Crescent Biopharma Inc (CBIO) 2011 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the third quarter 2011 Targacept earnings conference call. At this time, all participants are in listen-only mode. Later we will conduct a question-and-answer session. (OPERATOR INSTRUCTIONS)

I would now like to turn the conference over to your host for today, Mr. Alan Musso, Chief Financial Officer. Please proceed, sir.

Thank you, Jeremy, and good afternoon, everyone. Don deBethizy, Targacept's President and CEO; and Dr. Geoffrey Dunbar, Targacept's Senior Vice President Clinical Development and Regulatory Affairs and Chief Medical Officer, are also with me today.

Before we get started, I'd like to remind you that our comments today may include forward-looking statements made under the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to future events, plans, expectations, objectives or financial results or condition, including for any of our product candidates, the design, scope or other details of clinical trials, the timing for initiation or completion of or reporting of results from clinical trials, or for submission or approval of regulatory filings, target indications or commercial opportunities, as well as any payments we may receive from AstraZeneca, our cash runway, revenues or expenses or any other matter that is not a historical fact.

Actual results may differ materially from those expressed or implied by any forward-looking statement as a result of many factors, including those described under the heading Forward-Looking Statements in our press release from earlier today, or under the heading Risk Factors in our most recent Form 10-K or in later filings with the SEC. We caution you not to place undue reliance on any forward-looking statement. Also, any forward-looking statement that we make speaks only as of today and should not be relied upon as representing our views as of any future date. We disclaim any obligation to update any forward-looking statement, except as required by applicable law.

And now I'll take just a few minutes to review our financial results for the third quarter of 2011, which we released earlier today; then I'll turn the call over to Don for some remarks.

For the third quarter of 2011 we had a net loss of $9.1 million, compared to net income of $2.5 million for the third quarter of 2010. The change is due principally to higher research and development expenses for the 2011 period, which was driven largely by increased activity in the Phase 3 program for TC-5214, and a decrease in the recognition of deferred revenues from payments previously received from AstraZeneca and GlaxoSmithKline. Year to date, we had net income of $1.3 million compared to $13.1 million for the corresponding 2010 period, with the decrease due primarily to increased R&D expenses.

We ended the third quarter with over $270 million in cash and investments and marketable securities. Based on our current operating plans, we now expect that our cash, cash equivalents and investments balance at the end of 2011 will be at least $240 million. We continue to expect that our current cash resources will be sufficient to meet our operating requirements through at least the end of 2014, exclusive of any milestones or royalties that we could receive under our AstraZeneca collaborations. We are not making any adjustment to our previously announced guidance for expected net operating revenues or expected operating expenses for 2011.

And with that, I'll turn the call over to Don.

Thanks, Alan, and good afternoon, everyone. Let me dive in by providing an update on the TC-5214 RENAISSANCE Program. If you saw our release today, you know that we and AstraZeneca expect to report top-line results this month from RENAISSANCE 3, a flexible-dose, Phase 3 study conducted in Europe with 5214 as an adjunct treatment for patients with major depressive disorder who do not respond adequately to initial antidepressant therapy.

We recognize that this first Phase 3 readout is of great interest to many. As we approach these results, it is important to remember that REN-3 is just the first of four separate Phase 3 efficacy studies in the RENAISSANCE Program for 5214. We will continue to focus on the RENAISSANCE Program as a whole, as we expect the regulators will, and we anticipate results from the remaining RENAISSANCE trials to report out through the first half of 2012.

With the strength of our Phase 2b results with 5214, our enthusiasm for what could potentially be the first new mechanism for treating depression in decades remains unwavering. Bringing forward a new mechanism that holds potential to help millions of depressed patients, for whom existing treatments are inadequate, is a tremendously motivating proposition.

Before I move on, I'd like to acknowledge the work of the teams from Targacept, AstraZeneca and Quintiles in remaining focused on quality execution of a global Phase 3 program against aggressive timelines. Thanks to those collective efforts, enrollment is complete in each of the RENAISSANCE studies, and we continue to expect an NDA filing for 5214 with the FDA as planned in the second half of 2012.

