Aveo Pharmaceuticals Inc (AVEO) 2010 Q4 法說會逐字稿

Thank you for holding for the AVEO Pharmaceuticals conference call to discuss 2010 financial results and its recent corporate development. 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 Monique Allaire. Please go ahead.

Thank you, Shanelle. And good afternoon, everyone. Welcome to today's call. My name is Monique Allaire, Associate Director of Investor Relations at AVEO Pharmaceuticals. With me today are Tuan Ha-Ngoc, our President and Chief Executive Officer; Elan Ezickson, our Executive Vice Presidnet and Chief Business Officer; and David Johnston, our Chief Financial Officer.

Earlier today, we issued a press release detailing our 2010 financial results and a separate press release announcing the signing of a definitive agreement with Astellas. Both of these releases are available on our Website at aveopharma.com.

Please note that all information discussed on the call today is covered under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. During the call today, management will be making forward-looking statements, including statements about AVEO's future expectations and plans, including clinical developments, timelines and commitments, financial projections, and the potential success of our product candidates.

Actual results may differ materially from our expectations. These risks and uncertainties are described in the risk factors section of AVEO's most recently quarterly report on Form 10-Q filed with the SEC and available online at sec.gov.

All of the information in this conference call is accurate as of February 16th, 2011, and should not be relied upon as representing AVEO's views on any date in the future. While AVEO may choose to update its forward-looking statements in the future, we disclaim any obligation to do so.

With that, let me turn the call over Tuan Ha-Ngoc, our President and CEO.

Thank you, Monique. And thank you, all, for joining us on the call this afternoon. Since establishing AVEO, our corporate strategy and mission have been focused on discovering, developing, and commercializing cancer therapeutics with a goal of positively impacting patients' lives.

2010 was a transformational year for AVEO, during which time we achieved several significant milestones. These in addition to the worldwide collaboration agreement with Astellas that we just announced today position us an important step closer to fully achieving our corporate objectives.

Last year, the successful completion of our initial public offering and high financing seven months later set the stage for a series of key corporate developments. We reported strong Phase II data, demonstrating the longest PFS with tivozanib in first-line renal cell carcinoma or RCC as well as strong safety profile for tivozanib.

On the heels of that, we initiated and completed target patient enrollment in our pivotal Phase III trial for tivozanib called TIVO-1. In addition, we reported encouraging data throughout the year from several Phase Ib clinical trials, demonstrating the potential to combine tivozanib with both targeted therapies and chemotherapies at their full doses and schedules.

While tivozanib is the lead asset in our portfolio, with today's announcement, we are in strong position to maximize the continued development of the multiple other assets in our pipeline.

Ficlatuzumab, formerly called AV-299, is our lead internal discovered and antibody candidate that importantly inhibits the HGF/c-Met pathway, for which we now own worldwide development and commercialization rights. Last year, we initiated a Phase II clinical trial for ficlatuzumab in combination with Iressa in first-line non-small cell lung cancer. This study is well designed to evaluate potential activity in both wild type and mutant [HEFR] settings. And we expect preliminary data in early 2012.

Behind that, we continue to advance our third clinical candidate AV-203, a novel inhibitor of ErbB3 as well as our robust antibody pipeline.

2010 was indeed a momentous year for us. And 2011 is continuing that forward momentum, as evidenced by the collaboration agreement we just announced. This is the worldwide agreement with the sellers to co-develop and co-commercialize tivozanib outside of Asia. And we are very excited about partnering with Astellas.

From the start, we always said that we would undertake a partnership only If it achieved three strategic imperatives. First, we wanted to ensure that our partner shares our vision for the development of tivozanib in and beyond RCC and would put the necessary resource behind it to make the pipe bigger and at a faster rate, so to speak.

Second was a deal structure that would enable AVEO to build a North American commercial infrastructure. And third was a partnership structure that would not impede the strategic flexibility of our Company going forward. Elan will take you through the structure of that agreement in more details and share with you how this agreement achieves in fact and in fact exceeds all three of our objectives.

Most importantly, we believe this agreement will enable us to bring tivozanib to market faster and broader -- to a broader set of patients that won't have to compromise on safety for efficacy. In so doing, we believe it will be value accretive to our shareholders.

With that as a backdrop, let me pass the call over to Elan to walk you through the deal.

Thanks, Tuan. As you all know, Astellas is the second largest Japanese pharma company and one of the top 20 pharmaceutical companies worldwide with more than $11 billion in annual sales. Importantly, a key element to their growth strategy is to become a global category leader in oncology. They are well on their way to achieving this with their acquisition of OSI last year along with two other significant oncology product partnerships they established in 2009.

