Achieve Life Sciences Inc (ACHV) 2002 Q4 法說會逐字稿

Good afternoon. My name is Shawn and I will be your Conference Facilitator today. At this time I would like to welcome everyone to the Sonus Pharmaceutical's fourth quarter and year end 2002 conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question and answer period. If you would like to ask a question during this time simply press star then the number one on your telephone key pad. If you would like to withdraw your question press the pound key. I would now like to turn the call over to Michael Martino, President and CEO. Thank you, sir, you may begin your conference.

Thank you, Sean. Hello and welcome everyone to our 2002 year end conference call. With me today are Dr. Nagesh Palepu, Senior Vice President and Chief Science and Technology Officer, Rick Klein, Chief Financial Officer, and Pamela Dull, Investor Relations Manager. In addition I'm very pleased that Dr. Michael Stewart, our new senior VP of Clinical and Regulatory Affairs and Chief Medical Officer is joining us today as well. We announced Michael's hiring a few weeks ago. It's already clear to me that someone of his caliber join Sonus will be a significant asset as we take our lead cancer product, Tocosol Paclitaxel, through the remaining stages of clinical development and regulatory approval. You'll get to hear directly from Michael shortly.

2002 was a year of solid progress for Sonus. The outline for today's call is as follows. First, Rick will provide an overview of our financial results. Second, I'll recap our 2002 accomplishments. Third, Michael will provide an update on the clinical development of Tocosol Paclitaxel including our mission to define the remaining clinical and regulatory strategy for the product and, finally, I will outline our goals and objectives for 2003. Let's get going starting with Rick's quick review of our financial results

Thanks, Mike, and good afternoon, everyone. Before we begin it's important to note that some of the statements made today may include predictions, estimates and other information that might be considered forward-looking. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ from our predictions and estimates as a result of various risk factors including those identified in our form 10(K) and other SEC filings, all of which can be accessed on our Web site at www.sonuspharma.com.

Now on to the financials. In 2002 we achieved a number of strategic objectives that Michael will discuss in a moment and at the same time continued to maintain fiscal discipline allowing us to end the year with a solid cash position of $16.3 million. This cash provides us with the resources to achieve our near term objectives in 2003 and gives us financial flexibility as we seek to further strengthen our balance sheet later in the year for funding beyond the 2003 time frame. Turning to the income statement, for the fourth quarter of 2002, we reported a net loss of $2.4 million, or 18 cents per share compared with a net loss of $2.1 million, or 19 cents per share in the fourth quarter of 2001. For the full year, we reported a net loss of $11.6 million, or 86 cents per share, compared with net income of $0.5 million, or five cents per share in 2001. As a reminder, the 2001 results included one time revenue payments of $8.5 million realized from monetizing the remaining value of the ultrasound contrast technology through the assignment of the intellectual properties to [inaudible] Pharmaceuticals. Total operating expenses were $2.6 million in the fourth quarter of 2002 compared with $2.2 million in the prior year fourth quarter. For the full year, operating expenses were $12.2 million compared with $8.5 million in 2001. This planned increase reflected our investment in the clinical development and manufacturing scale-up for Tocosol Paclitazel and additional investments in new product development. Looking ahead in the first half of 2023 we expect that our monthly net cash burn will be consistent with 2002 levels of approximately $1 million per month. As I mentioned at the outset, we ended the year with over $16 million of cash which will allow us the opportunity to drive value in the coming months with an objective to further strengthen the balance sheet via a corporate partnership or additional equity financing. Mike?

Thanks, Rick. Now I'd like to review our progress on 2002 objectives. First, we met our objective of accelerating the clinical development of Tocosol Paclitaxel. We completed patient enrollment in the Phase I study in March and completed patient treatment and evaluation in August. In addition, we initiated four Phase II trials in March to evaluate the efficacy of Tocosol Paclitaxel in non-small cell lung, bladder, ovarian and colorectal cancers. In our clinical programs to date we have enrolled over 150 patients and administered over 1,000 doses of Tocosol Paclitaxel and the resulting clinical data which Michael will review with you in a moment have put us a position to map our regulatory strategy for the product. Second, we met our objective to secure a commercial manufacturing partner for Tocosol Paclitaxel. In July we announced an agreement with GenseeSecor [ph] and since then we have made good progress scaling and validating the manufacturing process with them. We expect the initial manufacturing campaign for commercial grade product to begin by mid 2003 for use in our late stage clinical trials program.

