Achieve Life Sciences Inc (ACHV) 2003 Q2 法說會逐字稿

Good afternoon. My name is Matt, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Sonus Pharmaceuticals, Inc. second quarter 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. Thank you. Mr. Martino, you may begin.

Thank you, Matt. Good afternoon, everyone. Welcome and thank you for joining us today for our second quarter conference call. This is Mike Martino. With me are Dr. Michael Stewart, Chief Medical Officer, Rick Klein, Chief Financial Officer, and Pamela Dull, Investor Relations Manager. As we review our mid year progress, the key message is that we're on track to achieve our 2003 objectives. The highlights of our progress in the past quarter are as follows: first, I'm pleased to announce that in June, we completed patient enrollment in our Phase 2a studies for TOCOSOL Paclitaxel. We are now in the process of setting up the next clinical studies to implement the regulatory strategy that we shared with you a few months ago, to move the drug towards the filing of an NDA. Michael will provide more information on this in a moment. Second, we've also made progress to complete the scale-up from manufacturing commercial sized lots of TOCOSOL Paclitaxel. During the past month, with the outstanding collaboration of our contract manufacturer Secor, we successfully demonstrated that the manufacturing process for ready-to-use TOCOSOL Paclitaxel works at commercial scale. Finally, we continue in negotiations with a number of prospective partners for TOCOSOL Paclitaxel, and I want to emphasize that I believe we're on track to close a deal this year. In part our negotiating experience to date reflects what's happening in the entire sector, which is that negotiations on partnerships like this are simply taking more time. In our specific case, we believe that potential partners share our enthusiasm about the clinical performance and the overall value of TOCOSOL Paclitaxel. The focus of negotiations has been on the apportionment of that value between up-front payments, milestone payments, and royalties. We believe that TOCOSOL Paclitaxel will be a competitive next-generation Taxane product. The performance of the product in the clinic and our progress to manufacture it at commercial scale have reinforced our expectations of the product's value. We are committed to realizing this value in a partnership and through terms that fairly recognize and compensate the relative degrees of risk, both already taken and to be taken. Now, with that overview, I'd like to ask Rick to review the financial results, and then Michael will provide an update on TOCOSOL Paclitaxel.

Thanks, Mike. Before reviewing our financial results, I'd like to remind everyone that some of the statements made today may include predictions, estimates, and other information that might be considered forward-looking. Thee 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, turning to the financials, we reported a net loss of $3.1 million or 22 cents per share for the second quarter of 2003, compared with a net loss of $3.5 million or 26 cents per share for the second quarter of last year. Total operating expenses were $3.1 million in the second quarter of this year compared with $3.7 million in the prior year. For the first half of the year, total operating expenses were $5.5 million, on plan at just under $1 million per month on average. Looking ahead, we expect our spending level to increase in the second half of the year to approximately $1.2 million per month on average, as we initiate the additional clinical studies for TOCOSOL Paclitaxel and continue to invest in new product development. We ended the quarter with $11.3 million of cash and at the slightly higher level of spending in the months ahead, this balance is sufficient into mid 2004. However, as Mike mentioned, we believe that additional funding will be available to us by year end in the form of a corporate partnership on TOCOSOL Paclitaxel. That completes a quick review of our financials, and I'll turn the discussion over to Michael Stewart.

