Achieve Life Sciences Inc (ACHV) 2004 Q2 法說會逐字稿

Good afternoon. My name is Jean and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Sonus Pharmaceuticals second-quarter 2004 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. (OPERATOR INSTRUCTIONS) Mr. Martino, you may begin your conference.

Thank you, Jean. Good afternoon and welcome everyone to our 2004 second- quarter conference call. Joining me today are Dr. Michael Stewart, Chief Medical Officer, and Pamela Dull, Director of Investor Relations. We will use the following format for today's call. First, Pam will provide a brief summary of our financial results. I would then update you on our progress during the second quarter and over the past few weeks with a focus on headlines, and then Michael will review the status of our clinical and regulatory programs for TOCOSOL Paclitaxel and give you some details. Finally, as always, we will be happy to answer any questions that you may have.

With that, I will turn the call over to Pam.

Thanks, Mike. I would like to remind everyone 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 materially from our predictions and estimates as a result of various risk factors, including those identified in our Form 10-K for the year ended December 31, 2003, our Form 10-Q for the quarter ended March 31, 2004, and other SEC filings, all of which can be accessed on our website at www.SonusPharma.com.

Turning to the financials, we reported a net loss of 3.8 million or 19 cents per share for the second quarter of 2004, compared with a net loss of 3.1 million or 22 cents per share for the second quarter of last year. For the first 6 months of 2004, we reported a net loss of 7.3 million or 39 cents per share, compared with a net loss of 5.4 million or 39 cents per share for the same period of 2003. The higher net loss for the second quarter and year-to-date financial results reflected planned increased levels of R&D spending, primarily for TOCOSOL Paclitaxel clinical development, and to a lesser extent for our research program and corporate development initiatives.

During the second quarter, we strengthened our balance sheet with completion of a private placement in May. At quarter end, we had 28.7 million of cash and no debt, compared with a cash balance of 19.7 million and no debt at year-end 2003. Our net cash burn in the second quarter was approximately 1.3 million per month. As previously indicated, we expect that our net cash burn during 2004 will average approximately 1.5 million per month as we continue to execute the clinical and regulatory plans for TOCOSOL Paclitaxel and work to bring forward additional product candidates.

I will now turn the call back to Mike.

Thanks, Pam. We have made solid progress during the past quarter toward achieving our 2004 objectives. I would like to summarize 5 specific headlines that I believe really emphasize that progress. First, we recently completed patient enrollment in the clinical pharmacology study for TOCOSOL Paclitaxel. As a reminder, this study was initiated as part of our 505(b)(2) U.S. regulatory strategy, and designed to compare the pharmacokinetics of TOCOSOL Paclitaxel to the marketed paclitaxel product, Taxol. The evaluation from the data of this study has been complex and time-consuming. However, we believe that it's essential to take advantage of everything we can learn from this study to drive a robust discussion with the FDA about our pivotal trial program.

I want to be very clear that our intention is to discuss the full data with the FDA before discussing it in any other forum. What I can tell you now, based on our analysis to date, is simply that we are pleased with the data. It indicates that TOCOSOL Paclitaxel is delivering at least as much active drug as Taxol, and we believe that the data will support our 505(b)(2) regulatory strategy for approval. We are close to completing our evaluation of the data, and this will lead to our proposal for a Phase 3 clinical testing of TOCOSOL Paclitaxel (technical difficulty). We expect to submit the data and our plans to the FDA before the end of the summer.

Taken together with its ease-of-use, convenience of administration, excellent side effect profile, and the potential for improved efficacy, in addition to its cost advantages, we believe that if approved, TOCOSOL Paclitaxel could offer a highly competitive alternative to the marketed taxane-based therapy. As we have said in the past, our overriding goal remains to get TOCOSOL Paclitaxel to market rapidly with the most competitive possible label, and we are on track with that strategy.

Second headline. In June, clinical investigators presented ongoing results from 3 Phase 2a studies of TOCOSOL Paclitaxel at the American Society of Clinical Oncology Annual Meeting in New Orleans. This was the first time that the data were presented in separate disease-specific sessions, rather than on a combined basis. The presentations attracted a great deal of interest from clinical investigators who were previously unfamiliar with TOCOSOL Paclitaxel. Michael will give us his perspective on the significance of our ASCO experience during his remarks.

