Achieve Life Sciences Inc (ACHV) 2012 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the OncoGenex First Quarter 2012 Earnings Conference Call. My name is Amy. (OPERATOR INSTRUCTIONS.)

At this time, I would like to turn the call over to Susan Specht, Director Investor Relations with OncoGenex Pharmaceuticals. Please go ahead.

Thank you and thanks, everyone, for joining us. With me today from OncoGenex are Scott Cormack, Chief Executive Officer, and Michelle Burris, Chief Financial Officer. Also on the call are Cindy Jacobs, Chief Medical Officer; Cameron Lawrence, Principal Accounting Officer; and Jaime Welch, VP 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. Please refer to OncoGenex's documents filed with the SEC concerning factors that could affect the Company, copies of which are available on the website.

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

Thanks, Susan. Good afternoon and thank you for joining us.

I'd like to begin today's call by reviewing highlights for the first quarter of 2012 for a development program for custirsen. As previously announced, we and Teva have amended our collaboration agreement, enhancing our custirsen development plans in advanced prostate cancer. We believe these changes optimize future feasibility to succeed in the rapidly changing prostate cancer treatment landscape.

Later this year, we will be initiating a new Phase III study named the AFFINITY study, designed to evaluate an overall survival benefit of custirsen when combined with second-line chemotherapy, cabazitaxel, for patients with castrate-resistant prostate cancer, or CRPC. The AFFINITY study is important for the custirsen development plan as it will evaluate the benefit of custirsen in combination with cabazitaxel, which is relevant whether cabazitaxel remains a second-line chemotherapy for CRPC or is repositioned as first-line chemotherapy based on future results of ongoing studies.

We continue to be very positive about the patient accrual rate and progress of the SYNERGY trial, our primary registration Phase III study evaluating a survival benefit for patients in the first-line chemotherapy CRPC setting. We continue to expect SYNERGY to complete accrual later this year.

Finally, we continue to work closely with our development partner, Teva, in regards to the initiation of a Phase III study of custirsen in non-small-cell lung cancer. We expect to initiate this trial in the second half of 2012.

I'd like to now focus on our second product candidate, OGX-427. As you may recall, OGX-427 is designed to reduce levels of heat shock protein 27, or Hsp27. Over-expression of Hsp27 correlates to increased stage and grade in many types of cancer. It is also believed to be an important factor leading to the development of treatment resistance and is associated with negative clinical outcomes in various cancers.

Preclinical studies indicate that the inhibition of Hsp27 increases tumor cell death rates and delays tumor growth.

Clinical data were presented on OGX-427 in both bladder and prostate cancer at the 2012 ASCO GU Symposium. Regarding bladder cancer specifically, preliminary data were reported on a Phase I trial evaluating OGX-427 infused directly into the bladder of patients with superficial or muscle invasive bladder cancer prior to tumor excision.

Approximately one-third of patients had complete responses with no pathologic evidence of disease observed in post-surgical tissue following only four doses of OGX-427 administered over an 8-day period.

We believe it is important to capture the effect of OGX-427 on Hsp27 expression in tumor cells within the bladder and, therefore, will continue to enroll patients into this (inaudible) to assess the effect of higher doses of OGX-427 on Hsp27 levels in patients with bladder cancer.

We also continue to enroll patients to our international randomized Phase II trial of OGX-427 in approximately 180 patients with metastatic bladder cancer. The primary objective of this study is to evaluate a potential survival benefit when adding OGX-427 to first-line gemcitabine and cisplatin chemotherapy. The survival endpoint and the results of the study should inform us of future requirements and potential success of a Phase III trial.

Additionally, preliminary data were presented at the 2012 ASCO GU Symposium for OGX-427 in chemotherapy-naïve patients with metastatic CPRC. The goal in this study is to evaluate the effect of OGX-427 plus prednisone compared to prednisone alone on disease progression and tumor response markets, such as PSA and circulating tumor cells. Compared to patients in the control arm, over twice as many of the patients who received the OGX-427 treatment were progression-free at 12 weeks.

Additional preliminary results for this ongoing study have been accepted for oral presentation at the upcoming ASCO Annual Meeting in June 2012. We look forward to sharing those data with you in future communications.

