Aveo Pharmaceuticals Inc (AVEO) 2011 Q1 法說會逐字稿

Thank you for holding for AVEO Pharmaceuticals First Quarter 2011 Financial Results Conference Call. At this time, all participants are in a listen only mode. Following the formal report, AVEO management will open the line 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, Associate Director of Investor Relations. You may proceed.

Thank you, Grace-Ann, and good morning everyone. Thank you for joining us on the call today. With me are Tuan Ha-Ngoc, our President and Chief Executive Officer and David Johnston, Chief Financial Officer. Earlier this morning, we issued our press release detailing our first quarter 2011 financial results, which are available on our website at aveopharma.com.

Please note that all information discussed on the cal today is covered under the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995. During the call today, we will be making forward-looking statements that involve risks and uncertainties, 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.

These risk and uncertainties are described in the Risk Factor Section of Aveo's most recent annual report on Form 10-K filed with the SEC and available online at sec.gov. All of the information in this conference call is accurate as of today, April 28, 2011, and should not be relied upon as representing AVEO's views on any date in the future. While Aveo may choose to update these forward-looking statements in the future, we disclaim any obligation to do so. With that, let me turn the call over to Tuan.

Thank you, Monique. And thank all of you for joining us this morning. We have had a very productive first quarter led by our collaboration with Astellas which we announced in February to co-develop and co-commercialize tivozanib outside of Asia. I am pleased to report that this collaboration is off to a strong start. We have had multiple team meetings to initiate our joint activities according to the agreed-upon joint enrollment plan our clinical development and commercial planning efforts are underway.

This collaboration is an important milestone for Aveo. We believe the structure of the agreement is aligned with our overall company building strategy and provides us with a framework for developing enough American infrastructure while also participating in a significant market of opportunity in Europe, both important components as we prepare to commercialize not only tivozanib but our deep pipeline of assets.

As we look ahead, an important anticipated milestone is the top-line data from our pivotal Phase III trial for tivozanib called TIVO-1. This trial completed enrollment of 517 patients in August of last year. TIVO-1 is designed as a [superiority] trial comparing the efficacy and safety of tivozanib with those of Nexavar. The primary end point of the trial is progression free survival. As such, the timeline for the trial is entirely dependent upon the accumulation of qualifying events. We recently took a look into the status of the events in the trial and, based on the current event rate, we do not anticipate top-line results until the fourth quarter of this year at the earliest.

Data from several of our combination trials with tivozanib were highlighted in poster presentations earlier this year. Based on the data reported to date, tivozanib has demonstrated its ability to be combined other oral and IV standard treatment regimens with a promising safety and tolerability profile. We believe these properties of tivozanib have the potential to provide a compelling value proposition to patients and their oncologists, particularly in tumors outside of RCC.

Indeed we are on track to expand the development of tivozanib in breast and colorectal cancers independent of the TIVO-1 data as contemplated under the Astellas collaboration. We are confident in the potential of tivozanib in multiple indications and look forward to updating you on the next trials as they are initiated.

In advance of TIVO-1 data, we have begun our staged effort to build a commercial infrastructure. We have started adding to our medical affairs and marketing teams and are expanding our publications and presentations of data on tivozanib as well as on our other product candidates, including our second most advanced agent, ficlatuzamab.

Ficlatuzamab, formerly known as AV-299, continues to make progress since we regained worldwide rights to the product late last year. Ficlatuzamab is our first internally discovered monoclonal antibody which targets the HGF/c-Met pathway. This pathway is believed to address many cancers for which there are high unmet medical needs.

Data previously recorded from the pre-clinical and Phase I studies of ficlatuzamab demonstrate a well-tolerated profile and good combinability with HGF/r-inhibitors. We believe ficlatuzamab has great promise and are currently evaluating it as a first line therapy in a Phase II clinical trial in patients with non-small cell lung cancer. We expect to complete patient enrollment for this trial this year and data anticipated in early 2012.

Not only do we believe that ficlatuzamab represents by itself another viable product in our portfolio, it also serves as an example of the strength of our antibody pipeline and validation of our proprietary human response platform from which it was -- is covered.

