Achieve Life Sciences Inc (ACHV) 2010 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to OncoGenex Pharmaceuticals Second Quarter Conference Call. At this time I would like to turn the call over to your host, Jason Spark with Canale Communications.

Thank you. Good afternoon, everyone. Thank you for joining us for OncoGenex Pharmaceutical's second quarter conference call. The Company issued a press release today containing financial results for the second quarter and six months ended June 30, 2010 as well as a review of the Company's highlights for the second quarter of 2010. This release is available in the Investor's Relations page of the Company's website at www.oncogenex.com. As a reminder, this call is being recorded and broadcast live on the Investor Relation's page at the Company's website and the replay of the webcast will be available for 90 days.

Before we begin I would like to remind everyone that some of the statements made today 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 annual report on Form 10-K for 2009, filed on March 8th, 2010 and our quarterly report on Form 10-Q filed earlier today, copies of which can be accessed on our website.

I'll now turn the call over to Scott Cormack, President and CEO of OncoGenex.

Thank you, Jason. Good afternoon everyone and thank you for joining us. On the call with me today are members of the OncoGenex Senior Management Team including Cameron Lawrence, our Principal Financial Officer and Dr. Cindy Jacobs, our Executive Vice President and Chief Medical Officer. Cameron will begin today's call with a review of our financial results for the second quarter. Following Cameron's overview I will provide a summery of the Company's achievements for the second quarter of 2010 and review the ongoing development programs. Cameron?

Thank you, Scott. Recall that at the end of 2009 we had $26.5 million on our balance sheet as deferred collaboration revenue, which represented the remaining amount we're obligated to contribute to the Custirsen previously referred to as OGX-011 or TV-1011 development plan under our collaboration agreement with Teva.

As previously discussed, when we contribute to the Custirsen development plan the deferred collaboration revenue balance will decrease and be recognized as revenue. We expect to recognize the remaining deferred collaboration revenue over the expected performance period of our deliverables under this agreement. We currently expect this performance period to end in the fourth quarter of 2012.

Collaboration revenues were $1.7 million and $6.4 million respectively for this three and six months ended June 30th, 2010, which reflects our contribution to the Custirsen Phase III development plan. Of the revenues recognized in the second quarter, $362,000 is included on the Company's balance sheet as amounts receivable on quarter end, as these amounts are reimbursable from Teva on a cash basis.

As of June 30th, 2010, $24.1 million of the up front we received from Teva was included on the Company's balance sheet as deferred collaboration revenue. By comparison for the three and six months ended June 30th, 2009 no revenues were recorded.

Research and development expenses for the three months ended June 30th, 2010 were $3.1 million compared to $3.6 million in the corresponding period of 2009. While research and development expenses for the six months ended June 30th, 2010 were $9.5 million compared to $5.3 million in 2009. The increased research and development expenses for the first six months of 2010 reflect our contribution to the Custirsen Phase III clinical trials.

General and administrative expenses for the three months ended June 30th, 2010 were $1.5 million compared to $1 million in the corresponding period of 2009, while general and administrative expenses for the six months ended June 30th, 2010 were $2.8 million compared to $1.8 million in 2009. The increases in 2010 were due mainly to higher employee expenses including severance charges, professional fees for legal and accounting services, employee recruitment costs and [SOX-based] compensation expense.

An income tax recovery of $3 million was booked in the second quarter of 2010, as the Company received approval from the Israel Tax Authority or ITA for its request for withholding tax exemption on amounts received from Teva in relation to the collaboration agreement. Prior to the receipt of the approval the Company had recorded a $3 million tax liability recognizing this amount as uncertain tax position. Following this approval from the ITA, this liability was released and the Company has recorded a $3 million income tax recovery in the second quarter.

The net income for the second quarter of 2010 was $154,000 compared to a net loss of $4.6 million in the second quarter of 2009. The higher net income in the current period is due to the collaboration revenue recognized in relation to our products reaching to the Custirsen Phase III Clinical trials as well as the $3 million income tax recovery.

Net loss for the six months ended June 30th, 2010 was $2.9 million compared to $7 million in the corresponding period of 2009. The reduced loss in the current year again was the result of revenues earned in relation to the collaboration agreements and the $3 million income tax recovery previously discussed.

