Aptose Biosciences Inc (APTO) 2018 Q4 法說會逐字稿

Good afternoon. My name is Dilem, and I will be your conference operator today. I would like to welcome everyone to the Aptose Biosciences Conference Call for the Fourth Quarter and Year ended December 31, 2018. (Operator Instructions) As a reminder, this conference call may be recorded.

I would now like to introduce Susan Pietropaolo. Please go ahead.

Thank you, Dilem. Good morning, and welcome to the Aptose Biosciences conference call to discuss financial and operational results for the fourth quarter and year ended December 31, 2018. I am Susan Pietropaolo, a communications representative for Aptose Biosciences. Joining me on the call today are Dr. William G. Rice, Chairman, President and CEO; and Mr. Gregory Chow, Senior Vice President and Chief Financial 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 U.S. 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 achievements 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 annual report on Form 10-K and SEC's and SEDAR filings. All forward-looking statements 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. Dr. Rice?

Thank you, Susan. I'd like to welcome everyone to our earnings call for the year-end and quarter ended December 31, 2018. In retrospect, 2018 was a productive year for Aptose. We were acutely focused on advancing APTO-253, or 253, into the clinic and getting CG-806, or 806, clinic-ready. I'm pleased to say we accomplished those objectives and Aptose now enters 2019 as a clinical-stage company with an eye towards achieving clinical proof of concept with both of our small molecule assets.

Most of you on the call are aware that most of these molecules, while very different from one another, represent exciting agents with substantial market opportunities in hematology. Today, we'll review the progress of both 806 and 253, talk about what makes them distinctive and compelling even among the competitive hematologies landscape, and update you on upcoming milestones and timelines. Following these updates, our Chief Financial Officer, Mr. Greg Chow, will review our quarterly and year end financials, and then we'll open the call for your questions.

But first, let's discuss 253. One of the key advances of 2018 was the return of 253, our small molecule MYC inhibitor, to the clinic after resolving a manufacturing issue with the original formulations that led to a clinical hold. We addressed these formulation challenges with 253 and completed all studies necessary to submit the appropriate documents to the FDA in order to lift the clinical hold. Our belief in this drug and the diligence of our team resulted in the reinitiation of a Phase Ib trial in patients with relapsed or refractory hematologic malignancies this past November.

Quickly, before I bring you up-to-date on the status of 253 and the ongoing clinical trial, let me remind you why we're excited about this drug. 253 is the only know clinical-stage molecule that has the potential to directly target the MYC oncogene and inhibit MYC expression. MYC dysregulation is a common driver in many malignancies, including AML, making MYC an attractive therapeutic target. However, other therapists directed at MYC are often limited by severe toxicities, drug resistance, myelosuppression and the difficulty in targeting the MYC protein itself. In fact, history has shown MYC to be notoriously difficult to target because the MYC protein binds to other proteins in DNA, but has no enzymatic active site to target with the drug. Consequently, MYC has been deemed as an undruggable. But we're inhibiting MYC through a different strategy. Rather than directly targeting the MYC protein, we're targeting the MYC gene.

253 binds to a DNA regulatory motif in the promoter region of the MYC gene, stabilizes the motif and prevents active transcription of the MYC gene. This inhibits synthesis of MYC, message RNA and MYC protein, and leads to apoptotic cell death in the cancer cells. These findings were published during 2018 in the AACR Journal, Molecular Cancer Therapeutics.

While studying the mechanisms of 253, we also performed studies to induce drug resistance in the laboratory setting. The purpose of resistance induction studies, which are performed on all drugs, is to confirm the molecular target of the drug and to guide clinical drug combination studies into the future. Creation of cells' resistance to 253 remarkably took 3 years. And the cells required multiple changes in the MYC gene to generate drug resistance. The specific details of these findings are the subject of an abstract that will be presented at AACR on April 1 and the important messages from these studies are: One, they confirm MYC as the target of 253; two, they demonstrate the difficult modifications a cell must acquire in order to become resistant to 253; and then three, they aid in the selection of combination agents for future clinical trials. To date, 253 has demonstrated a robust safety profile in humans. Most importantly, 253 does not cause toxicity to normal bone marrow functions, differentiating it from other therapies that attempt to inhibit MYC. In addition, preclinical results demonstrated the ability of 253 to induce apoptotic cell death in multiple types of blood cancer cells, including AML as well as in vitro synergy with various classes of conventional approved and investigational therapies for AML or myelodysplastic syndrome or MDS.

From what we have seen thus far, we believe 253 has the potential to benefit a large patient population across various therapeutic areas, and we have begun our clinical development in AML.

So where are we in the clinical development of 253? I'm happy to report that in our Phase Ib open-label dose escalation trial of 253, we successfully completed the 28-day cycle of our first patient. As we explained on our last call, our protocol requires only one patient in each of the 2 lowest dose levels. Our first patient received a lowest dose of 20 mg/m 2 once weekly over 28 days, and the drug was tolerated favorably. In addition, we performed biomarker analysis from that patient. And we observed evidence of target engagement. During the 28-day cycle, the total amount of MYC gene expression in the PBMCs was reduced by more than 70% with a clear downward trend each week and a reduction in MYC gene expression when measured 24 hours after each dose. Likewise, B21 protein was induced, an indication of cell cycle rest and apoptosis, all of which is consistent with MYC target engagement. And yes, these are data from one patient only and at the lowest dose, and there's no guarantee that such trends will be observed in the future patients. Nevertheless, we are pleased to see these trends and to be moving forward to our second patient.

