Achieve Life Sciences Inc (ACHV) 2006 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the SONUS Pharmaceuticals 2006 year end conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. [OPERATOR INSTRUCTIONS] This conference is being recorded, Wednesday, March 14th, of 2007.

At this time, I would like to turn the presentation over to the Director of Investor Relations, Pamela Dull. Please go ahead, ma'am.

Thank you, Andrew, and good afternoon, everyone. Welcome to SONUS Pharmaceuticals 2006 year end conference call. As a reminder, this call is being recorded and broadcast live on our web site at www.sonuspharma.com. A replay of the webcast will be available through the same link.

With me this afternoon are Mike Martino, our President and CEO, Alan Fuhrman, our Chief Financial Officer, Dr. Richard Daifuku, our acting Chief Medical Officer and Vice President of Discover and Preclinical Research, and Dr. Elaine Waller, our Senior Vice President of Regulatory Affairs and Quality Assurance. We will use the following agenda for today's call. First, Mike will provide an overview of our progress in 2006. Next, Elaine and Richard will give us an update on the TOCOSOL Paclitaxel program. Third, Richard will review progress of TOCOSOL Camptothecin, our second drug candidate, and then Alan will review a brief summary -- or provide a brief summary of the 2006 financial results and guidance on our 2007 burn rate. Finally, Mike will summarize our 2007 objectives, and then we'd be happy to take your questions.

Before we begin, I would like to remind everyone that some of these 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 result could differ materially from our predictions and estimates as a result of various risk factors, including those identified in our filings with the SEC, copies of which can be accessed on our web site.

Mike, I will turn the call over to you.

Thanks, Pam. Good afternoon, everyone. 2006 was another busy and productive year for SONUS. On behalf of the SONUS team, I'm really pleased to summarize and highlight our major activities and achievements for the year as follows:

First, in November, we completed enrollment in the Phase III trial for TOCOSOL Paclitaxel with 821 patients. This trial is being conducted at over 100 clinical sites in 17 countries around the world. And meeting the enrollment target in a little over 12 months was a significant accomplishment. The conduct of the trial remains on track, and we continue to expect to have adjudicated data in the third quarter of 2007, based on the assumption that the objective response for the last patient enrolled in the study will occur in May.

We also continued to collaborate with our partner, Bayer Schering Pharma AG to extend the development of TOCOSOL Paclitaxel into other geographies. In 2006, Bayer Schering subsidiary in Japan initiated a Phase I study for TOCOSOL Paclitaxel in Japan. Additionally, the Bayer Schering project team met with regulatory authorities in Europe and received clarification on the requirements for gaining approval of TOCOSOL Paclitaxel in that region. Under our agreement with Bayer Schering, they will be conducting any clinical studies that take place outside the U.S. The results of which will be used in applications for marketing approval of TOCOSOL Paclitaxel outside the U.S., as well as to support the U.S. regulatory submission.

In 2006, Bayer Schering also exercised its option to assume responsibility for the commercial manufacturing of TOCOSOL Paclitaxel, and together we continue to make progress with the chemistry, manufacturing and controls or CMC section of the NDA.

As you may also know, Bayer completed the acquisition of Schering AG at the beginning of 2007. We've met with senior management who now lead the Bayer Schering Global Oncology business unit, and we are pleased that our two teams share the view that TOCOSOL Paclitaxel is an important asset for both companies. We are also pleased that members of the TOCOSOL Paclitaxel working team of Bayer Schering have largely remained unchanged during the transition, and that they continue to have a strong focus and level of commitment to the TOCOSOL Paclitaxel program.

Next, we also enter into an agreement with a Cancer and Leukemia Group B Foundation, or CALGB, to use data from the CALGB study 9840 should we need to submit it in the TOCOSOL Paclitaxel NDA to support weekly dosing of Taxol as our control arm. We recently had a productive meeting with the FDA regarding the CALGB data set and Elaine will provide a few more details in a moment.

