Achieve Life Sciences Inc (ACHV) 2013 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the OncoGenex third-quarter 2013 financial results conference call. My name is Janine.

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). As a reminder, today's conference call is being recorded.

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

Thank you and thanks, everyone, for joining us. With me today from OncoGenex are Scott Cormack, Chief Executive Officer, Susan Wyrick, Principal Accounting Officer, and Jaime Welch, VP of Marketing and Corporate Communications. Cindy Jacobs, our Chief Medical Officer, is traveling.

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 documents filed with the SEC concerning factors that could affect the company, copies of which are available on the website. I will now turn the call over to Scott.

Good afternoon and thank you for joining us. We will be implementing a new format for the call today in order to address commonly asked questions and respond to inquiries that have been submitted recently via the IR page of our website. Instead of holding questions until the end of the call, we will open the line up a few times throughout the discussion and I will take questions.

I'd like to begin by addressing questions we have received regarding the Phase III SYNERGY trial evaluating custirsen in combination with docetaxel for men with metastatic castrate resistant prostate cancer, or CRPC. We are frequently asked why we believe in the potential of custirsen and specifically in the SYNERGY trial when several agents have failed in combination with docetaxel. Quite simply, it comes down to two reasons.

First, custirsen is unique because of its mechanism of action. Second, there are robust Phase II data in support of the Phase III trial program.

I'll first address my mechanism of action reference. Custirsen is designed to block the production of the protein clusterin, which is overexpressed in a number of cancers. Clusterin stabilizes and sports cancer cells and is upregulated during times of cell stress, for example in response to treatment such as chemotherapy. The more stress for treatments the tumor cell experiences, the more clusterin that can be produced as a result. In addition, clusterin is linked to a delay in cancer progression, treatment resistance, and tumor growth.

When you add custirsen to docetaxel, you are not combining two cytotoxic agents as we have seen in other failed Phase III trials. In the case of the SYNERGY trial, we are combining docetaxel with custirsen.

Recall custirsen is an agent that is designed to disable a natural defense mechanism by which patients are becoming resistant to chemotherapy. Docetaxel is a proven therapy that has been shown to extend survival and improve quality of life, and the goal of custirsen is to improve upon the proven. That leads to the second reason for our belief in our Phase III program, the robust Phase II data supporting the SYNERGY trial.

In the randomized Phase II trial, a 6.9 month improvement in survival for custirsen plus docetaxel versus docetaxel alone was observed. We and others have interrogated these data and haven't come across a reason to disbelieve the results, and so we have confidence in those results.

With SYNERGY, we are essentially repeating the same study design but obviously with more patience. We continuously receive questions about the timing and announcement of the SYNERGY data. I would first like to emphasize that we and our partner Teva remain blinded to all SYNERGY data and analysis.

The planned efficacy interim analysis for SYNERGY has not yet occurred. Once the interim analysis has been conducted and the independent data monitoring committee, or IDMC, has provided their findings, we will provide an update.

Regarding the final survival analysis for SYNERGY, we continue to expect them by mid-2014. However, results could be announced sooner depending on the results from the interim analysis. It should be noted that the criteria to achieve statistical significance at the interim analysis is considerably more stringent than the criteria required for the final analysis.

I would now like to discuss the implications of the positive Phase III XTANDI interim trial results announced two weeks ago. We have received numerous questions as to how the expected use of anti-androgens, specifically in the pre -- (technical difficulty) -- setting will impact the use of chemotherapy and the market potential for custirsen.

Similarly, we have received questions about whether we view these agents as competitors for custirsen. As I have previously stated, the goal of custirsen is to improve upon the proven, and we believe this is not limited to just chemotherapy. We do not view these new treatments as competitors, and in fact preclinical data have been published demonstrating a synergistic effect when custirsen is added to radiation therapy and anti-androgens such as XTANDI.

Importantly, positive data and the approval of new agents means more treatment options for patients and obviously that is our collective goal. Unfortunately, however, despite the introduction of these new treatments, a majority of men are not being cured of prostate cancer and will eventually experience treatment resistance to these anti-androgens and require additional therapies.

At this point in this disease, chemotherapy is rational and expected course of therapy because it has a very different mechanism of action than anti-androgens. With over a decade of experience with docetaxel, oncologists are very comfortable administering chemotherapy to patients with advanced prostate cancer.

In addition to the scientific rational to switch therapies based on mechanism of action, there continues to be a significant period of time that patients are eligible to receive docetaxel. While XTANDI and Zytiga have extended overall survival and delayed time to progression, once patients do experience progression, the time to death continued to report around 19 months. This is the same as the time of docetaxel treatment initiation to death seen 10 years ago in the regulatory trials of docetaxel. Therefore, we believe the market opportunity for chemotherapy remains unchanged and the biology of custirsen is now even more relevant given the additional treatments and stress response I discussed earlier.