Third, during 2002 we exceeded our objective by filing 17 new patent applications related to our Tocosol technology platform, significantly expanding our intellectual property position. In addition, in October we received the cornerstone patent for our Tocosol technology with certain composition claims of the patent directed to Tocosol Paclitaxel. A second Tocosol patent was issued in November. Fourth, I am pleased to report that in late 2002 we did file an investigational new drug application, or IND, for our second cancer product, Tocosol camptothecin. We are in the process of responding to some questions from the FDA related to this IND and were optimistic that we can answer these questions in a timely manner. Fifth, in late 2002 we also initiated partnering discussions for Tocosol Paclitaxel. We continue to move forward with those discussions and I am encouraged by our progress. We are currently in discussions with a number of companies who have both existing positions in oncology as well as those who are seeking to establish positions in oncology. The fact that Paclitaxel is well known and is used on such a wide scale in many different indications makes it a very attractive addition to an oncology portfolio. We are very pleased with responses that we are getting across the board from interested parties and we continue to believe that we'll be successful in securing a partner for Tocosol Paclitaxel. And finally as Rick mentioned we continue to prudently invest our cash resources in programs to achieve these objectives.

Now, in the last few months we further strengthened our clinical and regulatory expertise in oncology with the additions of Drs. Michael Stewart and Paul Widen. Paul is an experienced oncologist who has treated patients and managed cancer clinical trials for over 25 years at Virginia Mason Medical Center and the Fred Hutchinson cancer research center both in Seattle. Mike Stewart has a proven track record of getting drugs approved and marked in U.S., Canada, Europe and Asia. His 20 years in drug development includes ten years at Bristol Myers Squibb in senior management positions where he had directly relevant positions with Paclitaxel. This experience will be extremely beneficial for Sonus as we move Tocosol Paclitaxel into final stages of clinical development and registration. We are fortunate to have experienced oncologists like Paul and Mike who share our sense of the opportunities ahead. It is now my pleasure to introduce Michael to you and to have him provide an update on the clinical development of Tocosol Paclitaxel.

Thanks, Mike. It is a pleasure to be with all of you today. I apologize for the sound quality of my voice. Please bear with me and forgive the hoarseness. I am delighted to be joining Sonus at such an important time. One of my first priorities will be to pursue the most efficient regulatory strategy for Tocosol Paclitaxel, a product that may offer important advantages to doctors and patients over other Paclitaxel products being prescribed today. I'm also impressed with the promise of additional product candidates using our Tocosol technology. I believe that Sonus will provide meaningful benefits to many people with the development and commercialization of these products. As Mike mentioned earlier, we are making encouraging progress with the clinical development of Tocosol Paclitaxel. The Phase I study reached its full enrollment in March and the clinical treatment and evaluation of all patients was concluded in August. We continue to be pleased with the results, some of which were presented last spring at the 2002 meeting of the American Society of Clinical Oncology. The final data has now been received from our contract research organization and the final clinical study report is being prepared. A total of 37 patients with various types of solid tumors that were no longer responding to approved therapy were evaluated in the Phase I one study. Thirty of those patients were treated in doses of 175 to 225 milligrams per square meter every three weeks. Our product was generally well tolerated in all patients treated. Anti-tumor response to Tocosol Paclitaxel was set after beginning two cycles of treatment. Five patients with different cancers had partial responses. These stage one results demonstrated Tocosol Paclitaxel is an active agent in people with advanced cancer. Importantly we've also shown that Tocosol Paclitaxel can be administered to patients in a quick fifteen-minute infusion compared to the three hour infusion that is required with the currently marketed Paclitaxel product. We believe this will be a welcomed benefit by both patients and physicians.

