Achieve Life Sciences Inc (ACHV) 2012 Q2 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the OncoGenex second quarter 2012 earnings conference call. My name is Mimi.

(Operator Instructions)

As a reminder, this conference call is being recorded.

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

I'll now turn the call over to Scott, who will provide an overview of the development activities for our two clinical stage product candidates, custirsen and OGX-427.

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

I'd like to begin today's call with an update on our clinical development progress for custirsen in both non-small cell lung cancer and castrate-resistant prostate cancer, or CRPC. We recently issued a press release announcing the updated development plans for custirsen in non-small cell lung cancer.

The Phase 3 trial, known as the ENSPIRIT trial, will be an international, randomized, open-label study evaluating the potential survival benefit of combing custirsen with docetaxel in patients with advanced or metastatic non-small cell lung cancer who have progressed after first-line chemotherapy has failed. The study aims to enroll approximately 1,100 patients and has been designed based on an expected median survival for patients in the control arm to be nine months and to detect a hazard ratio of 0.8 with 90% power.

Two interim analyses will be performed. The first analysis is planned to assess whether to stop the trial early based on both inadequate evidence of clinical benefit and futility. We will be evaluating both progression-free survival and overall survival during this interim analysis. If both endpoints meet the predefined criteria for showing an inadequate progression-free survival clinical benefit and overall survival futility, the trial will be stopped. The second analysis is based on survival alone and will be performed later in the trial. The trial will not be stopped early to claim efficacy.

As you may recall, Phase 2 data from a single-arm study evaluating custirsen in combination with gemcitabine/platinum-based regimen in first-line non-small cell lung cancer were published earlier this year. The data demonstrated a median overall survival of 14.1 months and an acceptable safety profile. Additionally, decreased serum clusterin levels in 95% of patients evaluated were observed, with lower serum clusterin levels during study treatment correlating to longer survival outcomes.

While these data are promising data for custirsen in combination with a gemcitabine/platinum regimen, treatment in the first-line non-small cell lung cancer landscape has rapidly changed to predominantly other agents such as pemetrexed. While preclinical data indicate activity for custirsen with pemetrexed, numerous studies in prostate and breast cancer have demonstrated an excellent safety profile and clear synergy for combining custirsen with docetaxel. Docetaxel is globally recognized as a standard of care in second-line treatment for both squamous and non-squamous non-small cell lung cancer, and the second-line market represents a considerable unmet patient need.

This study will be conducted internationally by Teva, and enrollment is planned to begin later this year. We look forward to providing further details when the trial is initiated.

Regarding the clinical development program for custirsen in CRPC, we continue to be very positive about the progress of SYNERGY. As you may recall, SYNERGY is the primary registration Phase 3 study for custirsen in combination with docetaxel and is evaluating a survival benefit for patients in the first-line chemotherapy setting. This study aims to enroll approximately 1,000 patients, and accrual is expected to be completed by the end of this year.

Finally, in the coming weeks we expect to begin patient enrollment to the AFFINITY trial, our Phase 3 clinical study evaluating an overall survival benefit of custirsen when combined with Jevtana as second-line chemotherapy for patients with CRPC. This study aims to enroll approximately 630 patients throughout North America, Europe, Russia and Australia.

The Phase 3 study is based on an estimated median survival for patients in the control arm of 14 months and to detect a hazard ratio of 0.75 with 85% power, or an approximate 25% increase in survival time. The critical hazard ratio has been calculated to be approximately 0.83.

The AFFINITY study will evaluate the benefit of custirsen in combination with Jevtana, which is relevant whether Jevtana remains a second-line chemotherapy for CRPC or is repositioned as first-line chemotherapy based on future results of ongoing studies.

I'd now like to focus on our other clinical-stage product candidate, OGX-427, which is a proprietary asset. As you may recall, OGX-427 is designed to reduce levels of heat shock protein 27, or Hsp27. Overexpression 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 inhibition of Hsp27 increases tumor cell death rates and delays tumor growth.

Preliminary data from an investigator-sponsored Phase 2 clinical trial of OGX-427 in chemotherapy-naive patients with metastatic CRPC were presented at the American Society of Clinical Oncology Annual Meeting in June 2012. The results showed a higher number of patients without disease progression at 12 weeks and greater declines in prostate-specific antigen and circulating tumor cells with OGX-427 plus prednisone treatment compared to prednisone alone.

This study has recently completed enrollment at 74 patients. We look forward to providing updated results from this trial as they become available.

As previously announced, an investigator-sponsored, randomized Phase 2 study evaluating OGX-427 in combination with Zytiga in patients with CRPC is expected to initiate in the second half of 2012.