Third headline. I am pleased to say that we are in the process of initiating a Phase 2b study in advanced metastatic breast cancer. The purpose of this study is to support our NDA application by developing data in one of the primary cancers treated with taxane-based drugs.

Fourth headline. As we continue to advance the development of TOCOSOL Paclitaxel, securing a partner to commercialize the product remains a priority in 2004. With the ongoing positive nature of the clinical trial data, the increasing clarity on the regulatory strategy, and our strength and financial resources, we are in a stronger position today than we were a year ago to maximize the overall value of this partnership. Discussions continue with a number of interested parties, and I believe that we will achieve our goal of partnering TOCOSOL Paclitaxel this year.

The fifth and final headline relates to other product development activities. You may remember that we presented data on our novel camptothecin derivative at the American Association for Cancer Research Annual Meeting in March. With the encouraging preclinical results generated to date, and now with sufficient financial resources, we have decided to advance one of our camptothecin derivatives through the remaining stages of nonclinical development with the goal of initiating clinical testing as quickly as possible, most likely early next year. By formulating a camptothecin derivative with the TOCOSOL technology, we hope to produce a drug that has increased anti-tumor activity with a safety profile that is equal to if not better than the marketed camptothecin products.

You may recall that there are 2 camptothecin analogues on the market today, irinotecan and topotecan, that are approved for the treatment of colorectal, ovarian and lung cancers, and together they generate nearly $800 million in annual sales worldwide.

Now I would like to ask Michael to provide some of the details on the clinical and regulatory progress with TOCOSOL Paclitaxel. Michael?

Thanks very much, Mike. First, let me start the presentations we made at ASCO. A year after completing enrollment in the 3 Phase 2a studies, the data continue to mature and strengthen and now include encouraging trends for time to disease progression and one-year survival in patients with ovarian non-small cell lung and bladder cancers after failure with primary chemotherapy regimens. As Mike mentioned, this was the first time that the individual study data were presented in disease-specific sessions for lung, gynecologic and urinary cancers instead of being shown as composite data in experimental therapeutic sessions.

We were honored that the lead investigators for each study traveled to New Orleans to make the presentations. It was an exciting few days responding to the high-level of interest that emerged from many U.S. and international clinical investigators, most of whom were becoming aware of TOCOSOL Paclitaxel for the first time. It was particularly gratifying to see and hear the interactions between those clinicians and our investigators. Nothing illuminates understanding as well as direct communication with other physicians who have used a new product and feel strongly about how valuable it might be. During ASCO and in the weeks since, we have seen increased interest from investigators who want to participate in new trials of TOCOSOL Paclitaxel.

The clinical outcomes to date continue to suggest that TOCOSOL Paclitaxel may offer a new treatment option for cancer patients because of the potential for improved efficacy, the simplicity of its administration compared to current taxane products, and the fact the treatment is not limited by side effect in most patients. The Phase 2a study demonstrated that this product was very well-tolerated and most patients received their intended weekly therapy without any interruption, including some patients who have been receiving the drug on an uninterrupted basis for over 52 weeks.

We believe that the frequency of TOCOSOL Paclitaxel administration or dose density may result in improved efficacy. Indeed, one of the critical late-breaking reports at ASCO was the results of an NCI sponsored Phase 3 study involving more than 700 women with advanced breast cancer and comparing the effects of Taxol administered at 80 milligrams per square meter weekly, with the standard dosing regimen of 175 milligrams per square meter every 3 weeks. It was clear that both response rate and time to disease progression were significantly improved by weekly dosing. Although weekly administration of Taxol is not part of the approved labeling for that drug, we plan to include the dose dense approach in our upcoming discussions with the FDA about the design and endpoints of our pivotal trial for TOCOSOL Paclitaxel.

Now, let's talk about our progress with the multipath U.S. regulatory strategy for TOCOSOL Paclitaxel. We continue to believe that the initial approval will be through a 505(b)(2) new drug application, which compares TOCOSOL Paclitaxel to Taxol. As Mike mentioned, we have now conducted the clinical pharmacology study as the first clinical step of the 505(b)(2) regulatory plan. We completed that study with 31 fully evaluable patients, exceeding our required target of 20. In this trial, each patient received a single dose of TOCOSOL Paclitaxel and a single dose of Taxol, with the doses given in random order at least 3 weeks apart. After each dose, multiple blood specimens were taken at specified times for 5 days to measure the amount of paclitaxel in the circulation over time.