We have also received inquiries regarding the Teva partnership, and more recently the resignation of Jeremy Levin, their CEO. Our partnership with Teva was established long before Jeremy's arrival at Teva, and the partnership is with the company, not a single individual. The partnership with Teva remains in effect and unchanged, and our relationship with our collaboration team is as strong as ever. So we expect business to continue as usual. Teva has committed substantial resources to the development of custirsen and all parties are fully engaged to prepare for potential regulatory filings next year.

I think that covers the key questions we have received regarding custirsen. However, if there are others, I will open up the line now and take those. Janine, if you would mind just doing a quick break and taking questions from the audience please.

(Operator Instructions). Howard Liang, Leerink Swann.

Hi, thanks. I don't know if you can get into this, but just maybe if you can expand on the interim analysis, just the major -- I think there's a futility component as well. Maybe you can talk about any details on what the hurdle might be for -- and the number -- any details on that would be helpful.

Good afternoon. Thanks for the question, Howard. So we are not able to give any specific details around the interim analysis or the final with regards to the number of events or details around the statistics, but I can help a little bit perhaps in your other part of the question with respect to futility and efficacy.

So as you may recall from our last discussion, there are two -- there were two planned futility assessments that were previously cleared through the IDMC and recommendation to go forward. The analysis for the interim efficacy is a true efficacy analysis where, if it passes the pre-specified boundaries for efficacy, then we would have an opportunity to do an earlier filing with regulatory bodies throughout the world. So, there's a true efficacy interim, but we haven't given specifics on what those criteria are at this point although, as I'm sure you could recognize, the interim efficacy hurdle is higher than it would be for the final because you want to be sure that the activity that you are seeing is not a false positive. So it does have a more stringent bar for that interim analysis.

Do you have a projection as to when the interim analysis might occur?

We haven't given guidelines on the timing either.

Okay, great. Thanks very much.

David Nierengarten, Wedbush Securities.

My question would be if you could refresh our memory on what post-progression treatments are allowed in the clinical trial. And then I have a follow-up on that.

Yes. So, there is not a protocol restriction on what patients would be able to receive after they are treated. As you can expect, as patients go into a progression environment, they would and should have access to the available therapies that would normally be available to individuals outside of a treatment paradigm.

And then given the -- assuming a shrinking difference in the XTANDI overall survival curve relative to what folks may have expected to placebo there despite the benefits of PFS, do you think that has some bearing on the potential outcome for your survival curve?

Are you referring to the pre-chemo environment or the post?

Actually to the pre-chemo, to the -- (technical difficulty) -- trial. I know that's a different setting with you, but presumably some of the pre-chemo patients' progress to chemo and beyond. Do you see any potential for a similar narrowing of the survival benefit in your trial design?

No. It's an interesting one. That's why I was making the reference to the previous studies and specifically that Tax 327 study that was the registration study for docetaxel. If you recall, that study had reported survival in and around the 19 month mark; I think it was about 18.9 months if I recall correctly.

And then if you look at both the Zytiga pre-chemo study and the XTANDI pre-chemo study, in both circumstances, reported survival from radiographic progression to death was 18 months to 19 months respectively in those studies. So it would seem that, if that is the demarcation for where patients would be eligible to begin chemotherapy, radiographic progression, it seems that that survival period is pretty much the same as it was 10 years ago. So while these agents are certainly adding survival time, it seems like it's a delay to the event of -- to opportunity for chemotherapy. But once they get into that progression environment to the point where they pass away, it looks like that time period is the same. So I think our opportunity is pretty much unchanged from what it has been.

Thank you.

Stephen Willey, Stifel.

Thanks for taking my question. Just with respect to the 19-month number that you referred to for tax 327, I believe most of the other kind of failed Phase IIIs that we've seen in print, whether it be [livercept] or [desantonib] have all kind of had a chemo in the arm in the 22-month range, is that correct?

Yes, that's right. They generally are between 21 and 22. I think the controls are coming in just under 21.5 or thereabouts.

So those were obviously studies that were really not conducted in the context of at least post-chemotherapy. So would you kind of -- would you view the consistency of those other chemo-only arms versus historical tax 327 data as just being an improvement in basic supportive care, that two to three month delta that we are seeing?

