Brickell Biotech Inc (BBI) 2012 Q1 法說會逐字稿

Good day and welcome, ladies and gentlemen, to the Vical Incorporated financial results conference call. At this time I'd like to inform you that this conference is being recorded and that all participants are in a listen-only mode. At the request of the Company we will open the conference up for questions and answers from invited participants after the presentation.

I would now like to turn the conference over to Mr. Alan Engbring, Executive Director of Investor Relations. Please go ahead, sir.

Hello, everyone. Welcome to our first-quarter 2012 financial results conference call. Participating on the call today are Vical's President and Chief Executive Officer, Mr. Vijay Samant, and Vical's Chief Financial Officer, Ms. Jill Broadfoot.

I will begin with a brief notice concerning projections and forecasts. This call includes forward-looking statements, including financial expectations and projections of progress in our research and clinical development programs that are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Including the risks set forth in Vical's annual report on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission. As well as the specific risks and uncertainties noted in Vical's news release on first-quarter 2012 financial results. These forward-looking statements represent the Company's judgments as of today. The Company disclaims, however, any intent or obligation to update these forward-looking statements.

Now I would like to introduce Vical's President and Chief Executive Officer, Mr. Vijay Samant.

Thank you, Alan, and thanks to all our participants for joining us on today's call. I will provide updates on each of our key development programs and share some insights that I hope will be helpful. We'll begin today with a review of our latest financial results by our CFO, Jill Broadfoot.

Jill?

Thank you, Vijay. I'm pleased to announce we had a very strong first quarter financially in 2012. We raised approximately $50 million in a follow-on offering at the beginning of the quarter. And we earned another $10 million with a milestone payment from Astellas at the end of the quarter for finalizing the general design of the TransVax Phase III trial. In addition, we recognized $1 million in contract service revenue related to our supply and services agreement with Astellas. We expect to continue receiving payments from Astellas under our supply and services agreement as we progress with the final preparations and conduct of the TransVax clinical trials.

Total revenues for the first quarter of 2012 were $11.5 million, compared with $600,000 in the first quarter of 2011. Total operating expenses for the first quarter of 2012 were $11.6 million, compared with $9.4 million for the first quarter of 2011, primarily due to a sublicense payment obligation related to the $10 million milestone payment from Astellas. Our net income in the first quarter of 2012 was $200,000 which rounds to $0.00 per share, compared with a net loss of $8.7 million or $0.12 per share in the first quarter of 2011.

We ended the first quarter of 2012 with cash and equivalents of $96 million. During the first quarter of 2012, we were pleased to be able to sell two of our three auction rate securities and book a gain of approximately $300,000. The cash for the Astellas milestone payment was received in April after quarter end, so our current cash position is even stronger. We believe we have sufficient capital to support our ongoing operations, our plan development activities, and our preparations for Allovectin commercialization.

With that I will now turn the call back to Vijay.

Thank you, Jill. I'll begin an update on our Phase III Allovectin program for patients with metastatic melanoma. Allovectin is our lead program. We are excited by our progress to date and approaching the trial completion. We believe we have designed an excellent trial to highlight the patient benefits of immunotherapy compared with chemotherapy. We believe we have selected the right set of patients to demonstrate the benefits of immunotherapy. Believe our trial execution and data collection are well managed. We have carefully designed the data adjudication process for the primary end point. We believe the trial is adequately powered to demonstrate statistical significance on both the primary and secondary endpoints. And finally, we expect to release the top line data from both the endpoints by the end of the year.

As a reminder, we enrolled 390 subjects starting in January of 2007, ending in February 2010. Our trial allowed up to two years of treatment. So the last patients enrolled could have received treatments until February of 2012 as long as they had stable disease or partial responses. Those last patients enrolled completed their final treatments in February and they completed their last post-treatment safety follow-up with us by the beginning of March. So the treatment stage of the trial is now complete. We're currently finishing the final data audits to verify that all the patient records are complete and correct. We expect to complete the data collection and the audit process for the primary efficacy end point response rate by the end of this month. That clears the path for completion of our independent end point assessment and adjudication process for our response rate end point.