Now, as much as I understand the importance of 5214 to Targacept, and as passionate as I am about the RENAISSANCE Program, we've worked very hard so that Targacept is much more than just one compound or one program. Our talented and committed team has built a portfolio of promising NNR therapeutics, aimed at addressing large, unmet medical needs in several different nervous system diseases and disorders.

As we mentioned in our release today, we expect to initiate two separate clinical trials with TC-5619 by yearend or early next year. 5619, a highly selective alpha7 modulator, showed encouraging findings on both negative symptoms and aspects of cognitive dysfunction in a previous Phase 2 trial in patients with schizophrenia. These domains of the disease, which are estimated to affect approximately 80% of schizophrenics, or nearly 4 million people in the world's seven major pharmaceutical markets, remain largely untreated with currently approved medications.

We are completing preparations for a Phase 2b study designed to build upon our prior data and further investigate the potential of 5619 to help restore independence to this patient population and address a huge unmet need.

The second study we plan to initiate for 5619 is a Phase 2 study in adults with inattentive predominant ADHD. Our decision to pursue further development in this area follows additional analyses from the full dataset from our Phase 2 trial in adults with ADHD that revealed encouraging efficacy signals in subjects with inattentive predominant ADHD on several measures, including the CAARS-S Investigator-Rated ADHD Symptoms total score, an inattentive subscale score and the CAARS-S Subject-Rated ADHD Index.

As background, the DSM-IV segregates ADHD into inattention predominant, hyperactivity predominant or the two combined, with the inattentive predominant type estimated by decision resources to be the most prevalent. Positive trial outcomes in inattentive predominant patients could differentiate 5619 for a population that may not be well served by available treatment options. Our planned study is expected to enroll approximately 80 adult subjects, include a four-week dosing duration and generate results in the second half of 2012.

Now, moving on, we are pleased last month to announce our initiation of a Phase 2b study of AZD3480, an alpha4beta 2 NNR modulator in Alzheimer's disease, an area where new treatment options are critically needed. Although we are conducting this study, 3480 remains licensed to AstraZeneca under our cognitive disorders collaboration agreement, and much of the cost of the study will be offset by payments that we have received or expect to soon receive from AstraZeneca.

As you'll recall, the previous Alzheimer's results with this product candidate were inconclusive, but we are encouraged by the effects on cognition that 3480 has exhibited in several studies and are optimistic that a longer trial, head to head with Donepezil, will demonstrate the beneficial effects of this drug candidate in Alzheimer's disease.

Now I'll turn to TC-6987, another internally developed Targacept compound in Phase 2. We are conducting two separate learning trials, one in asthma and one in Type 2 diabetes, which are designed to guide the selection of indications for later stage development. We now expect to complete both studies in the first half of next year.

And finally, I want to mention an upcoming event that highlights the enthusiasm for NNRs in the scientific community. Later this month, international thought leaders in the area of nicotinic research will convene at a satellite meeting to the annual meeting of the Society for Neuroscience that is focused specifically on NNRs, where Targacept scientists will join their peers to present the latest developments in the field. The satellite meeting will be taking place November 9 through November 11 in Washington, DC, and we are delighted to participate.

I'll close by saying this is an exciting time for Targacept, and the next few months, with the potential for transformation that they bring, will certainly be as well.

And with that, we'll open the call up to your questions.

(OPERATOR INSTRUCTIONS) Our first question comes from Bret Holley with Oppenheimer. Please proceed.

Yes, thanks for taking the question. I'm wondering at this point do you have any update on the extent to which you'll, I guess, be able to convey the information from RENAISSANCE 3 as far as the top-line data? Exactly what should we expect in the top-line release?

We have -- we don't have any further update. We're still in discussions with AstraZeneca, and as the data become available here in the month of November, we'll have better clarity. So there's no further update on that.

Okay. And then relative to the EXPLORER study, I'm wondering what AstraZeneca and your take is on the relative prevalence of adjunctive versus switch monotherapy in second-line depression at this point. I guess I was just trying to get an idea of how the market breaks down?

