Aptose Biosciences Inc (APTO) 2015 Q2 法說會逐字稿

Good afternoon. My name is Danielle and I will be your conference operator today. I would like to welcome everyone to the Aptose Biosciences conference call for the second quarter ended June 30, 2015. At this time, all participants are in a listen-only mode. After the speakers' remarks there will be a question-and-answer session. (Operator Instructions) As a reminder, this conference may be recorded. I would now like to introduce your host for today's conference, Ms. Susan Pietropaolo. Please go ahead, ma'am.

Thank you, Danielle. Good afternoon and welcome to the Aptose Biosciences conference call to discuss financial and operational results for the quarter ended June 30, 2015. My name is Susan Pietropaolo with BCC Partners, the investor relations representative for Aptose Biosciences. Joining me on the call today are Dr. William G. Rice, chairman, president, and CEO; Mr. Gregory Chow, senior vice president and chief financial officer; and Mr. Avanish Vellanki, senior vice president and chief business officer.

Before we proceed, I would like to remind everyone that certain statements made during this call will include forward-looking statements within the meaning of US and Canadian securities laws. Forward-looking statements reflect Aptose's current expectations regarding future events but are not guarantees of performance and it is possible that actual results and performance could differ materially from these stated expectations. They involve known and unknown risks, uncertainties, and assumptions that may cause actual results, performance, and achievement to differ materially from those expressed. To learn more about these risks and uncertainties, please read the risk factors set forth in Aptose's most recent prospectus annual report on Form 20-F and SEC and CR filings. All forward-looking statement made during this call speak only as of the date they are made. Aptose undertakes no obligation to revise or update the statements to reflect events or circumstances after the date of this call except as required by law.

I will now turn the call over to Dr. Rice, chairman, president, and CEO of Aptose Biosciences.

Thank you, Susan. I would like to welcome everyone to our call for the quarter ended June 30, 2015. In today's call we will provide a corporate update including the status of APTO-253 and our R&D initiatives. As you are aware, Aptose is focused on the clinical development of APTO-253 and at the same time we are evaluating opportunities and assets for the Company's growth. Aptose is committed to developing innovative targeted agents with the potential to transform treatment strategies for patients with life-threatening hematologic malignancies. As you know, these are cancers that originate in the bone marrow and then spill large numbers of dysfunctional cells into the bloodstream.

At Aptose, we develop agents that disrupt the inappropriate or dysfunctional gene expression that results in aberrant signaling of cancer cell pathways. These are anticancer drugs that restore the innate apoptotic pathways by altering the transcriptional regulation associated with cell cycle rest and apoptosis. Our leading drug, APTO-253 or 253 as I will refer to it induces expression of the KLF4 gene. This is a master transcription regulator and tumor suppressor that causes AML and other hematologic cancer cells to undergo programmed cell death or apoptosis. Importantly, we have observed no harmful effects to the normal bone marrow cells. This is in stark contrast to the drugs currently approved to treat AML and other hematologic cancers, which typically can cause severe suppression of normal bone marrow cells.

During the quarter, we announced that the US Food and Drug Administration granted Aptose orphan drug designation for 253 for the treatment of AML. AML is a particularly challenging cancer of the blood and bone marrow with few treatment options. Orphan drug designation is granted by the FDA to encourage companies to develop therapies for the treatment of diseases that affect fewer than 200,000 individuals in the United States. Orphan drug status provides R&D tax credits and opportunities to obtain grant funding, exemption from FDA application fees, and other benefits. If 253 is approved to treat AML, the orphan drug designation provides Aptose with seven years of marketing exclusivity.

APTO-253, a first in class induce her of the KLF4 gene, is currently in a phase 1B clinical trial evaluating patients with AML, high risk myelodysplastic syndromes or MDS, and other hematologic malignancies in which KLF4 silencing is central to the onset and advancement of the disease. We believe that 253, with its unique mechanism of action, has the potential to emerge as an entirely new therapeutic approach for this patient population and receiving orphan drug designation is a key regulatory milestone toward that end.