Lastly, we continue to grow from the corporate perspective. We were very delighted to announce just recently that Henri Termeer has joined our Board of Directors. Henri is the outgoing Chairman, President and CEO of Genzyme and we believe his experience building Genzyme into a biotech leader and his significant commercial expertise will be invaluable, particularly as we prepare to bring tivozanib to market.

At the same time that we welcome Henri, we also wish to thank both Russell Hirsch and Doug Cole for their guidance over the last several years as they retire from our Board. We appreciate their many contributions to Aveo from the inception of the company for Russell and shortly thereafter for Doug. Now let me turn the call over to Dave for a recap of our financial results. Dave?

Thanks, Tuan and good morning, everyone. Since we issued a press release this morning outlining our first quarter 2011 results, I will just review the highlights. Total collaboration revenues for the first quarter were $133.6 million, compared with $10.9 million in the first quarter of 2010. This increase was primarily due to the revenue recognized in conjunction with our strategic collaboration with Astellas.

Based upon our sub-licensing agreement with Kyowa Hakka Kirin or KHK, we owe certain amounts to them on sales and revenues from tivozanib. As such, out of the $125 million upfront payment from Astellas, we retained net proceed of $97.6 million after payments to KHK as well as non-recurring payments to our strategic legal and financial advisers on the deal, the majority of which were made in the second quarter. Note that this net proceeds number has been slightly updated from the $96 million estimate we provided last quarter, as we were able to reduce some of the advisory fees associated with this transaction.

To help some of you with your financial models, let me review with you how our agreement with KHK is structured. We owe to KHK a tiered royalty of low to mid teens on sales booked by Aveo. In geographies where we don't book sales, we owe KHK a pre-specified percentage of certain sub-license revenue from Astellas which includes such things as royalties and milestones.

Now, moving back to our first quarter results, research and development expense for the first quarter of 2011 was $38 million, compared with $22.6 million for the first quarter of 2010. The increase resulted primarily from the percentage of sub-license revenue due to KHK from the upfront payment by Astellas as well as increase in clinical costs associated with ficlatuzamab which we are now fully responsible for developing. As a reminder, 50.0% of tivozanib development costs are now reimbursed under the cost-sharing provisions of our agreement with Astellas.

G&A expense for the quarter was $9.2 million compared with $2.8 million for the first quarter of 2010. The bulk of this increase was related to fees for our strategic legal and financial advisers associated with the collaboration agreement with Astellas as well as an increase in personnel-related expenses.

Lastly, net income for the quarter was $85.4 million resulting in basic and diluted earnings per share of $2.38 and $2.28, respectively. For modeling purposes, we currently do not anticipate incurring a tax liability for 2011. We entered 2011 with a strong balance sheet and we have maintained that position, ending the first quarter with $232.6 million in cash and marketable securities.

As a reminder, though, the sub-license payment owed to KHK and the bulk of the advisory fees were paid in the second quarter and are therefore not in that balance. This capital position also reflects a $10.2 million payment made to Merck for the purpose of its ficlatuzamab inventory. Of this amount, $1.1 million was recognized as R&D expense in the first quarter of 2011 and the remainder is in pre-paid expenses on our balance sheet and are expected to be expensed in the second quarter.

Looking out to the rest of the year, we reiterate our financial guidance that we expected in 2011 with at least $125 million in cash and marketable securities and we expect that this cap] will provide us with the cash runway through 2012 based upon our current operating plans.

So we have the key fundamentals in place. We have a broad and deep portfolio of clinical and pre-clinical assets, as well as a solid financial position. We're excited about our future and look forward to updating you on our progress as the year continues. With that, let's open the call up for questions. Operator?

(Operator Instructions)

And your first question comes from the line of Geoff Meacham from JPMorgan.

Hey, guys, thanks for taking the question.

Good morning, Geoff.

Hey, a question for you on the TIVO-1 study. So obviously the PFS events on both arms have slowed. You guys previously talked about a mid-year unblinding of the data so have the events been lumpy particularly, or what other color can you give us just about the delay in the event.

