Achieve Life Sciences Inc (ACHV) 2011 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the OncoGenex Third Quarter 2011 Earnings Conference Call. My name is Amy. (Operator Instructions) As a reminder, this conference is being recorded. At this time I would like to turn the call over to Susan Specht, Director, Investor Relations with OncoGenex Pharmaceuticals.

Thank you, and thanks, everyone, for joining us. With me today from OncoGenex is Scott Cormack, Chief Executive Officer, and Michelle Burris, Chief Financial Officer. Also on the call are Cameron Lawrence, Principal Accounting Officer, and Jaime Welch, Senior Director of Marketing and Corporate Communications.

Before we begin, I'd 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. So, please refer to OncoGenex' documents filed with the SEC concerning factors that could affect the Company, copies of which are available on the website. Now I will turn the call over to Scott Cormack, President and CEO of OncoGenex.

Good afternoon, and thank you for joining us on today's call as we review our progress towards fulfilling our objective of bringing to cancer patients new therapies that inhibit mechanisms of treatment resistance.

During this past quarter we have made substantial progress towards this objective with our custirsen program for the prostate indication, and we are very excited with the clinical development related to our OGX-427 program.

I'd like to begin with our lead product candidate, custirsen, or OGX-011, which is partnered with Teva Pharmaceuticals. Two Phase III clinical trials are currently ongoing evaluating custirsen in metastatic, castrate-resistant prostate cancer, or CRPC. The SYNERGY Phase III trial is evaluating the potential survival benefit of custirsen in combination with first-line docetaxel chemotherapy. SYNERGY is our primary registration trial for market approval in both North America and Europe. We are very pleased with the level of investigator enthusiasm, as well as the study's patient enrollment.

SYNERGY's accrual remains on track to be completed before year-end 2012 in accordance to previously discussed timelines. Based on the present accrual rate, we continue to expect results from the survival primary endpoint before year end 2013.

SATURN, our second Phase III trial, is designed to evaluate the potential of custirsen in combination with second-line chemotherapy to provide a durable pain palliation benefit for patients with CRPC. The SATURN trial serves to augment our registration strategy by providing an additional study to support the SYNERGY trial.

Data from our completed Phase II study in CRPC patients receiving second line chemotherapy was recently published in the September issue of Clinical Cancer Research. These data were the basis of the SATURN trial design and support custirsen's ability to approve overall survival and provide pain palliation in this difficult-to-treat patient population.

Also in September we completed an amendment to the SATURN special protocol assessment, or SPA, with the FDA. The amended expanded the inclusion criteria and patients may now receive either docetaxel retreatment or cabazitaxel as second line taxane chemotherapy. Patient accrual will continue to be closely monitored to determine the impact of the amendment on SATURN's previously reported accrual challenges.

Regarding the development of custirsen for the treatment of patients with non-small cell lung cancer as discussed on our Q2 conference call, we and Teva continue to revise a development plan for this indication. We will provide guidance on this indication and timing of the Phase III clinical trial initiation when more information is available.

I would now like to provide a clinical development update on our portfolio asset, 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 expressed in many types of cancer. Over-expression 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 the inhibition of Hsp27 increases tumor cell death rates and delays tumor growth. As a recent example, results from a preclinical study in pancreatic cancer were published in the October edition of Cell Death and Disease. These data associated increased levels of Hsp27 with a poor prognosis and with promotion of tumor cell growth. Conversely, when pancreatic tumor cells were exposed to OGX-427, tumor cell growth was inhibited and treatment with OGX-427 enhanced the effects of gemcitabine and reduced tumor volume by approximately 50%.

OGX-427 was evaluated in a Phase I trial in patients with bladder, breast, prostate, ovarian, or non-small cell lung cancer, and the results were presented at the ASCO 2010 annual meeting. Investigators concluded the biologic activity was demonstrated to be a reduction in serum Hsp27 protein levels, reductions in CA-125 in patients with ovarian cancer, and PSA decreases in patients with prostate cancer, and declined circulating tumor cells in over 70% of the patients.

OGX-427 appeared to be well tolerated both as a single agent and when combined with docetaxel. Although we evaluated doses up to and including 1,000 milligrams, maximum tolerated dose was not reached, suggesting that OGX-427 had a broad safety index. These results, together with the vast array of preclinical data, warranted further study of OGX-427.

Currently, three trials are underway. The first is an investigator-initiated randomized Phase II trial in chemotherapy-naive men with CRPC. This trial was initiated in September of last year and evaluates PSA progression as a primary objective.