Let's talk now about our current Phase II studies. Since initiating four studies a short nine months ago in ovarian, non-small cell lung, bladder and colorectal cancer. We've enrolled 119 patients and administered over 950 doses of Tocosol Paclitaxel. We believe this is excellent progress by any industry benchmark and most impressive for a company of our current size. Shortly after joining Sonus one of Paul Widen's first priorities was to visit our clinical study sites to assess the progress of our Phase II program. Paul was particularly impressed by the skill, dedication and knowledge of the clinical investigators and their staff as well as the staff of our contract research organization. As a reminder Tocosol Paclitaxel is being used similarly in each of the four phase 2 trials. Patients must have had standard first line treatment for their disease before enrolling in our studies. Each study tests sequential dose levels of Tocosol Paclitaxel administered on a weekly basis which differs from the phase one regimen where the drug was given every three weeks. Each Phase II study began with the dose escalation stage. The starting dose level was 80 milligrams per square meter per week, or 240 milligrams per square meter over each three-week period. If that dosage density was tolerated subsequent patients were treated at 100 milligrams per square meter per week, which is 300 milligrams per square meter over three weeks. The final dose escalation tests enrolled patients at 120 milligrams per square meter per week, or 360 milligrams per square meter over each three-week period. After the dose escalation portion of each study, the maximum tolerated dose for that study was determined and additional patients were enrolled at that dose level. Anti-tumor efficacy was tabulated in these patients and if a pre specified level of responses was observed, the study was continued to expand the total number of patients sufficiently to meet statistical requirements for efficacy analysis. Patients in each trial are evaluated for anti-tumor efficacies starting after 8 weeks of weekly dosing and continuing as long as they show clinical benefit. These studies are ongoing so the results that I will mention today are preliminary and will be updated as treatment continues and as studies progress.

In the ovarian cancer study 23 women have been enrolled to date and 19 are now evaluable for anti-tumor [inaudible], six of the 19 have been reported as partial responses. And a similar number was reported as having stable disease. The investigators and we are pleased to see this level of activity in pretreated patients and a decision has been made to continue enrolling at the 120-milligram per square meter week dose level based on observed tolerability. Our current target for full enrollment is 51 women which we project will occur later this year.

In the non-small cell lung cancer study, the investigators have completed the full enrollment of a planned 43 patients. Nearly half of the patients enrolled, 22 of them are now evaluable and four of the 22 have been reported as partial responders to treatment so far. Thirteen others were reported as having stable disease as their best response. Patients on this study are also being treated at the 120-milligram per square meter week dose level, again based on observed tolerability.

In the bladder cancer study, 25 patients have been enrolled and efficacy evaluation has been confirmed in 15 of them. Five of those 15 have been reported to have partial responses. Ten patients treated in this study had stable disease reported. We are awaiting response assessments on the next three patients which will determine whether to continue enrollment to the full 37 patient target. New patients in this study are being treated at 100 milligrams per square meter per week. In the colorectal cancer study 28 patients were enrolled, treated and assessed. When the initial 18 patients reached the first efficacy assessment point, one patient had evidence of a partial response. Ten additional patients were enrolled at the 120-milligram per square meter per week level as specified by the protocol. After 26 patients were evaluable no additional responses were seen. Based on predefined criteria, this study was closed to enrollment in October.

Let me offer you some perspectives on these numbers and on how Tocosol Paclitaxel is performing. Again, I hasten to add the clinical trials are ongoing and the data will continue to evolve. Our total experience using Tocosol Paclitaxel now comprises more than 1,000 doses in about 150 patients. Although our patient numbers are still not large we are pleased to see that the apparent response rate in the ovarian, non small cell lung and bladder cancer trials compare favorably with those observed in similar patients treated with approved taxene products. It's also a pleasure to tell you that a further report on the progress of our Phase II trials will be presented in early April in Toronto, Ontario, at the annual meeting of the American Association for Cancer Research. We were notified that our abstract has been accepted for a poster presentation at that international meeting and we are gratified to see the growing level of interest in Tocosol Paclitaxel among the cancer research community.

