Achieve Life Sciences Inc (ACHV) 2011 Q1 法說會逐字稿

Good afternoon ladies and gentlemen and welcome to the OncoGenex first-quarter 2011 earnings conference call. My name is Shaun and I will be your facilitator today. At this time, all lines are in a listen only mode. Later we will conduct a question-and-answer session and instructions will be given at that time.

(Operator Instructions)

As a reminder this call is being recorded. At this time I would like to turn the call over to Jason Spark of Canale Communications. Please go ahead.

Thank you and thanks to everyone for joining us. With me today from OncoGenex is Scott Cormack, Chief Executive Officer; and Michelle Burris, Chief Financial Officer. Also joining in the call for Q&A are Dr. Cindy Jacobs, Chief Medical Officer; and Cameron Lawrence, Principle Accounting Officer. Earlier today OncoGenex issued its first-quarter 2011 financial results. A copy of the press release can be found on the company 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 current expectations. These statements are only predictions, and actual results may vary materially from those projected. Please refer to the OncoGenex documents filed with the SEC concerning factors that could affect the Company, copies of which are also available on the 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. Before Michelle discusses the financial results for the first quarter, I'd like to share with you an update related to our clinical development program for custirsen. Following the custirsen update, I will share with you some recently presented pre-clinical data that was generated from the Vancouver Prostate Center, at the University of British Columbia. As you may recall, the prostate cancer SATURN clinical trial is our Phase 3 study evaluating chemotherapy in castrate resistant prostate cancer, or CRPC. Testing the ability of custirsen to improve quality of life by reducing prostate cancer related pain.

We have submitted to the FDA a proposed revision to the approved Special Protocol Assessment to expand the inclusion criteria for the SATURN trial. As part of the proposed revision, participants would receive either docetaxel re-treatment, or cabazitaxel as second line chemotherapy. Importantly, this revision would expand the treatment population by including patients who progressed during first line docetaxel treatment, who currently cannot participate in the trial. This proposed change would mean that more patients with CRPC, who have pain, could be considered for enrollment.

It would have the further benefit of aligning custirsen's development with current chemotherapy treatment in prostate cancer. The stud y design would remain the same, in that all patients would be randomized to receive custirsen or placebo, in conjunction with chemotherapy. In addition, the pain palliation endpoints remain unchanged. As reported in the cabazitaxel phase 3 TROPICS study, pain palliation occurred and only 8% to 10% of patients when treated with second line chemotherapy of either mitoxantrone or cabazitaxel.

Recall in the custirsen phase 2 study, in a similar patient population, pain palliation occurred in approximately 50% of patients when custirsen was add to either mitoxantrone or docetaxel re-treatment, as second line chemotherapy. Our phase 3 development program for custirsen in prostate cancer, is comprised of both the SATURN study along with the synergy trial. Synergy will evaluate an overall survival benefit for custirsen, in combination with first line docetaxel treatment, in approximately 800 patients. We aim to demonstrate through these trials that custirsen can both extend and improve the lives of prostate cancer patients.

Men with metastatic CRPC are living longer due to new therapies and better management of the disease. However, prostate cancer can still spread to the bone making it especially painful. Optimal new therapies should not only extend life, but also improve quality of life, which we hope to demonstrate with custirsen via the phase 3 clinical development program. As many of you may be aware, the one-hundred-and-second annual meeting of the American Association of Cancer Research, or AACR, took place April 2 through April 6 in Orlando Florida. We were pleased that pre-clinical evidence in support of our lead product candidate custirsen, as well as our second product candidate, OGX-427, were selected for presentation.

HSP27 is designed to inhibit treatment induced cancer cell death. One mechanism is (inaudible) role in managing cells unfolded protein burden. Properly folded proteins are required for normal cell function. Increased levels of unfolded proteins are often found in cancer cells, particularly those being treated with anti cancer agents. When unfolded protein levels reach a critical threshold, the cells become committed to cell death. HSP27 promotes folding of unfolded proteins, and is therefore important in ensuring that a critical threshold of unfolded protein burden is not obtained. This function enables cell survival.

Presented at AACR were new results from pre-clinical studies that demonstrated that the inhibiting HSP27 increased unfolded protein burden in prostate cancer cells, activated the unfolded protein response, and increased autophagy as a compensatory mechanism. Co-inhibiting both HSP27 and autophagy resulted in significantly increased prostate cancer cell death. This effect on autophagy adds a new dimension to the mechanism of action of OGX-427, and further expands potential treatment combinations for this product candidate.