In our last call, we reported that OHSU or Oregon Health & Sciences University and the University of Michigan have joined Baylor Cancer Center in Dallas and the M.D. Anderson Cancer Center in Houston as clinical sites for the 253 phase 1B clinical trial. These four prominent institutions are all up and running, actively screening in treating patients. We're happy to report that two additional clinical sites are undergoing RFP approvals and preparing to join the study. Our clinical team expects to have those sites active this quarter and we plan to open further sites in the coming months.

As you may recall, this study is an ongoing open label single agent dose-escalating phase 1b will be critical trial in patients with relapsed or refractory hematologic malignancies including AML and high-risk MDS. The study is designed to assess the safety, tolerability, pharmacokinetics, pharmacodynamic responses, and efficacy of 253 as a single agent. 253 is being administered twice weekly over a 28-day cycle. The study is expected to enroll up to 30 patients with relapsed or refractory hematologic malignancies across two separate dose escalation arms: in arm A, up to 15 patients with AML or high risk MDS patients, in arm B up to 15 patients with lymphomas, Hodgkin?s, and non-Hodgkin's lymphoma and multiple myeloma.

We are evaluating and hope to show benefit in patients who are very sick and have either failed or are unresponsive to all other drugs in their treatment. In order to understand the benefits of our drug without having such results clouded by the underlying symptoms of the diseases, we have been judicious in our selection of patients. In addition, we've engaged only highly reputable clinical sites known to offer superb clinical care for patients and we initiated an educational effort to teach the sites about our drug, which acts through a unique mechanism and does not kill normal bone marrow cells.

Our phase 1 dose escalation study began enrolling patients at a rate typical of the hockey-stick enrollment rate observed from new agents in the clinic. Working with investigators and KOLs, we learned that a key reason for the slower initial rate of enrollment was that physicians appeared to be reluctant to use a non-myelosuppressive agent. We are now seeing more physicians respond more favorably when they are educated on how 253 has demonstrated preferential killing of cancer cells but not normal bone marrow cells. We believe physicians are now more aware of the benefits of 253 and, as expected, the enrollment rate has increased. At this point in time, we've treated patients with 20, 40, and 66 milligrams per meter squared doses.

Patients are being dosed on a schedule in which they receive 253 on days one and two of each week of a 28-day cycle and their bone marrow and peripheral blood samples are being collected and processed for biomarker analysis. The next dose level is 100 milligrams per meter squared. Our preclinical data with heme cancer cells demonstrate that the majority of AML cells are killed with concentrations below one micromolar. Plus in our prior clinical experience using different dosing schedule, the 100 milligrams per meter squared dose achieves Cmax levels of 2 to 4 micromolar, which should be sufficient impact the viability of AML and other heme malignancies cells. Thus we believe we may be entering the therapeutic range for the heme cancer patients at the 100 milligrams per meter squared dose level.

We anticipate providing a potential update on the dose escalation study during the second half this year and completing enrollment of the phase 1B dose escalation study by late 2015 or the first half of 2016, depending on the number of dose escalations that are undertaken. Depending on the availability of data for submission, this update may take place at or around the 2015 meeting of the American Society of Hematology or ASH meeting in December of this year. We have just submitted an abstract to the 2015 ASH meeting and that abstract outlines the pharmacologic rationale for the expectation of single-agent activity against AML by 253.

The phase 1B study is designed to transition to single agent expansion cohorts in AML and MDS, followed by combination studies. Based on our current understanding of the phase 1B trial and depending on the results of the current study, we expect to initiate four subsequent clinical studies in specific cancers: two single-agent expansion trials evaluating 253 alone, one in AML and one in MDS, consisting of approximately 15 patients each; and two phase 2 drug combination trials evaluating 253 in combination with another drug, one in AML and one in MDS, consisting of approximately 20 patients each.

The phase 1B data of course one formative element plans and guide our decisions regarding patient populations, dosing, timing, costs, potential partnerships, and other relevant perimeters. We are pleased now by the enthusiastic support this trial is receiving from researchers at these institutions for the 253 clinical program and we value what we're learning along the way, which will serve us in later-stage development and beyond. In addition, we are actively expanding the ranks of key opinion leaders that supports the rationale for KLF4 induction as a treatment strategy in heme malignancies with scientific medical leadership that include doctors Brian Druker, Dan Von Hoff, Stephen Howell, and Michael Andreeff.