As we mentioned on our last call, we're very carefully selecting patients for the first 2 dose levels. The first dose level is complete, and now we're screening for a patient for our second cohort that will receive a dose of 40 mg/m 2. The process to find the right patient with a high-performance status takes time, as relapsed or refractory AML patients tend to be acutely sick and seeking a patient who likely can complete the second dose level with a favorable tolerability profile and without the need to expand at that dose level to additional patients. We hope this careful approach will allow us to progress to higher dose levels more quickly.

This Phase Ib study is expected to enroll up to 20 patients with relapsed or refractory AML or high-risk MDS. And then to transition to single agent expansion cohorts in AML and MDS as appropriate followed by combination studies.

As mentioned previously, many B cell malignancies also are reported to over-express MYC and depend on MYC for survival. Consequently, we found that B cell cancer cell lines as well as bone marrow samples taken directly from B cell cancer malignancy patients such as CLL and ALL are surprisingly sensitive to 253. The MYC inhibition we observed with the first patient with AML also supports 253's potential to target MYC in B cell malignancies. And if the data continue to warrant it, we will pursue an amendment to our IND to include such B-cell cancer patients in the Phase I clinical trial. We currently have four clinical sites actively screening patients for the study. We're continuing to bring additional clinical sites online and expect additional sites to be initiated in the near term. And we expect that dose escalation will continue to the end of the year. However, to be consistent with our policy of transparency, we intend to provide meaningful clinical updates of this open-label trial when appropriate during the year, and hope to report data from this study at ASH in December. Finally, I wish to thank the clinicians, families and patients for their willingness to participate in our APTO-253 trial. These are very sick patients, and we don't want to lose sight of the fact that they are working with us to create better drug.

Now let's turn our attention to CG-806, or 806, as I will call it. 806 is Aptose's oral, small molecule noncovalent kinase exhibitor that potently inhibits all wild type and mutant forms of the FLT3 kinase, and all wild type and mutant forms of the BTK kinase. 806 truly is a first-in-class agent as a pan-FLT3, pan-BTK multi-cluster inhibitor. And it is being developed for the treatment of patients with select hematologic malignancies, including patients with relapsed or refractory chronic lymphocytic leukemia or CLL, including the C41S (sic) [C481S] mutant CLL population as well as for non-Hodgkin's lymphomas and patients with relapsed or refractory AML and MDS. 806 stands out because it targets specific cancer promoting driver kinases such as FLT3 and BTK. And it suppresses additional cancer survival pathways, such as the ERK, Akt, MYC and H3S10 pathways, in order to kill the heme cancer cells, both in atypical safety sparing precision. Indeed, 806 stands in a class of its own, distinct from other FLT3 inhibitors or noncovalent BTK inhibitors.

During 2018, we completed all required ID-enabling studies and a host of additional safety studies to prepare 806 for the clinic. Due to the favorable safety outcomes of the standard GLP talks and xenograft studies, we took the added steps to conduct additional cardiovascular, respiratory, CNS and genotoxicity studies, which also demonstrated favorable safety outcomes. In addition to our capsules for the clinic, 50 milligrams and 150 milligram gelatin capsules, oral delivery had passed the initial 28-day accelerate stability testing, and are well prepared to initiate dosing upon allowance of the IND.

As most of you are likely aware, we submitted an IND to the FDA for 806 2.5 weeks ago. And we're planning first to conduct a Phase I trial with orally administered 806 in patients with relapsed or refractory B cell malignancies. This should include CLL, SLL and non-Hodgkin's lymphoma patients who failed, or who are intolerant to standard therapies, including patients with B-cell cancers having the C481S mutant form of BTK or other mutations that render their tumors resistant to covalent BTK inhibitors such as ibrutinib.

Pending regulatory allowance of the IND, we'd expect to initiate our first clinical trial with 806 in the second quarter of this year. In this trial with B cell malignancy patients, we plan to determine the pharmacokinetic safety and tolerance properties of 806 with a twice-daily oral administration regimen over a 28-day cycle. And plan to watch for clinical benefit and measure a series of markers of disease status. These markers should include FDG PET scans to look for tumor volume and cooling, measurement for phospho-BTK and phospho FLT3 levels and perform a plasma inhibitory assay or PIA assay to determine if the plasma at different time points after dosing has 806 levels that can inhabit the target kinases and suppress key oncogenic pathways. We also plan to measure serum CCL3 and CCL4 levels as well as circulating tumor DNA levels. To be clear, 806 uniquely and potently inhibits both the wild type and C431s mutant forms of BTK as well as the other oncogenic pathways used by B cell cancers to survive. And we expect to see robust clinical responses from 806 in this patient population.