This process has two distinct steps, radiology and oncology, and they are conducted sequentially. They are pretty comprehensive steps. For the radiology step, the goal is to agree on each patient's target lesion measurements based on the following process. Two radiologists independently review each scan and document each lesion measurement. If the measurements are not in agreement, a third radiologist reviews both the assessments and chooses the read from the one radiologist that in his judgment is the most accurate. This process is repeated for patient at each scan point so there's a significant amount of work. Now, remember, we have almost 390 patients. And that results in about several thousand scans. So this is a pretty labor-intensive process and takes a long time.

After the radiological evaluation is finalized, that data, along with physical measurements and photos of visible lesions, ultrasound imaging, patient medical histories, and other supporting document information is provided to three oncologists, who together conduct the final evaluation, with assistance, as required by the radiologist who was the adjudicator. Based on patient-by-patient analysis, they will carefully determine which subjects met the primary end point of clinical response rate at 24 weeks or more after randomization. With subjects with stable disease and with subjects progress through the course of the trial. Throughout this process, they remain blinded as to whether each subject was the treatment arm or the control arm.

This assessment and adjudication process is expected to take several months. It's a lot of logistics involved in terms of scheduling the radiologists and oncologists. These are very important experts in logistics. And bringing them together is not very easy. So that's why it's a time-intensive process besides the intensity of the scans that we have to look at. The results will remain blinded in a third-party database until we reach the trigger for secondary endpoint of survival.

Analysis of the database for secondary end point survival is relatively simpler. The key number for each patient is the time from randomization into the trial until death. For the survival end point we are tracking the overall number of death events for the trial but we are blinded by the number of events per study arm. The databases for two efficacy endpoints are separate and will be processed separately. The results will remain blinded until both are finished. We expect to announce the top-line results for both efficacy endpoints simultaneously by late 2012.

What else is going on with Allovectin-7? A number of things are going on, both in the manufacturing front and the commercial front. We are advancing our preparations for a BLA filing and potential commercial launch for Allovectin-7, was covered in our last quarterly call. Since then, we have reviewed chemistry, manufacturing, and controls for Allovectin-7 in the pre-BLA CMC meeting with the FDA. The objective of this meeting was to confirm the acceptability of our plans for transition to commercial production. And we are pleased with the outcome. So all aspects of the Allovectin program are advancing well. We are excited with both the progress and the potential.

As you all know, immunotherapy for melanoma is now part of the standard care of advanced melanoma treatment as a result of two recently-approved drugs. You also recall the positive pre-clinical data we announced last year, demonstrating synergy, using combination of Allovectin-7 and an anti-CTLA-4 antibody. We look forward to building on this recent progress. Again, just to remind everybody, we expect to announce the top-line results for both response rate and survival endpoints by late 2012. If the results are positive, we look forward to offering a safe and effective new treatment option for melanoma patients.

With that now I'll move on to our CMV program. TransVax or therapeutic vaccines designed to control CMV infection or reactivation in transplant patients. Since licensing this program to Astellas last summer, we've been working together to design a multi-national pivotal Phase III trial for TransVax for recipient of stem cell transplant. Our agreement with Astellas was recognized recently at the vaccine industry excellence awards as one of the best licensing deals of the past year, and the collaboration continues to work well.

Late in the first quarter, we and Astellas were able to finalize the general design of this trial which triggered the $10 million milestone payment to Vical that Jill discussed earlier. Based on guidance from the FDA and EMA, we have confirmed that CMV disease will not be the primary endpoint of the Phase III trial. We initially took the lead role in the collaboration for continuity in our interactions with the Agency, FDA. Once we agreed on the trial design, we have now transferred the IND to Astellas who will be leading the Agency interaction, along with the rest of the program. We're now working with Astellas to complete the trial protocol and will then become a supplier to Astellas in support of the TransVax program. Under our services and supply agreement, Vical will manufacture TransVax for Astellas through clinical development and commercial launch. We expect Astellas to initiate the Phase III trial of TransVax for stem cell transplant recipients in the second half of 2012 and to initiate a Phase II efficacy trial of TransVax for solid organ transplant recipients shortly thereafter.