In the first quarter, we also announced plans to initiate a Phase II study of OGX-427 in combination with abiraterone in CRPC. This study will also initiate in the second half of this year.

Finally, in March we completed the public offering, issuing approximately 4.8 million shares of our common stock. Net proceeds of $53.8 million from the financing will be used not only to expand the development program for OGX-427 into potential indications such as lung and pancreas cancer, but also [to extend] our operating runway. As previously discussed, although we had funding to 2014, the additional capital now provides us runway into 2015, which we expect to be sufficient for timing of data readouts for the Phase III SYNERGY study and potential NDA filing.

Unfortunately, Michelle is ill and has pretty much lost her voice, so I'll be providing the overview of the first-quarter financial results on her behalf. We hope her voice will be strong enough to address any financial questions that may arise following the prepared statements.

We ended the first quarter of 2012 with approximately $111.3 million in cash, cash equivalents and short-term investments. We estimate that these funds, combined with any reimbursements due from Teva under our collaboration agreement, will be sufficient to conduct our development plans into 2015. Please keep in mind that once the remaining advance reimbursement from Teva is drawn upon, which equals $17.3 million at the end of the first quarter, all costs associated with the custirsen development plan will be reimbursed by Teva on a quarterly basis. We expect the remaining $17.3 million to be drawn upon by year-end 2012.

Revenue for the first quarter of 2012 increased to $1.3 million, compared with $1.2 million for the first quarter of 2011. This slight increase was earned through out strategic collaboration with Teva, resulting from clinical development activities associated with the AFFINITY trial which we plan to initiate later this year.

Total operating expenses for the first quarter of 2012 increased to $6.8 million, compared with $6.4 million for the first quarter of 2011. This increase was due primarily to higher employee expenses, including stock-based compensation expenses.

Net loss for the first quarter of 2012 was $6.9 million, or $0.67 per diluted common share, compared to $3 million, or $0.31 per diluted common share, for the first quarter of 2011. The increase in net loss was primarily due to a $1.4-million non-cash loss on revaluation of our warrant liability reported in the first quarter of 2012, as compared to a $2.1-million non-cash gain on revaluation of our warrant liability in the first quarter of 2011. This non-cash revaluation accounts for a $3.5-million change between the two quarters.

Before completing our financial review, I'd like to update our guidance for 2012. This guidance reflects the recently-completed financing, our continued development of custirsen under our Teva agreement, as well as our proprietary asset, OGX-427, soon to be in three randomized Phase II studies. Net cash requirements are expected to be in the range of $45 million to $50 million, which is higher than our previous guidance of $40 million to $45 million and reflects an additional investment in OGX-427 development.

Year-end cash, cash equivalents, investments and receivables from Teva are expected to be in the range of $68 million to $73 million, which is higher than our previous guidance of $20 million to $25 million.

In conclusion, we are pleased with our progress in the first quarter of 2012 and look forward to an exciting year ahead. We are eagerly anticipating completion of enrollment in SYNERGY, and we now have the financial strength required to more fully explore the potential of OGX-427.

Thank you again for joining us, and I will now turn the call back over to the operator to open up this conference call for questions. Amy?

(OPERATOR INSTRUCTIONS.) Our first question comes from Katherine Xu of William Blair. Your line is open.

Hi. Good afternoon.

Hi, Katherine.

Hi. So are you going to collect partial collect from SATURN and are there going to be any analyses coming out of that data?

There probably isn't, Katherine. There -- as we said before, the number of patients accrued into that trial is not that large and we're not sure there's a lot of value derived from analyzing that data. Obviously the (inaudible) would be there, but we would have to discuss any disclosures related to data with Teva and we haven't had those discussions specifically.

And then with regards to AFFINITY -- so those patients are definitely going to be Taxotere failures, right? So they're not going to be retreatment of Jevtana?

These would be following docetaxel treatment. It will be first access and exposure to Jevtana.

So just wondering, the -- so you have a Phase III ongoing and the SYNERGY is in combination with Taxotere front line and you have a combination with Jevtana for -- as AFFINITY in the second line. In the future, when Jevtana moves to front line -- which is possible in prostate cancer -- what kind of label are you looking at in this case? And how confident are you that you would get label for -- as a companion to both of these chemo agents in any line setting?