Well, I'll start with the answer, Bret. You know, when we first started this program and we were positioning this opportunity second line, it was prior to the advent of Abilify and Seroquel being approved and coming onto the market as augmentation treatments in major depressive disorder. So I think there's likely been a shift in the market that I'm not familiar with the actual data on. But with the STAR*D study that was published and which demonstrated that in a real-world setting of treatment that you could -- that you would -- could get better outcomes from a second-line augmentation rather than a switch, it's likely that physicians are shifting to augmentation. But Geoffrey, you may want to comment on that as well.

Yes, I think I would agree with you, Don. Historically, depression is treated in the domain of the general practitioners. And in that area, historically, I think switching has been more prevalent because they don't like the chance of increased adverse events in their patients. But as I say, as the science has moved on with the STAR*D results, I believe that that bias towards switching is changing, and the physicians are becoming more confident in the add-on approach.

Okay. Thank you very much. Good luck, guys.

Thanks, Bret.

Our next question comes from Robyn Karnauskas with Deutsche Bank. Please proceed.

Hi, guys. Thanks for taking my question. Now you got me all excited the data is coming out this month. And I guess I have two questions for you. I guess -- you know, where -- you talked about the process before, the data review process, you said the data's gone to the -- will go to a joint committee review and the stat team and then eventually go to your Management team. And I guess my first question is, you know, do you know where you are in that process? And will you, at some point, go into a quiet period as you get closer to the data? I guess that's my first question.

And the second question was on the timing of your 5619 dataset. I think you said now we could see data the second half of 2012, and I think previously you'd been talking about 2013. Maybe give us some sense of what are the key things that you have to execute on to make sure that we see data by the end of next year.

So I'll address the first question simply, Robyn, is we don't have any further guidance on that. We've worked very closely with our partner to round this disclosure around refining the guidance from fourth quarter to the month of November, and that's the extent of our guidance right now.

Now, in terms of 5619, we need to clarify the fact we have two studies. We have been discussing mostly the schizophrenia opportunity with investors and analysts, and we -- and that's where we had given guidance that we are expecting to get the trial started around the beginning of the year, and that we thought we could have top-line data out by the middle of 2013. The new disclosure here is the disclosure that we're doing an ADHD trial in the inattentive subtypes, and we believe that we should be able to get that trial started in a similar type timeframe, and we could have data in the second half of 2012.

So we're very excited about that. That was rather obvious in the dataset as we completed further analysis. And we're excited about being able to replicate that finding in ADHD patients.

And any update on the design of the CDS trial?

I think we've got -- Geoffrey, you may want to just comment on some of the top-line elements to the CDS trial.

Right. Well, the trial will be, obviously, a placebo-controlled trial. It will be similar to the first study, and that is it's augmentation, it's add-on. We -- in the first study, we had four-step titration. In this next trial we will be having fixed-dose parallel group design. And the -- another important feature of this study is that we will be treating patients for a longer period of time. The first study was for three months. The next trial will be for six months.

Okay, great. Thank you.

Thank you.

And our next question comes from Alan Carr with Needham & Company. Please proceed.

Hi. Thanks for taking my questions. I guess -- I've had to jump between calls. But can you clarify for me is the data from the schizophrenia trial, that's still mid-2013?

Yes.

Okay. And then where do things stand in terms of trials that are designed to support European approval?

As you -- as we've disclosed over a period of time, the European approval, we're doing a global program for US submission with 5214 in depression, and the European trials are staggered. They have -- the European regulators have somewhat different requirements, and we felt like it was important for us to get the results from the -- from these Phase 3 trials we're running and get clarity around dose, and then move on to planning that program. So we have the elements of that program. We've had interaction, and we'll be providing further guidance on that as the Phase 3 results come out.

Okay. And then around the 5619 trial that you're planning in ADHD, can you give an estimated cost for that?

I think we can give you a sort of a ballpark.

It's probably going to be -- yes, we're expecting it to be sort of in the $2 million to $3 million range. That's where we're thinking right now. As we disclosed, it's going to be a relatively small trial, about 80 patients and a four-week dosing duration. So that's likely to be where the cost comes in on it.

Did the decision to bring this one forward have anything to do with not bringing it forward in 3480 in ADHD?

