Aveo Pharmaceuticals Inc (AVEO) 2010 Q1 法說會逐字稿

Thank you for holding for AVEO Pharmaceuticals First Quarter 2010 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following the formal report, AVEO Management will open the lines for a question and answer period. Please be advised that this call is being taped at the Company's request and will be archived on the Company's website for two weeks from today.

At this time, I would like to introduce Miss [Jennifer Engleman]. Please go ahead.

Thank you, operator. Good morning, everyone. And welcome to AVEO's first quarter 2010 financial results conference call. With me on the call today are Tuan Ha-Ngoc, President and Chief Executive Officer; David Johnston, Chief Financial Officer; and Dr. Bill Slichenmyer, Chief Medical Officer.

Before I turn the call over to the Management Team for their prepared remarks, I would like to remind you that certain of the remarks made by Management during this call about the Company's future expectations, plans, and prospects constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements about the Company's future expectations, plans, and prospects include statements regarding estimates of 2010 financial performance, anticipated cost of the TIVO-1 trial, and the efficacy and combination qualities of tivozanib.

Any such forward-looking statements are based on assumptions that the Company believes are reasonable, but are subject to a wide range of risks and uncertainties. Actual results may differ materially from those expressed or implied by such forward-looking statements. Many of these risks and uncertainties are described in the risk factors section of the [final] [perspectives] relating to our initial public offering filed with the Securities and Exchange Commission and are available online at www.sec.gov.

All of the information in this conference call is as of April 29, 2010, and should not be relied upon as representing the Company's views as of any subsequent date. While the Company may elect to update these forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so. Therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to today.

Please be advised that today's call is being recorded and webcast. To access the webcast replay, please visit the Investor Relations section of the Company's website at www.aveopharma.com. I would now like to turn the call over to Tuan. Tuan?

Thank you, Jennifer. And thank you all for joining Dave, Bill, and me for our first financial results conference call. Elan Ezickson, our Chief Business Officer, and Murray Robinson, our Senior Vice President of Translational Medicine, will also be joining us for the Q&A session.

As most of you know, we recently successfully completed our initial public offering of approximately 10 million shares of common stock. Before we delve into our first quarter update, I would like to take a moment to acknowledge the hard work of the AVEO team that has allowed us to begin a new phase of development as a public Company. We are very proud to be among the few companies thus far in 2010 that have achieved this goal. We believe that our success in this endeavor underscores the excitement that we and others have for the AVEO story.

Our excitement is based upon a set of opportunities stemming from our deep portfolio of clinical, discovery, and platform assets. We believe our portfolio has positioned us as an emerging leader in cancer therapeutics with multiple opportunities across several programs. Our lead product candidate, tivozanib or AV-951, is in a Phase III trial in RCC, or renal cell carcinoma. Based upon current estimates and sales numbers, we believe that our share of the market to be in excess of $1 billion worldwide and is still growing.

We believe that tivozanib is a highly-differentiated triple VEGF receptor inhibitor with best-in-class potential based upon its efficacy and safety profile demonstrated in clinical trials to date, potential for use in combination with chemotherapy and other targeted agents, potential applicability in indications beyond RCC, and our pivotal Phase III trial designed to capitalize on our previous clinical experiences to date. We believe tivozanib is a valuable asset poised for success.

As a reminder, we in-licensed this compound from Kyowa Hakko Kirin. And we hold exclusive rights of [sight] of [vision]. We believe that tivozanib represents a tremendous number of opportunities for AVEO, including a potential to commercialize and/or partner the drug. This compound, however, is only one asset among many in our pipeline of earlier-stage products under development.

AV-299 is our next most advanced product under development. AV-299 is an antibody that binds to the hepatocyte growth factor, which is thought to play a broad role in cancer. Indeed, in our pre-clinical models AV-299 has demonstrated an ability to inhibit growth of many tumors including lung and colon tumors, glioblastomas, and multiple myeloma. We successfully completed our Phase I study, and expected to initiate a Phase II trial in lung cancer in Q2 of this year.