While we recognize that PSA is an imperfect metric of progression, PSA is useful as a pharmacodynamic tool for some product candidates. Specifically, PSA is useful in assessing OGX-427's ability to suppress androgen receptor activity since one of OGX-427's mechanisms of action is to block androgen receptor translocation to the nucleus and cause proteasomal degradation of the androgen receptor, which should result in a decreasing PSA.

We believe OGX-427's potential impact on the energy receptor is highly relevant even in the evolving landscape where new and future therapies such as abiraterone and MBV-3100 that interfere with the androgen pathway are available to patients since reactivation of the androgen receptor represents a potential mechanism for progression of prostate cancer.

Because OGX-427 can potentially block androgen-receptor activation and also suppress other survival signaling pathways, such as insulin growth factor I and interleukin-6, which are implicated in cancer progression, the rationale for combining OGX-427 with new and existing androgen inhibitors is clearly justified.

Preliminary data from the randomized Phase II trial evaluating OGX-427 in chemotherapy-naïve men with CRPC has been submitted to the 2012 ASCO GU symposium, which will take place on February 2 through the 4th, 2012.

We are also exploring the role of OGX-427 in bladder cancer with our ongoing investigator-initiated Phase I trial in superficial or muscle invasive bladder cancer, and our recently announced Company sponsored randomized Phase II trial in metastatic bladder cancer.

Bladder cancer represents an important unmet need as it is the fifth most commonly diagnosed cancer. This year in the US alone, approximately 69,000 people will be diagnosed and 15,000 people will die from this disease.

Over the last several years, very few medical advances have occurred to improve patient outcomes specifically extending survival.

Preclinical data show that OGX-427 significantly inhibited the growth of bladder tumors when infused into the bladder as a single agent. As a result of these preclinical studies, OGX-427 is being evaluated in a Phase I trial in patients with superficial or muscle invasive bladder cancer where OGX-427 is infused into the bladder prior to tumor excision. This trial will evaluate Hsp27 expression in post-surgical tissues thereby giving direct pharmacodynamic assessment of OGX-427's influence on Hsb27 expression.

Additionally, we will be able to evaluate tumor response rate following treatment. Preliminary data from this trial has also been submitted to the 2012 ASCO GU Symposium in February 2012.

Relating to our randomized Phase II trial in patients with metastatic bladder cancer, published preclinical data have shown that human tumor cell lines which over-express Hsp27 are more resistant to chemotherapy and grow more rapidly compared to tumors not over-expressing Hsp27. When Hsp27 was inhibited in these models, tumor growth was significantly delayed, tumor cell death was significantly enhanced, and the tumors became more sensitive to commonly used therapeutics, such as gemcitabine, cisplatin, and paclitaxel.

We recently initiated enrollment in our international randomized Phase II trial that aimed to enroll approximately 180 patients at cancer centers throughout North America and select European countries. The primary objective of this study is to evaluate evidence for longer survival when adding OGX-427 to first line chemotherapy. Patients will be randomized to receive gemcitabine, cisplatin and OGX-427 at two dose levels versus gemcitabine, cisplatin and placebo as a control arm. It is assumed that the control group will have a 14-month median survival time based on prior published studies. Survival difference will be assessed for each of the 427 treatment arms compared to the control arm, and for the combined 427 treatment arms compared to the control arm.

The trial will be conducted as an event-driven trial such that the final analysis will have 80% power to show a critical hazard ratio of approximately 0.66 to 0.71. Because the Phase II trial has a primary endpoint of survival, results from this study will allow us to better predict the potential size and success for a Phase III trial where a survival benefit will also be the primary endpoint.

In conclusion, we are excited about the continued progress for both custirsen and OGX-427, and continue to work diligently to bring these agents forward to patients with difficult-to-treat cancers.

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

Thank you, Scott, and good afternoon. Revenue for the third quarter ended September 30, 2011, was $1.2 million compared with $4.9 million in 2010. As you recall, all of our revenue is earned to our collaboration agreement with Teva. The decrease in revenue was due to reduced efforts required to support the SATURN trial in the third quarter of 2011 while we were awaiting FDA approval of the SPA amendment, which we did receive in September.

Revenue for the nine months ended September 30, 2011 was $4.3 million and compares with $11.3 million in 2010. The decrease in revenue relates to the reduced third quarter SATURN activity and also because custirsen manufacturing activities are now being paid directly by Teva.

Also as of September 30, $19 million of the $30 million upfront payment received from Teva in December of 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 third quarter were $5.3 million, compared with $11.8 million in 2010. Total operating expenses for the nine months were $18.6 million compared with $24.1 million in 2010. The decrease in operating expenses was primarily due to a noncash restructuring expense that was recorded in the third quarter of 2010. That charge is related to the excess facilities in the Bothell headquarters that we acquired in a reverse merger with Sonus in August of 2008.