In addition to progress with TOCOSOL Paclitaxel, we are pleased to move our second product candidate, TOCOSOL Camptothecin into Phase I of clinical development in September. We are excited about this candidate's potential, and Richard will provide a few more details on the program later in the call.

And finally, we completed a financing in May that significantly strengthened our balance sheet and put us on a much stronger position to implement our programs for 2007, and into 2008. Alan will provide guidance on our cash know and financing objectives later in the call.

With that overview, I'm pleased now to turn the call over to Elaine and Richard to review our drug development activities.

Thanks, Mike. As mentioned earlier, we acquired the right to use the CALGB 9840 data for the TOCOSOL Paclitaxel NDA, should it be needed to support weekly dosing of Taxol as a control arm in our Phase III study. Our Phase III trail is comparing weekly dosing of TOCOSOL Paclitaxel and Taxol. Given that the approached Taxol dosing regimen is every three weeks, the FDA has indicated that in the event TOCOSOL Paclitaxel does not achieve superior efficacy over Taxol in the Phase III trial, or the currently approved label for Taxol is not changed to incorporate a weekly dosing schedule, we would need to submit reviewable data in the TOCOSOL Paclitaxel NDA to support the weekly Taxol dosing regimen.

In our recent meeting with the FDA, we received clarity regarding the requirements for submission of the CALGB data set. Based on our discussions, the data set is considered to be reviewable by the FDA. And we also received guidance on the appropriate statistical analysis of the data. Based on the statistical analyses we have conducted to date, we believe the study results demonstrate that weekly administration of Taxol is superior to every three week dosing, and accordingly, would serve as an appropriate reference arm for our Phase III trial. Should we need to submit the data it would be subject to the usual FDA rigor as part of their review of the TOCOSOL Paclitaxel NDA.

Moving on to the NDA submission, we are actively collaborating with Bayer Schering on the completion of components of the NDA, the assembly of those components and the timelines for the submission. As a reminder, under the terms of our agreement, Bayer Schering will be the sponsor of the NDA and is responsible for submitting it to the FDA. Bayer Schering has our full support in preparing the submission and we are jointly completing as many of the NDA components as we can prior to the availability of the adjudicated Phase III data, which we expect to be available in the third quarter.

Based on the current timelines, we do not believe that our currently targeted submission date at the end of 2007 will be feasible. We currently anticipate that the NDA will be submitted in the second quarter of 2008 and we continue to work with Bayer Schering to optimize the submission plan. It is clearly in the interest of both parties to submit the NDA as soon as possible after the availability of the Phase III data.

With that, I will turn the call over to Richard for an update on some additional development work with TOCOSOL Paclitaxel.

Thanks, Elaine. I would like to bring you up to date on some preclinical work that we're conducting to test whether TOCOSOL Paclitaxel may have the ability to provide better efficacy and safety than the approved [taxain] products.

First, let's start with why TOCOSOL Paclitaxel may be able to provide better efficacy. We have early preclinical data showing that our products results in an increase in the concentration of TOCOSOL Paclitaxel in tumor tissue relative to Cremophor Paclitaxel. Our hypothesis is that this may occur because our [inaudible] formulation is able to take advantage of enhanced premiability and retention, or EPR, by preferentially accumulating a tumor tissue due to its leaky vasculature and poor lymphatic drainage. In contrast to approve taxain products, our preclinical work shows that TOCOSOL Paclitaxel [inaudible] droplets are stable and persistent [be short] for at least six hours. Which may allow them to participate in EPR. This work remains to be confirmed in additional preclinical model. However, the experiments we've conducted to date provide evidence that TOCOSOL Paclitaxel may lead to a greater antitumor activity and reduce toxicity to other tissues through EPR and passive targeting.