Astellas has an established global infrastructure, strong relationships with European payers, hospitals, and key opinion leaders, significant experience with both US and EU regulatory agencies, and a proven track record of successfully commercializing oncology products.

Throughout all of our business development discussions, it was very important to AVEO to engage a partner that shared our enthusiasm and confidence in tivozanib as a differentiated product for the treatment of patients with RCC as well as for patients with other forms of cancer, a partner who would commit to an aggressive development strategy to realize that potential.

Under our just-announced agreement, AVEO and Astellas have committed to putting substantial resources into an accelerated and expanded development plan for tivozanib. This is a 50-50 deal structure in North America and Europe, where AVEO and Astellas will share equally all development and commercialization costs and profits for tivozanib.

Speaking to the updated development plan, our initial focus beyond RCC will be in breast and colorectal cancers with plans to expand into other indications after these.

Because both companies are confident that the TIVO-1 trial is poised for success and that tivozanib has the potential to address significant unmet medical needs, we intend to initiate this accelerated and expanded development plan ahead of top line TIVO-1 data.

In that regard, recall that TIVO-1 is an event-driven trial. And based on our projections, we've indicated that we expect to have top line data from TIVO-1 available in mid 2011. We expect to have a read on the accumulation of events in the trial during the second quarter. And if necessary, we'll adjust our data timing expectations at that time.

The second one of our fundamental goals was to build out a commercial infrastructure that would support not just the successful launch of tivozanib in North America but also the potential future commercialization of oncology products emerging from our pipeline. With this agreement, we are well positioned to execute on this objective as well as to begin establishing a European commercial presence, both of which are critical to tivozanib and our earlier stage programs.

Under the agreement, AVEO will be responsible for leading the commercialization of tivozanib in North America, including filing the NDA and booking all sales in North America. Astellas will participate in North American commercialization, providing 50% of the sales reps and MSLs in this territory. I'm pleased with the progress we've made toward building out our commercial infrastructure, including the caliber of the additions to our team in the last several months.

A substantial benefit to this agreement is also the access it will provide AVEO to the European market, where we will participate with Astellas. Astellas has an established oncology commercial organization in Europe. And they will lead commercialization of tivozanib in this territory with AVEO providing 50 percent of the MSLs in the major EU countries.

As many of you know, the EU is a rapidly growing market for TKIs. And we believe tivozanib will be well positioned to compete against other VEGF-directed therapies in this territory.

Astellas will also be responsible for development and commercialization, including all related costs, in the rest of the world outside of Asia. AVEO has further downstream value creation in this territory, where Astellas will pay to us a tiered double-digit royalty on all sales. As for the development of tivozanib in Asia, many of you recall that AVEO entered into a licensing agreement with Kyowa Hakko Kirin in 2006, in which KHK retains the rights to develop and commercialize tivozanib in Asia.

Lastly, AVEO has also strengthened its financial position with this partnership. We will receive an initial $125 million cash payment composed of a $75 million license fee and $50 million in R&D funding. Further, we are positioned to receive more than $1.3 billion in milestones. $575 million of these are clinical and regulatory milestones, including $90 million in conjunction with the regulatory filings and market approval of tivozanib in RCC. And we are eligible to receive more than $780 million in commercial milestones.

We look forward to building a strong partnership with Astellas to maximize the value of tivozanib in the US, EU, and beyond. And I'd personally like to thank both the AVEO and Astellas teams for their tremendous effort in this process.

Now let me pass the call to Dave to give an update on the financial progress of the Company.

Thanks, Elan. We also issued a second press release today detailing our 2010 financial results on the heels of the announcement of our collaboration with Astellas. So let me briefly recap those results and then provide you with certain 2011 guidance.

In 2010, we raised $150 million in capital through the public markets with our IPO last March and our secondary offering in the third quarter, which we executed at a 50% premium to the price of our IPO just seven months earlier. As we start 2011, we continue to have a very strong balance sheet. We ended last year with approximately $140 million in cash and marketable securities.

With the broad and deep portfolio of clinical and preclinical assets as well as our market valuation today, we believe we're well positioned to fund the ongoing development of our programs and the fundamental growth of the Company.