With that I'll move to our herpes simplex program. This is a key development program in the Vical pipeline. Our Vaxfectin formulated vaccine against HSV-2 generated some very strong data for this target in mice and guinea pigs. We announced in our last quarterly call that we are advancing this therapeutic vaccine into the clinic. We believe a relatively small Phase I/II study could be conducted in HSV-2 positive and symptomatic volunteers. This is a large and a very motivated population. So we expect to be able to recruit the study very quickly and also get results very rapidly. We are completing all the requirements to support an IND application. And we expect to be ready to initiate a Phase I/II trial in 2013.

In summary, we've secured financial resources to support our planned development, at least through the next year or more. Allowing us to focus on continued progress of our independent and partners program for the remainder of 2012. In our Phase III trial of Allovectin, we expect to release top-line data, both for primary and secondary efficacy endpoints in late 2012. In our collaborative TransVax CMV vaccine program, Astellas expects to initiate a Phase III trial in stem cell transplant recipients in the second half of 2012. And to initiate a Phase II trial in solid organ transplant recipients shortly thereafter. In our independent program for the development of vaccine for herpes simplex 2, we expect to advance through the remaining pre-clinical requirements to allow initial human testing in 2013.

This concludes my prepared statements. Operator, we're now ready to open the call to questions from our invited participants, thank you.

(Operator Instructions) Eric Schmidt with Cowen & Co.

Vijay, on Allovectin, it sounds like you're spending a considerable amount of time and money to adjudicate the primary endpoint response rate, which seemingly is less relevant to the regulatory agencies these days. I'm wondering two things. One, have you had any discussions with the FDA about simply changing the primary endpoint to overall survival? And, two, does it actually make sense to spend the money to adjudicate the response rate data when it seems like the FDA is going to focus more on survival?

We have to spend money on adjudicating the data because, remember, our SPA is still valid with the Agency. And in that SPA, response rate is the primary endpoint. And if we don't adjudicate, we'll be in violation of the SPA. The Agency has told us to stick with the current statute of the SPA, and that's why we're sticking with the statute of the SPA. Having said that, you're absolutely right. Given the fact that the landscape has changed with the approval of two drugs in survival, survival is going to be an equally important endpoint. So we are hitting on both fronts. And we need to make sure that we follow the statutes of the SPA, but at the same time we're going to have to demonstrate survival advantage of the study.

Thank you.

Ren Benjamin, Rodman.

Congratulations on the progress. Just getting back to Allovectin-7, Vijay, am I assuming correctly that the database lock will actually occur only after all the adjudication processes are done by both the Radiologists and Oncologist's? Or does that happen before?

The final database lock will occur after all the adjudication is complete. Then we have the ability to go and analyze it. Remember, that whole adjudication process, just to remind everybody, is blinded to the oncologist's. So they don't have a real idea of what's going on in terms of which arm is performing where. All they're doing in that adjudication process, after the radiology component is done, and the oncology component is done, is they're identifying patients or responders who have stable disease and the patients who are progressor's. And once the database is locked and it's sealed, we then have the ability to run a SaaS program on it and actually count for both arms what the response rates are.

Okay, but just so I'm understanding it correctly, all this data, the adjudicated data, will be put into a third person database. You will not run that program until the survival results are in, as well.

Absolutely. They are done all at third party. We have no access to that. We don't participate in the adjudication process. We participate in the training leading to the adjudication process, but we do not participate in the adjudication process. Once the adjudication process starts we are out of there and we have no knowledge of what's going on. Until the database is locked and we take possession of it. And we don't intend to take possession of it until we meet the other database completion requirements, which is the survivor database.

Okay. And in the prepared remarks you mentioned that the top-line data should be out in the fourth quarter of '12, which is what you said in the previous call, as well. Have you had any further thoughts or discussions regarding stopping the trial even before, let's say, the events are out? And the reason why I ask is you must have some sort of a decent idea as to how these patients are doing, given the previous Phase II trial with Allovectin-7 and the fact that it's the same patient population. Have you done any sort of analysis like this and gotten a sense as to where you might be?

We obviously do a lot of analysis because this is our bread and butter. We sleep and eat it and we are working on it all the time. So the answer is yes, we have done. But I think we also have to be careful. This is one single trial that we are conducting. It's a relatively small trial, a 400-patient study as opposed to a 700-patient study. We really need to hit a home run on the survival front.