Given the progress to date and the clinical program with Tocosol Paclitaxel we are considering all possible regulatory strategies to maximize the value of the product and to bring it as quickly as possible to doctors and patients who may benefit from it. We are providing the FDA with an update on our progress and we communicated our desire to meet with them soon to seek agreement on our strategy. Given the ordinary course of interaction with the FDA we hope to have agreement on our regulatory strategy in the next few months. Following this agreement with the agency we will be poised to begin the clinical trials that will serve as the basis for approval for our new drug application.

Again, let me say how excited I am to be part of the Sonus team. And I look forward to providing updates to you in the future. Back to you now, Mike.

Thanks, Michael. I want to assure you that we are working very hard to obtain FDAs agreement on the regulatory strategy for Tocosol Paclitaxel. And as we gain greater clarity from the FDA we look forward to sharing that with you. Over the past year we've been very successful in significantly increasing the number of patients studied with Tocosol Paclitaxel and as a result of that much broader clinical experience let me summarize what we've learned.

First, Tocosol Paclitaxel is well tolerated given by a short fifteen minute infusion and we believe this translates into much greater convenience and better economics for patients, doctors and treatment centers. Second, patients who have been previously treated with other chemotherapies including taxane have had anti-tumor responses to Tocosol Paclitaxel. Now we need to remember that our total patient numbers are still small but we are nonetheless encouraged by the responses to date which, as Mike said, we believe compare favorably with those observed in similar patients treated with approved taxane and I would add as well as with published data on new Paclitaxel formulations. Third, the pharmacokinetic analysis of the Phase I data suggests that our improved formulation of Paclitaxel is delivering excellent exposure of the active drug in the body. Fourth, we have a ready-to-use formulation that does not require reconstitution or dilution. Our stability data indicate a long shelf life of this ready-to-use formulation at room temperature and we believe that Tocosol Paclitaxel will provide not only unsurpassed convenience but also excellent economics and pharmacy budgets. And, finally, the scale up to commercial manufacture of the finished product is moving smoothly and we believe that our cost of goods will be very competitive in this space.

Our achievements in 2002 give us a solid foundation for continued progress in 2003. Looking ahead we will continue to implement the three elements of our business strategy as follows. First, in addition to Tocosol Paclitaxel and Tocosol camptothecin we are continuing to develop additional product candidates using our Tocosol technology and these products will be proprietary to Sonus. Second, there is a renewed level of interest from other companies to apply our technology to develop their drugs. And we will aggressively pursue those potential collaborations in 2003. And, third, we are working to expand the versatility of our Tocosol technology to novel drugs in other dosage forms. Within this strategy our specific objectives in 2003 are as follows. First, secure FDAs agreement on a strategy that will get Tocosol Paclitaxel's initial approval with minimal time and expense and implement the registrational studies to achieve that approval. Of course we will also continue to conduct the ongoing Phase II studies and, as Michael indicated, provide the next clinical update at the American association for cancer research meeting in April. Second, conclude a corporate partnership on Tocosol Paclitaxel. Third, resolve the FDAs questions about the Tocosol camptothecin IND and initiate phase 1 studies when financial resources permit. Fourth, advance the preclinical development of at least one additional proprietary product candidate in our pipeline. Fifth, aggressively pursue opportunities to apply our technology to the development of drugs owned by other companies. And, finally, continue to prudently invest our cash resources in the key programs that will drive value and we believe these programs will provide additional funding opportunities to bring our lead product to market and to advance the development of additional product candidates.

This completes our prepared discussion and we'd be pleased to answer any questions. Operator, could you please open the line for the first question?

Yes, sir. At this time I'd like to remind everyone in order to ask a question please press star then the number one on your telephone key pad. We'll pause for just a minute to compile the Q&A roster. Your first question comes from Matt Kaplan.

Hi, guys.

Hi, Matt.

A couple quick questions. In terms of the, just to follow up on the camptothecin IND first, when do you think you could have closure with respect to the potential to start clinical studies with that?