We also looked at the effects of each drug on blood cell counts and other laboratory tests. The data from this study are going through complex, detailed analysis, both internally at Sonus and in parallel by a world-renowned outside expert who has published extensively in the field of clinical pharmacology and specifically on the effect of taxanes and similar cytotoxic drugs. Based on the data analysis to date, we feel confident that the clinical efficacy of TOCOSOL Paclitaxel will be shown to be at least as good as that of Taxol, if not better. And our discussions with the FDA will confirm the details of how we will have to go about proving that.

Pivotal trials are a major undertaking. They must be optimally planned in every detail before any patient is enrolled. It is difficult, expensive, and can cause unwanted delays to make changes once the study begins. Ideally, we would like to have specific agreement with the FDA before starting the study, that if specified endpoints are met, the results will provide the basis for approval with the NDA. As soon as we have the FDA's concurrence with our plans, we will initiate the pivotal trial as expeditiously as possible.

Also ongoing is our clinical program to pursuing new claim for paclitaxel in the treatment of inoperable or metastatic bladder cancer, for which we received FDA fast-track designation in 2003. There are not a large number of patients with advanced bladder cancer, but importantly, it is a disease for which there are few good treatment options, and paclitaxel may offer a new one. To support this program, we initiated a Phase 2b study late last year, and during the second quarter we added clinical sites with key U.S. investigators and opinion leaders in Philadelphia, Cleveland and Baltimore. We will be adding more U.S. sites this year, as well as opening sites in Western Europe. We would expect to report results from this study as soon as we are able to estimate response rates and medium time to disease progression, sometime in 2005.

Finally, as Mike mentioned, we are initiating another Phase 2b study, this one in advanced metastatic breast cancer, which is an indication for which TOCOSOL Paclitaxel has not been studied in the past. This Phase 2b trial will use weekly dosing of TOCOSOL Paclitaxel at 120 milligrams per square meter in about 45 patients with the purpose of evaluating the effect of increased dose density in this patient population. In summary, TOCOSOL Paclitaxel continues to be an exciting potential product. We are expanding the clinical development program to bring it to market with the best possible label.

Mike, that's it for the update. I will turn the call back to you now.

Thank you, Michael, for both the great progress and a concise update. With the strength of the clinical data and the ongoing implementation of the regulatory strategy for TOCOSOL Paclitaxel, we're moving closer to translating the promise of the product into real benefits for cancer patients. We believe that TOCOSOL Paclitaxel may ultimately be shown to improve the treatment and therapeutic outcomes of patients receiving taxane therapy, and that we will be positioned very competitively in a large and growing market. This belief is based on 6 potential advantages that we see for the product as follows. First, while improved efficacy and safety remain to be proven, clinical trials to date have demonstrated that TOCOSOL Paclitaxel compares favorably with approved taxane products as well as other new paclitaxel formulations under development.

Second, TOCOSOL Paclitaxel offers the convenience of a ready-to-use formulation that does not require time-consuming and expensive preparation prior to administration. This may provide a unique advantage over both currently marketed taxane products and new formulations under development. A ready-to-use product can also provide an important cost benefit for physicians and payers.

Third, TOCOSOL Paclitaxel is administered to patients in a short 15-minute infusion compared to the 3-hour infusion approved available paclitaxel products, and TOCOSOL Paclitaxel does not require special IV tubing, filters or other apparatus. These benefits translate into both lower cost of delivery and greater convenience for patients, doctors and treatment centers.

Fourth, TOCOSOL Paclitaxel does not require dilution. It can be given in small volumes, 25 to 35 milliliters, compared to several hundred milliliters for Taxol, a significant advantage in patients whose hearts or lungs cannot tolerate excessive amounts of fluid. Fifth, the ready-to-use and 15-minute infusion features mean that treatment may be moved from the hospital or clinic to the physician's office, which could lower the cost of care and provide additional convenience for patient and physician. Finally, the manufacturing process TOCOSOL Paclitaxel is efficient, and we believe that its lower cost of goods will provide a competitive advantage.