I think a little bit of the contribution of the current therapy is being approved. In the case of at least one of those trials, there's a pretty good proportion of patients that do go on to secondary therapies or follow-on therapies. Specifically around half of those patients do go, and around a third ended up on Zytiga actually. So there is -- I think that's a pretty decent proxy for what we are expecting to see in the SYNERGY trial, although as you can well imagine it depends a little bit on geographies and treatment processes in different countries and availability of these therapies, given timing. But I think that's kind of where we are expecting is somewhere around that 21 months. And that's what we were talking to in the last -- our second-quarter conference call, that we have modified our model to expect survival somewhere around that 21-month range. And that's where we said that the events are continuing to progress slower than that projected model even with that modification.

Okay. And then do you plan on actually press releasing when the interim gets treated?

Yes, we would let the market know an update after the interim has occurred. And again, just for clarity on the interim, if the interim is deeming that we're going to go to a final, we won't actually have any additional information with regards to the specifics of the data. And that's an important point. We obviously won't know the survival medians. We wouldn't know the hazard ratio. We wouldn't know a bunch of those things. And of course, that means we ultimately remain blinded.

It's only an event that is deemed that we've crossed the boundary, in which case we would know some more specifics around that. So in the event we continue to final, we really won't know an awful lot other than it obviously didn't hit the higher threshold that was established for the interim analysis.

Again, I just want to reemphasize what I had said during the previous statements. That interim analysis, as is true of I think most interim analyses, has a pretty high bar for stopping because you don't want to stop a trial when you have a false positive, so it does have a pretty high threshold for stopping.

Okay, thanks.

I think we will go ahead and move on to the questions regarding development plans for the other partner product candidate, Apatorsen. If there are other questions respecting custirsen, we certainly will have an opportunity as we go forward in the discussion to field those questions as well.

So, a question was submitted via the website regarding the Apatorsen bladder program and our path for regulatory submission following the data from the Borealis-1 trial. As a reminder, as part of the ORCA program, we are evaluating Apatorsen in two Phase II trials in advanced bladder cancer. Borealis-1 is our company-sponsored randomized placebo-controlled Phase II trial of Apatorsen in combination with first-line gemcitabine and cisplatin in patients with metastatic bladder cancer. This trial completed enrollment of 183 patients in July.

And Borealis-2, which is currently enrolling, is an investigator-sponsored randomized Phase II trial evaluating Apatorsen in combination with docetaxel in approximately 200 patients with metastatic bladder cancer who have disease progression following first-line platinum-based chemotherapy.

We expect results from the Borealis-1 trial in the second half of 2014. And assuming it is positive, we will initiate discussions with regulatory agencies to pursue a registration path.

Similar to custirsen with a robust Phase II program, we are hopeful that only one Phase III trial will be required. However, it is too soon to speculate on the regulatory requirements.

Also submitted on the website was a question regarding the timing of the PACIFIC trial data. PACIFIC is an investigator-sponsored randomized open-label Phase II trial evaluating Apatorsen in approximately 80 men with CRPC who are experiencing a rising PSA while receiving Zytiga. This trial is currently open to accrual. The evaluation, submission, and presentation of preliminary data will be at the discretion of the investigators. We really can't comment as to if or when interim data will be available.

Importantly, we have two material events on the horizon. Final survival data for SYNERGY and Borealis-1 are both expected in 2014.

I'd like to open up the line again for any further questions you may have specific to Apatorsen. Janine, if you could please queue the listeners again.

Thank you. (Operator Instructions).

Again, if we don't have questions during this phase, we certainly can we field, there will be one more opportunity at the back end of discussion. So Janine, in the interest of time, I think we should probably just go forward.

I am showing no questions in the queue.

I'd like to clear up any confusion regarding our management team executives selling shares now. The terms of our grants of restricted stock units, or RSUs, provide that, on each vesting date for an RSU award, a portion of the shares will be automatically sold without discretion by the employee to cover withholding taxes associated with the vesting event. The shares that were sold in March and August were used to cover applicable taxes. These sales were not discretionary transactions by OncoGenex executives. The cash went directly to the company to cover the withholding tax and protect the company from tax liability on behalf of the employee.

Regarding questions about management's interest in purchasing shares, you should be aware that we are subject to blackouts related to the timing of quarterly financial results and periods where we may be in possession of material nonpublic information, including as we approach key data events. These blackouts prohibit buying or selling shares.

It may be worth mentioning at this point that I remain one of the top 20 shareholders of OncoGenex.

Moving on to address questions about our cash position, we have a staff of just over 40 people and considerably lower infrastructure costs than many biotech companies. Most of our clinical trials with Apatorsen are investigator-sponsored and substantially less capital-intensive than company-sponsored trials, and custirsen trial expenses are fully reimbursed by Teva.