We have partnered this product with Schering-Plough, now a division of Merck. The highlight of this agreement includes Merck's responsibility for all costs related to clinical development of AV-299, as well as clinical and promotional manufacturing. AVEO has retained to co-promote AV-299 in the United States for the first large market oncology indications, for which Merck [finds] marketing approval. To date we have received about $50 million in payments. If all approvals in multiple indications and all sales milestones are achieved, AV-299 could generate up to $480 million in milestone payments in the aggregate.

Among other assets we have, AV-203 is in preclinical development, which is an antibody that targets ErbB3. In preclinical testing, our (inaudible) antibodies have significantly inhibited the growth of a variety of tumors including breast, prostate, and pancreatic cancers. We have recently selected a development candidate for this program. We have an exclusive agreement with Biogen Idec regarding AV-203's development and commercialization outside of the United States, Canada, and Mexico.

Under the terms of that agreement, we are responsible for developing AV-203 through the completion of the first Phase II clinical trial or clinical proof of concept. To date we have received $45 million in payments, including the $5 million milestone just announced on April 14. We also have additional potential option fee and milestones worth up to $55 million plus royalties on sales.

Both the AV-299 and AV-203 programs were generated through our proprietary cancer biogene platform. We believe our platform improves upon traditional xenograft models using our genetically engineered cancer models to preserve novel interactions between tumors and surrounding tissue. As a result, our proprietary is designed to address three key issues in cancer drug discovery and clinical development.

First, target identification and validation by identifying and validating which of the many candidate cancer-causing genes are most important to tumor growth. Second, drug discovery by enabling the development of tumor models driven by the target gene of interest to facilitate the evaluation of drug candidates directed against the target and the selection of the most promising candidate.

Third, biomarker identification by enabling the identification of genetic markers or biomarkers, which may help identify patients who are most likely to be responsive or resistant to such drugs by leveraging the naturally occurring genetic variation in our cancer models and their divergent sensitivity to anti-cancer drugs.

AV-299 and AV-203 are just two of our 10 antibody programs that we have generated utilizing our platform. We believe these programs provide a number of partnering opportunities for us going forward. In addition, Merck, OSI, and Schering-Plough, now a division of Merck, have entered into agreements with us to utilize our platform. To date our platform has generated $179 million in funding.

As my brief introduction illustrates, each of those programs provide AVEO with the potential for multiple opportunities for success. And we are very excited about our future. With that, I'd like to turn the call over to Dave Johnston, our Chief Financial Officer, for an update on our financial results and a discussion about 2010 financial guidance. Following Dave's comments, Bill Slichenmyer, our Chief Medical Officer, will provide you with an update on recent clinical results and upcoming milestones. Dave?

Thanks, Tuan. And good morning, everyone. And thanks for joining us on this morning's call. Before I dive into the quarterly numbers, I'd like to recap the results of our initial public offering. On March 11, we announced the pricing of 9 million shares of common stock at $9.00 per share. Net proceeds to the Company were approximately $72 million.

On March 31, we announced our underwriters elected to exercise their option to purchase just under 1 million additional shares of stock at the IPO price. Both of these transactions together raised a total of $90 million with just less than $10 million of associated fees and expenses. And we expect to use most of these proceeds to fund the development of tivozanib.

So, turning to the financial results for the quarter, this morning we issued a press release disclosing these results. So I'll keep my comments relegated to our financial highlights. Total revenues for the quarter were $10.9 million compared with $3.7 million for the first quarter of 2009. Revenue in the first quarter of 2010 primarily reflects license fees, research and development funding, and milestones that we received from our partnerships.

Specifically, we achieved a $5 million milestone in connection with our partnership with Biogen for the selection of the first humanized antibody development candidate for the AV-203 program. And we received that payment early in Q2.

For the first quarter of 2010, we reported a net loss of $14.4 million or $2.27 per share versus $9.4 million or $5.92 per share for the first quarter of 2009. Most of the increase in this loss was driven by the start of our Phase III clinical trial program for tivozanib.