Right. Cindy, co you want to speak to Katherine's question specifically on the registration strategy?

Yes. So obviously, what we'd be looking at is in an indication with custirsen in combination with Jevtana in the treatment of metastic CRPC. And usually the indications aren't that specific that it has to be like first or second line. Obviously, FDA writes indication and [leads] that package insert so we can't give than 100% assessment.

Is that okay, Katherine?

Yes. Thank you.

Thank you. Our next question comes from Jonathan Eckard or Leerink Swann. Your line is open.

Hello. Thank you for taking my questions. A couple on 427, if I could.

Sure.

In -- so for the Phase II trial with Zytiga, based on the preclinical data you have for the combination of these two agents, what would be the most interesting kind of biologic or clinical observation that you would expect to see or would hope to observe from the combination in the clinic?

Yes. There's a number of things that you're looking to look for basically as surrogates of biologic activity. One of those would be obviously PSA in the CRPC setting. We've had this discussion before with respect to PSA. Generally, in the context of CRPC, PSA is not necessarily a surrogate for survival, but when you have agents that are specifically targeting the antigen receptor, PSA is a surrogate of whether or not you're hitting the AR target -- the antigen receptor target. So we've previously talked about in conference calls and other public forum that Hsp27 has an impact on the AR in that it is a chaperone to move from the (inaudible) plasm into the nucleus. So I think the combination of abiraterone with Hsp27 inhibition -- that influence on PSA would be a surrogate for impact on the AR. So that would be an important piece of that. And then generally looking more broadly at metrics for progression. So progression as looked at not only by PSA, but other factors.

Is the trial expected to have a Zytiga monotherapy arm so you can compare the difference or is it only a combination trial or --

It's a randomized trial. It's a control trial. So you [would] have --

Okay.

As a -- as one of the treatment arms.

Very good.

Yes.

And then with regards -- I think you've also had some preclinical work with MDV3100. Is there any reason or any kind of specific difference that you would expect between using those two agents in combination and is that something that you would plan on pursuing in the future?

Yes. The work with MDV3100 that's publicly been presented was in relation to combination with custirsen, and that data was presented a couple of symposia last year where, essentially, the addition of MDV into model systems causes the upregulation of clusterin, and then, of course, the downregulation or inhibition of clusterin provided some additional activity for MDV3100 and that whole concept of overcoming treatment resistance that tends to occur when you apply treatment stresses. We haven't talked about 427 specifically in the context of MDV3100 combinations.

Very good. And then at the -- from the ASCO GU data of 427 in prostate cancer, was there any of those endpoints that were presented there where there were certain patients that were not evaluable, or should we -- would it be safe to assume that the data to ASCO is more -- just more mature data overall for all the patients on the trial?

Yes. We have to be very cautious about what we say in respect to the updated data. Obviously, ASCO has some pretty strict embargo requirements. But what we can say is, obviously at the time it was presented, the ASCO GU data set -- that was on a set number of patients, so you can look for some continuation of data sets with respect to ASCO GU, and we probably can't go too much further than that without reaching the embargo.

Very good. Thank you very much.

Thanks, Jon.

Thank you. Our next question comes from Chad Messer of Needham & Company. Your line is open.

Hi, Chad.

Hi there. Thanks for taking my question. So given the strong cash position that'll get you through some pretty major readouts with custirsen and let you bring 427 sort of down the line a bit further, how do you think about 427 partnering at this juncture? Is this something you think you could take all the way through registrational trials? (Inaudible) this -- CRPC's a -- is a pretty large indication, so I'm kind of wondering how you're thinking a little bit ahead towards the end game in getting that drug approved.