Now just as we stated, with the action of 806 on wild type and mutant BTK, 806 also potently inhibits the wild type and all known mutant forms of FLT3 as well as the other oncogenic pathways used by AML cells to survive. Because of these properties, we believe 806 can uniquely serve a broad spectrum of the AML population. And we wish to be thoughtful and deliberate in our approach to the treatment of AML patients. Because AML patients tend to be acutely ill, we do not want to treat them with potentially subtherapeutic doses of 806. Rather we would plan to collect PK data from the B-cell cancer trial, and identify a dose level that could represent a likely therapeutic dose for AML patients. Once identified, we plan to seek allowance from the FDA to move 806 into the relapsed or refractory AML and MDS patient population in a separate Phase I trial in which we plan to evaluate safety, tolerability and pharmacokinetics of 806 as well as potential clinical benefits in these patients.

As we mentioned in our last call, we may consider performing a single ascending dose or SAD healthy volunteer study. If the first few dose levels in the B-cell cancer trial do not appear to deliver exposures that likely would be therapeutic for AML patients, then we may decide to perform a SAD study in healthy volunteers to quickly collect PK data that will allow us to model the PK properties of 806 in humans and select a dose that would likely be therapeutic for AML patients. We want to be very data-driven in this process and responsive to the request of the FDA. We'll have more to discuss on this matter in a few weeks. But be certain that we're taking the appropriate steps in accord with the FDA and the needs of the AML patients to select the appropriate starting dose for AML patients. As you can imagine, it is an important step for Aptose to initiate dose in the patients as soon as possible. Likewise, it's important for us to articulate that the rational for developing 806 for both the CLL, B-cell cancer population and AML, MDS population is derived from our extensive preclinical program.

As you know, we and our collaborative researchers have gone to great lengths to collect to present preclinical data that differentiate 806 from other agents. We presented data at ASH in December 2018, exploring the mechanism of action of 806 and showing the drug's unparalleled ability to potently inhibit all in forms of FLT3 and BTK and to suppress multiple oncogenic pathways linked to a crippling of the malignant cells and avoidance of rapid emergence of drug resistance, which unfortunately occurs with many other therapies. Indeed, 806 is not your standard FLT3 or BTK inhibitor. And in vitro laboratory efforts have been unable to generate drug resistance in AML or lymphoma cells after more than 2 years of continued exposure of cells to the drug in vitro.

In other data presented to ASH, the M.D. Anderson Cancer Center team compared 806 to the FLT3 inhibitor, lestaurtinib. 806 but not quizartinib efficiently reduced the in vitro phospho FLT3 levels and potently killed FLT3 mutated cells even in the presence of mesenchymal stem cells. Likewise, 806 has had a profound pro-apoptotic effect on primary AML patient cells. And a patient-derived xenograft or PDX model, midostaurin grafted with the FLT3 ITD plus D835 dual-mutated bone marrow cells from a FLT3 inhibitor-resistant AML patient. That patient represents a very difficult to treat population. Yet 806 readily reduced the leukemic burden, extended survival in the PDX model, indicating that 806 may be useful in the treatment of an emerging population of AML patients that are resistant to other FLT3 inhibitors. Importantly, this may also serve as a path for rapid approval for 806.

Data from Dr. Brian Druker's group at OHSU demonstrated that primarily cells from patients with diverse hematologic malignancies are highly sensitive to 806. In particular, his laboratory measured the IC50 of 806 against more than 200 AML patient bone marrow samples, and related the sensitivity of samples to the mutation profiles and RNAC gene expression profiles from those samples. As anticipated, he observed that patient samples were broadly sensitive and that FLT3 ITD samples were highly sensitive as expected. Surprisingly, in a new finding presented at ASH, he showed that primary cells from AML patients with the IDH1 mutation found in an estimated 6% of AML patients demonstrated high sensitivity to 806. This unexpected finding further broadens 806's potential use and potential paths for rapid development.

Also presented at ASH in collaboration with OHSU Knight cancer center, a study of 806 with more than 100 samples of freshly isolated bone marrow from CLL patients demonstrated that 806 has exerted far broader activity and far greater cell killing potency than ibrutinib. In parallel studies, 806 killed the malignant CLL and B-cell lines with a potency that was 50 to 6000x greater than that of ibrutinib.

The ability of 806 to kill malignant cells was further analyzed on cultured and primary malignant B-cells in the presence of stromal cells and unlike other agents, 806 maintain full potency. 806 was also shown to be significantly more potent than ibrutinib at inhibiting malignant B cell colony formation, migration, and inducing apoptosis in the presence of stromal cells. Moreover, 806 potently killed cells resistant to ibrutinib.

Aptose has recorded new results from the 28-day GLP toxicology and toxicokinetics study of 806, which continue to demonstrate a highly favorable safety profile. One of the more interesting preclinical studies that was initiated during the fourth quarter of 2018, and continued into 2019, was a long-term preclinical study in mice bearing MP4 11, FLT3 ITD AML. In this study, we demonstrated that an oral 28-day dosing of 806 could result in cures of mice that continue out to the end of the study at 120 days at doses that generated no observed toxicity. Yes, 120 days, thereby demonstrating the effectiveness and the durability of 806.

