Achieve Life Sciences Inc (ACHV) 2010 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the OncoGenex fourth-quarter and year-end 2010 earnings call. My name is Latoya and I will be your conference operator. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions).

At this time, I would now like to turn the call over to OncoGenex' Senior Director of Marketing and Corporate Communications, Jaime Welch. Please begin.

Thank you, Latoya, and thanks to everyone for joining us.

With me today from OncoGenex is Scott Cormack, our Chief Executive Officer, and Michelle Burris, our Chief Financial Officer. Also joining in on the call for Q&A are Doctor Cindy Jacobs, our Chief Medical Officer and Cameron Lawrence, our Principal Accounting Officer.

Earlier today, we issued our fourth-quarter and year-end 2010 financial results and a copy of the press release can be found on our website at www.OncoGenex.com. As a reminder, this call is being recorded and broadcast live on the Investor Relations page of the Company's website and a replay of the webcast will be available for 90 days.

Before we begin, I would like to remind everyone that today's conference call may contain forward-looking statements based on our current expectations. These statements are only predictions and actual results may vary materially from those projected.

Please refer to OncoGenex's documents filed with the SEC concerning factors that could affect the Company, copies of which are also available on the website.

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

Thank you, Jaime. Good afternoon, everyone, and thank you for joining us.

Before Michelle discusses the financial results for the fourth quarter, I would like to provide a brief overview of our recent accomplishments and exciting updates on the custirsen development program that we are sharing today for the first time.

I am pleased to announce important details regarding our non-small cell lung cancer Phase III trial. Later in the call, I will discuss the estimated number of patients, the expected study design and initial plans for interim data analyses. I will also be reviewing updated data from the previously reported second line Phase II prostate cancer trial evaluating docetaxel retreatment for both overall survival and pain responses.

These data further support custirsen's differentiated position and relevance within the rapidly evolving prostate cancer landscape.

Over the last 12 months, we have delivered on our corporate objectives and created a solid foundation for future success. Specifically, in collaboration with Teva, we initiated a global Phase III clinical trial referred to as the Prostate Cancer Saturn trial to evaluate a pain palliation benefit for custirsen in combination with docetaxel as second line chemotherapy. The Saturn trial will enroll approximately 300 patients with calcrate resistant prostate cancer or CRPC and was initiated in the second quarter of 2010.

Also in collaboration with Teva, we initiated an additional global Phase III clinical trial referred to as the SYNERGY trial. This trial is to be conducted in approximately 125 cancer centers to evaluate a survival benefit for custirsen in combination with first line docetaxel treatment.

The SYNERGY trial will enroll approximately 800 patients with GRPC and was initiated in the third quarter of 2010.

Finally, we initiated a randomized Phase II investigator-sponsored clinical trial evaluating OGX-427 as monotherapy in patients who have minimally symptomatic or asymptomatic advanced prostate cancer, and who have not yet received chemotherapy. This trial is expected to enroll up to 72 patients and was initiated in the third quarter of 2010.

We have entered 2011 with a diverse portfolio of novel cancer therapies and the financial strength to enable us to achieve our objectives over the next several years.

I would like to now talk about the development plans for custirsen in the non-small cell lung cancer indication.

Teva and OncoGenex have agreed to expand the original estimated enrollment from 700 to 950 patients. We believe this 35% patient increase underscores Teva's commitment and enhances the probability of observing an overall survival benefit. The primary endpoint will be survival and the secondary endpoint will be progression-free survival at 12 weeks. The trial will include two futility assessments and one interim analysis for efficacy.

Finally, the study will evaluate carboplatin and paclitaxel as a standard double chemotherapy.

Consideration was given to a number of other potential combinations. Carbo/Tax was chosen for a number of reasons, including it being one of the most widely used combinations for the first line treatment of non-small cell lung cancer patience. We anticipate initiation of this trial in the second half of this year and look forward to providing you with an update in subsequent communications.

I would now like to direct our focus to prostate cancer. As you are well aware, the prostate cancer landscape is rapidly evolving with several recent and expected product approvals. With a constantly changing dynamic, we are frequently asked where and how custirsen will fit in?

A fundamental challenge in treating patients with cancer is that tumors adapt and become resistant to available therapies and ultimately many patients succumb to their disease. Despite the development of new therapies for advanced prostate cancer, we believe that the issue of tumor cells developing resistance will remain and, consequently, the need for new therapies is required.