We believe we can successfully translate new understandings and transcriptional regulation in epigenetics into new medicines for patients with cancers of blood and bone marrow. Indeed, epigenetic suppression of the KLF4 gene, which is prevalent in a multitude of hematologic indications, is considered to be a key driver in the onset of certain subsets of heme cancers. And as the science continues to mature, we are employing these findings to guide our clinical trials.

For those of you who may be new to Aptose, we again want to drive home the fact that 253 is the only clinical-stage agent that acts through induction of the KLF4 gene. It displays a mechanism of action different than standard therapies for AML, MDS, and other heme malignancies. In addition, 253 is not a cytotoxin and does not cause myelosuppression of the normal bone marrow. This is a powerful differentiator in the treatment of AML.

Aptose is also creating proprietary companion diagnostic tools that will allow selection of patients that may benefit from 253 treatment for use in single-agent or combination regimens based on their specific gene signatures. We continue to explore these diagnostic tools so that we may direct 253 to the patients that will benefit the most. Within insights to these genetic signatures growing, Aptose is the forefront of a personalized therapeutic approach to AML and other heme malignancies for a defined patient population and the scientific community has begun to share in our excitement.

I would now like to turn the call over to our chief business officer, Mr. Avanish Vellanki, to provide an update on our collaborative efforts.

Thank you, Bill. Good afternoon, everyone. First let me provide an update of ongoing activities from the prior quarter. As many of you will recall, in parallel with the single-agent dose-escalating phase 1B trial of APTO-253, we have been performing studies through the Beat AML initiative being conducted at Oregon Health & Sciences University, OHSU. We have now collected data on over 150 fresh bone marrow isolates from patients with AML, myelodysplastic syndromes or MDS, chronic myeloid leukemia or CML, chronic lymphocytic leukemia or CLL, and patients with other myeloproliferative neoplasms or MPNs.

The team at OHSU have submitted an abstract to the upcoming American Society of Hematology meeting this year and we anticipate the abstract and presentation will discuss the efficacy of APTO-253 as a single agent and in combination with other agents. We also expect OHSU to present their findings of the genomic sequencing results from these patient samples which we believe will be insightful to guide future combination studies of APTO-253.

We undertook the studies with hundreds of primary patient cell isolates to both confirm the strong preclinical efficacy that we've observed across a range of hematologic cell lines and to identify optimal agents to combine with APTO-253 in subsequent trials as we expand our understanding of APTO-253 commercial potential. It will take a bit of time to implement the actual combination trials and we will keep you informed as we go.

Additionally I'm happy to report that Aptose has begun collaborating with other companies to conduct initial preclinical assessments of other investigational agents in competition with APTO-253. While we are not yet disclosing today who these collaborators are or the drugs we are evaluating, we anticipate that these studies will provide preclinical news flow in the near-term. If these preclinical data are supportive, we may move forward and clinical studies in patients with various hematologic malignancies. As you can see from our participation with Beat AML initiative and these corporate collaborations, we believe many hematologic malignancies ultimately will be best addressed with combination strategies. Aptose will be pursuing additional collaborations to identify a regimen with the best possible outcome for patients. Finally we continue to anticipate in-licensing at least one new pipeline program this year.

I will now turn the call over to our chief financial officer, Mr. Greg Chow, who will review the financial results in the quarter.

Thank you, Avanish, and good afternoon, everyone. As a reminder, effective July 17 of last year, the Company changed its fiscal year from May 31 to December 31. As a result, the period that we are reporting today is the three months ended June 30, 2015 and will compare to the three months ended May 31, 2014. In addition, our reporting currency is in Canadian dollars.

And now turning to our financial results for the quarter ended June 30, 2015, which I will refer to as the quarter, starting with our cash balance. We ended the quarter with CAD25.2 million in cash, cash equivalents, and investments compared to CAD28.9 million at March 31, 2015. During the quarter we utilized approximately CAD3.9 million of cash in our operating activities compared with CAD3.9 million in the three months ended May 31, 2014, and received proceeds of CAD281,000 related to stock option award exercises. We currently believe we have capital resources sufficient to fund our research and development and operations into early 2017.