If you are reading our 10-Q filed today, while we do have an ATM in place we have not drawn on that facility since it was put in place.

Finally, while I cannot comment specifically on the stock pricing activity, I do want to highlight that we have sufficient cash to fund our operations into 2015, and more importantly, through the expected release of final survival results from both the SYNERGY and the Borealis-1 trial.

I will now turn the call over to Susan Wyrick, who will provide an overview of the third-quarter financial results. Susan?

Thanks, Scott. We ended the third quarter of 2013 with approximately $46.8 million in cash, cash equivalents, and short-term investments. Revenue for the third quarter of 2013 increased to $9.9 million compared with $6.6 million for the prior-year quarter. Revenue for the nine months ended September 30, 2013 increased to $21.3 million compared with $10.3 million for the same period in 2012. The increase in both periods was due to higher revenue earned through our collaboration with Teva, largely resulting from clinical development activity associated with the AFFINITY trials.

Total operating expenses for the third quarter of 2013 increased to $20.5 million compared with $14.9 million for the same period in 2012. Total operating expenses for the nine months ended September 30, 2013 increased to $49.6 million compared with $30.1 million for the same period in 2012. The increase in both periods was primarily due to higher clinical trial expenses associated with patient treatment and enrollment in the AFFINITY and Borealis-1 trials, increased costs related to our investigator-sponsored trials, increased headcount to support our clinical development activities, and toxicology expenses related to Apatorsen and OGX-225. These increases were partially offset by lower manufacturing expenses due to the timing of Apatorsen manufacturing activity.

The net loss for the third quarter of 2013 was $10.1 million, or $0.68 per diluted common share, compared with $5.9 million, or $0.40 per diluted common share, for the prior-year quarter. Net loss for the nine months ended September 30, 2013 was $25.2 million or $1.72 per diluted common share, compared with $17 million or $1.29 per diluted common share for the same period in 2012. The net loss in the nine months ended September 30, 2013 included a non-cash gain on reevaluation of our warrant liability of $2.9 million compared with $2.5 million in the prior period.

Before completing our financial review, I would like to update guidance for 2013. Net cash requirements for 2013 are expected to be at the lower end of the previously provided range of $40 million to $50 million, reflecting AFFINITY costs which are reimbursed by Teva quarterly in arrears as well as the majority of the cost for Borealis-1.

Year-end cash, cash equivalents, and investments are expected to be at the higher end of the previously provided range of $25 million to $35 million. We continue to expect that this estimated year-end cash balance and the fourth-quarter receivable from Teva will be sufficient to operate the company into 2015.

Thanks, Susan. We have had questions regarding how our cash position of $46.8 million can fund all of the activity into 2015. As mentioned previously, we have a staff of just over 40 people, most of our clinical trials with Apatorsen are investigator-sponsored trials, and the custirsen program expenses are fully reimbursed by Teva. Most importantly, we have the cash to fund operations through the expected release of final survival results from both the SYNERGY and Borealis-1 trials.

To conclude, we hope that we have addressed your questions. Any feedback that you have on this new format would be greatly appreciated.

We are very excited about the potential with both custirsen and Apatorsen as we move forward into 2014, our most critical year. The execution risk for our company-sponsored trials is now behind us. We have resources to support our programs into 2015, and we remain focused and committed to delivering on our goals.

Thank you again for joining us. Operator, let's go back one more time to see if there are any final questions.

(Operator Instructions). Katherine Xu, William Blair.

Hi, good afternoon. This is Phil calling in for Katherine. Thanks so much for taking the question. Hi Scott. A quick question, just to get a better sense talking about synergy, have you provided any detail in terms of how the enrollment -- the kind of enrollment between the US and ex-US sites and I guess the numbers behind that?

Thanks, Phil. We haven't given the specifics of numbers of patients on the geographies, but what we did indicate in previous calls was that about two-thirds of the sites are ex-US. So that would be in other geographies, including obviously Canada and parts of Europe, though for the most part excluding Eastern Europe.

Great, I appreciate that color. And in terms AFFINITY, just wanted to see how enrollment was going there, and if you have any updates from that study.

Yes, again, we don't give any specifics on the play-by-play with respect to accrual, but we are pleased with the accrual of AFFINITY. That trial is moving along as we would expect as far as bringing patients into that, which I think is a testament to the interest in second-line chemotherapy.

And still I guess the timeframe of completing enrollment by the end of next year?

That's correct.