Custirsen is unique in that it targets clusterin, a key protein that is associated with treatment resistance in many cancers. It works by augmenting not replacing other treatments. In separate Phase II studies, custirsen demonstrated both improvement in overall survival and pain palliation, an important benefit to patients.

We previously reported data from our second line CRPC Phase II clinical trial evaluating custirsen in combination with either docetaxel retreatment or [Mitoxantrone] as second line chemotherapy. I would like to share with you today updated data from this trial.

In this trial, patients who were previously treated with a first line docetaxel-based chemotherapy and progressed on or within six months of discontinuation of docetaxel treatment were randomized to receive custirsen plus either docetaxel retreatment or Mitoxantrone. The trial initially enrolled 20 patients to receive custirsen plus docetaxel as second line chemotherapy and was later expanded to include an additional 25 patients.

Pain palliation was observed in over 50% of evaluable patients treated with custirsen plus docetaxel retreatment. Evaluable patients had pain or were on opiates for pain control upon entering the trial. Of those patients that had pain palliation, over 85% were durable pain responses, defined as a duration of 12 weeks or greater.

The pain palliation benefit in the second line chemotherapy patient population from other studies as recently reported, has been reported to be between 7% and 9%. The updated meeting overall survival duration from our trial was 15.8 months for the initial 20 randomized patients and 12.8 months for the 45 combined patients who received custirsen plus docetaxel retreatment.

Previously presented data has shown that lower serum clusterin during custirsen treatment were correlated with longer duration of survival. The baseline characteristic from our second line CRPC Phase II trial suggest that patients in this study had poor prognosis for survival, particularly the 25 patients enrolled in the expanded group who had high serum clusterin levels at baseline.

These data are especially compelling, given the study was designed to include a number of patients that had prior progression on docetaxel and then were retreated with custirsen in combination with docetaxel. Retreatment with docetaxel alone would not be expected to yield pain responses or a survival advantage in these patients.

The reported median overall survival from trials evaluating other investigational treatments in the second line chemotherapy patient population has been approximately nine to 12 months and, more recently, approximately 15 months.

In conclusion, our updated Phase II data demonstrated overall survival of 12.8 to 15.8 months and durable pain palliation in approximately 50% of the patients, results that, if replicated, in our Phase III Saturn trial would represent a significant improvement to the standard of care for patients. These data continue to substantiate our Phase III clinical development strategy to evaluate custirsen in combination with vaccines.

We're pleased with the progress and potential of custirsen and we are just as excited about the potential of our second product candidate, OGX-427. As you may recall from previous discussions, OGX-427 is designed to reduce levels of heat shock protein 27 or HSP27, a protein that is highly overexpressed in many types of cancer.

Overexpression of HSP27 is believed to be an important factor leading to the development of treatment resistance and is associated with negative clinical outcomes in various tumor types. Preclinical studies indicate that inhibition of HSP27 increase the tumor cell death rates and delays tumor growth.

OGX-427 which has the potential to work as both monotherapy and in combination with other agents is now in a randomized investigator-sponsored Phase II clinical trial in advanced prostate cancer and a Phase I investigator-sponsored trial in superficial bladder cancer. A Company-sponsored randomized Phase II trial in metastatic bladder cancer is expected to begin later this year.

In conclusion, over the course of the last year, we have delivered on our corporate objectives and created a solid foundation for future success. We have initiated two of the three Phase III trials under the clinical development plan with Teva and have moved OGX-427 into first randomized Phase II trial.

In 2011, we look forward to initiating two additional trials, a Phase III of custirsen in patients with advanced non-small cell lung cancer and a randomized Phase II trial of OGX-427 in metastatic bladder cancer.

I would now like to turn the call over to Michelle to provide an overview of hour financial results. Michelle?

Thank you, Scott. We entered 2010 with $85.1 million in cash, cash equivalents and short-term investments. We also estimate that these funds will last us into 2014, potentially enabling us to complete the Phase III trials for custirsen in advanced prostate cancer and the two randomized trials for OGX-427 in prostate cancer and metastatic bladder cancer, those that Scott previously discussed.