Early in 2018, our researchers also presented at EHA, the European Hematology Association, and AACR, the American Association for Cancer Research, conferences. All of our preclinical work is available on our website but to quickly summarize the wealth of preclinical data, 806 has demonstrated a superior potency and breadth of activity on AML patient samples relative to other FLT3 inhibitors. It has demonstrated superior ability to kill B cell malignancy patient samples relative to ibrutinib. It has demonstrated the ability to eliminate or cure tumors in animal models in the absence of toxicity. And it demonstrated a robust safety profile on all of our IND enabling studies to date.

806 checks a lot of boxes. We and our scientific advisers are particularly excited about 806 and believe that it has the potential to serve as a transformational agent for multiple hematologic cancers, including AML, CLL and others. We're always proud to say that we work with clinical research teams that are second to none. And all of them are eager to initiate dosing of 806 in patients.

Toward that end, we're delighted to host a KOL or key opinion leader event in December that featured Dr. Brian Druker, Director of the Knight Cancer Center and recipient of numerous awards. Dr. Druker, who chairs our scientific advisory board, has been involved in the testing and development of 806 and many other hematology drugs. And he is among the most sought after and acclaimed researchers in this space. We often get asked what differentiates 806 from other hematology drugs on the market or in development. Dr. Druker's vast experience, which includes the development of Gleevec, the first molecule to target a specific kinase, gives him an important perspective on the current treatment landscape in AML and B-cell cancers, and we appreciate that he shared his enthusiasm about 806 with the analysts, investors in attendance and on the webcast. The link to the webcast is on our website, and if you haven't listened to it, I would encourage you to do so.

To wrap up on 806, I want to mention that in May 2018, Aptose exercised its option to obtain the exclusive license from CrystalGenomics to develop and commercialize 806 worldwide outside of China and Korea. An additional agreement in June extended that license agreement to include China. We also continue to build IP around this important asset. In September, we were granted a European patent for 806 and its uses. And just last week, we announced that we had a similar Australian patent that was issued. These patents add to previously issued 806 patents in the U.S. and Japan and are expected to provide protection at least until the end of 2033. In addition, earlier in 2018, 806 received a patent allowance in China. And this represents an important market into the future for 806.

I will now turn the call over to our Chief Financial Officer, Mr. Greg Chow, who will review additional highlights and the financial results from the quarter.

Thank you, Bill, and good afternoon, everyone. Before moving onto the financials, let me quickly touch on additional and new highlights from the year. Early in 2018, we announced an exclusive global license agreement that provided OHM oncology associated with India's life sciences with the right to the development, manufacture and commercialization of APL 581 as well as related molecules from Aptose's BET kinase inhibitor program. The deal has the potential to provide Aptose with up to $125 million in milestones. This transaction provided a host for a non-core asset and has the potential to bring new assets to patients and meaningful non-dilutive net funding for Aptose in the future.

During 2018, we also added 2 valued remembers to our Board of Directors, Ms. Caroline Loewy and Ms. Carol Ashe. Both of these ladies are accomplished executive leaders in the biotech and pharmaceutical industries, and we have already benefited from the breadth and depth of their experience. During the year, always science driven and data driven, we presented at the major hematology meetings, AACR, EHA and ASH, and we continue on that track with 2 upcoming presentations at AACR in April this year. We have also submitted an abstract for consideration at the 2019 EHA meeting in June.

We've reached a critical stage with 2 exciting compounds that may fill great unmet needs in hematology. We know it is incumbent upon us to give our products the best chance of success and to ultimately reflect the true value in Aptose.

Now let's turn to the financial overview. We entered the quarter with $15.7 million in cash and cash equivalents and investments compared to $15.6 million at September 30, 2018. Subsequent to December 31, 2018, we raised $6 million through the common stock purchase agreement with Aspire Capital and a nominal amount from the aftermarket facility with Cantor Fitzgerald. To date, we have over $18 million in cash, cash equivalents and investments, which along with the availability from the ATM and Aspire facility, provide a cash run way well into the first half of 2020. This comfortably allows us to initiate our clinical trials and collect meaningful clinical data without the need for a near-term financing. During the quarter, we utilized approximately $5.6 million of cash in operating activities, which were attributable to increased activities surrounding 253 and 806 and general and administrative purposes.

Moving on to the income statement, we had no revenues for the quarter. Research and development expenses were $4.2 million for the quarter, and this is attributable to increased 806 development activities, which include completing the IND enabling studies for 806 and preparing the IND itself, continuing development on improving GMP formulations for 806 and 253 and increased salaries related to increased headcount in clinical operations to the CG-806 clinical trials. General and administrative expenses for the quarter were $2.1 million. This increase was primarily due to an increase in stock-based compensation and increases in administrative costs such as Investor Relations, technology, travel, office space expansion, consulting fees supporting the growth of the company's operations and an increase in legal cost related to the patent filings now that we have worldwide rights to 806 outside of Korea. Finally, our net loss for the quarter was $6.3 million or $0.17 loss per share.

Before I turn the call back to Dr. Rice, I want to inform everyone that as of December 31, 2018, Aptose became a domestic issuer, meaning our filings will be consistent with those of a U.S.-based company. We will be filing our annual reports on Form 10-K, and our quarterly statements on Form 10-Q. As a result of this, the $100 million shelf registration statement that we filed last year on form F10, which is a foreign filing, becomes obsolete. And we will be filing a new $100 million mixed used shelf on form F-3 to replace that.