In summary, there are a number of important catalysts on the near-term horizon for TOCOSOL Paclitaxel. Our objectives for the second half of this year remain unchanged and clear. First, complete the analysis of data from the TOCOSOL Paclitaxel clinical pharmacology study, as well as finalize the details of the pivotal trial and submit that proposal to the FDA. Second, obtain FDA agreement on our TOCOSOL Paclitaxel pivotal trial program. Third, initiate that pivotal trial program to enable a New Drug Application submission for TOCOSOL Paclitaxel. Fourth, secure a corporate partner to help complete development and commercialize the product. And finally, continue to advance other product and corporate development activities, including bringing our novel camptothecin derivative into clinical testing.

That completes our prepared remarks. We would be pleased to answer any questions. Jean, could you please open the line for questions?

(OPERATOR INSTRUCTIONS) David Miller.

Good afternoon. First question I have is that you have mentioned a couple of times on previous conference calls about that TOCOSOL Paclitaxel has a low cost of manufacturing. Is that compared to paclitaxel itself, to the two most commonly-named competitors, or both?

We believe to both, and that believe is based on our understanding of the chemistry involved in the products, as well as the cost of materials. And we believe that the cost position of TOCOSOL Paclitaxel is very competitive.

Okay. Where's my other question? If I read between the lines, could we see the pivotal 505(b)(2) trial to be actually 3 arms, to where you do the -- which would be the direct comparison, which would be dosing once every 3 weeks, but also throw in an arm where you dose weekly as well?

David, we really don't want to speculate at this point on the pivotal trial design. Our intent, our goal, remains to get the fastest possible approval of the most competitive label possible. We are evaluating options as we speak, as Michael said, both internally and with the help of outside experts. And once we have a discussion with FDA and agreement, we will communicate that news in as timely a manner as possible.

The last question I have is, when are we likely to see full survival data from the Phase 2 trial?

Well, we reported at ASCO median survival rate for the ovarian and non-small cell lung, and we're getting more follow-up for the bladder cancer patients, but we've already got the median survival for the non-small cell lung and ovarian.

Okay. All right, thank you very much.

Matt Kaplan.

Thanks for taking my questions. With respect to the -- I guess this is for Dr. Stewart -- give us a sense why it's taking so long to analyze the PK study. And then with respect to that, why are you so comfortable right now with respect to the preliminary analysis that the data supports the 505(b)(2) strategy? Give us some flavor why you are so confident with that.

Well, the first thing I would say is I don't think it's taking a long time to analyze the data. We've got a lot of data; the analyses are very, very complex, and I don't think it's taking very long at all to do the amount of work that is required there. Actually, I have been very pleased with the progress both internally and with the work that is going on with the expert consultant.

Secondly, in terms of why we are confident, we are seeing preliminary results. I think as Mike was very clear, we are not going to be discussing those results with anybody before we actually have the discussion with the FDA. But what we're looking at, as you know, the 505(b)(2) requires you to be at least as good, and I think we are very confident that that is no longer a question. So that is exactly the message I want to communicate.

So you're confident because in the criteria as set by the FDA, you have to be in 80 to 120 percent -- 125 percent range bioequivalent. So we can understand that you're greater than 80 percent bioequivalent and perhaps --?

That is their minimum threshold, and we are confident so far in what we are seeing. The analyses are not complete, but I think that we've started to see enough of the data that we are confident that we are not going to have an issue of being inferior to Taxol.

What else needs to be completed with the analyses for you to have the full data in-house? Can you give us a sense, obviously, of the timeline associated with that?

Well, again, I think it is not so much a matter of when the analyses are done as when we're actually able to have them reviewed and have the discussion with the FDA. And as you know, we can put together our aggressive timelines, and the FDA response is not something -- their timeline is not something we control. The work that has been going on, the pharmacokinetics work, is very nearly complete. The pharmacokinetic pharmacodynamic correlative analyses are where the work is being finalized right now.

Are you still on schedule to be able to submit a proposal to the FDA sometime this summer?

We are.