Moving on to the income statement, we had no revenues in the second quarter. R&D expenses were CAD1.3 million for the quarter compared to CAD1 million for the quarter ended May 31, 2014, reflecting the advancement of our APTO-253 program. This increase is due to the initiation of the phase 1B dose-escalation trial this year as well as formulation studies and research work supporting the ongoing clinical trial.

General and administrative expenses for the quarter were CAD2.5 million compared to CAD3.2 million for the three months ended May 31, 2014. This decrease is due to severance costs incurred in the prior year of CAD762,000 with no comparable expense in the current period. We also reported a foreign exchange gain in the amount of CAD390,000 related to US dollar cash balances during the quarter. Finally our net loss for the quarter was CAD3.4 million or CAD0.28 per share compared to a loss of CAD4.2 million or CAD0.49 per share in the three months ended May 31, 2014.

I will now turn the call back to Dr. Rice. Bill?

Thank you, Greg. I would like to open the call for questions. Operator, if you would, please introduce the first question.

(Operator Instructions) Chris Marai, Oppenheimer.

This is actually Michelle on for Chris. Sorry about that. We were just wondering -- congratulations on the quarter and we are glad to hear that the enrollment of going well and that you are seeing some physician enthusiasm. We are wondering if at ASH this year you guys might have some biomarker data or if that will be coming in 2016. I know you guys said you will have a presentation on your PK data.

Michelle, this is Bill. Thanks for calling in. A couple of items on that call. So first of all we mention that we have PK data, only actually did was we took all the existing pharmacokinetic data from the earlier phase 1 clinical trial that was completed with 253 in patients with solid tumors. We looked at the data, looked at the AUC, Cmax, the different exposure levels across all the doses and we observed that we have dose-related pharmacokinetics, both Cmax and AUC.

So we have taken those data to assess do we believe that we will be able to treat the heme malignancy cells in the current trial? And what I can say is the AML cells that we have treated in vitro, we clearly see IC50s anywhere from 7 to 300 nanomolear, which is well below 1 micromolar. And we know that we can achieve levels, exposure levels, of say 2 to 6 micromolar in the range of doses that we expect to be able to dose in this current trial. So that gives us confidence that we expect to see the single-agent efficacy in this current heme malignancy trial.

So it's really incorporating much of the preclinical data of where we have evaluated the AML and other heme malignancy cell lines in vitro and then marrying that with the pharmacokinetic data from the prior phase 1 to give us the confidence that we're going to see single-agent activity in this current trial with heme malignancies.

In parallel -- so we are treating patients now. We're moving to the dose escalations. We are also collecting samples, both bone marrow and peripheral blood. We are pulling those and collecting them so that we can begin to evaluate these pharmacodynamic parameters and so hopefully we will have some of those data by the ASH meeting and we will be able to discuss it. We don't have those data at this time but we hope to have those data between now and then.

All right, great. You mentioned also that you will have or I'm sorry another collaborator is doing gene sequencing data. Is that what you are going to use to develop your diagnostic panel or could you talk a little bit about where you are there? Are you going to partner that off for development or maybe incorporate it into what you learned there into a panel like the FoundationOne heme?

There were again a number of questions there and I'm going to ask Avanish to address those, please.

Sure. Hi, Michelle. So the collaborator in question is OHSU via the Beats AML initiative and we have commented on this I think before. So we've also initially talked that the scope of the work was also to provide the sequencing workup of these primary patient cells as a result of using 253. So we expect the genomic sequencing data that will be presented will include that information.

We expect that to be a robust data set also because it is full RNA-seq against how many different isolates did you say?

We have 150 isolates.

Over 150 isolates, so we are hoping to be able to pull out the gene sequences or genes that correlate with both sensitivity and resistance. But again, that is work coming out of OHSU. They are going to be presenting those findings and it's not appropriate for us to disclose the findings at this point.

All right, great. Thank you.

Adnan Butt, RBC Capital Markets.

Thanks for taking the question. Let me ask a couple. First, when would you expect to provide --? Well, I guess you said that you will expect some kind of an update from your ongoing phase 1B study by the end of this year. Is there a possibility that the Company could go into the expansion studies without necessarily completing -- taking the phase 1B to conclusion? Could the expansion cohort start sooner?