Thank you very much, Rick. First of all, and as Mike mentioned earlier, we've now completed patient enrollment in our ongoing Phase 2a studies in ovarian, non-small cell lung and bladder cancers, with 122 patients enrolled in these studies. Total enrollment in the Phase 2a program has been on 150 patients, including the colorectal cancer study that ended last October. Initial safety data have now been verified for 134 patients, and 126 are valuable for initial response at this point. We're excited about the sustained progress that we've seen in the performance of these clinical trials since their inception slightly over a year ago, in the spring of 2002. The full data from the update that we are sharing with you this afternoon will be reported in detail two days from now on Saturday morning, July 12, in a poster presentation at the American Association for Cancer Research annual meeting in Washington, D.C. The poster will also be available on our web site at www.sonuspharma.com after the AACR meeting ends early next week. Anti-tumor efficacy with TOCOSOL Paclitaxel in the three ongoing Phase 2a studies continues to look quite promising. Again, these are patients who have previously been treated unsuccessfully with other chemotherapies. In the ovarian cancer study, one complete response and fixed partial responses have been observed among 28 evaluable patients, for an overall response rate of 25%. In the non-small cell lung cancer study, two complete responses and seven partial responses have been observed among 43 evaluable patients for a response rate of 21%. And in the bladder cancer study, two complete responses and seven partial responses have been seen among 27 evaluable patients, yielding an overall objective response rate of 33%. As we've previously noted, TOCOSOL Paclitaxel is well tolerated. In nearly 1600 doses administered in the Phase 2a program using weekly dosing, 83% have been given on time at the full planned dose. And among the patients who required a temporary dose reduction, more than 80% of them returned to full dose by the following week. Most patients treated with TOCOSOL Paclitaxel get their intended therapy, on time and at full dose. That's not common with other chemotherapeutics. Turning attention now to the key safety data emerging from the current studies, TOCOSOL Paclitaxel again continues to look favorable. The latest results affirm what we had previously reported to you. Grade 3 or 4 neutropenia, the most commonly expected toxicity, has been seen in 29% of patients to date. However, febrile neutropenia occurred in only 2% of patients. Grade 3 or 4 anemia has occurred in 12% and grade 3 thrombocytopenia in 3% of patients. There have been no grade 4 thrombocytopeniasobserved. Grade 3 neuropathy has been observed in only 6% of patients in these trials, and no grade 4 neuropathy has occurred. As you know, disabling chemotherapy induced neuropathy has been a critical toxicity limiting the use of Taxol and other cancer drugs. We are very encouraged that TOCOSOL Paclitaxel does not appear to share this liability. These results provide the evidence that compels us to move forward with our pivotal trials program for TOCOSOL Paclitaxel. And the our last conference call, we outlined a regulatory strategy that includes three pathways for getting the product approved, including one path that could result in an NDA submission in late 2005. Our goal is to gain the fastest possible market entry, with a competitive product label, while preserving opportunities to further differentiate the product post-approval. We will seek initial approval of TOCOSOL Paclitaxel under the 505b2 mechanism by comparing our product to Taxol, with both drugs given at 175 milligrams per square meter every three weeks. At the same time, we will pursue a new claim for Taxane, beyond the labeling potentially available via 505b2. And that is for the treatment of metastatic or inoperable bladder cancer using weekly administration of TOCOSOL Paclitaxel. Finally, we will concurrently conduct trials on ovarian and breast cancers for which TOCOSOL Paclitaxel is given every three weeks has already indicated to support labeling of our product for the weekly treatment of those diseases. The clinical evidence to support our 505b2 application will begin with a randomized crossover clinical pharmacology study comparing TOCOSOL Paclitaxel and Taxol, as described in our last conference call. We also plan to initiate a Phase 2b study in advanced bladder cancer using rigorously defined eligibility criteria and the 120-milligram per square meter per week dose that has been demonstrated to be well-tolerated. And to implement the third leg of our regulatory strategy, we will initiate Phase 2b studies in ovarian and breast cancers. Reaching agreements with investigators, study sites, IRBs, ethics committees, and health authorities takes time, of course, and can be challenging to pursue during the summer months, but we believe we are on track to have all of these new clinical trials enrolling patients during the fourth quarter of this year. Mike, with that I'll turn the call back to you.