Geoff, this is Tuan. Good morning. As you know, our event driven class such as TIVO-1. We would routinely monitor the event rates and we do look particularly into a study (inaudible) we just did that and at this point in time, the events in the trial that we have accumulated thus far is lower than we initially projected. And let me remind you that we are absolutely blinded in terms of which arm of the two that those events are coming from.

I guess the real question here is there any reason to think that your initial assumptions with respect to Nexavar, the comparator, are not correct?

As I mentioned, I think because we don't have his ability in terms of which arms will he be coming from. I don't think it's (inaudible - background noise) to expect it one way or the other.

Got you. Okay. Okay, guys, thanks.

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

Hi, good morning. Thanks for taking my questions. Have you guys taken any [interim] looks for futility or taken any statistical penalties on any looks with TIVO-1?

Good morning, George. This is Tuan. As we mentioned, we have not built in any interim look nor do we feel to have any interim look at this point in time so we will continue as our protocol dictates.

Okay. Great. And, David, can you kind of help us on the Q1 expense line, specifically with R&D. You mentioned that at one point $1.1 million was attributed to purchase of AV-299 framework. What's the rest of that? It's a big jump from previous quarter.

Yes, so most of that is the fees -- is the amounts that are owed to KHK as a -- as a -- as part of their revenue sharing agreement with Astellas. I mean -- so, in short, we recognized on the income statement the amount that we owed to KHK, from $125 million up front.

Okay, and that's recorded as an R&D expense.

R&D expense, right. Now, the thing is, once again, we had a pretty healthy cash balance and a cash balance does not reflect that payment because that payment was actually made in the second quarter.

You mean in the current quarter that we're in now?

Yes.

All right --

I mean, it's, it's already happened but it happened after the, you know, (inaudible - multiple speakers.

George Farmer. Okay, okay, great. And can you guys comment on the progress with the non-small cell trial in combination with gefitinib?

Yes, I mentioned in my remarks that this enrollment is ongoing and we anticipate a completion of that trial this year and are looking forward to the data in early 2012.

Okay. And I was struck by some data that was presented at AACR and I think previously presented elsewhere where you showed that -- and in preclinical models when you combined tivozanib with erlotanib. I think it was on cell lines that had the [EGFR] mutation that made -- conferred resistance to erlotanib to gefitijib that you could actually restore activity. It was a pretty interesting phenomenon. Have you thought about expounding on that further in the clinic? It seems like it would --

You meant the combination with --

Yes.

with -- ficlatuzamab, not with --

I though it was -- was it with ficlatuzamab or was it with tivozanib? A preclinical study.

I thought that the data presented was ficlatuzamab. We can go back and we can discuss offline after --

All right, we an just -- okay. In any event, I just thought that (inaudible - background noise) what that was worth exploring either the combinations in a resistant setting could be pretty easy to do and be an - expedited to approval of some sort?

Yes.

Have you thought about it along those lines, with either agent?

We are -- not only have we taken over the conduct of the trial, we, from Merck, we are looking at additional trials that would be shorter -- that would be shorter to proof of concept.

Okay, thanks very much.

Thank you.

Thanks, George.

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

Hey, thanks for taking the question. I have a couple, I guess. First of all, with this look at the event rates, was there also any kind of pre-planned safety look or can you speak to any data safety monitoring committee meetings that have either been held or any that that might be held between now and the final data?

Yes, there are pre-planned data safety board review of the safety data that -- there have been a couple ones (inaudible) ready -- there will be more to come, as I mentioned to you in a prior conversation that there is nothing remarkable that has come out of those reviews. And, again, the way -- the committee has privy on the data on the unblind basis we do not visibility on those unblinded data.

Great. And then with regard to the other studies that you're planning to start. I think the guidance is still the same: you plan to start these trials before the Phase III readout, but the Phase III readout's moved in time, so do you still plan to start those trials before, say, mid-year, which was your previous guidance or are you now saying that you're going to start them before the fourth quarter, which could imply some time after mid-year. If you'd give us a little more visibility on that, that would be helpful.