From a safety perspective, with we have preclinical data supporting the possibility that TOCOSOL Paclitaxel may result in less clinical peripherial neuropathy which may be attributed to our formulation. Neuropathy is a dose limiting toxicity of greatest concern to oncologists, because there is no treatment for this side effect. It's also a concern to patients because it affects their quality of life. We recently completed some encouraging preclinical studies showing that weekly dosing of TOCOSOL Paclitaxel resulted in reduced neurotoxicity when compared to approved taxain products. I am pleased to report that the results of this work were accepted for a poster presentation on April 15 at the American Association For Cancer Research annual meeting in Los Angeles and we'll be delighted to discuss those results once they are presented.

Of course, the efficacy and the safety of TOCOSOL Paclitaxel will need to be confirmed by the ongoing Phase III trial. However, we believe the preclinical work that I have talked about today, in addition to the results from our clinical studies to date, provide an important foundation for the differentiation of TOCOSOL Paclitaxel from the marketed taxain products.

I will now review our progress for TOCOSOL Camptothecin. We initiated a Phase I clinical study for our novel Camptothecin compound in September of 2006 at two leading cancer centers in the United States. Sara Cannon Research Institute in Nashville, and Fox Chase Cancer Center in Philadelphia.

The Phase I study is investigating the safety profile of TOCOSOL Camptothecin at different doses, in order to determine the maximum tolerated dose in humans. The study is also designed to observe antitumor effects of TOCOSOL Camptothecin and to characterize the pharmical kinetics of the drug. A small number of patients have been enrolled in the Phase I study, and it's too early for any definitive safety and efficacy observations. However, based on our preclinical work we had expected a longer half life and a greater exposure to the active drug [inaudible], and we are very encouraged the preliminary data from the Phase I study confirmed this target pharmical kinetic profile. These improved kinetics may translate into greater therapeutic benefits compared to the currently marketed Camptothecin NOR.

As excited as we are about the potential opportunities for TOCOSOL Paclitaxel and TOCOSOL Camptothecin we remain committed to advancing other products in cancer therapies in our pipeline. A key objective in 2007 is to increase the focus of our organization and resources on the discovery of new oncology products, and we look forward to providing insights on these efforts later in the year.

I will now turn the call over to Alan for a review of our financials.

Thanks, Richard. I will briefly review the financial results for the fourth quarter and year end, which we reported in our press release this afternoon.

For the fourth quarter of 2006, we reported a net loss of 7 million or $0.19 per share, compared with the net loss of 3.3 million or $0.11 per share for the fourth quarter of 2005. For the full year, we reported a net loss of 23.6 million, or $0.68 per share, compared with the net loss of 21.1 million, or $0.88 per share in 2005.

For the fourth quarter of 2006, we recognized 5.9 million in revenue under our collaboration agreement with Bayer Schering, which includes 4.5 million from reimbursable expenses for work related to the development of TOCOSOL Paclitaxel and 1.4 million for amortization of the up front license fee that we received in 2005. For full year 2006, we recognized a total of 22.4 million in revenue, including 16.9 million from reimbursable expenses for the TOCOSOL Paclitaxel development program, and 5.5 million from the amortization of the up front license fee.

At year end, we had 58.3 million in cash and investments. We anticipate that our net cash burn for 2007 will be approximately 36 million, consisting of the following, R&D spending of approximately 27 million, which is net of reimbursements we expect to receive from Bayer Schering, general, marketing, administrative costs of approximately 9 million, net capital expenditures of approximately 2 million and interest income of approximately 2 million. This anticipated level of spending would result in a cash balance of approximately 22 million at year end 2007. Our cash position provides funding for our activities through the second quarter of 2008. We do not expect to raise additional equity in advance of a catalyst and at this point, we believe that catalyst will be the data from the TOCOSOL Paclitaxel Phase III trial.

That completes the financial review. I will turn the call back to Mike for some closing remarks.

Thanks, Alan. I would like to take this opportunity to thank the SONUS team for making this past year such an outstanding success, and to thank our colleagues at Bayer Schering for their continued focus and commitment. With all that was achieved in 2006, we are positioned for a milestone year in 2007. Overall, we remain focused on implementing the two key elements of our business strategy. First, maximizing the value of TOCOSOL Paclitaxel, and second, developing additional product candidates to expand our pipeline.