Research and development expenses for the quarter totaled $22.6 million compared with $9.7 million for the first quarter of 2009. R&D expense this quarter included a $10 million payment to Kyowa Hakko Kirin related to the TIVO-1 trial. The R&D expenses primarily consists of preclinical research and clinical trial costs. But also included in R&D expense are stock-based compensation charges of about $400,000.

General and administrative expenses was about $2.8 million for the first quarter of 2010 compared with $2.6 million for the same quarter of last year. It also includes roughly $500,000 of stock-based compensation expense. For the quarter ended March 31, 2010, we are reporting cash, cash equivalents, and short-term investments of $96.1 million compared with $51.3 million at year-end 2009.

On this call, we are also providing certain financial guidance for 2010. And please note that this guidance does not include any income from new partnerships or collaborations that we enter into in the future. But as Tuan mentioned, we have about ten preclinical programs, as well as opportunities for tivozanib, which could form the basis of new partnerships. And also keep in mind that any new partnerships could come in a variety of forms. And we intend to continue to selectively collaborate with partners to lever our programs for enhanced shareholder value.

So, with that in mind, our guidance for 2010 anticipates that revenue should range between $40 million and $50 million. 2010 costs directly related to our tivozanib Phase III trial ranging between $27 million and $30 million, and a net loss of between $74 million and $79 million, which translates into a loss per share of $3.00 to $3.20 per share with full-year weighted average shares outstanding of about 25 million shares. This net loss also includes non-cash expense of approximately $4 million for stock-based compensation.

Finally, we expect to exit 2010 with a minimum of $50 million in cash, cash equivalents, and marketable securities. With that, I'd now like to turn the call over to William Slichenmyer, our Chief Medical Officer, for an update on our clinical progress. Bill?

Thank you, Dave. And good morning, everyone. I'm pleased to provide you with an update on our lead product, tivozanib, which we believe has the potential to become a best-in-class angiogenesis inhibitor. That belief comes from the drug's outstanding potency and selectivity for inhibiting the VEGF receptors 1, 2, and 3, and is reflected in the very favorable safety and efficacy profile that has emerged from Phase II.

In February of 2010, we began enrolling patients into TIVO-1, which is a global Phase III clinical trial evaluating tivozanib in patients with advanced renal cell carcinoma or RCC. TIVO-1 will evaluate the efficacy of tivozanib versus sorafenib, also known as Nexavar, an RCC therapy that's been approved by both the FDA and the European Medicines Agency or EMA.

This pivotal trial is the first ever Phase III study in RCC that's designed to evaluate superiority in a head-to-head comparison against a widely prescribed anti-angiogenic therapy. The primary endpoint of the trial is progression-free survival, or PFS. Secondary endpoints include overall survival, objective response rate, safety, and quality of life.

This Phase III trial was designed to avoid some of the risks that have historically caused problems for other drugs transitioning from Phase II to Phase III. For example, we are studying the same disease, RCC, and the same line of therapy, first-line anti-VEGF therapy, in Phase III that we did in Phase II. We are giving tivozanib in exactly the same dose and schedule in Phase III as we did in Phase II.

Finally, the primary endpoint in Phase III, progression-free survival, is one for which we saw very encouraging data in Phase II. The trial design has been discussed with the FDA and EMA, and is consistent with the feedback that we received from both agencies.

The study is being led by Dr. Robert Motzer of the Memorial Sloan-Kettering Cancer Center. Enrollment is going very well. We expect to enroll approximately 500 patients worldwide. As a reminder, our placebo-controlled, randomized 272 patient Phase II trial of tivozanib in advanced RCC was completed last year. We presented detailed analyses from the trial this past March at the 2010 Genitourinary Cancers Symposium, or ASCO GU, which we believe further demonstrated characteristics of a highly-differentiated profile.

The median progression-free survival achieved by tivozanib patients with advanced RCC who had undergone a prior nephrectomy and had clear cell carcinoma was 14.8 months, which compares favorably to historical data from clinical trials that tested other currently approved VEGF receptor inhibitors in RCC. It's important to note that the Phase III registration studies for tivozanib, sorafenib, and pazopanib were all performed predominately in patients who had clear cell RCC and had undergone a prior nephrectomy.