Great. I guess with Mike Martino, a question for you. You had indicated that you're going to -- you want to get the signoff from the FDA with respect to the endpoint and what the criteria will be for the confirmatory trial before you start that. Will you get an SPA from the FDA?

Well, you know, Matt, I think the detailed answer to that question is that it's a function of our intent and willingness to apply for one and a function of their willingness to grant one. I think, philosophically, what we would say is that we are exploring all paths to achieve our objective, which is the fastest possible approval of a competitive label. We know that drug development does not occur on a straight line. We also know that as you put together these plans and have discussions with FDA, it may well be worth spending a few extra months up front to save time and money throughout the process. So I think it is fair to assume that we're certainly evaluating the merits of an SPA in terms of the confidence that would give us that if we, as Michael said earlier, achieve specific endpoints, that they will approve the drug.

At the same time, preparing for an SPA, requesting one and getting it approved does have a cost, and that cost is some additional time. To support an SPA application, for example, requires a lot more data up front. I think it is clear the FDA is moving in the direction of requesting more SPAs. They may ask us too, regardless of what our intent is. So I don't mean to be evasive. We simply have no way to predict what the outcome there will be. I think it is fair to assume that we are certainly evaluating that path and that it may save us time in the long run, but it may cost us a couple of months up front, and we are evaluating those trade-offs.

Great. Just a couple more questions. Can you give us a sense with respect to the status of enrollment in the bladder cancer? As you said, as Dr. Stewart mentioned, there are not that many patients with advanced third-stage bladder cancer.

Yes, we're just starting up, Matt. I don't even remember what the last number was, but I can tell you that all of the investigational sites are actively screening; all of the investigators are very eager. We have new people approaching us who want to participate too, but we're really just starting up right now with the enrollment. It is small numbers right now.

Then a follow-up question on Dave Miller's with respect to manufacturing. Can you update us with respect to the status of manufacturing for TOCOSOL Paclitaxel; what is the stage of that?

Well, I am happy to confirm what we have said earlier about the manufacturing process. Together with our contract manufacturing partner, Sicor, we have scaled and validated the process to the 50 liter scale which we think is sufficient to support the remaining clinical development of the product and, in fact, to support commercial launch. That process I think, thanks to the outstanding efforts of the entire team, both Sicor employees and Sonus employees, went much faster than we expected and came in at or under the budget that we had allocated to it. We are currently manufacturing product to support clinical trials from that process. In fact, are on schedule to support -- to manufacture the required validation demonstration lots (ph) to support an NDA with that process. We're delighted with the yields, and we aren't done yet. As we speak, the combined teams are looking at opportunities to scale that process still further. So we believe the yields and the cost advantages that we enjoy today will only get better.

Great. In terms of starting the pivotal study after your conversations with the FDA, I understand this goes back to the fluidness of your conversations with the FDA and the time associated with getting an FDA or not. Do you think if you take the worst-case scenario and include getting an SPA, do you think you'll still be able to start that pivotal confirmatory trial this year?

Well, it remains our intent. We know from other companies' experience, and we have -- Michael and I chatted with quite a few people to try to learn what we can relative to our own situation, that applying and having an SPA granted can introduce 3 to 6 months into the process. In our particular case, if we go that route or if FDA requires us to go that route and it takes 6 months, then I think it is highly unlikely that we would initiate the pivotal study this year. However, that's a delay that we hope would be justified by eliminating disconnects and back and forth time with FDA at a future point in the process.

We just have no way to speculate at this point. We have no way at this point to change the guidance except to say that our objective remains to implement the trial this year. It will depend upon the discussions with FDA. We have no way to change that guidance at this point and, therefore, any discussion around it is really speculation on our part, beyond sharing with you what we have learned about the SPA process.

Just changing the subject a little and then I will jump back into the queue. With respect to the partnership and the discussions, ongoing discussions with partners, what is it going to take to get someone over the hump and sign on to partner this product, and where are you in that process?

Well, I have said previously that what will converge on that partnership will be the maturity of the existing 2a clinical trial data, the clinical pharmacology data which will provide clarity on the regulatory strategy. And I think we're getting really close to those things converging with where we are in discussions with several potential partners.

I guess, just on closing, congratulations with respect to the successful completion of the PK study and the preliminary -- positive preliminary outcome.