Matt, I'm going to bounce that comment to Mike Stewart, that question. I would say, though, on a preliminary basis that frankly, I believe that the gating factor on initiation of Phase I trials will not be a regulatory gate but a resource gate. As we've discussed previously, we have, and as Rick has said repeatedly, we've continued to prudently invest our cash resources on a prioritized based and while this product and initiation of trials is important to us, we don't want to let up on the prudent financial controls and at this critical point begin to spread ourselves too thinly. So with that overview I will turn the question over to Mike.

Thanks, Mike. Matt, just a brief recap, that IND was logged into the FDA on December 4 and their initial response from the CNC pharmtox and clinical review came just shortly before the Christmas holiday. And they requested clarification of some language in the clinical protocol and some additional information about the preclinical animal studies and one change in the CNC section. And we have been in touch with them last week and told them that we are prepared to talk with them and we'd like to have a conference call, a teleconference with all of those reviewers. And I expect that that's going to occur sometime this month. As to when the first trial will begin, I think it's exactly what Mike just said to you, we have to manage our financial resources carefully, balancing the needs to pursue aggressive development for Tocosol Paclitaxel while continuing to support the pipeline with new product. So we will be prepared to initiate the Phase I trial whenever our financial resources permit us to do that.

Thank you.

Thank you, Mike.

Now, second question, with respect to the update that you just gave with the Phase two data for Tocosol Paclitaxel, could you compare that with the data that the top line in turn results that you initially announced in I guess it was late September, and compare the number of added responses that you've seen in each of the indications?

You know, honestly I've reviewed all of the current data that we did as of the cut off last week but it didn't occur to me to go back and look at what the numbers were that were reported in September. So I apologize, I can't tell you off the top of my head what the distinctions were. I can certainly get that information for you later but all of the studies have continued to progress except for the colorectal trial that was closed in October. And all of them are continuing to enroll patients and are continuing to enlarge not only patient enrollment numbers but the number of patients who are evaluable. Maybe if there's something that, is there a way that I can come at this differently in terms of what you wanted to do with that information? Maybe I can help you another way.

Sure. More specifically obviously with the non-small cell lung trial in I guess September you announced top line results for 18 patients. And you saw four objective responses, ten stable diseases and a disease control rate and I guess in 78%, 14 out of 18, compare and contrast that with what you've seen so far, you have I guess 22 evaluable patients now?

That's correct. It was the same four responses in 13 patients having been reported with stable disease. I would also hasten to add that I think in this disease state one has to be very careful talking about stable disease because the natural history of that disease may be such that not a great deal of change will occur in an eight-week period and the criteria for stable disease means that the tumor growth in an eight-week period is less than 20% in one diameter which is approximately less than 40, 45% in volume. So even a patient who is continuing to have clinically discernible tumor growth can be called stable disease. And I think if what you've seeking to do is compare our results with those being reported for other products I would urge you to go back and look at the partial response rate for all of the products and to really focus there.

If I could, Matt, just add a couple of comments to Michael's comments which I certainly agree, by the way, I would say emphasize, number one, that we believe that the objective response rate continues to compare favorably to the published data on approved taxanes as well as published data on other Paclitaxel formulation. Number two, we would emphasize that the ends continue to be small. And so one of the repercussions of that is as you report updates along the way you are going to see swings in specific numbers that remain within the confidence intervals where we need them to be to continue to be encouraged by the data. Number three I want to under score Michael's point about looking at disease control rates. And you know if you look at the history here, I think you would find that we started taking about disease control rates in response to a competitor’s discussion on disease control rates. We continue to believe that that is not a meaningful benchmark and, as Mike said, particularly in non-small cell lung cancer and what we really need to focus on are objective response rates. Now, having said that, if you look at our disease control rate data once again we believe it continues to be as good as, if not better than, the data that others are presenting. I can tell you that we do not plan to discuss disease control rate in our discussions with FDA. We just do not believe that that is a credible discussion.

Great. Because you, could you also go over with respect to giving an update with respect to product side effects on the, the product side effect profile that you've seen so far in the 119 patients?