We finished the second quarter of 2010 with $47.3 million in cash and investment securities compared to $64.6 million as of December 31st, 2009. Other than costs incurred in relation to the Custirsen Phase III clinical trial, this $17 million decrease in cash and investment securities is due largely to the $10 million in payment to Isis made in the first quarter of 2010, which was included in accounts payable at December 31st, 2009.

We anticipate ending the year with cash, investment securities and amounts receivable of between $32 million and $34 million, an increase from prior guidance due to the $3 million income tax recovery. We believe this will be sufficient to fund our currently planned operations into mid 2012 at which time we expect to have both Phase III prostate cancer trials fully accrued.

That completes our financial review and now I'll turn the call back to Scott.

Thank you, Cameron. This is an exciting time for OncoGenex as our clinical development programs for both Custirsen and OGX-427 continue to gain momentum. In the second quarter we announced initiation of our Phase III evaluating Custirsen plus [Docetaxel] for second line castrate resistant prostate cancer or CRPC.

The trial, which we are referring to at the prostate cancer Saturn trial, will be conducted internationally in approximately 50 cancer centers and will have enroll roughly 300 patients where disease progression involving prostate cancer related pain, which can be debilitating and significantly impact patient's quality of life. Demonstration the reduction of pain is the primary objective of this trial and an important treatment goal for both patients and their healthcare providers.

The focus of our second Phase III trial of Custirsen in call patient with Docetaxel, is in the first find CRPC setting after initial hormonal treatments have failed. Overall survival will be the primary end point. This trial is expected to begin by the end of this quarter. It's important to note that the FDA and EMA have accepted the primary end point of durable pain palliation for the second line trial and survival the first line trial.

In addition, with our partner Teva we continue to engage lung cancer experts to develop the Custirsen program in non-small cell lung cancer. The Phase III trial is scheduled to commence in early 2011.

Excitement continues to grow surrounding pipeline as preliminary results from the Phase I trial of OGX-427 were presented at the 2010 ASCO annual meeting. OGX-427 is designed to reduce levels of Heat Shock protein 27, or Hsp27, a protein that is highly expressed in many types of cancer. It is over produced in response to many anti-cancer treatments and is an important factor in development of treatment resistance.

Investigators in the Phase I study concluded that OGX-427 is safe and well tolerated both as a single agent and in combination with Docetaxel, a chemotherapy commonly used in the treatment of a number of cancers.

In addition, treatment with OGX-427 as monotherapy resulted in a reduction of circulating tumor cells and tumor specific markers such as PSA in prostate cancer and TA-125 in ovarian cancer. Preclinical evidence linking Hsp27 to treatment resistance and the initial OGX-427 clinical data support continued development.

I would also like to take this opportunity to elaborate on the OGX-427 program and the rationale supporting our ongoing clinical trial in bladder cancer and our planned randomized Phase II clinical trial in prostate cancer. Preclinical data generated by Vancouver's Prostate Center and published in leading scientific journals have shown that prostate cancer cell lines, which over express Hsp27, are more resistant to both hormones and chemotherapy, which implicate a role of this target in the acquisition of treatment resistance.

In contrast, when Hsp27 is inhibited by OGX-427 in these models, tumor progression is significantly delayed and tumor cell death is enhanced. Hsp27 regulates many pathways important in cancer progression and cell survival. One of these mechanisms specific to prostate cancer involves interaction between Hsp27 and the androgen receptor.

Almost uniformly CRPC involved the reactivation of the antigen receptor as illustrated by increases in serum PSA, which is a discretely engine regulated gene. Hence, CRPC tumors are non uniformly hormone refractory and may remain sensitive to therapies directed against the androgen receptor axis.

Several new classes of androgen receptor targeting agents are now in clinical development including [Morpho] androgen receptor antagonists, such as [MediVation's] MEB3100. Inhibitors as [terodigenisists] such as Johnson & Johnson's Abiraterone and our OGX-427 an androgen receptor disrupting agent that targets the chaperone protein Hsp27. OGX-427 offers unique and novel approaches to androgen receptor inhibition including decreasing levels of the androgen receptor itself.