In addition to our development activities in prostate cancer, we continue to enroll patients to our randomized, Phase 2 clinical trial of OGX-427 in patients with metastatic bladder cancer. This trial aims to enroll approximately 180 patients throughout North America and Europe and will evaluate the overall survival benefit of OGX-427 in combination with gemcitabine and cisplatin.

Additional Phase 2 investigator-sponsored studies evaluating OGX-427 in other malignancies are under development. Further details of these studies will be provided when the trials are initiated. Results of these studies may direct future Company-sponsored trials in indications that show promising clinical benefits.

In conclusion, we are pleased with our progress in the first six months of 2012, and we look forward to an exciting year ahead. We are eagerly anticipating completion of enrollment in SYNERGY, initiation of two new Phase 3 trials for custirsen and continued data presentations and trial initiations for OGX-427.

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

Michelle?

Thanks, Scott.

Well, we ended the second quarter with approximately $97.6 million in cash, cash equivalents and short-term investments. We continue to expect that these funds, combined with our reimbursements due from Teva under our collaboration agreement, will be sufficient to conduct our operations into 2015.

As part of the Teva agreement we received an advance reimbursement of $30 million. Of this amount, we incurred costs through June of $14.6 million. We expect the remaining $15.4 million to be spent by year-end 2012. As we've discussed in the past, once the advance reimbursement is exhausted, all costs associated with custirsen's development will be reimbursed by Teva on a quarterly basis.

Revenue for the second quarter of 2012 increased to $2.4 million. That compares with $1.9 million for the prior year quarter. Revenue for the six months ended June 30, 2012 increased to $3.7 million, compared with $3.1 million for the same period in 2011. The increase in both periods was due to increased revenue earned through our collaboration with Teva as a result of the clinical development activities associated with the AFFINITY trial, which we plan to begin enrolling later this year.

Total operating expenses for the second quarter also increased, [to] $8.4 million, compared with $6.9 million for the same quarter in 2011, and the total operating expenses for the six months ended June 30 increased to $15.2 million, compared with $13.3 million for the same period in 2011, the increase, again, for both periods primarily due to higher clinical expenses, some associated with the patient enrollment in our clinical trial evaluating OGX-427 in combination with initial chemotherapy in patients with metastatic bladder cancer and the start of the AFFINITY trial, as well as employee expenses, including stock-based compensation expense.

Net loss for the second quarter of 2012 was $4.2 million, or $0.29 per diluted common share. That compares with $6.5 million, or $0.67 per diluted common share, for the prior-year quarter. Net loss for the six months ended was $11.1 million, or $0.89 per diluted common share, compared with $9.6 million, or $0.99 per diluted share, for the same period in 2011.

The decrease in net loss for the three months ended compared to the same period in 2011 was primarily due to a $1.6 million noncash gain on revaluation of our warrant liability that's recorded in the second quarter of 2012, as compared to a $1.7 million noncash loss on the revaluation of the warrant liability in the second quarter of 2011. This noncash revaluation accounts for a total of $3.3 million delta between the two periods.

Also, as a reminder, total operating expenses did increase for both periods, as previously discussed.

Before completing our financial review I'd like to run through our guidance for 2012. Net cash requirements are expected to be in the range of $45 million to $50 million. Year-end cash, cash equivalents, investments and receivables from Teva are expected to be in the range of $68 million to $73 million. This guidance has not been changed since our last call and reflects the financing completed this past March. Our continued development of custirsen under our Teva agreement as well as our development of activities for our proprietary asset, OGX-427, soon to be in three randomized Phase 2 studies, is included in that guidance.

Thank you again for joining us, and I'd now like to turn the call over to the operator to open up the line for questions.

Mimi?

Thank you.

(Operator Instructions)

Our first question comes from Katherine Xu, of William Blair. Your line is open.

Great. Thank you for taking my questions. I have two. First is with regard to AFFINITY, and can you elaborate again, Scott, about how you are going to move the combination with Jevtana to the front line if Jevtana eventually is going to overtake Taxotere in the front line? And then second question is with OGX-427 in combination with Zytiga, which setting are you looking at? Are you looking at pre-chemo setting after Zytiga is approved in that setting, that's why you're starting it later this year, or you're looking at a post-chemo setting?

Okay. Thanks, Katherine, and thanks for the questions. So, first question with respect to AFFINITY and the combination with Jevtana. So, the trial design, as you well know, is in combination with Jevtana in the second-line setting, so that would be in combination, or following patients that would have first-line chemotherapy, and specifically docetaxel.