Our clinical programs for OGX-427 continue to move forward. The investigator sponsored phase 1 clinical trial evaluating OGX-427 administered directly into the bladder in patients with superficial bladder cancer, is continuing to enroll patients. And preliminary results from the study are expected to be available early next year. Enrollment also continues for the investigator sponsored randomized phase 2 clinical trial evaluating OGX-427 when administered as mono therapy to patients with castrate resistant prostate cancer, or CRPC.

Finally we remain on track to initiate randomized phase 2 clinical trial of OGX-427 in approximately 180 patients with metastatic bladder cancer in the second half of 2011. In regards to our lead product candidate, custirsen, results from two pre-clinical studies were presented at AACR on mechanism action. The first study showed that custirsen treatment enhanced an inhibitory effect on heat-shock protein 90, or HSP90, in prostate cancer cells. Historically, a single agent, but potential utility of HSP90 inhibitors, has been limited by adverse event.

Also their administration can trigger the elevation of other heat-shock proteins as compensatory mechanisms, which enables cell survival. However, as demonstrated by these pre-clinical models, when an HSP90 inhibitor was combined with custirsen, both agents worked synergistically to inhibit tumor growth and prolong survival. While further research is needed, this combination may enhance the clinical activity of HSP90 inhibitors as a potential treatment option, and further expands opportunities for treatment combinations.

In the second study presented at AACR, pre-clinical data identified clusterin as a regulator of epithelial-mesenchymal transition, or EMT. EMT is a process in which cells undergo multiple biochemical changes that enable cancer cell migration, invasion, and metastasis, and it's in an evolving area of Cancer biology. The OncoGenex transcription factor, Twist1, is known to be a master regulator of EMT. The data presented at AACR identified Twist1 to be bound to the promoter region of the clusterin mRNA, and showed that Twist1 expression regulated clusterin expression.

Importantly, (inaudible) regulation of clusterin inhibited both cell migration and invasion. Researchers concluded by these pre-clinical results that custirsen is a valid therapeutic target for the treatment of cancer. We feel conclusions from the studies presented at AACR further support the body of research demonstrating the importance of the ongoing phase 3 program. Additional pre-clinical data will be presented at the American Neurologic Association meeting later this month, and at the American Society of Clinical Oncology meeting in June. We look forward to sharing these highlights with you at the time of the conferences.

At this time I like to turn the call over to Michelle, who will provide an overview of the first quarter financial results. Michelle?

Thank you Scott. Revenues for the first quarter of 2011 decreased to $1.2 million, compared with $4.7 million for the first quarter of 2010. This decrease was due to lower reimbursement revenue earned through our strategic collaboration with Teva that resulted from manufacturing costs now being paid directly by Teva. As well is lower cost associated with clinical trials. At March 31, 2011, $21 million, of the $30 million up front payment received from Teva in December 2009 was included on our balance sheet as deferred collaboration revenue.

We are amortizing this payment over the expected performance period of our deliverables under the agreement. We currently expect this performance period to end in the first (technical difficulty) fourth quarter of 2012. Total operating expenses for the first quarter of 2011 decreased to $6.4 million, compared with $7.7 million for the first quarter of 2010. The decrease in operating expenses was primarily due to lower custirsen manufacturing costs, as these costs are now being paid directly by Teva, and lower clinical trial costs associated with the custirsen phase 3 clinical studies.

These savings are offset by higher manufacturing and clinical trial costs for OGX-427 in 2011. Launch from operations in the first quarter of 2011 increased to $5.2 million, compared with $3 million for the first quarter of 2010. The increased launch from operations was primarily due to lower revenue earned through our strategic collaboration with Teva, and higher manufacturing and clinical trial costs for OGX-427.

Net loss for the first quarter 2011 was $3 million, or $0.31 per diluted common share. That compares with $3 million, or $0.48 per diluted common share, for the first quarter of 2010. The lower net loss, as compared to net loss from operations, was due to a $2.1 million non-cash gain on the re-valuation of our warrant liability as at March 31, 2011. Which is included in other income. These warrants were issued as part of the public offering completed in October 2010, and therefore, there was no comparable gain or loss in the first quarter of 2010.