So any attempt to try to uncover the trial sooner and missing the endpoint by a very short margin would be foolhardy at this stage. And as I told you, we're not going to un-blind the data until we get the adjudication complete. And I don't think we are nowhere to completing the adjudication. So we have time to make that decision. But I don't see any reason why we would un-blind the data sooner than what we have told you previously.

Just related to that, in the previous Phase II trial, and the fact that you mentioned you're doing multiple analysis, could you give us a sense, just remind us, how the control patients did from a survival point of view?

Your question is in our current Phase III study? Remember, the Phase II study didn't have a control arm. It was an open label study. But our assumption is currently in the control arm for this study's 11-month estimate, which is useful for our calculations. And this was based on historical publications. And remember, we are using some healthy patients and that 11 months takes into account the healthy patients. We have looked at that number very carefully and done a thorough analysis of all relevant dacarbazine publications.

And although, as you know, there are no trials that exactly mimic this patient population for dacarbazine in the last 20 years, our best estimates come from the detailed analysis also of our own Phase III study. We had conducted a low-dose Phase III Allovectin versus dacarbazine study. So we have a lot of our own data where we are able to look at prospective patient population in the current Phase III study. And that data provides further support to our trial assumptions right now. So very comfortable.

Of course, you need to understand that with the recent approval of these two new immuno therapy treatments, it may impact both the control arm and treatment arm. But that impact on the treatment and control arm should be no less for Allovectin than the control arm. If anything, it should be better for Allovectin if there is indeed synergies between Allovectin-7 and CT MLS. So we remain confident that our studies are adequately powered to achieve the end point.

Just a question on the TransVax. You've finalized the trial design. Can you talk to us a little bit about what the final trial design will look like?

I think we are in the close of discussions with the Agency right now. And I don't want to upset our partner in terms of revealing where the trial design is. But Astellas is such a savvy company, understands the transplant space very well. Has put a lot of effort behind it, has engaged an expert panel to help them out. I think the trial design will be pretty comprehensive. Obviously there have more sources to the trial site that they are planning slightly larger than what we originally planned for. But I think it's all progressing very well.

Okay. And then just given the recognition you got with the TransVax deal, any thoughts regarding CyMVectin and moving that forward?

The answer to that question is yes. I think we are still awaiting -- remember the FDA conducted a workshop earlier this year on CyMVectin, and that position paper from the Agency on what the surrogate endpoints has not come out yet. Once that position paper comes out, I think it will bring clarity to what proof-of-concept studies need to be conducted for CyMVectin. And that will hopefully accelerate our partnering discussions. Right now there's ambiguity to what's required. But that workshop was extremely helpful because all of the four big pharma companies were there, including the key opinion leaders. And as soon as that position paper comes out we should be in much better shape.

Do you have a sense as to when that position paper may come out?

I think in the next few months.

Okay, great. Thank you very much and good luck.

Lee Kalowski with Credit Suisse.

One question I have is on overall survival. Since you gave us the update, what have you been seeing in the event rates since, that gives you the confidence that we're still looking at a late 2012 release? And then in terms of the statistical power, just to be clear, if we move to the lower end of the published range on the Allovectin and the upper end of the comparator arm, you still think that there will be enough power for significance?

First question is what gives you the confidence that we will reach the event rate that we have pre-specified, which we haven't described to you what it is, by year-end. The answer is, we look at -- Jill, myself and our senior team -- look at the data on a rolling four-month average basis. We have an idea of what the slope of the event rate that's occurring. And based on that we feel fairly confident right now that we will reach the event rate by year-end. Unless something happens remarkable in the next two months and nobody dies. But that's unlikely to happen. So right now we're targeting towards it.

Also, you need to understand that though we have targeted some event rate, if we reach a complete plateau, then we reach basically a point of diminishing returns anticipating for additional event rates. So I think we're fairly confident that year-end 2012 should be a reasonable time frame. Now, obviously we have done a variety of analysis in terms of assuming the control arm living longer, or the treatment arm living lower. And we feel pretty confident that, indeed, the study has adequate power to meet the endpoints. But let me remind you on the Allovectin-7 treatment arm, the assumption there is 18 months. And that's a pretty dam conservative assumption.