Net income for the third quarter of 2011 increased to $4.5 million, or $0.45 per diluted common share, compared with a net loss of $6.9 million, or $1.07 per diluted common share in the same period of 2010. The net income for the quarter is predominantly due to an $8.6 million noncash gain on the revaluation of the warrants that were issued as part of our financing in October of 2010.

For the nine months ended September 30, net loss decreased to $5.1 million, or $0.52 per diluted common share compared with net loss of $9.8 million, or $1.53 per diluted common share in the same period of 2010.

At the end of September we had $69.3 million in cash, cash equivalents and short-term investments. Also, we had approximately 9.8 million shares outstanding.

Related to the reduced efforts required by SATURN, we expect to end the year with more cash and consequently we are updating our 2011 guidance. We anticipate net cash requirements for 2011 will be between $23 million and $27 million, which is lower than our previous guidance, which was between $31 million and $35 million. Also, then, we expect a related year in cash balance to be between $58 million to $62 million, obviously higher than our prior guidance of between $50 million and $54 million. Based on our current expectations, we believe our capital resources will be sufficient to fund our currently planned operations into 2014.

And that completes our financial review. I would now like to turn the call back over to Scott before we take questions.

Thanks, Michelle. To conclude, I am pleased with our progress this quarter as our clinical development programs continue to gain momentum. Synergy remains on track for enrollment. We initiated a randomized Phase II trial for OGX-427 in metastatic bladder cancer, and if accepted we hope to present preliminary OGX-427 clinical data early next year. With that, I would now like to open up the line for questions. Operator?

(Operator Instructions) Our first question comes from the line of David Nierengarten of Wedbush Securities. Your line is open.

Hey, guys. I think I might have just missed a little bit of the detail on the program for lung cancer. Could you just repeat that? You're going into gem/cis patients. I just missed that.

No, we didn't give any specificity around it, David. All we indicated is that we are continuing our discussions with Teva in respect to the development plan that we are reviewing presently, so we will come back when we've got some further details on clinical trial design.

Okay. And then you are continuing to expect the same enrollment timelines and everything for SATURN, so that's -- okay. All right, thanks.

Thank you. Our next question comes from Philippa Flint of Bloom Burton. Your line is open.

Thank you. I just have a couple of questions. Given that now the SATURN trial is in full force with the SPA, do you expect R&D to now kind of ramp up similar to levels that you have seen in the past couple of quarters?

Michelle, do you want to touch on the R&D expenses?

Sure. We would expect R&D to increase for a couple of reasons, one of which would be reflective of SATURN activity, but also related to the metastatic bladder study we have ongoing with OGX-427. Considering that trial was not initiated until recently, you should expect to see R&D expenses reflect those activities as well.

Okay. And then second question, given the recent news today out of Medivation, can you reflect on how -- if they get approval for that drug -- that would impact your second line strategy?

Sure. Clearly the data from Medivation in respect of MDV3100 today was a very positive event for particularly prostate cancer patients, and we would like to give congratulations to Medivation for their success. It's an interesting program clearly that we see some really direct impact and benefit for the OncoGenex programs and particularly if we reflect on custirsen and OGX-427. So maybe we'll first address the relevance with respect to custirsen.

If you may recall earlier in the year, Dr. Martin Gleave had presented at various cancer symposiums some very interesting data showing that custirsen when combined with MDV3100 showed synergistic effect and particularly in dealing with resistance to MDV3100. So, that is an interesting one because it presents an opportunity for us potentially should OncoGenex and Teva decide to go down that path.

As you may recall from earlier presentations, some of our initial data, in fact, the discovery of custirsen was made in the context of patients that are being treated with hormone ablation, where we saw enough regulation of clustering as a consequence to that treatment paradigm. So, we think there is certainly relevance with respect to custirsen's combination in that regard.

The other one is in respect of OGX-427, as we detailed in a fair amount of detail in today's conference call. OGX-427 shares with MDV an important biologic impact on the androgen receptor itself. Obviously, MDV is interacting in a different way than 427. Hsp27 is the chaperone that is involved in chaperoning the androgen receptor into the nucleus, which then impacts its biologic activity. And I think what the data today is doing for us with respect to the 427 program is validating that approach and that particular target, which we are obviously excited about.

The other impact, of course, for 427 is that not only do we influence the androgen receptor but there are a number of other mechanisms as we touched on briefly in the call with respect to IGF-1 signaling and IL-6 signaling which hsp27 is also involved with.