We had $81.1 million in cash, cash equivalents, and short-term investments as of March 31, 2011, compared with $85.1 million as of December 31, 2010. That completes our financial review, and with that I would now like to open up the line for questions. Operator?

Thank you. (Operator Instructions) Our first question comes from Stephen Willey with Stifel Nicolaus. Please go ahead with your question.

I was wondering, if you could maybe just comment a little bit on the decision to submit a revision to the [SPA], Is that being driven as a function of current patient enrollment, should we perceive this to be as a limiting factor right now to enrollment, or is that really more a function of trying to remain relevant in a cabazitaxel world?

Hi Stephen, thanks for the question. Generally, as you know from the biology of [custirsen], we are always trying to align to the most current are therapies that are available. There's been a strategy as we went through a phase 1, phase 2 development and so on.

And with the addition of cabazitaxel into the second line setting, and the fact that it is a taxane, showing roughly the same pain palliation that we were expecting with docetaxel re-treatment, we thought it was prudent to include it in the enrollment criteria.

The other factor that I think is relevant for this is, as we've noted in the press release and the prepared statements, the previous protocol version that we were talking to -- the one that is presently approved where we have docetaxel re-treatment only, precludes those patients that would have progressed a first-line -- during treatment with first-line docetaxel. This one has an expansion capability for us as well.

Cindy, did you want to add anything to that?

No, actually that's exactly the case as far as expanding to patients that have progressed on first-line, and have pain and require second-line chemotherapy with a taxane. So, it really conforms to what is appropriate clinical use for second-line chemotherapy.

Okay. And maybe if you could speak to where you are in this process with the FDA. Maybe what's the next data point you are waiting to hear back from the agency.

Cindy, go ahead.

Sure, well we have submitted to FDA the proposed revision. FDA does not have a defined timeline for revised [cause], so at this time we are not able to really give any guidance on that.

Okay. And then just with respect to -- I know you're not providing any hard numbers on patient enrollment at this point, but how should we think about the number of patients that have already been enrolled in the trial, or are we in the first inning, or the second inning, the ninth inning? Just trying to get an idea as to how this change -- how this protocol change actually impacts the percentage of patients that are already in versus those that are coming in.

Yes, well we can't speak to the innings either, unfortunately. But it doesn't really impact what has occurred to date because again, this is just adding another treatment paradigm on top of this. RIght, so we would still continue to look to enroll docetaxel re-treatment patients. It's just going to have other elements to it. You can combine these with the view that, that expected pain palliation is going to be less than 10% regardless. It doesn't really change what's been done in the past.

Okay. I'll get back in the queue. Thanks.

Thanks Stephen.

(Operator Instructions) Our next question comes from Mark Monane with Needham & Company. Please go ahead with your question.

Hi, thank you, good afternoon, greetings from New York City. For lunch I had a peanut butter and jelly sandwich, and now all of a sudden almond might be available as an option, almond butter. And I guess this relates to my question on a revision of the SPA. And that is, what do we know about the combination of cabazitaxel and custirsen at this point? Is the dose going to be the same? Have you done pre-clinical work? How do we know how much almond butter and how much jelly?

It's Scott, thanks Mark. (laughter) The work that has been to date has really been focused on the pre-clinical and particularly looking at PK attributes of the two. To ensure that either custirsen with cabazitaxel or vice versa, don't impact each other's PK attribute. So, the presumption going forward is that we would maintain our 640 mg dose with custirsen, and approved label version of cabazitaxel. Cindy, did want to expand anything further on that, on safety?

No, and proposed revision obviously looks at safety of the first patients coming in with cabazitaxel. You know this is a blind study, so it would be regardless of getting custirsen or placebo at the time. We don't expect any safety concerns because cabazitaxel is a taxane and we have, obviously, a lot of data on taxanes.

That makes sense. Will you randomize, does your potential revision, including randomized by drug? So, you get equal numbers in each group?

No, so patients come in and they are randomized to receive custirsen or placebo in a blinded manner. The type of taxane is a stratification factor.

Will you stratify?

Yes.

Okay, you will. And is there -- sometimes the FDA will adjust the special protocol assessment or maybe take away the special protocol assessment when there are revisions. Is that something that is potentially possible here? And how would you react to that?