Thank you, Michael. While we've completed enrollment in the current phase 2a studies, I want to point out that patients are still on treatment, so the data will continue to be updated in the coming months. For example, our investigators enrolled the final 20% of parents into these studies during the last quarter. So by the time of our next conference call, we would expect all patients to be evaluable for initial response. However, we believe the data already in hand demonstrate that TOCOSOL Paclitaxel provides a good risk benefit for patients and physicians, and represents an outstanding investment opportunity for both Sonus shareholders and commercial partners. Our total phase 1 and phase 2 clinical experience in nearly 190 patients during the past two years supports our belief that TOCOSOL Paclitaxel will ultimately be the Taxane of choice. First, because of a ready-to-use formulation that does not require additional preparation prior to use; second, it could be administered in a fast 15-minute infusion without steroid pre-medications; third, it is well-tolerated at doses equal to or greater than the approved products; fourth, the manufacturing process will provide a competitive advantage; and finally, TOCOSOL Paclitaxel has a safety and efficacy profile at least as good as, if not better than, marketed Taxane products. Superior safety and efficacy will, of course, require additional clinical trials to prove. The important point is that our life cycle management plans encompass those goals, so that additional value will continue to accrue to this product following initial registration and launch. Now I'd like to shift gears and say a few words about our organization and our people. As we continue to make solid progress towards achieving our 2003 goals, the Sonus organization also continues to evolve. We are extremely proud of the team who advanced TOCOSOL Paclitaxel from a non-clinical formulation concept to the reality of clinical performance and commercial scale manufacture in just two years. This team has exemplified our corporate values of integrity, perseverance, innovation, and commitment, and through them we have brought forward our first product as well as a new platform technology that we believe will be applied to many other products in the future. At this transition point in our organization's evolution, Dr. Nagesh Palepu has made a decision to resign to devote more time to his family. Nagesh has agreed to make himself available to Sonus on a consulting basis. We're grateful to him for leading his team in the scale-up of the manufacturing process for TOCOSOL Paclitaxel and the expansion of our product pipeline, and we wish him and his family the best. Our search for a head of research and development is well underway, and we've already identified a number of prospective candidates. Given our stage of development and how well our programs are progressing, I believe that we are in an excellent position to both attract and select an outstanding candidate. As TOCOSOL Paclitaxel advances towards commercialization and our pipeline expands, we have also strengthened our expertise in regulatory affairs, data management, analytical chemistry, and process development to add the depth necessary for the successful registration and commercialization of our products. Recently, we were very pleased to have Dr. Elaine Waller join Michael Stewart's staff as Vice President of Regulatory Affairs and Quality Assurance. Dr. Waller brings 20 years of experience in the pharmaceutical industry, including senior management positions in both clinical research and regulatory affairs. She was formerly Vice President North American regulatory affairs for Hercks, now Aventis pharmaceuticals. Most recently Elaine was Chief Operating Officer for Radiant Research a nation-wide clinical site management organization. Elaine has great breadth and depth of experience in the successful registration and commercialization of multiple products. We believe she will bring substantial value to our programs and I'd like to welcome her to the Sonus team. As we look out over the next three to six months, our objectives are clear, and it's an exciting time for Sonus. TOCOSOL Paclitaxel is generating promising results, and we're on the verge of initiating the next clinical studies to implement the regulatory approval strategy. Resources permitting, we are also continuing to prepare to move our second product, TOCOSOL Camptothecin, into clinical trials by the end of this year. And we have a strong and dedicated team who are working to achieve our goals. With the relatively near-term catalyst on the horizon and our current valuation relative to our competitors, I continue to believe that Sonus is an outstanding investment opportunity. That completes our prepared remarks. And we would be pleased to answer any questions. Matt, could you please open the line for the first question?

Certainly, sir. At this time, I would like to remind everyone, if you do have a question, please press star, then the number one, on your telephone key pad. We'll pause for just a moment to compile the Q&A roster. Your first question is from Ren Benjamin.

Hi, good afternoon. Congratulations on your ongoing progress.

Hi, Ren. Thank you.

Two quick questions. Can you help us put these results into context? What sort of toxicity and efficacy profiles does one expect from Taxol alone?

Well, I'll gladly let Dr. Stewart handle that question.

Okay.

And I appreciate that the -- it's harder to check the Taxol label because it's moved out of the PDR. Basically what you might recall, for example, when -- you asked first about toxicities. When we were reporting neutropenia, which is our commonest toxicity, as you would expect with a cytotoxic (ph.), we're looking overall at grade 3 and 4 neutropenia rates just a little under 30%. If you look at the Taxol label when that product was administered at over 24-hour infusion, the grade 3-4 toxicities of neutropenia there are over 90%, and even with the three-hour infusion, you typically see numbers of 50% or higher. Neuropathy is certainly up in double digits, and as I indicated, we're seeing only 6% at grade 3 and no grade 4. So I think that gives you a sense of where we are in terms of toxicity. In terms of efficacy, we're very encouraged because there has been no apparent sacrifice of efficacy at the cost of providing improved tolerability and reduced toxicity. The efficacy results that we're seeing in these disease states in these patients who have previously been treated with other drugs and have relapsed or failed to respond to other drugs, we're seeing efficacy in these trials that is, as Mike said, at least as good, if not better, as what you would expect with the current Taxol formulation. So we're very encouraged that we've got a product that we think is going to, down the road, offer a better option.

Terrific. One last question. Can you go over the milestones that we can expect for the remainder of the year? When you think enrollments may be complete, which trials you think are going to be starting in the second half, and anything else you think will be relevant for shareholders?

Ren, from a clinical milestone perspective, we would expect the next round of trials to implement all three legs of our regulatory strategy to start this year. That includes the pharmacology crossover study that is the next key step in the 505b2 regulatory path, the Phase 2b bladder study that is the next step in the path aimed at getting approval of currently unapproved indication for Taxanes, and that would also include Phase 2b studies in ovarian and breast, to support, at a minimum, weekly dosing and approved indications for Taxol, if not superior performance.