Yes, so as part of the agreement that we signed in mid-February with Astellas, there were specific trials that have been included with the approved budget -- corresponding approved budget. As soon as the collaboration got initiated, the teams are in active mode implementing those trials so right now we are actively enrolling the activities to pursue those settings. So at the time that we will -- at the time that we will initiate with the first patients, we will announce that. Now when we say that those trials will be initiated this year, we say that it will be independent -- meaning that we don't need to wait for the data on TIVO-1, because both Astrellas and us believe that there are tremendous opportunities to be pursued independent of the activity of tivozanib in RCC.

Okay, but, all right. I'll let that stand. Thank you very much.

Thanks, Jason.

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

Thank you very much. Is the only reason to push back the time around TIVO-1 the slower event rate? Just make sure it's not due to any additional time you might expect to collect data or conduct analysis. And also, to get an idea how much push back in a time line it is, can you tell us what did you mean by mid-year previously? Which month of the year were you talking about when you said mid-year?

Howard, good morning. This is Tuan. And with regards to the -- our remarks that the timing for the TIVO-1 data now is not going to happen in Q2 and Q3 and Q4 -- it will happen in Q4 at the earliest, this has nothing to do with any other things other than the fact that our observed event rate is slower than what we had projected. As to the explanation about -- the assumptions that we used behind our previous guidance and the timing -- time -- color around the guidance, I don't think that we would get into that level of specificity at that time or in the future.

Okay, great. And regarding the trial with 299, sorry, I'm not good with the new name yet, but the -- you mentioned the data early in 2012, can you talk about what type of data? Shall we expect whether it's on response rate only or will there also be data PFS or potentially even [oral] survival, and then I also have a question on the trial as to whether -- are you seeing the [wall] type patients staying on the trial? I think you're going to have roughly an equal split between wall type and HFR mutants, but the -- I -- according to [IPASS] these patients -- the wall type patients do better on chemo [uptake] than [arissa], which is the control in your arm -- in [this] trial.

Yes, on your first part of your question, we are looking to top line data in early 2012 for ficlatuzamab trial and that means that both looking at the overall response rate as well as PFS. As you know, (inaudible) will take longer to look at. On the question about the -- do we see any difference or any potential outcome with regard to one subset of patient population versus the other, we don't have a practice to give interim updates on any of our intermediate data on any of our trials whether that is ficlatuzamab or, for that matter, on TIVO-1 as well. And of course we will be looking --

No, I --

- at -- once we have the data, we'll make that top line data publication and then the full data set will be presented at the medical symposium.

I didn't ask about that data, sorry, it was just whether these patients -- are you getting -- are the wall type patients -- (inaudible) enrollment, are the wall type patients staying on the trial? I don't know if you can comment on that at all.

I don't think that we can comment on -- that's what I meant about the interim look into the data.

Okay, great, thank you.

(Operator instructions)

Your next question comes from the line of Chris Richard of [Marlee Nexus].

Hi, Tuan and David. Thanks for taking a big question. I have two questions. The first one on AV-299, I know there's going to be an [ASCO] poster on that Saturday on the arissa study. Is this an open label study? And without disclosing the contents of the poster, can we expect to see anything more than just safety there or?

Yes, I think that, again, and thank you for acknowledging the embargo rules of ASCO, what we can say is the data from our Phase 1 date, safety.

Okay, safety. And, okay, that actually answers, all right, the second question. Thank you, Tuan.

Thank you.

And you have no further questions. I will now turn the call back over to Mr. Tuan Ha-Ngoc for closing remarks.

Thank you, operator. On a final note today, I look forward to our first annual shareholders meeting which will be held on Wednesday, June 1 at 10.00 a.m. Eastern time. The proposals and recommendations of the Board are to be found on our website. We encourage all of our shareholders to register and express their opinions and if you have any questions about any of the proxies, please do not hesitate to let us know.

In conclusion, we at Aveo believe we continue to make progress on our mission to discover, develop and commercialize new medicines that better the lives of patients with cancer. We are focused not only on building our business for today but also laying the foundation for success for tomorrow. Thank you again very much for your continued support.

Thank you for your participation in today's conference. This concludes the presentation, and you may now disconnect.