Part of our Phase II analysis that was presented at the ASCO GU meeting focused on the relationship between hypertension and efficacy in patients with RCC who were treated with tivozanib. Prior studies of other anti-angiogenic agents in RCC and in other tumor types have shown that patients who develop hypertension have better efficacy outcomes than patients who do not develop hypertension. It is now recognized by experts in the field that hypertension is a biomarker of efficacy. What we showed at ASCO GU is that this relationship holds true for tivozanib, as well.

In our Phase II tivozanib study, hypertension was the most commonly reported treatment-related adverse event effect of tivozanib. And it affected approximately 50% of the patients. Hypertension rates were directly associated with improved clinical outcomes among patients overall and in subsets of patients with clear cell RCC and those who had undergone a prior nephrectomy. This observation supports the [on] mechanism role for VEGF receptor inhibitors in the development of hypertension.

Other clinically important off-target toxicities that are commonly associated with other targeted therapies, such as fatigue, diarrhea, nausea, hand-foot syndrome; these were notably low in the tivozanib study. With patients taking tivozanib showing rates of dose interruptions and reductions that were lower than seen in historical trials of the competitor drugs. This favorable tolerability profile for tivozanib suggests a strong potential for combinability with chemotherapeutic agents and other targeted therapies.

Data stemming from multiple ongoing exploratory clinical trials of tivozanib either as monotherapy or in combination with other agents across multiple tumor types, including colorectal, lung, and breast cancers, are expected in the months ahead. Additionally, AVEO expects to have a presence at several major medical meetings coming up in the near future, including the ASCO meeting, the annual meeting coming up in June; the ESMO meeting -- that's the European Society for Medical Oncology in October; and a San Antonio breast cancer symposium in December.

More information about these and other future presentations will be shared at the appropriate opportunity. And now I'd like to turn the call back over to Tuan.

Thanks, Bill. We are pleased with the progress we have made this quarter, and look forward for the many opportunities for success that lie ahead. Before I turn the call over to the operator for questions, I would like to congratulate Dr. Raju Kucherlapati, a founding member of the Company and a member of the Board of Directors, on his recent appointment with President Obama's Presidential Commission for the Study About Ethical Issues. Congratulations, Raju. Operator, we are ready for questions.

(Operator Instructions). Our first question comes from the line of George Farmer from Canaccord Adams.

Good morning, guys. Thanks for taking my questions. I want to know when you expect we'll see overall survival data from the randomized discontinuation trial.

Good morning, George. It's Tuan. Bill, would you like to take that question?

Overall survival is not an endpoint in the Phase II trial. It is a secondary endpoint in our Phase III program. But it was not built into the design of the Phase II. And we do not plan to collect those data.

Okay. And in light of some of the setbacks that SUTENT has had in the oncology space, most recently with its failure in hepatocellular carcinoma, recent failures in breast and lung, how do you see tivozanib as being differentiated from SUTENT in these other indications. Most people have pinned tivozanib as being a better and safer SUTENT. How do you look at these setbacks when you think about developing the drug in these other expanded indications potentially?

Well, thanks for the question. And we do see a clear distinction between our drug, tivozanib, and several other competitors, including SUTENT. It starts with the basic pharmacology of our drug, which is the most potent picomolar potency in inhibiting VEGF receptors 1, 2 and 3, and also the most selective in that it does not inhibit other kinases to the same extent that the competitor drugs do, kinases like c-KIT or Raf, which are associated with off-target toxicities. Consequently, we're able to get a higher degree of inhibition of VEGF receptor than the competitor drugs can in patients. And we believe that this is why we're seeing such a good efficacy and safety profile in our Phase II experience.

One point that plays into this is that the rate of dose reductions or discontinuations of tivozanib in RCC is considerably lower than has been seen for the competitor drugs in this disease. And we note that -- you cited the example of SUTENT in HCC. That study was done with a dose of SUTENT was lower than the dose that's labeled in RCC, presumably because of the need for adjustment because of potential toxicities. With tivozanib we are seeing our ability to deliver full doses, even in combination with other drugs in our combination studies.