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

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

Your first question comes from the line of Matt Biegler from Oppenheimer.

Maybe a little bit more detail on the first patient treated in the 253 trial. Can you tell us if the patient is still on therapy? And if there's been any indication that the inhibition of MYC is translating to early objective signs of activity? And also, do the kinetics of MYC inhibition you've seen so far suggest that once-weekly dosing is sufficient or might you think of potentially increasing the dosing frequency for optimal inhibition?

All right. Matt Biegler, so the first patient on the 253 trial, this is an AML patient, top performance patient, he was able to complete the 28-day cycle. We actually were quite shocked and pleased to see the reductions in MYC, and the increases in P21 during that 28-day cycle. Again, we dosed once weekly for 4 weeks. And after each dose, we observed 24 hours later a decrease in the expression of MYC in the PBMC samples, where we collect total RNA from PBMCs. So that patient is no longer on study. They completed the 28-day cycle. But at the end of that cycle, there was no real reduction in the blast counts. The patient was not doing poorly. But they also had received no apparent benefit. At that time, the physician -- the attending physician thought it was best to just move them off the study since we did not see any major benefit. And that was done. However, a couple of weeks later, we gleaned the data on c-Myc and P21, and what I would say is both that physician and the other physicians that have now seen the data would be happy to continue patients as long as they are doing well on this drug to see if there are continued decreases in the MYC into the cycle 2, cycle 3 and on. So what I can say is the impact of MYC reductions was meaningful for us. It was meaningful for the clinicians that are treating these patients. Again, we were all shocked and elated, really, to see target engagement and to truly see MYC inhibition in the absence of any bone marrow suppression or toxicity. But again, that patient did receive no observed benefit. So in terms of changing the frequency, it's difficult to change the frequency if you're dosing IV. So at least for into the near future, we want to understand the tolerability and effect once weekly, as we increase the dose levels. So that -- the next thing that we have to do is begin increasing the dose levels. Hopefully, we'll see even stronger benefits in the patients going forward. If then safety allowed us then to increase the frequency, we will continue doing so. But in reality, what this shows us is that 253 can be an active MYC inhibitor, without causing myelosuppression. And that's saying a lot. I don't think anybody's ever said that with any other molecule. And so what we're trying to do is position for the future. Ultimately, we want to have an oral drug that we can dose daily. That's going to be for AML, for B cell malignancies as well as some of the solid tumor indications that we're -- that we want to pursue. So the best way to answer your question is really to indicate that it's great to see this activity with IV administration. And that is feasible in the AML population, but ultimately we want to get that once daily oral dosing to hammer these tumors as hard as we can, and then to also expand out into other indications as I mentioned the additional solid tumors even with their specific populations that we can go after there. So anything else, Matt?

No. I think that makes a lot of sense. Looking forward to that data at ASH you kind of alluded to.

Yes.

Oh, can I take one more then?

I'm good with that. Yes, please.

Okay. Maybe we can do a question on the clinical strategy for 806. Given -- in light of the progress that some competing molecules have shown recently for the ibrutinib refractory CLL and obviously, the approvals that we've been seeing in FLT3 positive AML, do you believe that there's any opportunities for an accelerated approval pathway for 806? And can you speculate maybe on what those indications or settings might be?

Oh, absolutely. So that's something we created great deal of time trying to identify those sub- populations that are of high unmet medical need. For instance, you just put out -- you and your team put out the AML survey of the various heme docs. And a couple of things came out. One is that there is an unmet need in patients who are unfit. These are older patients that it's difficult for them to be treated in induction therapy with the cytotoxins. So that's a patient population that needs a strong targeted agent and that's also well-tolerated. Also patients who go in for re-induction therapy and the physicians are looking for the target agents again, especially that can target the FLT3 and IND mutated patients. And it turns out our drug can target both of those population. There are a couple of other populations in AML that are emerging. So as you mentioned, a couple of new molecules have been and are on the docket for approval. If you took at the FLT3 inhibitors, so we have the midostaurin, we have ibrutinib and possibly a little bit later this year, we might even see quizartinib. What that means we're starting to treat a lot of patients with FLT3 inhibitors. That's great. It's extending life. The downside of that is, you're also getting drug resistance in those patients. And we've already seen that once you get the drug resistance induction because it's a D835 or some of these mutations, none of the other FLT3 inhibitors work. So this patient population that is emerging is the FLT3 inhibitor resistant population. We've already demonstrated that our drug actually works on that population. And so we believe that could be a path for rapid approval. Also the fact that we hit this IDH1 population and some of the IDH1 inhibitors out there, you're starting to see both toxicities as well as the emergence of drug resistance there as well as with venetoclax. There have been a number of papers, articles coming out showing mutations that occur in cells that are resistant to venetoclax, and we believe our drug can treat those. That's with the AML.

