Achieve Life Sciences Inc (ACHV) 2011 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the OncoGenex Second Quarter 2011 Earnings Conference Call. My name is Kevin and 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 like to turn the call over to Jaime Welch, Senior Director of Marketing and Corporate Communications for OncoGenex Pharmaceuticals. Please go ahead.

Thank you, Kevin, and thanks, everyone, for joining us.

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

Earlier today OncoGenex issued its second 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 contains 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, Jaime, and good afternoon, everyone, and thank you for joining us. First of all, deepest apologies for the delay in starting the call today. Apparently the newswire service was down and we had to find alternative routes to distribute our press release, et cetera. So, apologies for that delay, and thank you for bearing with us for the last 15 minutes as we waited to get started.

Before Michelle discusses the financial results for the second quarter, I'd like to share with you some important updates related to our clinical development program for both custirsen and OGX-427. As a reminder, the SYNERGY trial is our primary registration Phase III clinical trial evaluating custirsen in metastatic castrate resistant prostate cancer, or CRPC, in combination with first-line docetaxel chemotherapy.

In our recent discussions with FDA regarding the amendment to the special protocol assessment, or SPA, for the SATURN study, FDA has stated that an application supported primarily by the results of the SYNERGY trial alone would be acceptable. Thus, a positive survival benefit from the SYNERGY trial, supported by our completed randomized Phase II trial in patients receiving first-line docetaxel, may be sufficient for market approval of custirsen, independent of the completion of the SATURN trial.

This updated communication from FDA is consistent with FDA guidance that drug approvals can occur based on a single, adequate and well controlled Phase III study, especially is showing a survival benefit that is also supported by Phase II or other data. We expect results from this survival primary endpoint in Q4 2013, consistent with our prior expectations.

The prostate cancer SATURN clinical trial is our Phase III trial evaluating chemotherapy in men with metastatic CRPC, testing the ability of custirsen to improve quality of life by reducing prostate cancer related pain. The SATURN trial is designed to enroll approximately 300 patients who have completed first-line docetaxel, are experiencing disease progression, and are on narcotic medications to manage their prostate cancer related pain.

As discussed on our May conference call, we submitted a proposed revision to the approved SPA to the FDA. The proposed revision would allow patients to receive either docetaxel retreatment or cabazitaxel as second-line chemotherapy. Importantly, this revision would expand the treatment population by including patients who progress during first-line docetaxel treatment. These patients currently cannot participate in this trial. This change would also mean that any patients with CRPC who have pain and are considering second-line chemotherapy could be eligible for enrollment.

Our amendment aligns the development of custirsen with the current second-line chemotherapy options available to patients with prostate cancer. The study design remains the same in that all patients are randomized to receive custirsen or placebo in conjunction with chemotherapy.

We have been in discussion with the FDA, received comments on the amended protocol, and have revised the protocol to be consistent with their comments. We are awaiting final written FDA agreement on the SPA amendment. Although we are unable to speculate on exact timing, as the FDA has no specific timeline for review and completion of SPA amendments, we have received approval in Canada and expect approval in the EU this month based on the amended protocol.

We continue recruitment efforts and anticipate the amended protocol will improve the enrollment for SATURN, which has had few patients accrued due to the restrictive enrollment criteria regarding docetaxel retreatment and stable pain criteria. Assuming the amendment protocol addresses these enrollment challenges, results for the pain palliation primary endpoint are now expected to be Q4 2013 rather than Q2 2013.

Consistent with our previous communications, we continue to expect that both the SYNERGY and SATURN trials will report data within the same approximate timeframe.

Regarding the development of custirsen for the treatment of patients with non-small cell lung cancer, the initiation of the Phase III clinical trial has been delayed, as we determine the optimal chemotherapeutic combination. Teva has been conducting routine drug interaction studies to determine whether custirsen can interfere with the normal metabolism of one of the chemotherapeutic agents, paclitaxel, that we plan to use in the trial.

The initial studies in cell lines showed potential inhibition of the enzymes that break down paclitaxel. Preliminary results from the clinical studies showed custirsen possible induction of the enzymes, in which case the results are opposite to those in the initial cell line studies. Alternatively, the results could be misleading because both drugs potentially compete for binding with serum proteins that could artificially interfere with assessing the blood levels. Teva is completing additional drug interaction studies.

In parallel, we will also be considering other frequently used combinations. Remember, we believe a hallmark feature of custirsen is its potential ability to augment a variety of therapies. We have evaluated custirsen in combination with gemcitabine, cisplatin and docetaxel in patients and did not observe drug-drug interactions. Accordingly, we believe that the non-small cell lung cancer indication is a promising indication, and remain committed to the advancement of custirsen for this patient population.