As you again would know, there is a trial being conducted by Sanofi for evaluating Jevtana in the front-line setting. We're not suggesting that there's an automatic migration, but if we generate data with Jevtana showing a survival benefit in the second-line setting and we've also showed a benefit with custirsen plus docetaxel in a front-line setting, we should be able to achieve a label claim that would be [suggestive of] advanced prostate cancer regardless of the taxane that you'd be utilizing.

Great.

Your second question, with respect to OGX-427, so that was the study in combination with Zytiga. So, we haven't yet given the details about the specific patient population, whether that would be the pre-chemo or post-chemo setting, and the intent there, it is intended to start this trial later in the year, and at the time that we do the initiation we'll be providing additional details on the specifics for the patient population.

Thank you.

Thank you, Katherine.

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

Yes, hi, guys. Thanks for taking my questions. Just a couple on ENSPIRIT, and I think I may have missed your opening comments, or at least some of the specifics around this, but could you just walk us through the powering assumptions again with respect to ENSPIRIT? And did I hear you say that you were assuming a control arm survival of nine months in the docetaxel arm?

Yes, okay, so, on the ENSPIRIT trial, it's an 1,100-patient study which would be for docetaxel as second line. And, yes, the expectation for the control group for docetaxel is about nine months. That would be the expectation. And then, Cindy, if you want to go through the balance of the powering assumptions again for Stephen and any other questions he'd have on the stats analysis plan, that'd be great.

Sure. So, the hazard ratio is 0.8, so 90% power is how we calculated the 1,100 patients.

Okay. And just with respect, I guess, to that nine-month historical number around docetaxel, can -- I guess, just looking at some of the historical data, I think that's probably one of the bigger numbers. I'm not sure that there's been a historical tax-only arm where I think I remember seeing nine months. So I was just kind of curious as to why that was selected as the benchmark in the control arm.

And I think at that -- we agree, it's an estimate. I think the most important thing is that it's based on a hazard ratio of 0.8. So it really doesn't make too much difference what the control arm is, because the hazard ratio has to be 0.8 in favor of the treatment arm.

Yes, understood. And I think you said that docetaxel, again, we know is labeled in -- for both squamous and non-squamous. Is this an all-comers trial?

Yes, it is.

Okay. And will have you prespecified subset analysis from an efficacy perspective within both types of histologies?

Well, those will obviously be exploratory analyses, but we do have stratification for those two histologies.

Okay. And then just a couple more questions, if I may. One, the AFFINITY assumption, I think there you mentioned 14 months in the control arm. Does that assume any kind of -- are you building in assumptions with respect to kind of any potential post-chemo abiraterone or 3100 use into that number?

Well, yes. In fact, you know at the TROPIC trial it was a median survival of 15.1 months, and when we discussed this with our KOLs, again, what you try to estimate through your control arm was looking at if both abiraterone and MDV3100 was going to be moving into the pre-chemo space you might have patients then coming later into chemotherapy, later into second-line and actually probably could have shorter median survival time. So that's why we estimated 14 months. But, again, the most important thing is that hypothesized hazard ratio of, in that case, 0.75 for designing that trial.

Okay. And then, maybe, Scott, just a bigger picture question for you. I know that there's been a bit of new adds in terms of management over at Teva, and just curious as to kind of how your interactions with them have been thus far and if there's been any kind of palpable change, if at all, with respect to kind of how they're viewing the program at this point. Thanks.

Yes, thanks again for the question, Stephen. Obviously, the relationship with Teva is an important one because of their interaction with our lead asset for custirsen. I think what you see in the development plan with obviously the AFFINITY program going forward later on this year, as we've talked about, and then the detail surrounding the non-small cell lung cancer program that are now detailed and looking to initiate this year, as well, I think are instructive as to where that collaboration is. So we continue to be very positive on it.

As we talked about in, I think it was in the last call, there have been a number of changes implemented within the Teva structure that I think are actually very beneficial. They include, obviously, bringing Cephalon into the franchise, which obviously they have a lot of branded medicines benchmarked there for us that I think fit well to the strategic plan that aligns to where our program fits for the Teva program.

And then if you look at the changes they've made throughout the structure, bringing Jeremy in to lead the organization at the CEO level, Michael from the CSO perspective, there's just a number of very high-profile individuals with great expertise in not only expanding their franchise in the generics but of course in the branded medicine. So I think all of those are aligned to a very serious play to branded medicines, and oncology continues to have a good play for us, and we very much support the collaboration, and I think the progress we've made in the last six months has been very, very good with respect to the collaboration.

Great. Thank you for the color.

Thanks again, Stephen.