Given the increased size of the custirsen Phase III study in non-small cell lung cancer patients, we are unlikely to obtain final data from this study during the next three years.

Revenue for the fourth quarter and year ended 2010 decreased to $2.3 million and $13.6 million respectively. That compares with $25.5 million in the fourth quarter and year ended 2009.

Now the decrease in 2010 was due to lower revenue earned through the Company's strategic collaboration with Teva that we entered into in December of 2009. As of December 31, 2010, $21.6 million of the upfront payment received from Teva in December of '09 was included in the Company's balance sheet as deferred collaboration revenue.

We are amortizing the upfront over the expected period of our performance obligations under the agreement which we currently expect to continue until the fourth quarter of 2012.

Total operating expenses for the fourth quarter and year ended December 31, 2010 were $4.2 million and $28.4 million, respectively, that compares with $18.7 million and $28.1 million in 2009. The decrease in operating expenses for the fourth quarter of 2010 was primarily due to the 2009 milestones that were owed to Isis and the University of British Columbia that resulted from the collaboration agreement with Teva. This decrease in milestone expense is primarily offset by higher manufacturing costs, employee costs, and clinical trial costs associated with the custirsen Phase III clinical studies.

Net loss for the fourth quarter of 2010 and year ended 2010 increased to $2.9 million -- excuse me, $2.8 million and $12.6 million, respectively. That compares with net income of $3.9 million in the fourth quarter of 2009 and a net loss of $5.5 million for the year ended of December 31, 2009. The increase in the net loss was primarily due to lower revenue recognized in connection with the collaboration agreement with Teva.

Before completing the financial review, I'd like to provide guidance for 2011. Our guidance reflects our continued development of custirsen and three Phase III studies under the Teva agreement as well as our proprietary asset, OGX-427, and two randomized Phase II studies.

We anticipate net operating cash requirements for 2011 of between $31 million and $35 million which will result in an estimated 2011 year-end cash balance of between $50 million and $54 million. As stated earlier, based on our current forecast, and excluding any proceeds from potential new partnerships or financings, we expect that our existing capital resources will support our operations ending 2014.

That completes the financial review and with that I would now like to open up the line for any questions. Operator?

(Operator Instructions). Mark Monane of Needham.

Thank you. Good afternoon from New York City. Thanks for the comprehensive review so far. Speaking of going away, I have a question on the pain trial. A number of studies that have been focusing on cancer really think about the pain palliation, but here I think in this trial you are talking about a pain -- durable pain response and patients actually getting better rather than slowing down the rate of worsening pain.

Can you make sure I got that right and maybe provide some context of previous trials that I have looked at this, I think more challenging, but probably more patient useful outcome?

Yes. Thank you for the questions.

Yes, I think your understanding is quite accurate. The Saturn trial is specifically looking to assess durable pain palliation which is, obviously, the decrease of pain versus what we often see in these kinds of clinical trials as being pain progression endpoints. So it is kind of the opposite side of that scale.

As you well know, pain palliation in this particular disease is particularly important for these patients, because prostate cancer frequently will metastasize to the bone and what is, by far, the most important clinical manifestation of that is pain. And so when we look through the lens of our historic Phase II data set, obviously we have talked to the importance of the survival trial, and I think most people understand that. But when we combine that with the observation of seeing durable pain responses in the Phase II, if we could ideally affect and improve survival, together with improving pain palliation, that would be really a meaningful impact on these patients and, hence, the desire to go after that in clinical trials.

That was helpful. And how about could you -- are there clinical trials that you are using as a standard or in terms of thinking about this pain palliation outcome? I mean, I think you talked about 50% -- I think you said 50% patients have significant pain palliation or durable pain response.

Can you talk about other trials that you are using as a benchmark?

Yes, so the pain palliation is 50%, over 50% in this. The durability of that is over 85% of those patients had durable pain response.

Cindy, maybe you could address Mark's question from the perspective of other trials and the basis for the design of this -- this trial.

Well, Mark, that was a good question.

When we looked at other publications in second line, you don't find a lot of studies that look at pain palliation every cycle in a very methodical way. So we did look at pain palliation in first line, and as you probably well know in the TAX 327 that was about 35% for docetaxel first line. I think the most recent data in the tropics study is probably the best data looking at pain responses in second line patients and that showed from Mitoxantrone and (inaudible) taxel at 7% to 9% of pain responses.