If you just take, in the Phase II study, the chemo-naive patients that we had, that number is 22.5 months. But now you add to the fact that the modifications that we have done in that Phase III study. And the modifications of the Phase III study are that we have modified the resist criteria. So patients are going to get -- more patients -- remember, our dropout rate in the Phase II study was almost 70% -- or 62%. Right, Alan? 62% dropout rate. We modified the resist criteria so the docs can keep the patient for at least two cycles, even when a new lesion shows up. So more patients will be getting Allovectin-7 in that Phase III study. So we expect that number 22.5 months to even be better. We have looked at both the upper bounds of the Allovectin arm, the upper bounds of the treatment arm, the lower bounds of the Allovectin arm, and the lower bounds of treatment arm. And within bounds of our thought process we think the study is adequately powered.

Okay, that makes sense. Then shifting gears a little bit, I don't know if you saw Amgen's announcement a week or two ago that [KeyVec] data is not going to be coming out late this year. I don't know if you have any thoughts on that?

No, we have no thoughts on that. We don't know what their recruitment criteria is, what the trial recruitment characteristics were, or why the deal has been. I know they've made some modifications to the trial so I can't comment on it. But I'll tell you, if you look at our program versus that program, how the delivery is done, how the agent is stored, I think there are significant advantages, both mechanistically towards what we have done versus that program.

Okay, thanks guys, appreciate it.

(Operator Instructions) Stephen Willey at Stifel Nicolaus.

Quick one on TransVax. I know that you had conversations with the FDA and got feedback on CMV disease not being an applicable endpoint in the stem cell transplant but I'm wondering--.

Do you think that's good?

What's that?

You think that's good, right?

I do think that's good, yes.

Thank you.

But with respect to with any feedback that you may have gotten regarding the FDA's stance on CMV disease in the solid organ setting, anything you can provide there at all?

No, I think that's still under discussion. The trial paradigm for solid organ is completely different from the stem cell. Energy right now is more on the stem cell. The study that we're going to do in solid organ is Phase II, not Phase III. So there will be a couple of exploratory endpoints in that Phase II study, which will allow us to do a thorough Phase III study. So the answer is nothing is locked up on the Phase II design yet.

And then just is there anything embedded within the Q1 R&D number with respect to why it's optically a bit higher than what we had seen previously?

For research and development, there was nothing unusual other than the obligations that we had to sub-licenser's for the $10 million payment from Astellas.

Okay. Thank you.

Nathan Kelly with Noble Financial.

Congrats on the continued success from Vical. I just had a couple quick follow-up questions. With respect to Allovectin-7, can you just remind us what the difference in the patient population is from the Phase II compared to the Phase III study?

The Phase II study had chemo-naive bio refractory chemo-intolerant patients, chemo refractory patients. Whereas we found that majority of the respondents to the study, 11 out of the 15 respondents were chemo naive. So in the Phase III study we have gone only to chemo-naive patients, which are really patients with healthier immune systems, and intact immune systems. That's really the key difference between both groups. And, of course, we are using normal LDH, which was also in the Phase II study, and it repeats in the Phase III study. So we're going on healthier patients, which are chemo-naive and intact immune system. LDH, stage 3/4 melanoma, and stage 1b. No liver mass, no-brain mass. And the key thing is the modified resist criteria, which I mentioned earlier is the key one. Where, in the Phase II study as soon as a new lesion showed up, in a normal resist criteria, the patient had to be taken off the study.

In the Phase III study they have modified the resist criteria in agreement with the Agency so that the doctor can keep the patient on the study as long as the patient, the doctors believe the patient was benefiting from the treatment. So up to 16 weeks, when new lesion shows up, they will continue with treatment. And that should help because more Allovectin gets injected in the patients, we believe it will have impact on survival.

Thanks a lot.

There are no more questions. Thank you, everybody, for joining on this call and we look forward to seeing you again in the near future. Thank you.

Ladies and gentlemen, that concludes our conference today. You may now disconnect.