Yes. So obviously, part of the financing strategy was to provide additional dollars so that we could take the 427 development plans and pathways further than we had prior to the financing. So what we're looking at in that context is additional indications. So what that does for us is it removes basically pressure and a requirement to do partnering. It becomes more of a choice because, with the strategy we now have, we can go into multiple Phase IIs in different indications with 427. As you look forward into the future and you look at the timing of when Phase II trials would mature and then at the custirsen development plan and data sets that would then mature, you have an opportunity to see dollars from custirsen, assuming there's success in the indications we're pursuing, that then contribute bigger dollars into the OncoGenex balance sheet that would allow us to do different things. That's not to say that we would necessarily take it all the way through, but we would have different choices. At this point, we don't have to partner to diversify the development plan. We obviously talk to partners on a regular basis and constantly engage in those discussions, but that would be a want, not a need, is how I would define that now, and such a partnership would have to add a substantial amount to the development plans that that would have to be a meaningful difference in what we're already financing. So hopefully that answers your question, Chad.

Yes. Great. Thank you.

Our next question comes from Stephen Willey of Stifel Nicolaus. Your line is open.

Hi. Good afternoon. Thanks for taking my question.

Good afternoon, Stephen.

Just quickly, I guess, on the revised cash utilization guidance as it pertains to increased investment in 427. I guess when the $40 million to $45 million guidance was issued at the end of the year, I think you were still -- had plans to initiate the Zytiga trial, the front-line bladder, and you were still ongoing with the prednisone trial in pre-chemo CPRC. So is that $5-million bump indicative of you guys planning on an additional indication?

Michelle, did you want to address that?

Sure. And I apologize in advance for the voice. (Inaudible) in the revised guidance, you notice that there's an overlap, that the -- what was the high end and now is the low end. That reflects kind of the planning and building towards the initiation of additional indications. Whether we will -- when we actually have a timeline for those, we'll be able to provide more color on that. But you are correct, Stephen. Those incremental dollars are, in fact, for the planning and efforts required to initiate those intended additional studies.

Okay. Thank you.

The vast majority of that burn would not be in 2012, obviously.

Okay. And then also, I guess, on ASCO, we had heard some speculation at ASCO GU that Bristol may have their Phase III Dasatinib data there, and I guess based on kind of the [e-planner] that's available at this point, it doesn't look like that's going to be an ASCO event. Do you have any sense as to kind of where their trial is competitively at all?

Not really. No. It's not something that we would be able to anticipate as far as their data release is (inaudible) and so on. We'd have to see that data, probably like everybody else, to make a full evaluation as to its role in the landscape.

Okay. Thank you very much.

Thanks, Steve.

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

Hi, guys. I had a -- actually just a question on 427 and bladder cancer for the Phase I. Are these patients -- do you expect them to undergo surgery after treatment? I couldn't quite remember -- or if you mentioned that, I didn't hear it.

Yes. The -- basically, the paradigm that we're following there is taking patients that are already scheduled for either a TUR or a cystectomy to treating these patients for -- over an 8-day period before that surgical procedure and then giving these patients 4 doses of 427, and then the surgery gets carried out. So what that does is it gives you a pre-look at the tumors when they're basically being scheduled for the surgery. That's kind of your baseline that you have for those individuals. And then the surgery -- obviously, you're into the tissue itself which is where you can make the assessment of the pathologic complete responses. So that is (inaudible) kind of a classic Phase I study because we're evaluating this in the context of a dose escalation. There's a number of doses that are evaluated under that paradigm. But yet the surgery is something that is planned to be done really regardless of whether the tumors have a complete response, as we saw in about a third of the patients.

Okay. Just checking. Thanks.

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

Hi, Katherine.

Yes. Hi. Thank you for taking the follow-up. I'm just curious, can you elaborate on the design of the Zytiga combo study?

Go ahead. Sorry, Katherine.

Just a bit more?

Yes. We're -- we'll be providing some more details on that at -- closer to the time of the initiation. We're working through the finalization of a lot of the details on that and it's probably a bit premature for us to give some scope -- I mean some of the key elements that you're looking at is what is the patient population, and I think we'd like to bolt that down in more complete form before we come back out. So (inaudible) to a later communication where we'd give the specific details on that, and that would include the sample size, obviously the patient population, experience with different agents in this space, etc.

Thank you.

Thanks.

Thank you. I'm showing no additional questions at this time.

Great. Thank you very much. We very much appreciate everybody participating [to] answer the questions through the Q&A, and we look forward to updating you at a later conference call and press release. Thank you.

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