On the B-cell side, clearly, you've got the population that have the C481S mutants that are resistant to all the covalent BTK inhibitors. We want to go after those. There are other companies going after those too. But we believe that we can go after the patients that become resistant to covalent as well as other noncovalent BTK inhibitors because our drug works differently and hits a different set of kinases. As well as the patients who are becoming resistant to venetoclax in the CLL population. So we see a number of different populations we could go after there with high medical need with potential for rapid approval in these pathways.

Your next question comes from the line of Gregory Renza from RBC Capital Markets.

Just to build on Matt's question, with respect to the recent disclosures from competitor program. I was wondering if you could provide and help put that data into context aligned with 806, mainly the response reduction that was revealed after scan as well as based on the early characterization of 806. What are your views on some of the safety findings that had been revealed? So any thoughts you have as it pertains to 806, I would be interested in your views.

All right. Thanks, Greg, I'll see if I can unpack that one. The competitor, I'm happy to name them, it's ArQule. So let me just say, we were thrilled to see the information release from ArQule. There's been this question, we've seen the covalent inhibitor, BTK inhibitors have shown benefit in the clinic. But really, the noncovalent BTK inhibitors had not really shown true benefit to date. And there was a question, could they actually do so? Well, the data coming out from ArQule are great for all of us because it shows that a noncovalent BTK inhibitor can truly show benefit -- demonstrate benefit in these patients. So the way they show that, so they started at 5 milligrams, went up to 65 milligrams, and they have seen increasing benefit in patients. So one of the things they look at is the phospho-BTK over total BTK. And even at the low doses, they started seeing dramatic reductions in the phospho-BTK. And that's great. But if you'll notice, they didn't really see that much efficacy of the lower doses up until they got to the higher doses. At the higher doses, at 65 milligrams, they just reported that they had an 88% reduction in the tumor volume. They did a scan and this is in a CLL patient that had the C481S mutation; that's the population that they really want to go after. And this patient in the past had also failed one of the covalent BTK inhibitors, Acalabrutinib. So it was great news.

The question is, if they saw BTK -- phospho-BTK inhibition at some of the lower doses, why did they not see benefit in the patients, true benefit until the higher doses? And it comes down to yes, all of us can turn off the BTK, the phospho-BTK. But to truly start having an antitumor effect, then you have to go to the higher doses where they are starting to inhibit the other kinases in there. And so that's the reason because these -- I think I described this to people recently so if you got the BTK and you're inhibiting it. So think of the BTK as the interstate. Your drug inhibits that lane. But then, the -- suddenly the BTK C481 lane opens up. And then the cell can survive. Well, if you've got a drug that can inhibit the wild type and the phospho-BTK, where is it going to go? Well, you start going on the surface streets and the surface streets are all these other cell signaling pathways that the cell used to survive. And if you have -- and those are driven by different kinases, so you have to start cutting off enough of those to really have the traffic effect or the antitumor effect. So it's clear that as they began to dose up, they were starting to hit more of those other kinases. They're starting to have an anti-tumor effect. It was terrific. But at that dose, they also had a grade III rash. Typically, we have seen that in the past when compounds will hit EGF receptor. And that causes gut and skin toxicity. So it may be that at the higher level, they are inhibiting some of eGFR, some of the other kinases that are causing that. So they did expand out to 6 patients. But it looks like they were able to recruit patients quickly and get on there. So I saw everything there as good news for us. Suddenly we're able to say yes, the noncovalent BTK inhibitors work. Yes, we're enabled to hit FLT3, but you better hit -- BTK. But you'd also better be able to hit those other kinases. And for us, we don't hit the eGFR, we've never seen anything that would indicate a rash. So in every way, I think, it's good news for us. Did that answer your question, Greg?

It sure did. I really appreciate the color.

Your next question comes from Joe Pantginis from H.C. Wainwright.

First the question on 253 and then I guess, I'd call it a logistical question on 806. Looking forward for 253, assuming clinical activity. Bill, can you discuss, maybe, what might be on your relevant combo wish list? Now that you're accumulating more and more on the MYC inhibition side, what might be the more exciting combo to you than others?

Joe Pantginis, so for 253, one of the things that we learned from our mutation studies is -- and again, that's the reason you do it, is that the drug truly is hitting the MYC. So we -- and in the past we thought if this drug is acting through a different mechanism, we might want to put it with a [prometamine] inhibitor for AML, but that would not be the case now. So prometamine inhibitors also get MYC. So we've wanted to develop a complementary strategy. A couple of molecules that we want to look at, venetoclax, clearly that's a BCL2 inhibitor. So it's -- you're turning off the anti-apoptotic activity while still driving the pro-apoptotic activity with our drug. So we think that will be a great combination to go after, and actually we have a bit of data to help support that. Also some of the other -- well, in the venetoclax is a well-tolerated agent relative to some of the cytotoxic agents. But at the same time, we are going to be using cytotoxic agents going forward into the future, the cytarabine, the daunorubicin. We have the hypomethylating agents. So we feel and we have done combination studies in vitro. And so we believe that there is a place for -- to put 253 alongside all those compounds. The -- and you have to really understand the rationale for a MYC inhibitor. So anytime you treat with any drug, the cancer cells, what they try to do is they try to find ways to survive, the cells do, the cancer cells. So if you're hitting one particular pathway, the cell tries to find ways to use these other pathways to survive. And I always talk about the rescue pathways. Turns out, cells do that by up-regulating c-MYC. Then the MYC goes out and starts interacting with all these other genes and allowing the cells to play with these other pathways to survive. So we see that if we can truly show we have MYC inhibition, it may have a single agent activity. But ultimately, having drug combination activities prevent the rapid induction of resistance by other drugs. We think that's the path for 253, ultimately, and hopefully as an oral drug in the future. Then you said you had a logistical question on 806?