Turning to our pipeline agent, OGX-427, enrollment continues for both the investigator sponsored, randomized Phase II clinical trial evaluating OGX-427 in patients with CRPC, and the investigator sponsored Phase I trial evaluating OGX-427 in patients with superficial bladder cancer. We expect to report data on both of these trials in 2012, unchanged from previous guidance. These two trials represent important potential catalysts for OGX-427 and OncoGenex.

We continue to expect to initiate a randomized Phase II clinical trial of OGX-427 in approximately 180 patients with metastatic bladder cancer later this year.

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

Thank you, Scott, and good afternoon.

Revenue for the second quarter ended June 30, 2011 was $1.9 million compared with $1.7 million in Q2 2010. Now, all revenue is earned through our collaboration agreement with Teva. The increase in revenue is due to increased effort associated with the custirsen Phase III clinical trials.

Revenue for the six months ended June 30 was $3.1 million compared with $6.4 million in 2010. Now, the decrease in revenue is due to custirsen manufacturing activities now being paid directly by Teva. As of June 30, $19.9 million of the $30 million upfront payment received from Teva in December 2009 was included on our balance sheet as deferred collaboration revenue. We recognize this balance as we perform our deliverables under the agreement. And currently expect this performance period to end in the fourth quarter of 2013.

Total operating expenses for the second quarter ended June 30 increased to $6.9 million compared with $4.6 million in Q2 2010. And total operating expenses for the six months ended also increased to $13.3 million compared with $12.3 million in 2010. The increase in our operating expenses is primarily due to higher manufacturing and clinical trial costs associated with our proprietary product candidate, OGX-427.

Net loss for the second quarter of 2011 increased to $6.5 million, or $0.67 per diluted common share. That compares with net income of $0.2 million, or $0.02 per diluted common share, in the same period of 2010. Now, an income tax recovery of $3 million was recorded in that second quarter of 2010. That was related to the Teva collaboration.

For the six months ended June 30, net loss increased to $9.6 million, or $0.99 per diluted common share. That compared with $2.9 million, or $0.45 per diluted common share in the same period of 2010.

At the end of June we had $75.4 million in cash, cash equivalents and short term investments. And we had approximately 9.7 million shares outstanding.

Finally, while we have not altered our guidance, we anticipate being at the low end of our net cash requirements guidance for 2011, which is before -- between $31 million and $35 million, and the related high end of our yearend cash balance guidance of between $50 million and $54 million.

That completes our financial review. And with that I'd now like to open the line up for questions. Operator?

(Operator Instructions). Our first question comes from Stephen Willey from Stifel Nicolaus. Actually, his line has actually left the queue. And I'm not showing any questions at this time.

No further questions, Operator?

Actually, we do have another one. Our next question comes from [David Nurdian] with Wedbush Securities.

Thank you.

Hi, there. I was just -- I'd just like to go over with you the FDA, the SPA amendment and how you're thinking about that with the FDA. And again, if there are any changes in the statistics regarding the SATURN trial when you include these docetaxel or cabazitaxel treated patients.

Sure. Thanks, David, and thanks for the call. Cindy, why don't you go ahead and address David's question with respect to cabazitaxel inclusion and any consequence on the (inaudible)

At this time, the -- when we included the cabazitaxel it was based on the Phase III TROPIC trial that basically showed 9.7% pain responses. And interestingly enough, the SATURN trial was sized looking at the control arm, with a 10% durable pain palliation response. So in that regard, patients being treated with cabazitaxel, or as we predicted with docetaxel retreatment at 10%, did not need to then change any of the statistical methods or sample size for the trial.

Good, thanks. And then, perhaps I missed it, but with the -- but you are -- oh, I'm sorry, you're not upsizing the SATURN trial, I misread that, because you're looking to increase the enrollment, or speed enrollment, not increase the sample size.

That's correct. So the SATURN trial --

Okay.

The SATURN trial remains 300 patients. And all the statistical endpoints, calculations, considerations were not changed by adding cabazitaxel as an option for second-line chemotherapy in the SATURN trial.

And then with the bladder cancer trial, with the metastatic bladder cancer, are there other treatments that are allowed in that protocol? Just refresh my memory.

Sure. Cindy, why don't you go ahead and take David through the protocol and the treatment paradigm for the metastatic bladder?

Sure. So, this is the trial that we'll be starting at the end of this year. And this is in patients being treated with first-line gem/cis chemotherapy for metastatic bladder cancer. And so there will be basically three arms. One control arm that gets the standard gem/cis treatment. And then we're looking at two different doses of OGX-427 added to the standard gem/cis combination as treatment.

And then -- okay. So obviously there's no taxol or anything like that.

No.

That's right.