Okay, great. And then just kind of switching gears a little bit from knowing that the custirsen program is also non-small cell lung cancer and we've talked about ENSPIRIT previously, but PD-1 has been making a lot of noise there. I just wanted to kind of get your thoughts on PD-1 versus chemo. There's a lot of big pharma playing in that space now, a lot of studies being initiated. Just want to kind of get your thoughts on how you see the landscape kind of changing with the agents?

I think that's a great question, Phil, particularly as it pertains to landscape. There is clearly a lot of interest in PD-1 inhibitors generally in that landscape. As you know, we've kind of looked at this from an approach of what is in the marketplace now as far as the chemotherapy opportunities, and watching how the landscape may shift with respect to some of these other agencies, specifically targeted (technical difficulty) we move towards more medicines that are directed to different phenotypes.

So at this point, we haven't followed a pathway to say we are going to go after in combination with PD-1 or anything like that. There would have to be more evidentiary preclinical work to do.

I think there remains a very large market opportunity for -- as you know, custirsen is being combined with docetaxel in the second-line setting, which remains a pretty substantive marketplace. When we did that analysis, what we identified was that as a second-line opportunity for chemotherapy, pretty much all geographies have interest when we are looking at that analysis, are using that as a primary strategy for second-line treatment. And we will continue to monitor those markets and the landscape shift as it occurs in the non-small cell lung, but at this time, we remain committed to what is an 1100 patient Phase III trial in combination with second-line docetaxel and second-line chemo.

Sure, appreciate that. And then in terms of accruing patients, you haven't really seen any I guess kind of effect from these kind of studies being launched. And obviously there's plenty of patients out there unfortunately, but I just wanted to kind of get your thoughts on that as well.

Yes, to your point, unfortunately, there are a lot of patients, particularly in the non-small cell lung disease category. And the ENSPIRIT trials continues to enroll at a nice rate. I'm very, very happy with its accrual rate. And really not much more that we could comment on that particular trial but it is going well.

Understood. Okay, great. Thank you so much.

Stephen Willey, Stifel.

Thanks for taking the follow-up. I know, Scott, I think you've talked about before obviously wanting to keep 427 -- I forget what the name of it is off the top of my head.

Apatorsen?

Apatorsen. PD-1 is more of a wholly-owned asset, at least in the near term. But I think you can kind of attest to the fact that sometimes these business development arrangements take a long time to play out. So, I'm just kind of wondering. As you think about getting the Phase III data here maybe this year, I guess does that influence your decision on what to do with Apatorsen and specifically I guess does that kind of incentivize you to maybe initiate those conversations on the lead front a little bit sooner?

It's a really good question. Thank you for that. We are very aggressive I would say with respect to communicating with potential partners in the Big Pharma industry in particular and I would say Big Biotech as well. Obviously, we maintain confidence of things that we don't want in the general marketplace, but absolutely have conversations with Pharma about the status of generally the ORCA program under Apatorsen, where we are at with respect to accrual. Some groups would obviously be under CDA, so they would have a little bit more access to specifics. But it's something that we have always embraced to ensure that potential partners are aware of what we are doing with that program. And it does serve exactly to your point. Depending on how things migrate in the field, you get different shifts in the landscape, and companies will take different interests to bolster their marketplaces. And so we want to make sure that we have our asset in the front row since they're aware of what we're doing so that it may fit into their portfolio.

That said, as we've commented in the past, we do have the dollars to execute on a very robust Phase II program, including the seven randomized Phase IIs that we have in four separate indications. So the interest there is to get as much data and demonstrate as much proof of concept that this product candidate has a very broad opportunity. And we will continue to execute on that strategy and weave in with that the results that we may see under the custirsen program as we go forward.

It's certainly not blind to us that as we go forward with custirsen in particular, with survival results coming up in the not-too-distant horizon, that starts to feed into opportunities to draw milestone payments and obviously, if it's successful, royalty payments and the like, which then changes your whole dynamic with respect to your ability to develop a fairly robust program with Apatorsen. So, we move all those pieces around the board on a regular basis, but always keep Big Pharma up to speed as to where we are at in the development cycle.

That's helpful. Thank you.

(Operator Instructions).

All right. I think we can probably close the soft at this point. We really do hope that you've enjoyed this new format. We have tried to embrace an opportunity to not only have conversations amongst the discussion points that we are having as we go through these calls, but more in particular an ability to submit questions into our IR webpage site so that we can also communicate with people that may not be on the phone and be able to field these important questions as we move forward into the balance of this year and into 2014. So, please do provide comment to us whether you have a preference for this kind of format, because we would sure like to embrace it.

Again, thank you very much for the opportunity to chat today and we look forward to the next update.

Ladies and gentlemen, thank you for participating in today's program. This does conclude the presentation, and you may all disconnect.