Total collaborations revenue for 2010 were $44.7 million, primarily reflecting revenues related to our strategic alliances, which include an $8.5 million milestone payment from Merck for the start of the Phase II trial with ficlatuzumab, previously known as AV-299, and a $5 million payment from Biogen Idec for the selection of AV-203 as the clinical candidate in our anti-ErbB3 program and approximately $16 million in cost reimbursement and -- I'm sorry -- research funding.

Research and development expense for 2010 was $86.3 million, primarily driven by clinical costs, including those associated with our Phase III pivotal TIVO-1 trial. G&A expense was $14.8 million.

Our net loss for the year was $58.8 million or $2.30 per share based on 25.6 million weighted average shares outstanding at the end of the year.

As we said earlier, we will receive an upfront payment of $125 million associated with the partnership with Astellas. We expect to retain net proceeds of approximately $96 million after sublicense revenue sharing payments to Kyowa Hakko Kirin and fees to strategic, legal, and financial advisors.

As we look ahead into 2011, we're providing guidance that we expect to end the year with at least $125 million in cash and marketable securities. We believe that this capital should provide us with cash runway through 2012 based on our updated operating plans, which includes an accelerated and expanded clinical development plan for tivozanib in breast and colorectal cancers as well as continued advancement of ficlatuzumab and the rest of our oncology pipeline.

In conclusion, we're proud of the success we achieved during our first year as a public company and believe we have an exciting path forward. We have two late-stage differentiated assets, a robust pipeline of antibodies, and significant commercial rights to our entire oncology portfolio. We believe that we are executing the right strategy to achieve our long-term corporate goals. And we look forward to updating on our progress throughout the year.

And with that, I'll pass the call back to the operator for questions.

Thank you. (Operator Instructions). Your first question comes from the line of Geoff Meacham of JPMorgan.

Hey, guys. Congrats on the deal.

Hey, Geoff.

Hi, Geoff.

Hey, so a couple questions here, one is that you mentioned in the release with the Astellas partnership that you'll have enough capital through 2012. Any idea, sort of a rough idea about the number of Phase IIs or IIIs that that encompasses and maybe the size of those?

Yes, we're -- Geoff, this is Elan. As we said, we're -- the next two indications beyond RCC will be colorectal and breast. We're not at this point disclosing either the specific number or size of trials or the design of those trials. And that's really for competitive reasons.

I gotcha. And then anymore thoughts to other kind of smaller orphan indications. Are those still potentially in the cards? Or do you think that you'll switch priorities beyond colon and breast for TIVO to AV-299?

We're definitely looking together with Astellas at additional opportunities for tivozanib. We think there are, based on the mechanism of the drug as well as its performance in the clinic to date, that there are still plenty of other places to go with it. And so while we're not disclosing those specifics, those absolutely are on the table and being discussed between the parties.

Gotcha. Okay. Thanks. And congrats, again.

Thank you.

Thank you.

Thanks, Geoff.

Your next question comes from the line of George Farmer of Canaccord.

Hi, extending my congratulations as well. It's a great deal. Can you talk about any interest in hepatocellular that Astellas might have? I mean, in the past, you have said that you didn't want to develop tivozanib there necessarily and that all those responsibilities may be up to Kirin. Does Astellas have any interest in HCC in Europe?

George, unfortunately, we really -- we can't comment on that.

Okay. And I guess after this deal you have a lot of cash upfront and potentially more coming. That gives you a lot of dry powder to maybe do other things. Have you thought about in-licensing any other compounds? Or you think you're just going to stick to growing organically for now?

Yes, George, Dave here. Keep in mind that this deal is focused around tivozanib and funding the further development, expansion, and acceleration of the tivozanib product line. So beyond that, that would be a totally separate conversation, totally different funding, and is actually not related to this partnership at all.

Okay.

George, it's Tuan.

Yes.

I'd like to add a couple more points, number one, that beyond expanding and accelerating the development of tivozanib, we are also starting to further solidify the pre-commercialization investment that we started last year and to make sure that we ensure the successful commercial launch of the product. So that's always job number two after we get the product approved.

Beyond that, I think that we have -- we are very blessed with a rich pipeline. We are very excited about ficlatuzumab. We have rich antibodies behind that. It doesn't mean that we don't look outside from time to time. But I feel very good that we do have the engine for sustainable growth.

Great. And one more question quickly, David, did you say after this initial upfront you'll have net $96 million after a payment to Kirin? Did I hear that correctly?

That's correct. It's after the payment to Kirin and advisory fees, financial fees, and legal fees.

Okay. Thanks very much. Congratulations again.

Thanks, George.

Bye, George.