Accordingly, there is sound rationale for combining OGX-427 with existing and new androgen inhibitors in order to more completely block androgen receptor activation and complementary to androgen receptor inhibition OGX-427 also suppresses other survival signal pathways like insulin growth factor one and interleukin six, which are implicated in cancer progression.

Because of OGX-427 targeting of multiple pathways, we intend to initiate a randomized Phase II clinical trial in pre-chemotherapy prostate cancer patients. This trial will allow us to ascertain activity of OGX-427 in this patient population by evaluating disease progression.

While we recognize that PSA is an imperfect metric of progression, in circumstances where a drug's activity operates in whole or in part via the androgen receptor, such as with 0gx427, PSA can be a useful pharmaco dynamic tool in assessing the compound's ability to suppress androgen receptor activity.

As it has earlier in the year, grant finding has been awarded to support the randomized Phase II clinical trial in pre-chemotherapy prostate cancer patients and we expect this trial to initiate in the second half of 2010. The study design does permit inclusion of patients previously treated with experimental agents, which will provide important information about OGX-427 activity after Abiraterone or MDB3100 failure.

The logical next step will be to evaluate combinations of OGX-427 with some of these newer agents targeting the androgen receptor pathway. While we have focused this afternoon's discussion on the role of OGX-427 in pre-chemotherapy prostate cancer, the Vancouver Prostate Center has also published data showing the combining 0gx427 with chemotherapy in prostate cancer models delays progression and enhances tumor cell death.

Despite the evolving prostate cancer landscape with several recent and expected drug approvals, many patients will inevitably and unfortunately progress, this further evidence on the need for continued development of new agents that target mechanisms of resistance.

We are also exploring the role of OGX-427 in bladder cancer. Over the last several years very few medical advances have occurred in the treatment of bladder cancer and current therapies often do induce significant side effects. Published preclinical data generated by Vancouver's Prostate Center has shown that human bladder cancer cell lines, which over expressed Hsp27, are more resistant to chemotherapy and grow more rapidly than tumors not over expressed in Hsp27.

In contrast, when Hsp27 was inhibited by OGX-427 in these models tumor growth was delayed. Cell death was significantly enhanced and the tumors became more sensitive to [Paxataxol] chemotherapy.

Additionally, separate preclinical data generated by Vancouver's Prostate Center have shown that when OGX-427 is infused into the bladder it significantly inhibited the growth of [non-moslen] basic bladder tumors as a monotherapy. Our ongoing clinical trial in bladder cancer evaluates OGX-427 following infusion into the bladder prior to tumor excision. This trial will evaluate Hsp27 expression in post surgical tissues, thereby giving pharmaco dynamic assessment of OGX-427's influence on Hsp27 expression. Additionally, we will be able to evaluate tumor response rates following treatment.

We called it our first two-system Phase I clinical study evaluated the effect of our product candidate on target concert in patients with localized prostate cancer prior to radical prostatectomy. This trial was crucial in demonstrating knock down of over 90% target expression. The data generated from the OGX-427 bladder trial will assess target inhibition in a similar fashion.

Beyond prostate and bladder cancer, preclinical data has been generated by the Vancouver Prostate Center and others in breast cancer, head and neck cancer, ovarian cancer and lymphoma. These data show that expression of Hsp27 confers treatment resistance and that the inhibition of Hsp27 delayed tumor growth and increased the tumor cell death rates.

Additionally, Hsp27 expression is associated with negative clinical outcomes in breast, prostate and ovarian cancer patients. Clearly we are very excited about the future of OGX-427 and we look forward to continuing our discussions with potential pharmaceutical partners.

In conclusion, in the last year we have demonstrated the ability to deliver a clear development commercialization path for our lead asset, Custirsen. We look forward to embarking on a similar journey with OGX-427 and our pipeline assets bringing new cancer therapies to patients who so desperately need them.

That concludes our formal comments. With that, I would now like to open up the line for questions. Operator?

(Operator Instructions). Our first question comes from Mark Monane with Needham & Company.

Hi this is Brian Quan for Mark Monane. Congratulations on the good progress. Just a couple quick questions, on the OGX-011 the Phase III trial, your second one CRPC, how do think of that in the treatment landscape has changed now that [combos] of Taxol is approved in second line CRPC and how do you think that's going to affect your clinical enrollment and maybe the potential commercialization?