We are just, sure. I think that across the board we are seeing some instances of neutropenia. I can review the details with you at some point, there are a lot of them but maybe it's something that you prefer to do off-line. We are seeing some neutropenia, some grade three, some grade four, and the entire experience to date there have only been two episodes of fibrile neutropina and those were both patients that had grade three levels that's between 500 and 1000 [nutrafil]. So that compares very, very favorably to the currently approved product.

In terms of neuropathy which is the other thing I think people have asked about in the past, again there have been a couple reports of that. It's very difficult to know to what to make of that because these patients have been pretreated often with other agents that are going to cause periphoralperipheral neuropathy and frankly some patients are within an age range where that occurs even without chemotherapy. So we are not seeing anything that pops up as worrisome. I suppose the other thing that people sometimes worry about with new drug development is liver toxicity and we are not seeing much of that at all. About 3% of patients have had any elevation of liver enzymes to the grade two level and that's what we would call clean in the drug development world, I think. So if there are other specific things that you want to ask about I will try to address them but that's really the kind of things we are focused on. This product is generally very well tolerated by the patients who have had it.

Can you just give some more precise numbers in terms of the overall rate of neuropathy that you are seeing and give us some color in terms of the grade of neuropathy that you are seeing?

Yeah, if you wanted a total number out of the current Phase II, and right now that would include 94 patients out of the validated database, with adverse events we have a 5% rate of grade three neuropathy, that is five out of 94, and a 0% rate of grade four neuropathy.

And then overall rate? Hello?

I'm sorry.

And the overall rate of neuropathy in patient population?

That's not something we keep tabulated.

Great. And with respect to, just to follow up with respect to partnership discussions and the stage those are at, could you give a little bit more color with, with respect to that?

Well, Matt, I'm not going to be able to give much more color. As I'm sure you can appreciate, negotiations at best are executed in confidence and then the results disclosed. I can tell you again that I am pleased with the progress, that we are at the stage of discussing terms, and I am optimistic that this is something that will get done. And certainly get done within 2003, if not within the first half of 2003. So I am pleased with the progress.

Great. And final question, with respect to the regulatory strategy, could you I guess, Mike, could you give a little bit more color, Mike Stewart, could you give a little bit more color as to what you're thinking and what your experience tells you with past experience at Bristol how to go about this?

I think that although I think experience is important, the experience of the last couple of years and even the last few weeks is that a great deal has happened at the U.S. FDA both in terms of changes in law and changes in practice and the number of options that are now available to the FDA as they regulate the development of new drugs. I think that certainly is public knowledge that there's been substantial restructuring of that agency in very recent weeks. The new leadership there was publicly announced. They want to take a new approach to facilitate the faster evaluation and approval of new drugs. So if one looks at the existing regulations and looks at the practices that the agency has been open to in the last year or two, there are a variety of approaches by which one can look at the initial and subsequent, supplemental NDAs for any new product. And so we are looking at all of those because we think were we have some options that may not have been completely apparent just a couple of years ago to anybody in the drug development business. I think it would be premature right now to speculate on where we and the agency might come out. I think that would be a disservice to you and to the product and the company. But I think it's an exciting time to be in discussions with the FDA, specifically with the oncology division, about products that are a potential for patients who don't have really good choices right now.

When do you think you'll culminate some of those discussions?

As Mike Martino said, we are pursuing this vigorously. We are looking at being able to -- we will get back to you as soon as we can but we are looking at being able to conclude this and wrap this up very quickly if we can because it's germane to what we do next and we are interested in moving on and getting the trial started.

Thanks, guys.

Thank you, Matt.

There are no further questions at this time.

Thank you, Sean. Well, if there are no further questions again I want to thank you for joining us today. I once again extend my appreciation to all our shareholders for their support and to our employees for their dedication in the past year and for their level of excitement as we look forward to the next year. Together we look forward to reporting our continued progress in the months ahead. Thank you, everyone. Operator, that concludes the call.

Thank you, sir. Thank you for participating in today's conference. You may now disconnect.