Okay, that's great. Thanks very much.

Thank you. (Operator Instructions) Our next question comes from Katherine Xu of William Blair. Your line is open.

Hi. Good afternoon. This is Phil Petty calling in for Katherine. Thank you for taking my question. So, just to follow-up a little bit with that. Are there any plans to do possibly other combinations outside of the androgen receptor, possibly something with maybe Zytiga or, I guess continuing that conversation, just with MDV3100. I guess that would take some time for it to get through the regulatory process. You did mention the data that was presented at ASCO, but I just wanted to get your thoughts on potential combinations out there that you feel comfortable maybe speaking about.

Sure. It's a more difficult topic for us to address in respect of custirsen because obviously we are partnered with Teva and those decisions would have to involve Teva's participation as well. So, we can't really speak to that. I mean, clearly there is biologic rationale to move in that direction.

The other one I think we touched on in previous conference calls is in respect to 427 again. We've got a randomized Phase II that as indicated we are hoping to be able to present preliminary data in the pre-chemo environment with -- it's a randomized trial in that space as a comparator against prednisone. We've been hoping that we are going to see introduction of agents that are targeting the AR pathways, whether that's abiraterone or MDV, such that we could combine that agent with that pathway.

As you know, in previous years antiandrogens were used so early in the disease process it was more difficult to contemplate clinical trial strategies that would allow combinations like that. But now that we've got agents that are being used later in the disease process, where you could conduct clinical trials of reasonable time and duration, I think there is some additional opportunity that way. A little early for us to comment obviously on anything with MDV, because it will take a while, as you had just indicated, for them to get through the regulatory process and have that drug available for other clinical studies.

Sure, sure. And I guess just to that point, have you run any studies, I guess, with Casodex or anything like that with 427, just to see from a preclinical standpoint, just to see what kind of synergy you might have with the compound?

Yes, we haven't done it specifically with Casodex. I guess in the model systems we typically emulate, I guess, the effect of knocking out androgen by utilizing castration, which is a fairly effective model system for doing the same. Trying to use the model systems with those specific drugs is a little bit trickier. As I did say, though, it's been done with MDV and custirsen in preclinical models as presented.

I think there is a fair bit of data with both agents in combination with castration approaches that shows augmentation of combining with hormone ablation..

I'll add one other piece. Recall our first study that we did with custirsen was combining with antiandrogens specifically in the presurgery trial, or first Phase I trial, where we basically treated patients with hormone ablation, with increasing doses of custirsen and demonstrated not only a greater than 90% knockdown of custirsen, but it also translated into approximately a doubling in the apoptotic rate that we saw in those patients. And that was obviously a human study Phase I.

So, I think there is a fair bit of evidence there, the combination with antiandrogen approaches, or maybe it's more appropriate to say AR-directed agents certainly is well validated, I think, for potential for us.

Very good. Thank you.

Thank you. Our next question comes from David Nierengarten of Wedbush Securities. Your line is open.

Hey, thanks for taking this follow-up. I would like to ask you, just given the recent experience with Exelixis, looking at pain for their compound, I was just wondering, I know you have an SPA, but if you could comment on how you feel the FDA is looking at your compound differently with the pain endpoint. Thanks.

Yes, thanks for the question, David. We certainly had a number of questions following that particular event, announcement for Exelixis, and I think it is important to draw -- there are some pretty big differences with respect to what we had proposed and succeeded with the FDA, and most particularly we have two trials that we presented to the FDA. One is obviously the SYNERGY trial, our primary registration trial that is looking to show a survival benefit.

The second trial in the second line setting was for durable pain palliation, and I think the FDA's response is actually quite consistent with the communications we have had in that if you're going to demonstrate pain palliation as your primary and only effect, you have to show anticancer activity. And for the most part, and particularly in prostate, that typically is manifested through endpoints like survival. So, I think it's not a big surprise that they would want to combine pain with some other endpoint.

And, again, going back to our development plan, we are doing that, it just so happens that we're doing that through two separate trials. And, again, the primary is survival with pain palliation being the additional trial operating as a supportive trial, supporting that survival outcome. So, I think the FDA response is probably quite consistent and reflected in our development plan, which is why we have both of those trials with SPA approvals, or SPA granting from the FDA.

Thanks.

You're welcome.

I'm showing no other questions in queue, sir.

All right. Well, thank you very much. I believe that concludes our call and we look forward to speaking to you in the near future.

Ladies and gentlemen, this does conclude today's conference. Thank you for your participation and have a wonderful day. You may all disconnect.