All right. That's it for me. Thanks.

All right. Thanks a lot, David. Appreciate the questions.

Our next question comes from Stephen Willey with Stifel Nicolaus.

Hi. Good afternoon. Sorry about the confusion.

Hi, Steven. How are you?

Good. Just a quick question regarding, I guess, what you're seeing from a patient treatment perspective and if you've seen actual retreatment rates decrease since the refractory approval of abiraterone.

I'm not certain that we could address the particular question on the impact of abiraterone in the backend space. I think it's clear that we have seen an adoption. I think it's reflected in Sanofi's numbers with respect to cabazitaxel for that patient population as patients evaluate alternatives for chemotherapy treatment. That was obviously one of the driving forces for us to include cabazitaxel into the treatment paradigm. But I don't think we have a lot of clarity on what the impact may be on abiraterone with respect to that patient population.

And (inaudible) on the drug interaction studies that I guess that is kind of slowing things down a little bit on the lung front, those were interactions with paclitaxel? Is that correct?

Yes. At the risk of getting fairly complicated on the call, yes and no. The preclinical work that was done was actually with paclitaxel. But the clinical evaluation, because it's hard to put a chemotherapeutic into healthy volunteers, you use another agent that is metabolized by the same enzymes. So in that regard the read was not directly on paclitaxel.

And as we talked about in the prepared statements, the results from those two studies were actually opposite. One was showing induction, the other one was inhibition. So when you look through that lens, it's a little difficult to interpret which of those may be accurate, if either, actually. Hence the requirement to do some additional studies.

And is there much variability in the metabolism of chemicals from the taxane class?

Yes, actually, there are. So, as you know from our previous experience, we've evaluated custirsen in combination with docetaxel and the enzymes that are used in the breakdown of docetaxel are different than they are with paclitaxel. That was actually what was driving the need to do the drug-drug interaction study before we commenced the non-small cell lung Phase III.

Okay. And so --

And, in fact, perhaps you might mention cabazitaxel as well, which is similar enzymes to docetaxel in --

Right.

-- with cabazitaxel.

And again, Steve, I think it's an important message to maintain from our perspective that this is potentially related to paclitaxel, but it doesn't then transfer to the other chemotherapeutic agents that we've been looking at, or broader. So there remain a number of options with respect to lung, even if this were a real effect, which we're not even sure it is, actually, at this point.

And so I guess the next choice, obviously, keeping some kind of platinum based agent in there would be -- I think you mentioned it was a carboplatin and gem or --

Yes. The original Phase II that we had conducted was with gemcitabine and cisplatin for carboplatin. So that remains an option. We'd run the PK studies with respect to the gen/cis combination obviously in the Phase I/2 of that clinical study, so that remains an option.

And as we typically do, because we have the benefit of custirsen augmenting a number of different therapies, then we kind of match the biology of what we see in the safety profile to really what is commonly used in the marketplace. And so that's where we started to look at carbo/tax.

I think we've had this kind of market discussion before. There is geographic differences in the uptake of the different doublet chemotherapies in non-small cell lung cancer. And one of the other statements we made in the prepared statements was it's a good time to look at other options because there are a number of other doublets that are starting to evolve in the treatment of non-small cell lung cancer landscape.

So our effort, because we believe we can augment a number of different strategies, is to then take a look at some of that other information and potentially look at some different options that way, too.

And then lastly, would you still expect this to be an all-comers trial just based on the fact that there seems to be quite a bit of screening now going on in lung cancer, not just for stuff like KRAS, but also for ALK and c-MET and whatnot.

Yes, you're right. There's a lot of genotype screening of these patients that is depicting the treatment paradigm in non-small cell lung cancer. And again, I think, as we've discussed before, one of the benefits of custirsen or its target clustering is that the expression profile seems to be across the broad array of patients.

There isn't actually a requirement to preselect based on clustering expression in those patients because it's the vast majority of them over-express it. So we don't need to go down the paradigm based on the expression profiles and the data we have to date to try to do the phenotype expression that drives the treatment paradigm.

Okay, so, you wouldn't be excluding patients on the basis of, say, EGFR mutation or anything like that at all?

Right. Yes, I think in the selection that we're doing, it comes close to that, as we're obviously focusing on adenocarcinoma as opposed to squamous.

Thanks.

Thanks, Steven.

And I'm not showing any further questions at this time.

Okay. Thank you very much, Operator.

That concludes our second quarter conference call. On behalf of the team here at OncoGenex, I again thank you for joining us on the call today. We look forward to providing you with future updates. And again, apologies for the slow start this morning -- or this afternoon, as we tried to initiate with the press release. Thank you very much.

Ladies and gentlemen, that does conclude today's presentation. You may now disconnect.