that. And the second one is
if you can just generally characterize the volumes of
what you manufactured with this cosmetic blemish, at
what point did you discover it or how much clinical
trial material is going to have to be discarded? Thank
you very much.
Richard Thompson: Let's see, the second part I will take first. We are
probably not going to get too much into the details of
how frequently we are seeing this problem and how much
had to be discarded. It is not a material issue for us.
It is not costing us a lot of money. In fact, Novo
Nordisk pays for all of this one way or the other. We
have seen this cosmetic blemish since we implemented
these changes, have been working for some time to
understand the nature of the blemish and the impact of
it and have been able to recently demonstrate that it
has no functional effect at all on the way the product
works and then have also been working with Novo to
decide what we were going to do with regard to upcoming
clinical trials. I mean it is only recently that we made
the decision that we in fact want to wait on those
additional trials until this blemish problem is gone.
Albert Hocher: So are there trials ongoing right now that are going to
be held up?
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Richard Thompson: Yes, they are ongoing trials, but they are not going to
be held up because of this issue.
Albert Hocher: Thank you very much.
Operator: We have a follow-up question from Steve Seagul from
Janney Montgomery Scott. Please go ahead with your
question.
Steve Seagul: (Inaudible)... How long do you think it will take to go
on the web for a replay and who do we talk to for
follow-up questions?
Richard Thompson: The web replay should be available in about two hours.
You can call here to Christine for additional
information.
Steve Seagul: Thanks. One other thing, the person from Sturga* had
mentioned one of the trials that you will not be
enrolling anybody else. Approximately when will you
release those results?
Richard Thompson: That is a 24-month trial and we are 6 months into. The
release of that information will be entirely up to Novo
Nordisk.
Steve Seagul: Thank you very much.
Operator: Once again, if there are any questions please press star
then one on your touchtone phone. Mr. Thompson, we are
currently showing no questions.
Richard Thompson: All right. Thank you very much operator. I would like to
thank everybody for listening in on this conference call
and for giving us the opportunity to clarify some of the
information that came out earlier today. I hope that we
have been able to clear up some of the misunderstandings
that may have been out there and if people do have
additional questions they can address those at our
website or they call our Investor Relations Department
here at Aradigm. Thank you once again.
Operator: Thank you for participating.
*Please Note: Proper names/organizations spelling not verified.
C755814911133
Job #: 1708030
DT: 08/08/03
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