When do you expect those trials?

We would expect enrollment in those trials to be well underway in the fourth quarter of this year.

And business development milestones, if any?

Well, we continue to work hard on developing a corporate partnership, and I, as mentioned earlier, remain optimistic that that partnership can be concluded by the end of this year.

And if you will, just one last question. Can you talk to us about the pipeline a little bit? You know, you clearly have other molecules that are in development coming forward. Can you talk to us a little bit about that?

I'd be happy to do that. Our next product in the pipeline is a TOCOSOL formulation of Camptothecin. Our objective is to initiate clinical trials phase 1 clinical trials by the end of this year. That is resource-gated at this point. In other words, we do not want to begin burning resources, and frankly that's both internal time and attention as well as dollars on a second product until the development future for the first product is reasonably secured Beyond TOCOSOL Camptothecin at this point, we have four additional TOCOSOL formulations in earlier stages of development. They are all oncology products. Three of those are injectable forms, one is an oral dosage form. Our objective is to advance at least one of those candidates to the point where we could begin GLP non-clinical studies in early 2004, with the objective of initiating phase 1 studies on that product by the end of 2004.

Terrific. Thank you very much.

Thank you, Ren.

Your next question is from Matt Kaplan.

Hi, guys. Thanks for taking my question.

Hi, Matt.

Hi. Just-- could you give us a little bit more color in terms of the status of the partnership discussions? Are you in discussions with a number of parties, one party? Could you give a little bit more color?

Well, it continues to be difficult to give much color without, I think, impacting on the negotiations. What I can say is that we are in discussions with several parties, that we are at the term sheet stage of those discussions, that the discussions at this point are really focused on the apportionment of value between different components rather than on an overall value, and that I continue to be optimistic that we can conclude those discussions in the form of an announceable partnership by the end of the year, and that remains our objective.

So the parties that have been interested earlier on in the year are still interested in the partnership potential?

I think that's correct, yes.

Great. And then with respect to TOCOSOL Paclitaxel, could you give us an idea of the size and the -- of the Phase 2b trials and including the PK/PD trial that you expect to start this year, and then in terms of when you expect them to be complete and data flow from those trials?

Michael?

Sure. The randomized crossover PK is going to be somewhere in the range of 30 to 40 patients. I know that sounds imprecise, but it has to do with a requirement in the specific type of trial to have it oversized. We need a certain number of completely evaluable patients, and there's a regulatory preference in this situation to oversize rather than seeing how many you get and thinking about adding on others or replacing them. That's why that's in the 30 to 40 patient range. The other trials will be in excess of 40 patients each, and I'd have to check the statisticians, you know, the precise sample size depends on the end points and the variability and time to progression, that sort of thing, in each one. But each one of them is over 40 patients. We're looking to move them down the clinical pharmacology trials, we want to have results out sometime no later than mid-year next year, because we would like -- we need to know where we are with that one, so that we can move forward with the confirmatory efficacy study. The bladder study -- bladder, as you know, is a disease that can be tough to study, but we're looking on that one. That could take as long as a year. And the ovarian and breast cancers, if we look at the enrollment that we've had in these trials that have just now completed enrollment, I don't think that's going to be a challenge at all. We're going to see those enrolling pretty promptly.

Matt, in terms of the flow of data, we would continue with our philosophy and practice of updating data on clinical trials at regularly scheduled scientific meetings at our quarterly update sessions and on an as-required basis when material news is available.

And in terms of the location of these trials, are they going to be done in Eastern Europe, are they going to be done in the U.S.? A combination or ...

I think the quick answer is that it will be a mix. The more specific answer is that the pharmacology study will be done in the U.S. The other trials will be a mix, with some U.S. sites and some non-U.S. sites.

Thank you.

Thank you, Matt.

Your next question is from Kevin Williams.

Hi, guys.

Hi, Kevin.

The NOPK studies, have those finished?

They are in process. We don't have the final results on all of that.

But are you encouraged enough to have a good signal going into the human crossover studies?

Absolutely.

Okay. And, Mike, just to follow up on Matt's question, if these are 30 patients and they're given one dose and a crossover to another drug, why would results take until mid-year next year?

No, it's the enrollment we're talking about. You have to wait until the final patient is enrolled in order to have total results, because you have to analyze the data as a set.