Thank you, Matt.

Chris Tanaka (ph).

Good afternoon. Thanks for taking my questions. My first question has to do with the discussion earlier about costs, where you said that not only do you expect to have a cost advantage with respect to the new generation of paclitaxel agents, but also perhaps with Taxol itself. My question there is, what is the cost of generic Taxol as a fraction of the price that the brand was before it went generic?

Are you referring to cost of goods?

The sales price.

Oh gosh, I think you will hear different estimates that suggest that the current market cost of paclitaxel is a third to a half of the pre-generic price. The other element, though, in this equation is the price of Taxotere, which continues to be some 2 to 3 times greater than the price of branded Taxol.

Oh, I hadn't considered that. Thank you, that is helpful. Also, I was wondering if you could explain in terms of the question earlier about data analysis and timing, there was some -- what I am wondering is, when was the clinical pharmacology study fully enrolled?

The last enrollment was March 31, and the treatment period is -- the shortest treatment period was 6 weeks. Some patients took up to 8 or 9 weeks. And obviously, then we had to get all of the blood specimens in, all of the analyses done, all of the data in. We have still got final queries coming in from case report forms, but we've been busy analyzing data as they've been rolling in in real-time.

Okay, great.

The final treatment finished sometime I guess at the end of May or early June.

Okay, all right. The other question that I had pertains to the 505(b)(2) regulatory pathway. In particular, what other drugs have been approved through this pathway? In particular, are there any oncology drugs that might be a precedent that we could look at for how this could work?

There are other drugs, I believe, that -- well, again, we don't always know because the approval on a technical basis standing from a regulatory technical firm, all approvals are actually 505(b)(1). The FDA sometimes changes the designation of the review process from 505(b)(1) to 505(b)(2) or the other way around, and the sponsors don't even always know under which review process it occurred. Our belief is that, for example, I think that SuperGen's Mitomycin was approved under 505(b)(2). I think if you look at some of the approvals that Bedford Labs have had or -- and I don't remember whether American Pharmaceutical Products has any oncologies under 505(b)(2).

Yes, the short answer is yes, that division has, in fact, used the 505(b)(2) mechanism. To our knowledge, our approach to delivering paclitaxel is a sufficiently different approach to what some others have done that I am not sure you can see -- you can predict whether there is a well-trod path on this. I think the oncology division has made it very clear, however, that they are very interested in figuring out how to facilitate the review and approval of promising drugs that offer benefits to patients. They have been very public about that; they take pains to explain their thinking every time they do grant an approval, and certainly our conversations with that division I think have been very straightforward. So I don't think there is really much of a guessing game here.

So what specific advantages as a sponsor does the 505(b)(2) pathway offer to you versus the more traditional NDA approach?

The biggest difference is that the FDA can take advantage of everything that they have had -- all of the data they have had on file and reviewed for the innovative product, for Taxol. So, for example, we can start from the premise that they understand the active ingredient, paclitaxel. We don't have to go all the way back to the business of characterizing that at a manufacturing level and from the perspective of preclinical toxicology pharmacology. That is really the simplest way I can put it. The FDA can say, okay, we will start from the premise that the paclitaxel you're buying is, in fact, the paclitaxel we have known for the last 12 years, and now let's talk about how your formulation and your product are different, and that's the advantage that we have.

Oh, I see. Just lastly, you had mentioned earlier in the call a couple times that based on the clinical pharmacology study, you feel like TOCOSOL Paclitaxel will be at least as good as Taxol. And my question is, what would happen if the TOCOSOL Paclitaxel is, quote/unquote, better than Taxol and that it would deliver higher serum levels of drug for the same dose?

Then in conjunction with the FDA, we have to find out how much safety and efficacy information they need to be able to feel comfortable about labeling our drug.

Thank you very much.

At this time, there are no further questions.

Well, in that case, Jean, if there are no further questions, we would like to thank all of you for joining us today. Again, I think our progress in the past quarter has been outstanding. I am very pleased with where we are. I'm eager to continue to make progress in Q3 and to share that with you at the appropriate time. As always, we appreciate your continued support. We look forward to keeping you updated. Thank you, everyone.

That concludes today's Sonus Pharmaceuticals conference call. You may disconnect at this time.