Yes. And it really comes down to what's on your punch list right now to be able to hit the ground running for when the study is allowed, hopefully? And then also can you talk to the screening of patients and how it's probably likely easier to screen patients than it is for say, like the 253 study?

Oh, yes. This one is infinitely simpler. So we can go to the large institutions -- for 253, we had to go to the large institutions. It's IV administration, specific patient population. So we had to go those institutions. But for a molecule like 806, we're going to go to the community sites as well as the large institutions. So we already have IRB approvals at some of these -- what are they called? Not general, but -- regional. Some of the regional IRBs. So that we have been on the ground, developing all the activities for 806, making sure that we're getting the IRB approvals ahead of time so that once we get the IND allowed, we can transition into the lab -- into the clinic quickly. We've already been out, and we have -- and if we can get this, the IND allowed soon, we likely will have 6 to 7 sites up and screening in April. It's that quick, being able to go into these community sites. And that also puts pressures on the larger institutions to get through their IRBs so that they can put patients on. So we expanded out our clinical operations teams in house as well as of our informatics group. And so across-the-board, we've been building out to make sure that as soon as that IND is allowed, hoping it will be allowed soon -- that's up to the FDA -- that we can hit the ground running on this one. Whereas with 253, there had to be a number of modifications in the IND, we had to go back and take it back to the IRBs and it cost us months, getting back into the clinic. We hope and we expect that's not going to be the pace -- case with 806.

That's really helpful. And I guess just part -- real quick on that is based on our discussions, a lot of people are obviously -- or not obviously per se, but to me it is obvious -- they're chomping at the bit now for -- with regard to the potential for this drug. So being able to have at least that many sites being available in April and then looking to expand, do you think we might be able to see clinical data this year, presumably at ASH?

Oh, yes, I would fully expect that. As you said, chomping at the bit, so we had an investigators meeting at the very end of January and the 1st of February. And we had clinical sites and the investigators, nurses from all over the country. And when we showed them the data, so we're able to show them confidential data. And they were literally shocked at the potential of 806. We actually had in some of the various clinical sites, the investigators competing to be -- get to be -- determine who gets to be the PI at the institutions. So we think that these should be up and rolling very quickly. The investigators want a drug like this. There's a real need for it. And so we're finding sites that are saying they can get us not only AML patients but many of the CLL and B-cell malignancy patients that we're going to need. So I'm not going to disclose who those sites are because I don't want anyone else running there. But hopefully we will get this up and running quickly. We expect if we can get into dosing in the second quarter, that we should expect to have both AML and B-cell cancer data by ASH. You have to submit it by the 1st of August. So hopefully, we can get a place holder, continue to collect data. And then if we have some revealing data then maybe even put in for a late breaker. So those are the plans. And let's hope that it all flows out.

Your next question comes from the line of John Newman from Canaccord.

Just to -- the first one is how many clinical sites did you ultimately anticipate having operational for 253? And then, second question is in terms of both 253 and 806, how do you think longer-term about the potential for partnership opportunity, potentially outside the U.S. Is that something that you're -- would be interested in at this point? Or would you just like to keep all that good stuff in house?

All right. Thanks, John, for calling in. In terms of the number of clinical sites, for 253, we now have 4 that are actively screening for patients. And again, these are the major sites that have many patients, we've actually looked at a lot of patients coming through, hopefully, we will get that second patient on very soon -- high performance patient. So right now, it's 4, we expect to begin to ramp up to 13 to 15 as we get out toward the end of the year. But again, that's the major institutions. You can't do that type of drug development out in the community. As for 806, hopefully, in April, by the end of the first quarter, we could easily be in double digits for the number of sites. Ten or more by the end of the second quarter. And then second half of the year, increasing that on up to maybe even 15, 20. We have a lot of sites that want to get in. And when you started talking about the community sites, just a single IRB may bring you 5 to 7 sites in a region. So we'll just have to watch and see how many we have. It also -- you have to remember, that's going to include B cell malignancies and AML, so you have to a number of additional sites. Some specialize in the B-cell malignancies like CLL; some specialize in AML. So ultimately, you're probably looking towards that number. And then into the beginning of next year, as we get into the expansion phases. Now in terms of partnerships. The good news is for 253, we're starting to show as target engagement. We hope to continue to show that as we dose escalate. And also to demonstrate that it's a safe molecule that has MYC inhibition. So once we get that, that puts us back in the stage that partnership discussions would be on the table. Right now, we know that the people want to see strong clinical data, target engagements and well tolerated. So that's something that we clearly would engage in those discussions. It may turn out to be a regional or it may turn out to be a global type of deal structure depending on how the data emerge. As for 806, we're in no hurry to partner that compound. We think that molecule has tremendous upside potential once we demonstrate proof of concept in the clinic, both in B cells and AML. Right now if we were to look at partnership, no one could legitimately write us a check for what we believe the value of the drug is now. No one would do that; they couldn't justify it. But hopefully, second half of the year and the first part of next year, we start seeing these clinical responses. That changes how we want to look at partnering this drug. And ultimately, we will need to. If this were only an AML drug, a small company can commercialize that. But if this drug had the potential we believe it does and the number of indications, and we want to be able to take it to certain solid tumor indications because we know there's going to be activity there, or we have data that suggests there will be. We're going to have to be able to partner with a larger company that can expand the clinical activities as well as commercialization. So that's where we want to be able to get -- glean as much value as we can, build value as quickly as possible. But then, find the right partnership to maximize the clinical development and commercialization of the drug. And to take good care of our shareholders. Make everything flow so well.