This is Bill. So it sounds like you have multiple questions, so let's tackle that one first. The answer to that is yes. If we reach a dose that we believe is going to be therapeutic and still very well-tolerated, we can decide to expand at that dose and we would call it a recommended phase 2 dose, not necessarily the MTD. We have learned in the past that the drug is very well-tolerated and it may be on this new schedule and against the more sensitive cancers that we may be seeing efficacy at doses that are not approaching the MTD. So the answer is yes, but we will have to allow the data -- we will use the data to drive that.

So Bill, when you provide the update later this year, you expect to provide an update on these plans as well?

Yes, we hope by then we will have sufficient data and number of patients so that we can assess what are we seeing from the biomarkers? What are we seeing for the trends, the cell counts both in the peripheral blood and bone marrow? And then hopefully some -- depending on how long the patients are on these various doses, have some level of durability. That will then inform us as to how we want to move into the expansions as well as the drug combination studies.

I have always said all along I believe in this drug both as single-agent and in combination and for the greatest impact on all patients we need to get it in drug combination. Some I'm always looking for a way to initiate the drug combinations earlier rather than later also. That's better for the Company, better for the drug, and better for the patients. But again we need to utilize these data coming out of Beat AML as well as with other collaborators to best guide us as to what drug we want to combine with and then how to design the trial for the best indications going forward. So I'd love to get the studies started earlier rather than later.

Okay and perhaps one for Avanish. In terms of the preclinical collaboration that you mentioned, is that work that Aptose is doing in-house or is that something that the partner is doing? Can you say how many partners or how many collaborators or compounds you are evaluating?

So let me take last question first, Adnan, and no, we will not discuss the number or the specific collaborators today. However this is research that we are doing in-house at Aptose today.

We just say that Avanish -- we've actually had a very positive response regarding the mechanism of action of our drug. Other companies have become interested in it. Avanish has been engaging directly with a variety of other companies as well as the Beat AML to look at testing our drug in combination with other molecules at various stages of development. So it is gratifying to have this interest, but at this point we just can't speak about which companies and which drugs those are being looked at.

Okay, let me get back in queue. Thanks.

(Operator Instructions) John Newman, Canaccord.

Thanks for taking the question. So my question is have you seen any evidence to date from the phase 1 study of activity? I know that the enrollment is just picking up now, but given that it's open label I'm just curious if you've seen anything that gets you excited.

I also wondered if we assume that you have some data to present at ASH, what type of data that might be in terms of patients, if we should look for mainly just safety or if we should look for the typical RECIST response data. And I'm also curious if you've seen any type of dose-limiting toxicity to date, thanks.

Okay, so again a couple of questions there. In terms of DLTs, at this point it would be inappropriate for us to give any details from the clinical trial us to where we are now because as we are collecting data, we need to go out to make sure that we ensure all the data are valid from all the sites, the data that are coming into house. So that's one thing that you always have to do. And we're a little bit early in the process to be presenting any sort of data on the biomarkers, DLTs, or on the efficacy.

What I can say is we have not been required to expand out any of the dose levels at this point. That's one way of skirting around the issue of how well-tolerated the drug has been. And then as we get into the time around ASH, again it depends on how many patients we have, but we would like to be able to present any data that we have in which we have confidence around the data and that we've confirmed from the clinical sites regarding biomarkers, safety, tolerance, PK/PD, and any levels of efficacy. So we would like to be able to present as much as we can to you at that time, but again we have to have confidence in the data and hope that we can assess the durability at that time. So I think that addressed to of your questions. Was there one more or did that cover all of them?

I think that covers everything, thanks.

I'm not showing any further questions at this time. I would like to turn the call back to Dr. Rice for closing remarks.

All right, the first thing I want to do is thank everyone for being on the call today and especially for the questions that came to us. It shows that everyone is interested and cares.

So for closing remarks, I just want to remind everyone that we are building a focused leading R&D organization committed to translating new understandings of transcriptional regulation in epigenetics into advanced medicine for patients with heme and bone marrow cancers. We look forward to sharing updates with you in the second half of the year as we execute on our corporate, clinical, and financial objectives for 2015.

We hope to see you at the Canaccord investor conference in New York on August 13 and other conferences this fall. Our presentations in addition to the other recent webcasts and presentations can be found on the website of www.Aptose.com. And with that, I would thank everyone and have a good evening.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone, have a great day.