Okay. Going to weekly ovarian and weekly breast, these are going to be versus Paclitaxel?

No- those studies designs are not versus Paclitaxel. Those are going to be single agent open label studies, and part of what we're looking at is what we can do with the dose exploration. As you know, in the past, the MTD that was estimated -- sorry, backing up here. One of those is weekly dosing. One of them we're looking at is moving to three-weekly dosing to try to see whether we can move up a bit in the dose.

Okay. I mean, given that you've just finished a Phase 2 on ovarian at a weekly schedule, I was just curious why you're doing another one.

The basic answer is to try to get -- as you know, that was a staged design that looked at several different doses, and so all of these patients did not get the same dose, and it was a heterogeneous population. So we're looking at patients who are either primarily resistant -- we're looking at patients who are primarily resistant and patients who have had a response and then relapsed.

Question for Mike Martino. Do you have an internal clock that you hope to set up a partnership by the end of the year? What gives you conviction that this can be done, given that there's already been some delay?

The progress of negotiations and the content and tenor of those negotiations I guess fuel my optimism that that objective is achievable.

Okay. Thank you.

Thank you, Kevin.

At this time, I would like to remind everyone, if you do have a question, please press star, then the number one, on your telephone key pad. Your next question is from Bob Duresowitz (ph).

Hi, Bob.

Thank you for taking my question. Early on when we had spoken, part of the story was the idea that the vitamin E component was going to inhibit E-flux pumps, and I wonder where that component of the story stands and whether there is any evidence or not of the ability to overcome resistance in tumors that are innately resistant to Taxol.

Well, let me give you a reflex answer, and then I'll ask Michael Stewart to respond as well. We certainly have the non-clinical data to support a contention that the amount of Paclitaxel available in tumor cells over time seems to be well higher than the amount of Paclitaxel available from a same injection of Taxol over a same period of time. And, yes, we have speculated that that reflects, number one, preferential uptake of the emulsion particle and therefore Paclitaxel and tumor tissue as a result of passive targeting related to the size of the emulsion particles, and we have also speculated that that reflects the P-glycoprotein inhibition properties of TPGS, which is a vitamin E derivative and one of the surfactants used in the formulation. Additionally, we have data to support that TPGS is in fact a P-glycoprotein inhibitor. I think the key question from a business clinical and regulatory strategy perspective is whether or not it makes sense at this time to pursue those claims as part of the initial regulatory strategy to get a competitive label approved as quickly as possible, and we believe that we've laid out the strategy that gives us the best chance of doing that without precluding other opportunities to further differentiate the product down the road and certainly initially starting with studies that we would start in parallel with those that are intended to support a 505b2 filing. So I guess that's a long-winded way of saying, Bob, that, you know, we would still speculate, based on the data we have, that those properties are at -- are playing a role here. We don't believe that it makes sense to pursue registration on that basis at this time. Michael, would you want to elaborate on that or change that in any way --

No, I would echo that. I think that -- you know, before one gets into clinical trials, you're looking at the basic biology and pharmacology of a drug and trying to understand what good reason you have to bring it into clinical trials. Once you get into the clinic, the objective and the evidence that you have to provide to the FDA in the U.S. or to health authorities in any other country, is the specific clinical benefit that you bring to the patient, and that's done in terms of response rate, time to progression, survival data -- very hard clinical end points. That's really what has to be delivered in order to get a product successfully registered, and that's what patients and doctors are looking for, to understand whether or not it's going to offer them an advantage over the other choices they have right now.

Can you just remind us -- you had a colorectal trial at some point.

Yes, last October --

Was there any evidence of activity in colorectal cancer?

I think there was one partial response out of 28 patients, so the overall response rate was 4% estimate of confidence on that so the intervals on that was zero to I think it was 18 or 19%. And so as expected with Taxanes and colorectal cancer, we did not see anything that was dramatically different here.

Thank you.

I would add on that point that while we certainly would not rule out the future potential to study the drug in combination with other drugs for the treatment of colorectal cancers, it simply didn't seem like a good first, second, or third bet for a small company to develop its initial product.

At this time, it appears that there are no further questions. Would you like to proceed with any closing remarks?

I would, Matt, yes. Thank you. And I'd like to simply say that if there are no further questions, thank you again for joining us today. As always, we appreciate your continued support. We really are very pleased with the progress we're making, and I continue to be optimistic about the progress we'll make in the second half of the year towards the achievement of our objectives. And we'll look forward to keeping you informed of that progress.

This concludes this evening's teleconference. You may now disconnect.