(Operator Instructions) I show our next question comes from the line of Matt Biegler from Oppenheimer.

Sorry -- I have one follow up. I saved my nerdiest question for last. It's actually a 3-part question on your ATR abstract as it relates to CG-806. And I was intrigued by 806's activity in IDH1 mutants, and I'm just -- I'm wondering if we know now whether that activity is due to direct inhibition of IDH1? Or if it is by some other mechanism?

Okay. So upon that one, yes, we'll nerd out on that one. So IDH1 is not a kinase. That was a shock to us. So when IDH1 becomes mutated, it effectively remodels the epigenetic background of the cells. And so we assume what is happening is that it's begun to reprogram some of the other pathways required for survival, that are -- and those pathways now are sensitive to 806. So again, IDH1 is not a kinase. We don't believe our drug is directly targeting it, although we don't have any data on that yet. We will try to get that. But yes, it's going to be interesting to study how we're killing those cells and which pathways we're hitting. So that's nerd #1. What’s nerd #2?

Do you think that given the mechanism of action obviously, it hasn't been completely characterized yet. But do think that you would then potentially have a different adverse event profile than the IDH1 inhibitor that we know is out there, TIBSOVO? I know the differentiation syndrome is a pretty common adverse event associated with TIBSOVO.

Yes, I believe the mechanism of cell killing would just be pretty much like the other ones. If you look at the kinases that are hit by 806, what you can see is that you're hitting specific pathways that are driving the cells toward specific types of cell death. And we see that across-the-board in AML, B cells, we've looked at all of the different types of heme malignancy cells that we've gotten. So I would assume that it's going to be the same type of cell death induction. I don't foresee that we would see any negative impact on those patients, anything beyond any other patient for toxicity. It's been a very well-tolerated drug. So I suspect we should be able to kill those cells and still maintain a reasonable safety profile. Whereas I know some of the other -- some of the IDH targeted drugs, they have greater toxicities and side effects. So hopefully, we can get around that and also venetoclax is active in those cells. So we know our drug, when you put it in combination with venetoclax, is just phenomenal activity on all types of heme malignancies, so that's another pathway to go for those types of patients.

That's interesting. Do you know, is there a lot of overlap between patients with IDH1 mutations and FLT3 mutations? Or might this really expand the CG-806's potential in AML?

I don't fully know the answer to that. So the ones that we look at, these are cells -- these are all derived from patients, and we had a couple of hundred AML patients and then out of that, we had, again, about 6% of those are the IDH1 mutant patients. When we looked at those patients they clearly popped up as hypersensitive to our drug. At this point, I don't know if any of those have an additional FLT3 mutation in them and if they are more or less sensitive. I don't think that really would affect the mechanism because if it had the FLT3 mutations, our drug would work through that pathway as well as again, it's the other pathways that are induced by the IDH1 mutation. But again, all these cells use similar pathways. So you have to remember all the B cells malignancies, all the AML, the myeloid and the lymphoid, they're all derived from the stem cells in the bone marrow. And they all use many of these underlying pathways for survival. And it's just they use different ones to different degrees in each cell type depending on the genetic background. So I suspect that the type of cell killing will be pretty much equivalent across-the-board. The only [place] where we see it is absolutely distinct is if you have the FLT3 ITD. If the cell had the ITD, no matter what other mutations are in it, our drug works through a direct apoptotic event, but if you've any other form of FLT3, wild type or any other mutant then it's -- we see it working through different mechanistic activities in different pathways. And I would say then that would be the same in the IDH1 mutant.

And I'm currently showing no further questions. I would now turn the call back over to Dr. Rice for closing remarks.

All right, well, I just want to thank everyone for joining us this afternoon. 2018 was a very productive year for Aptose. And we're on the path now to deliver important milestones during 2019. There are many employees and collaborators to thank for their diligence and efforts in helping us get to this juncture. And we also want to thank our shareholders for your substantial support, and we look forward to communicating with you on the progress of 806 and 253 clinical programs, and also want to again mention that our website, www.aptose.com, has links to all of our presentations and webcasts and the preclinical data that we mentioned today. So operator, would you please conclude the conference call.

Thank you, sir. Thank you, ladies and gentlemen, for attending today's conference. This concludes the program. You may all disconnect. Good day.

Thank you.