Thank you very much for the question first of all. We appreciate it. Yes certainly the capacity approval that has occurred in the second line we've been watching that for some time. I think we addressed this in part in our last discussions. The view that we have is that [Tragazataxol] will be certainly used in that setting but to prematurely move patients from Docetaxel treatment in the retreatment setting to [Capazotaxol] would prematurely exhaust the use of an agent that is otherwise effective so we wouldn't anticipate and early transfer. So at this point we're not anticipating that its affection or accrual is in a substantive way.

Okay that's great. Also on the OGX-427 trial will you also do the same as you did in the bladder cancer? Will you be able to measure the Hst27 levels as well in the tissue?

In the initial Phase I trial are you referring to?

Yes and as Phase II, the upcoming Phase II?

In prostate cancer, no not in the prostate cancer ones because it would be very difficult to accrue to that and get patient consent for such biopsies or surgical specimens. It would be difficult. In the bladder trial it's a little bit different because those patients are indicated for a systectomy anyway or other surgical procedures that allow you to access the tissue as a part of their normal treatment paradigm.

All right thank you so much.

Simos Simeonidis, Rodman & Renshaw.

Hi this is [Yeo Tenin] calling in for Simos. I have a question about OGX-427 so at what point would you see yourself partnering this component? Could it happen now or would you want to put it to the randomized Phase II plan that you have already tried it?

As we indicated in the prepared statements, OGX-427 now has Phase I data completed and, as you just heard, we have a bladder trial ongoing with that agent as well as the randomized Phase II in prostate cancer. We believe that there is now data that should entice partners and, as indicated in the prepared statements, we have tremendous discussions in respect to that agent for partnering. Yet the future path for it we're not giving guidance on, timing, when, if, etcetera other than it's a pathway that we're pretty interested in for the future development.

And I think like we have said in previous discussions in respect to 011, because of the diversity of this agent to be able to be assessed in a number of different tumor types, there's a lot of opportunities that it can move into and diverse development plan that would certainly benefit from a partnering strategy or other means to advance the agent into other indications beyond what we have plans for.

Okay great. And in terms of the pipeline would you look outside the Company for other development candidates or do you feel you have -- what you have in your hand is enough?

Again, very good question. As you know, we have a robust pipeline right now beyond OGX-011 and 427 with three other compounds behind that. Clearly that's a lot of activity that we could put forward but we remain opportunistic with respect to other assets. We continue to take a rational assessment of the assets to be able to shuffle the deck accordingly if there are other assets that make sense in our pipeline. That could certainly make sense for us as well but presently we are focused really on the top two.

Okay that's great and my final question is are you still planning on bringing in a new CFO and if you can comment how is the search going?

Yes is the answer to the first part of that question. With respect to the second, I think the answer to that would have to be stay tuned. As you know, we certainly heard now for I think it's been three conference calls Cam has been managing the communications. We have a very talented financial department and we're not in a rush to basically fill that position.

Most important for us is to ensure we have the right candidate that comes into the role with a blend of skill sets that we need to advance the Company from where we stand and into the future, particularly where we're hoping that 011 goes in the not too distant future. So yes we would be looking forward to making an announcement at some later date.

Okay thank you so much and congrats on successful quarter.

[Steven Wooley], Stifel Nicolaus.

Scott, I was just wondering if you could provide any color with respect to out of the 50 sites you're looking to enroll in the first Phase III of the second line trial, maybe what percentage of those are up and running and maybe if you can remind us what percentage of those are ex U.S. sites.

Yes I'll turn part of this over to Cindy with respect to the distribution I guess and geographies. With respect to percent up and running that's a metric that we don't want to disclose into the public domain for a host of reasons.

What I can say is that we were really pleased with the initiation kickoff and the participation levels that we had, particularly with not just the support staff that usually attend those kinds of meeting but specifically with respect to the investigators themselves showing up for the kickoff meetings and so on, which I think speaks to two factors. One is the enthusiasm for the trial but I think the other one that is quite germane to that trial is that it's pursuing the durable pain [palliation] and which we've discussed in previous calls.