So in our Phase II trial, we are still very enthusiastic as far as the greater than 50% pain responses that we are seeing in similar patient population.

That was helpful, the background. And maybe, Michelle, you could help me a little bit with understanding the 2012 cash position. I think I got the operating cash requirements of $31 million to $35 million and then a cash balance of $50 million to $54 million. In 2012 and 2013, do you expect the revenues to go up or expenses to drop? Or both? (multiple speakers)

So what was causing that. So I think the most important thing to note is the forecast includes the studies that are currently contemplated that are either initiated already or to be initiated this year. It does not include additional studies that might be started in the future. So what you are seeing is the ramp-up as sites and as patients enroll. And then over time, those study costs as patients come off study begin to gradually decline.

So you would expect in the latter years as you approach 2014, a lot of part of 2012, 2013 -- those costs to actually be going down from an operating expense perspective.

And the revenues will be essentially the same as they are now? Is that your expectation?

The revenues that we currently recognize are only in conjunction with the Teva collaboration. So that collaboration, we are -- as we spend dollars on our obligations, we draw down on the pre-paid from Teva.

And then, how many people now at the OncoGenex Pharmaceuticals and what is the appropriate number for 2011?

As far as the number of employees?

Yes.

We have been between about 27 and 30. We may actually increase to about 34, 35 predominantly in data management and clinical. That is obviously where we specialize. And I wouldn't expect to see any major change in the infrastructure of the Company over this period of time reflected in the forecast.

Thanks very much for that information. We look forward to the upcoming events.

Thanks.

Thank you.

Greg Wade of Wedbush.

Thanks. Good afternoon. Cindy, I wondered if you just might help us better understand the timing in terms of events for the non-small cell lung cancer. When -- what number of events will this -- the first interim analysis for survival efficacy be taken?

We won't be able to give guidance on exactly the number of events and details. Further details of this study would be on clintrial.gov at the time that Teva puts it on clintrial.gov. I can say that you know we -- there is plans for two fertility analysis and the one interim analysis. But we can't give further guidance on the number of events.

Okay and what is your expectations in terms of the time to complete the enrollment? Will -- this will be a global study?

Yes. Yes. So with Teva in fact that's one of the reasons we went with them as a partner. This is definitely going to be a large global study. And as far as the timelines, we really -- it's difficult to say until once we get or Teva actually gets all of the countries up and rolling on what the exact time period for that enrollment might be.

Once we have additional information and it is in the clinicaltrials.gov, that will provide an overall anticipated timeline. So we will obviously keep folks apprised of that.

Yes. Greg, I'm just going to add in on to that one as well. I think most of the population feels for clintrial.gov does include initiation timelines and some other start of crucial data points as expected at the time you initiate. And we get this question frequently with respect to the ongoing trials.

We don't update those estimates. Those estimates are generally as we predict them at the time of initiation. But we don't regularly update them as we go on.

Thank you.

Thanks.

(Operator Instructions). Stephen Willey of Stifel Nicolaus.

Thanks for taking my question. Let me apologize in advance for the background noise. Could you maybe just dive a little bit deeper into some of the baseline characteristics of these patients beyond serum clusterin and maybe specifically in the remaining 25 but I think also in the first 20 you saw a pretty good last number at close to [16] months?

Right. We will just touch base on a couple of things on this trial. As you may recall, when this study was initiated one of the concepts that we were looking to evaluate was the ability of the addition of custirsen to potentially affect docetaxel resistance.

Recall that we had preclinical data that had docetaxel-resistant prostate cancer cell lines that when you re-expose to docetaxel with custirsen it demonstrated a response again. And so the clinical trial was really designed to (inaudible -- background noise) in part of the clinical docetaxel retreatment arm to evaluate some of those effects as well.

So as we went through the first 20 patients in a randomized trial and we got the results of the 15.8 months, plus the pain responses that we saw, obviously we became quite encouraged by those data set, but wanted to have a larger end. So we went back up to the clinical investigators and said, We are interested in expanding this cohort to further investigate and obviously share the data.

We were also interested in, also, getting more data set with respect to the resistant patient population. And I think as a consequence to that, we ended up bringing into the study patients that would be more resistant or refractory, you know, that kind of a patient group. So there might have been a selection bias towards the negative actually in this trial which is a little bit unusual, obviously, when you look at clinical trial histories.