Your next question comes from the line of Jason Kantor of RBC Capital Markets.

Hi, it's [Odman But] on Jason's behalf. Congrats on a very nice deal as well. First question, are you able to tighten up the timing of the expected Phase III data at all? Or is that the tightening expected sometime in the second quarter?

Yes, exactly what you said, we look periodically at this. This is an event-driven trial. We need 310. It's still early. And we expect to have better visibility into the projected timing for the 310 events in the second quarter.

Okay. And secondly, in terms of filing an NDA, assuming positive data, when might you file an NDA? And should we assume that the next milestone payments are kind of equally distributed between US and EU filings, expect [into those] then approvals?

So I think all we're saying at this point with regard to NDA filing is that, with the expected timing for data, it would -- although preparation for NDA will begin in 2011, the actual filing will be a 2012 event. And in terms of the milestones, the approval milestones, we're not breaking those out between filing and approval or the territories, between US and EU.

Okay. Last question, and then I'll get back in queue. Will AVEO be leading the NDA process in the US? And in terms of sales, how many salespeople do you expect from the AVEO side and the Astellas side in the US? And I'll jump back in queue. Thanks.

Okay. Yes, so AVEO will be leading the NDA filing process in the US. We will be the NDA holders. We'll be booking sales. The actual split on the sales reps, we don't have a final number on the overall size of the sales force. But the split will be 50-50 between AVEO and Astellas. And I'll just note that with the acquisition of OSI, Astellas has, of course, a very experienced and talented sales force in oncology, lots of expertise here. So we're very excited to be leveraging our access to their capabilities.

Thanks. I'll get back in queue.

Your next question comes from the line of Ted Tenthoff of Piper Jaffray.

Great. Thank you very much. And congratulations on the deal. You guys just keep hitting it out of the park. Great.

Thanks, Ted.

A lot of detail here, just with ASCO GU coming up this weekend, can you just preview or highlight what you guys will be discussing down in Orlando?

Yes, I think, Ted, this is principally going to be data that we have previously presented at ASCO, what we would think of as encore data from what we have previously presented, different cuts on that same data, in particular histological subtypes, looking at the performance in the Phase II study in clear cell versus non-clear cell and the various subsets of non-clear sell.

Good. Excellent. Well, again, keep up the great work.

Thanks.

Thanks, Ted.

(Operator Instructions). You have a follow up from the line of Jason Kantor.

Hi, it's Odman, again, on Jason's behalf. Just a couple of questions, in terms of the $50 million that's for future development, is there a spending time allocated at this time as to how it may be spent and over what period?

And a second question was a bigger-picture question. In the comments, you mentioned that you didn't want to pick a partner that would impede the strategy going forward. Can you say a bit more about that? Thanks.

Sure. So just to be clear, the $50 million R&D funding, that is entirely separate from the 50-50 split of costs going forward. So that's not creditable against Astellas's obligations to share 50-50 all costs going forward.

With regard to the second question --

And not impediments, strategic flexibility for the Company going forward. I think that it's very important that in the governance, closes of this agreement, which we have agreed now with Astellas, there's nothing that would prevent us to build, continue to build independent company. And more specifically is that all our rights are fully assignable. Actually, our mutual rights are fully assignment in the event of change control.

Okay. And in terms of the pipeline candidate, are there any thoughts on keeping it in house, partnering it, any interest, anymore on that? Thanks.

So yes, so as Tuan mentioned earlier, we are very excited about the prospects for the next product in line, ficlatuzumab, our HGF/c-Met inhibitor. Recall that's in a first-line non-small cell lung cancer trial in Asia now, began last May, and is -- we expect to complete accrual this year. With this, we will take the approach as we have with our other assets over time.

We're looking to build long-term value for our shareholders. And we will entertain potentially partnership proposals that we think contribute to creation of value. But we're in an enviable position if not being forced to do something based on short-term cash needs.

Okay. Thanks.

Ladies and gentlemen, that concludes the Q&A session. I would now like to turn the call back over to Mr. Tuan Ha-Ngoc.

Yes, thank you, again, for your time this afternoon. 2010 was a transformational year with significant achievements. And we have taken a major step forward today for specifically for tivozanib with the announcement of our new partner Astellas. We look forward to continued momentum in 2011 with tivozanib, ficlatuzumab, and the rest of our promising oncology pipeline. Thank you for your continued support.

Ladies and gentlemen, that concludes the presentation. Thank you for your participation. You may now disconnect. Have a great day.