And so we see broad opportunities for tivozanib across multiple tumor types based on the broad mechanism of the angiogenesis being important across tumor types and the great profile of our drug.

Okay. Thanks, Bill. And, David, one quick question on guidance, your $40 million or $50 million in revenues that you've guided. How much of that is cash revenues?

How much of that is cash? Good morning. We haven't really said how much of that is cash revenues. But the majority of it will be. And some of it is obviously going to be the amortization of license fees that have been paid to us earlier. But our revenue is made up primarily of research and clinical development funding, as well as the milestones. But it's mainly based on clinical progress.

So, for example, the $5 million milestone we just received from Biogen, that will all be counted in this year's revenue. Unless we do a license deal, another license deal, milestones are generally accounted for in full in this year because there's some risk involved. The only kind of revenues that are really amortized over time are those that are the upfront licenses that are then amortized over the anticipated life of the deal.

Okay. Thanks.

Sure.

And our next question comes from the line of [Krishna Feoriget] from JPMorgan.

Hi. Thanks for taking my question. I was wondering if you could help us understand tivozanib in lung and colon, your strategy as to which line you would go after. Is it in the labs or factory setting? Thanks.

So, at this point our experience in lung and colorectal cancer is still relatively early. We do have studies under way, one of them testing tivozanib as monotherapy in patients with non-small cell lung cancer, testing a novel schedule of administration of tivozanib. We also have a study under way in patients with colorectal cancer combining our drug with FOLFOX chemotherapy.

And we anticipate that the results of these studies will be presented at scientific meetings coming up in the not-so-distant future. We've not yet settled on a precise plan for how we will move forward in these specific tumor types. But they are definitely tumors of interest to us as we think about expanding beyond RCC in the future.

Okay. So, in the lung trial have these patients been treated prior with Avastin? Are they front-line patients or second-line patients? It's a Phase I study?

Yes. It's a Phase I study that allows patients with a variety of prior treatment regimens.

But you do have patients who have been exposed to Avastin in the past in the trial?

There are some of those patients in the trial. Yes.

Excellent. Thanks very much.

And our next question comes from the line of Howard Liang from Leerink Swann.

Good morning. This is Joe (inaudible) in for Howard. I just had a quick question on the progress of the Phase III TIVO trial. Could you give us an indication of approximately how many sites are currently open for that trial?

So, the study opened in February. And we enrolled our first patient -- so we enrolled our first patient in February of 2010. And we anticipate that we will complete enrollment by February of next year. And enrollment is going very well. Our target is to bring on a total of approximately 97 study sites worldwide. I think we'd rather not get into exactly how many are up and running at this point. But I am happy to say that things are going very, very well, and we're off to a good start.

Great. And could you remind us of the distribution of some of those sites? Are they -- I know that there's a lot in Eastern -- there's a few in Eastern Europe. Could you remind us what the distribution will be?

Sure can. We have sites open in the Americas, Western, Central, and Eastern Europe, and in Asia, and a number of sites in various countries in these regions.

Great. Thank you. And for the Phase III -- this is more of a finance question. For the Phase III trial, have you accounted for or booked the purchasing for Nexavar for this trial already? Is that already baked into the current expenses? Or is that something we should expect going forward?

Some of it's in the current expenses. If you look at the balance sheet, you'll see that there's some -- that it's actually in the -- some of it's in prepays. And some of it has actually [hit] through the balance sheet. But there's a fairly large slug of it in the prepaid expenses on the balance sheet still. And that'll be bled out as it's used.

Great. And then the last question is on combination, back to combination. Is there a plan for a combination with Xeloda in breast or in other settings, given the success of Nexavar?

That is a combination that's of considerable interest to us. And it's one that we are giving serious consideration to exploring in the near future.

Great. Okay. Thank you very much.

(Operator Instructions). And as we have no further questions, I'd like to turn the call over to Mr. Tuan Ha-Ngoc.

Yes. Thank you. Thank you all, again, for your time today. And we look forward to updating you on our progress throughout the year. Have a good day.

Thank you, ladies and gentleman, for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a great day.