And we have to remember that prostate cancer patients when they develop metastatic disease and progression one of the biggest issues to try to manage their disease is break through pain and so this is a very important trial with respect to that end point and I think that's what's drawing a lot of the investigator interest and general interest in this trial.

Cindy, did you want to address the distribution on sites?

Sure. As far as European sites it will be about 25% of the sites, 20% to 25%.

If I remember correctly I think you had maybe said on a previous call that there were a larger percentage of ex U.S. sites that will be used in the front line trial?

Oh yes and that's mainly because, as far as with Teva and the global sites selection for a trial that's 800 patients they are definitely looking at many more sites in Europe and other countries.

And then I know you had some circulating tumor cell data as part of the 427 presentation at ASCO and that's been a biomarker that we've been hearing about now for -- a lot about for the last year or two. Just wondering if maybe you could give us a little bit of color with respect to maybe how important of a prognostic factor you think it is in prostate and whether or not it's more meaningful than some of these other certain cancer types?

Yes I'll start with part of it and then turn it back over to Cindy. The DGC data that is emerging I think is becoming stronger in respect of certain tumor types, for example, prostate where the correlations are getting stronger. I think like some of the other data sets and PSAs probably not a bad comparable.

I think the challenge is using sort of a black and white determination of above or below the magical five number and whether that's truly the correlation or if it's more of a gradiated response but I think it is certainly evolving to be a good correlative to outcome, which is why we continue to evaluate that assessment. But I think with more data coming out of larger Phase III trials that are ongoing in different tumor types. Hopefully that will become more solidified. It's certainly not at the point where we can rely on from a regulatory approval perspective or that it truly is a surrogate that is the be all and end all of a clinical development program but I think it's emerging as an important surrogate.

Cindy, did you want to add anything to that?

No I mean we're clearly having it evaluated as a secondary end point analyses in those tumor types that are warranted for CTC analysis and that's also in addition to looking at serum Hsp27 levels with OGX-427 likely done with serum clusterin with OGX-011.

And then the 427 you mentioned in the investigator sponsor [trial] that is presumably a single-agent trial?

Are you referring to the prostate trial?

Yes, yes. The prostate.

Yes.

And so you did have some pretty interesting data in combination with Docetaxel as well with 427. Are those plans kind of on hold until we kind of determine where this is going to fall from a potential partnership perspective?

Yes that's part of the equation. The other part of the equation is now that the Phase I data is there there's the usual assessment. It's the same opportunity I guess that we had with 011 where you have a drug potential that goes across such a broad plethora of indications you have to look at a number of parameters to go through the prioritization of your clinical strategy and development plan and there's the usual landscape metrics market metrics.

Of course, the unmet need is one of the big ones. You need to make sure that your drug is assessing or addressing an unmet need. There's a lot of parameters there, including of course whether we have the data, whether we know the target expression exists in the various tumor types and of course we already have a lot of that. That's now been published. Trade medical data in support and then a sufficient safety base probably pre-clinically and then migrating into the clinical in different combination strategies.

So that probably all sounded very similar to what we were addressing in 011, right? We were looking at this going we've got to assess where might the drug have best opportunity in which disease, stage of disease and then combination strategies and we're going through all of that. And I think what will emerge is a pretty robust development plan and the question will be how do you advance that forward in an optimal way to really capture the value of the asset.

And then just one more quick question if I may, did you provide guidance on when we might see the bladder cancer data?

We haven't yet. I think obviously we've been talking through the accrual time frame and so on as we go through the data but those explanations which we have made a statement is coming through to fruition for next year.

Great. Thank you and congrats on the progress.

[Ted Penthoff], Piper Jaffray.

Thanks for the good thorough update. I am particularly interested in the data from the bladder cancer study. I think it was so informative what you learned with 011 from prostates so I think that's a really interesting and smart and well designed study. I guess this kind of a lot of my questions have been asked but looking at the pipeline how do the future Isis licenses work? Is there a certain number? Are they negotiated individually going forward?

Yes with respect to the ISIS relationship it has been on a product by product basis, Ted. 011 was obviously kind of the first one that we did. There was the next one was actually 225. Hsp27 was actually part of a two-target deal but we didn't select a second target on that. we had enough of a pipeline to address at that point so should we have other targets that we believe are amenable to an antisense platform strategy as a preferred strategy for inhibition we would again approach ISIS on that basis on a product-by-product basis.