Thank you.

(Operator Instructions)

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

Hi. Good afternoon, guys, and thanks for taking my question. If I could just go back to the ENSPIRIT trial briefly, thanks for going all -- over all of that, I'm just wondering, and no one knows this more than you guys, but there's -- prostate cancer this is certainly true, and in lung cancer, also, it's a pretty rapidly moving landscape with new therapies, and, okay, so nine months is what you're expecting, which, as Steve pointed out, sounds a little on the high end for docetaxel, but that's only to your favor if you actually hit it. But is a comparison to docetaxel -- I'm just wondering if that's really the best thing that you want to beat in second-line lung. So, I mean, what do you really think you need to see in terms of overall survival to have a commercially viable combination in this increasingly competitive setting?

Yes, thanks for that question, Chad. I think -- I was going to go to this question when Stephen was asking a similar question on hazard ratio and base. As Cindy pointed out, these trials are effectively based on hazard ratio, which is obviously the important determination. We provide our estimation for what the control group is so that you can understand sort of the magnitude of change that we might be looking for when you calculate that out, but it ultimately comes down to hazard radio.

I think the key question is the clinical benefit that you're looking to determine. Depending on the indication, you're generally wanting to show a 15% to 20% improvement in the overall survival benefit for these patients, and that's for a couple of reasons. It's from a regulatory perspective of approvability, but it also goes to the meaningfulness from a -- both a patient perspective as well as the clinician perspective. And somewhere around that 15%, 20% or better is generally where you want to be to have a sufficient level of benefit that everybody involved as stakeholders would want to be using the drug.

And so there's obviously a stats analysis plan that's driving what you want to do to ensure the trial's success. But the other piece is aligning that to what the clinical benefit is needed for the space.

And you probably know we utilize advisory boards on a regular basis. They tend to be disease specific, so in the prostate space we obviously bring together medical oncologists and urologists together and have discussions about meaningfulness. We've done the same thing with non-small cell lung cancer, and we ask the critical questions of what would we -- what should we expect for docetaxel in the second-line setting and what would we consider to be -- what would you consider to be meaningful as far as an improvement in survival that should allow for adoption of the agent in that space?

So, it's vetted against that kind of expertise. It's not just us coming up with this in a vacuum, and I think that's an important statement. And it's not designed, obviously, from just simply achieving the statistical endpoint, but it has to be aligned to a clinical benefit that is meaningful to the patient as well as the prescribing physician. So, hopefully that will answer the question, Chad.

Yes, no, thank you for that. I understand. And then just I want to make sure I got a couple of things right. You said there's going to be two interims, the first looking at PFS and OS with cutoffs, the second OS only, but neither of these are for efficacy, they're both for futility, I then assume, and safety?

That's correct. That's right. So, the two assessments that are being done are true futilities, and there isn't an intention to do an early stop so that you could claim efficacy. And I think we've had this discussion in previous discussions on calls where if you're trying to do some of these interim analyses, particularly if you have survival benefits, it's difficult to, for example, contain costs when you're looking at number of events, because by the time you get events that you have confidence in you've pretty much accrued the trial, right? So, there's that aspect of it.

And as far as doing an early stop, you're obviously giving up some of your powering to achieve an interim analysis to claim an early stop, which means ultimately -- your trial ultimately has to be bigger. And it tends not to make an awful lot of sense in some of these trials, and the lung trial is an example of that.

I wanted to go back to your question on docetaxel on second line, because I didn't address that in the first part of the question. So, again, when we've had the discussion with a very broad international advisory group in lung cancer, docetaxel is a standard of care that is globally utilized, and that's an important statement. It's one of the main drivers for us to go into the second-line setting, because if you look at the first-line setting and you look at, say, pemetrexed or some of the other agents, you get inclusion with or without Avastin, depending on geography.

And what's interesting is when you go to the second-line setting in docetaxel, it tends to be very uniformly used as the second-line go-to agent. So you don't have the same differentiation as you march through the various geographies, and I think that's an important aspect, because it goes to, obviously, the potential for this kind of a combination on a global basis for the development of this asset.

All right. Thank you very much.

You're very welcome. Thanks for the questions, Chad.

Thank you. I'm showing no further questions in the queue at this time. I'll hand the call back to Scott Cormack for closing remarks.

Thank you very much, Mimi, and thank you, everybody, for participating on the call. We look forward to providing you further updates as we progress on completing enrollment for SYNERGY and initiating the other trials as we move forward into the last half of the year. Thank you again.

Thank you. Ladies and gentlemen, this concludes the conference for today. You may now disconnect, and have a wonderful day.