At this time, this is the reason why we are submitting the revision to FDA for their buy-off and approval. At this point, it is with the FDA agreement that we move forward with this, especially for cabazitaxel. It would not be prudent of us to move forward with cabazitaxel if FDA did not agree.

Okay. Okay, that makes sense. And then I didn't hear that much about -- I didn't hear, I'm sorry if I missed it, the update on the lung cancer trial. Is there any update on the timing or the scope of that trial?

Not a material change from what we were talking about before, Mark. The plan is still to initiate the trial in the second half of 2011. And we haven't given any specificity around specifics on that. We would, probably the next material update we would give is when we would actually start the trial.

Okay. Thank you very much for the added information.

Thanks a lot Mark.

(Operator Instructions) One moment please. I have a question from Doug Miehm with RBC Capital. Please go ahead.

Good afternoon. Can you tell me what sort of precedence there are for this type of move during a phase 3 trial? Maybe you can just point to a few other examples where we've seen this occur with an SPA. I think that was help us all. Thanks for much.

Cindy?

Well, I'm not sure I can give examples as far as -- I know that there have been SPA's that have had some revision, obviously FDA has to approve those revisions, and that is in the guidance that FDA gives on SPA's. And a lot of times what they have also in the guidance is that in review, a SPA is only as good as -- or unless there is something scientific that happens during the time of the protocol or the study.

So, what we're looking at is given that cabazitaxel has been approved, it would be far more prudent of us to include the most current chemotherapy treatment, instead of two years when, or whenever we finish the study, that we have included what is current versus what is not. And then have that become a scientific issue for the SPA.

I just want to remind listeners again, that, remember the primary end point for this trial, the SATURN trial, is durable pain palliation. And our assumptions going in for the control arm would be 10% or less pain palliation, durable pain palliation.

And again, that's why we reference the TROPIC trial of cabazitaxel, which we showing again, is less than 10% for cabazitaxel. So, with respect to the primary endpoint of durable pain palliation, docetaxel re-treatment and cabazitaxel as second line, are both expected to yield roughly the same number. And again, since they're both taxanes as Cindy was mentioning, the presumption is that would be a permissible change.

If the end points were expected to be different, we would have obviously a much different issue to be considering here. But that's not the case given that it's durable pain palliation.

That's correct and just make sure everybody understands the primary endpoint does not change, the pain palliation evaluations and general of all the analysis haven't changed either.

Okay. Thanks very much.

Thanks Mark.

Our next question comes from Philippa Flint with Bloom Burton. Please go ahead with your question.

Thanks. Sorry, I dialed in a bit late, so I missed your first introductory remarks. So, my apologies if this has already been answered. Could you just comment on, if there will be any change to the overall patient numbers or the powering of the trial with this change?

Cindy go ahead. Yes. Sure, no there is no plan changes because the beauty of this cabazitaxel showed approximately to 10%, actually was 9.2% pain palliation, and our estimation for the control arm is at 10%. So, the powering and the number and the sample size is not changing by adding cabazitaxel as an option.

Okay. Great, thank you very much.

Thanks Philippa.

Our next question comes from Mark Monane with Needham and Company.

Thank you. In follow-up, how may people now at the OncoGenex, and what's the optimal number for 2011?

Number of people?

Yes.

Michelle?

Yes, we currently have approximately 30 employees and we will probably be around mid-30s and that should be a nice stable workforce for the next 18 months to 24 months.

18 months to 24 months. Good, and then in terms of moving the cost of the manufacturing that Teva is paying. With that run through the P&L for OncoGenex, or will it be a separate item, where Teva reimburses for manufacturing?

That is a reimbursement item and therefore it would not run through our P&L.

Okay.

Therefore we would not see any reimbursement revenue though either. Those we're netting.

So, you're netting. Okay.

They were netting in the past, now those costs are not ours, so they don't show up in our P&L.

Got it. Thank you.

Good. Thanks Mark.

I'm not showing any other questions in the queue at this time.

Okay. Well, thank you very much everybody, we will call this to a close and we look forward to giving you some more updates and particularly associated with the new data releases for pre-clinical data at AUA and ASCO. Thank you very much for participating.

Thank you. Ladies and gentlemen thank you for your participation in today's conference. This does conclude the conference. You may now disconnect. Good day.