Within this strategy, our specific operating objectives for 2007 are as follows: First, to secure adjudicated data from the Phase III preclinical trial of TOCOSOL Paclitaxel, which are expected in the third quarter. Second, to work with Bayer Schering on the TOCOSOL Paclitaxel NDA components and support the compilation and submission of the TOCOSOL Paclitaxel NDA, as soon as possible following the availability of the Phase III data. Third, to continue to advance the Phase I program for TOCOSOL Camptothecin with the objective of determining if this is a Phase II ready compound. And fourth, to move a third product candidate closer to an investigational new drug application.

In summary, 2007 will be another vital transition year on the growth and the development of our company. If we are able to execute on these objectives, by year end, we will be working with our partner to submit an NDA on our lead product, preparing to move our second product into Phase II clinical development and a third product into Phase I clinical development. In other words, we will transition from a single product company to one that should be recognized and valued as an oncology pipeline company.

With that, I would like to thank you again for joining us today. As always, we do appreciate your interest and support. And we'll now open the line for questions. Andrew, if you will please take questions.

Thank you, sir. [OPERATOR INSTRUCTIONS] Our first question will come from Mark Monane with Needham & Company. Please go ahead.

Hi. This is actually Rich [inaudible] for Mark.

Hi, Richard.

How are you? I have a question on the status of -- can you give us an update on the status of Phase II trials for the [inaudible] cancer and the bladder cancer for TOCOSOL Paclitaxel? TOCOSOL Paclitaxel, yes.

Well, Richard, we have -- we have not announced a trial in [inaudible] so long. We had completed a Phase II trial in non-small cell lung, oh, gosh, two years ago now. And we had disclosed those results. Regarding the bladder cancer trial, I would turn it over to Richard for a quick update.

Yes, I think as we said before, on the bladder cancer trial, we finished accrual on that, but -- and we are still following those patients and in part because of competing priorities and the necessity to bring the data in, we should be able to have a preliminary analysis performed towards the end of the second quarter of this year.

Okay. In terms of additional data, are you going to have any additional data for -- to present at ASCO meeting or any other medical meetings?

No, we will not have additional data at ASCO. Once again, we'd like to remind everybody that we are totally blinded on the conduct and results of the Phase III trial and will remain so until those results are fully adjudicated. And we'd expect to have those adjudicated results in Q3. Based, of course, on those results, one could anticipate that the soonest medical meeting at which we could present data would be San Antonio Breast at the end of 2007, provided that we have the data and the time for the submission deadlines.

Okay. Thanks very much.

Thank you. Our next question comes from the line of Matt Kaplan, with Punk, Ziegel & Company. Please, go ahead.

Hi, Matt.

Hi, guys. Thanks for taking my questions. A couple of things, you mentioned the -- that Bayer and Schering had a chance to meet with you. Could you give us some sense in terms of what the results of that meeting were, in terms of the regulatory -- the potential regulatory pathway in the EU for TOCOSOL Paclitaxel?

Well, I will turn it over to Elaine for what specifics we can provide on that. The caveat I would provide up front is that under our agreement, Bayer Schering is responsible for developing the product outside the United States. And we certainly don't want to preempt their decision on what, if anything, they will disclose regarding those development plans. But, Elaine, can you provide more commentary on that.

Surely. Hello, Matt.

Hi.

I think, as you would expect, there are some different requirements for registration in the EU that -- than from the requirements for a U.S. registration. And I think Bayer Schering, indeed, received the clarification that they were looking for on those requirements, and I -- I think it will probably just be simple to say that the plan for registration in the EU appears feasible.

In terms of the different requirements, is it -- would it necessitate another large Phase III study or could they -- are the requirement addressable in a shorter period of time than doing an additional Phase III?

No, I -- one of the things that I think that they -- that both parties were pleased to hear, that, in fact, the current Phase III trial, as it is being conducted appears to suffice for the EU.