Great. Thank you very much. Keep it up.

(Operator Instructions). Philippa Flint, Bloom Burton.

Just a couple of questions, I know you're not going give specific guidance on the Saturn study but can you comment if it's progressing as expected?

Yes we can't give a specific guidance other than we're obviously fairly early in the initiation phase of this so to kind of break down your execution of a trial, the first number of months are making sure you've got your sites up and running and everybody is engaged and the trial is initiated at the end of June effectively so we've got about a month and a half behind us so probably a little early to say if it's precisely on track obviously because you don't have a history. What we do look to is the site initiations and in that regard I'd say because I said we were very pleased with turnout we had for the initiation meetings and how those sites are coming on and the quality of those sites.

Great thanks and on the OGX-427 when you're looking at potential partners can you comment at all on what kind of deal that you'd ideally like to see in terms of your involvement with future development global versus regional etcetera?

We again haven't given specific guidance on that and I think there's a pretty open text on this one. As we go through the rationalization of the opportunity and the prioritization of that, I think there's a pretty good opportunity to look at really a pretty big white board on that one to look at deals that allow for regional development, that would allow capital to be applied to the asset to look at indication base support and of course I think, as you probably well know given the history of you with us, we've been very effective in getting grant support for our trials. In fact, four of the five trials that we did with 011 were grant supported and two of the ones with 427 are grant supported so that's another path that we can certainly look to to further advance in other, particularly non-core areas.

Okay that's great. Thanks that's all my questions.

Mark Monane, Needham & Co.

I have a follow-up question on second line prostate cancer please. When we think about the 011 use do you have a feeling, Scott, or any data to suggest that the response might be different depending on where the patient has gone on first line therapy?

Cindy, did you want to tackle that one?

So in our 07 studies of Phase II most of those patients that went on had progressed well on Docetaxel or within six months. Now there were -- we also looked at the prostate cancer center at patients that had responded to Docetaxel and then got re-treated with Docetaxel and kind of compared the data. Interestingly enough the patients on the Phase IIR07 study actually received more cycles of Docetaxel retreatments with OGX-011 combined and these are patients who were not responsive to Docetaxel compared to fewer cycles with patients at the Vancouver Prostate Center that had responded.

So I think what we're viewing is that there really is a potential ability for OGX-011 to do in humans like it does in the pre-clinical to reverse chemo resistance. So it's hard for us to say because we obviously -- it's not in the same study. But that's why our interest was in going into second line Docetaxel retreatments and keeping patients sensitive where our hypothesis is to keep them sensitive to Docetaxel.

Okay that was helpful. That was very interesting.

So that's our hypothesis.

Right no I got it. I get it. We'll find out. And then how about when we're thinking about other therapies then for 427, I am interested in the fact that you mentioned radiation therapy here. Is there any evidence that 427 has not only the opportunity to combine with radiation therapy but maybe a radiation sensitizer?

Yes there is some data in that regard actually, Mark. There is a published reference for example, with and then obviously you go through some of the other tumor types that we've talked about but one of the statements we made in the prepared statements was in respect of head and back. And that was a particular preclinical model system that was looking at radiation sensitivity and so, similar to the other parts of the story, expression of Hsp27 confers radio resistance knocking down Hsp27 confers sensitivity and that transcends both in vitro and in vivo, so it's another.

And we've seen that with other model systems too so I think as we saw with clusterin the over expression of this particular protein confers very broad spectrum resistance. It's not limited to hormone or chemo. It seems to be extending into things like radiation and, as we've been looking at proteasomal inhibitors and as well we've seen some data in that regard that Hsp27 confers resistance to those if we knocked it down you may improve sensitivity. So I think we're looking at a very similar profile here where this agent has an ability to be combined with a number of different strategic therapeutic approaches in a number of different cancer indications and is not limited to just chemo and hormone.

Thank you very much, Scott and Cindy, for the added information.

(Operator Instructions). I am showing no further questions at this time.

Okay thank you very much everybody for joining us on today's call. We look forward to updating you in the future.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the conference and you may now disconnect.