And I think that it's substantiated in part by the serum clusterin these patients had a baseline. When you look at the two, the second cohort had much higher clusterin levels.

That is important, I think, in the overall assessment of survival outcome through the lens of evaluating serum clusterin from the randomized Phase II in prostate as well as the lung trial. In both of those trials, those patients that have higher serum clusterin have shorter durations of survival.

And so, I think that tracks to what we saw in the survival numbers, ultimately. When we expanded the cohort for the higher serum clusterin patient population, are those patients that had higher serum clustering.

Cindy, did you want to add anything to that?

No, other than the 25 patients that were added on were clearly probably poor prognostic patients. One interesting thing is when we looked at the baseline characteristics, the baseline serum clusterin levels of those 25 patients were twice that of the randomized 20.

In fact, that is what led us to really looking at the serum clusterin. And some of those 25 patients were actually the ones that had high levels that came down to low levels during treatment and still had very good survival. So, ironically, although the 25 patients overall were by far more prognostic, that actually led to some of the best serum clusterin data in prolongation of survival.

And did you happen to see any difference in pain response, both with respect to overall response and the percent of patients had a durable response in the stratification of this -- of these patients, relative to the first 20 and the second 25?

Well, no. Not really. It might've been very subtle. I mean, it was 50% to 60% of the patients that came in with pain palliation and I can't -- I know overall it was 60%. And that may have been slightly more in the latter patients that came in. But it was pretty much consistently 50% to 60%.

And does that kind of reconfirm anything that you had thought previously or hypothesized, relative to baseline serum clusterin and then pain palliation response?

Well, in that about 50% or 60% of these patients have pain. That's the -- about the only consistent thing, it's too small a patient population, 20 to 25 to really say much.

Okay.

Cindy, (multiple speakers) describing for Stephen the time course of pain palliation vis-a-vis the serum clusterin drops that were observed?

Right. So for the patients that came under the study with pain or on opioids, I mean, one of the consistent results was that as serum clusterin went down, it made its largest decrease within the first cycle. So by the end of the first cycle, that was the same time we saw most of our pain responses occurring by the end of the first cycle. (multiple speakers) So there was relation in that regard.

And then maybe just quickly on the lung study. Maybe just some color around the decision to bump and roll up to almost 1,000 patients. Obviously powering is good but then if you could also give some color around the selection of the chemo doublet that was selected for the trial as well?

That's -- both very good questions. So the increase in the sample size was really an expansion from where we began with the agreement we had with Teva at the time that we wrote that agreement. We basically had to run all the stats analysis plan obviously because the doublet chemotherapy we are going to combine with wasn't determined.

So in the agreement we said at least 700 patients knowing that it would likely [take] off a bit, but had to run the stats. Now that we've run that in the context of expectation and running through sample size calculations, obviously the 950 is what comes out of that assessment, based on expectation of both the control group and outcome of treatment.

With respect to the doublet chemotherapy, it is an interesting one. Because there are a number of doublet chemotherapies commonly used in the treatment of non-small cell lung cancer. There are a number of publications that would suggest that most of those have very similar outcomes with respect to survival. And so, you begin an exercise of matching what happens in the market in different geographies and so on.

We have retraced back to the selected Carbo/Tax because it is one of the most commonly used regimens for the treatment of non-small cell lung cancer. We certainly have a history with carboplatin in lung cancer from our Phase II study and as we know from our other studies evaluating the combination of custirsen with taxene is something that obviously we are pursuing in prostate.

So you take a combination of the data set we have generated in the Phase II and data says we've had with taxenes and the market share and it all kind of triangulated towards the doublet chemotherapy.

And then maybe just one more quick question, if I may and forgive me if you may have already said this. But the powering assumptions around the Phase III lung?

Yes. We have not provided the specifics under the powering assumptions for this. Again it is something that would be in Teva's control as far as disclosure and at this point we are not authorized to provide the details.

Thanks.

Thanks a lot, Stephen.

(Operator Instructions). There are no further questions at this time. I'll turn the call back over to Scott.

Thank you very much. We appreciate everybody's time and attention and we look forward to providing you with future updates.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Good day.