Okay. What -- what is a reasonable timeline for expecting a filing in the EU? Could that be shortly after the U.S. filing? Or --

Well, I think that's where, frankly, we don't want to get crosswise with our colleagues at Bayer Schering. I think that that is their -- really their plan to discuss. I think the encouraging news is, as Elaine said, that, of course, depending upon the outcome, ie, the data, that the existing trial should be sufficient.

That's great news. Good. A couple more questions. In terms of giving us some more detail on the phase one, TOCOSOL Camptothecin trial, how many patients do you have enrolled and how many patients do you think you will enroll in that study? Obviously, it depends reaching the MDT or DLT, but what is your sense now at this point?

Richard.

Yes, well, Matt, honestly, we are very early in that trial, and we are on the third dose cohart and we treated so far six patients and so we are very early. We really can't, as you would guess, make any comments, as I said earlier about efficacy or safety. But, however, a major part of the reason for developing this [novel] compound was based on its expected pharmical kinetic profile based on animal studies that we had done. And it's fair to say that what we had projected through various elemetric scales and like has turned out to be true. And so we have hoped that in fact that will translate into the greater efficacy and hopefully safety as well, that we had anticipated.

But in terms of the total number of patients, as you can imagine, it's very difficult to answer that, because it depends on how many more doses we can grow up before we reach an MTD. But we would anticipate, as we said earlier, be in a position, even if we hadn't completed the trial fully to know whether we have something that can move ahead to a Phase II towards the end of this year.

And can you remind us what dose you started at and what dose you are at? And, based on the preclinical data, are you starting to be in the range of a dose that you think would be therapeutically relevant? And also, would you start to see some toxicities at this dose yet, based on the animal?

Yes, I don't know if we want to get into all the protocol specifics here, but, what I will say in general, and this is actually part of our press release, is that we've seen greater AUCs with our compound, and you would -- then you would -- and we anticipated that but greater than you would see with [inaudible] 38, and so it's quite possible that we may end up having an MTD that might be lower than you would just guess, just because our compound, if you will, is more [active]. We don't know that for a fact, one way or the other and we really need to just run through the trial to find that out.

Great. Thanks. And one last question, and it's not for Alan. Alan has given us all the guidance we need, I think. With respect to the extension of the time line for the NDA filing, what's the -- what's the cause of that or the reasoning behind that?

Well, I would -- I would say on that, Matt, that the original timeline that was presented was a SONUS timeline. It was based on the best available information that we had at the time, based on our collective experiences, as well as some pretty aggressive objectives that we had set for ourselves. I think the revised time line that Elaine has shared with you this afternoon, reflects a collaborative effort with Bayer Schering, which reflects their input and their experiences and their processes and systems. I think that it is, from a planning basis, it is a solid baseline, but as Elaine indicated earlier, both parties are hopeful that we can do better than that, and are still actively collaborating to optimize that plan.

Great. Thanks, guys.

Thanks, Matt.

Thank you, sir. [OPERATOR INSTRUCTIONS] One moment for the next question, please. Management, at this time, we have no additional questions in the queue and I would like to turn the conference over to you for any further remarks.

Thank you, Andrew. That concludes our call for today. As always, we appreciate your support. Our next opportunity to speak to you will be at the Invest Northwest Conference, which is being hosted by the Washington Biomedical and Biotechnology Association, here in Seattle on March 20th to 21st. Our presentation at the conference takes place on March 20th and will be webcast live. Thank you.

Thank you. Ladies and gentlemen, at this time, we will conclude today's teleconference program. We thank you for your participation. If you would like to listen to a replay of today's conference call, please dial 1-800-405-2236 or 303-590-3000 with the access code of 11085952. Once again, if you would like to listen to a replay of today's program, please dial 1-800-405-2236 or 303-590-3000, with an access code of 11085952. We thank you for participating. At this time, we will conclude. You may now disconnect, and please have a pleasant day.