No. It really just came out of the dataset. It came out from the outcomes from our Phase 2 trial in ADHD with 5619. It's pretty obvious that we have a signal in there on certain endpoints, and we want to make sure that -- and we also -- just coupled with the fact we had seen an attentional signal in Phase 1 in healthy normals. So the -- and then, of course, all the pre-clinical work we've done and the fact that we have cognitive activity in schizophrenic patients as well, it's pretty obvious that the compound has cognitive activity, and it seems obvious that it has attentional activity. And it's pretty robust attentional activity. If you look at it compared to sort of historical outcomes with similar endpoints, it's a pretty significant attentional effect. So we're -- we want to further describe that before we make more extensive investment in it for ADHD.

And I'm sorry if I missed this too, but what's the primary -- or I guess what are the key endpoints for this trial then?

Geoffrey?

The ADHD trial?

Yes.

It will be the CAARS-S Investigator Rating Scale.

Okay. Thank you.

Our next question comes from Jon LeCroy with MKM Partners. Please proceed.

Thanks. Can you hear me?

Yes.

Okay, great. Just a couple of questions on the depression trial. So have you guys said what you're powered to detect in terms of change in the MADRS?

Yes. We are -- we have powered the trials to be at a 90% power for a MADRS change of around 3.5 points.

Okay. And then on clinicaltrials.gov, it looks like for REN-3 they screened the last patients, I guess, in the original number on there. Was that just a safety number, like a high-end number? Is -- did that number mean anything?

Well, it's just when we started out with this, we had estimates of what the screening numbers needed to be. Those got posted to clintrials.gov early. And then in practice, we ended up with the -- a lower number than we originally anticipated.

Okay. And so it looks like, I don't know, about 37% of patients screened were then enrolled. [Does that sound] about right?

I haven't really looked at it that way. So --

Just like 288 out of 780, I think. Or at least your target I think was 288.

Yes, we -- our target is having 288 patients in the -- at the end of the trial that are evaluable. So if that's that calculation, then yes.

And does it -- can you infer anything from that number being either higher or lower the number of patients needed to screen?

No.

Okay. And then -- actually I guess that's it for me. Thanks.

Okay, Jon.

(OPERATOR INSTRUCTIONS) And our next question comes from Juan Sanchez with Ladenburg. Please proceed.

Good evening, guys. If the RENAISSANCE Program fails, what will be the main adjustments you will make to your operations next year?

Well --

I'm not talking about the first trial. You know, (inaudible).

We're not expecting RENAISSANCE to fail.

I'm not either.

I'm at this point now where I'm knocking on wood, so I just knocked on wood. But it's -- our plan is, as you know we built a pipeline of opportunities around these NNR therapeutics, and our guide has been the human experience for a variety of compounds that have been in the clinic. So we have a pretty good idea of where the receptors are working in the clinic. And then we're selecting compounds on their pharmacological profiles and optimizing them. So we will continue to invest in our clinical stage pipeline.

And as you know, historically, we've always been able to continue to support the preclinical activities that we've had through a mixture of grants, industry collaborations and Targacept investment. So we will -- you know, as we build the book of Targacept, we're not pulling any pages out of it from the early chapters. And so we're going to continue to do that. We will, of course -- once we see the outcomes, you know, in the first half of 2012 -- and remember, we need to see all of the outcomes to be able to make a judgment about whether 5214 has been successful or not.

And so we're going to continue to invest in our clinical stage pipeline, continue to move forward the promising earlier-stage compounds, mostly being, you know, some of the earlier work like in Parkinson's is supported by the Michael J. Fox Foundation. Our addiction work in smoking cessation is supported by the -- partially by the National Institute's Drug Abuse Grant that we have with Caltech. So we're going to continue to do that kind of work. And we'll, of course, in the first half of 2012, be reevaluating where we are. One thing we do know is change is coming to Targacept. We just don't know what form it's going to take at this point.

Okay. Thanks. One last thing. The switch monotherapy data is by the end of next year as well?

Yes. We're -- you know, all the -- I want to compliment AstraZeneca and Quintiles, again, working with our internal team. They've done an outstanding job of executing this Phase 3 program with the augmentation approach, so that we were able to apply all the techniques and things that we did to keep that on track and on an aggressive timeline. So those are all being applied to the switch trial now, and we're very optimistic about the timing and the outcome of that.

Perfect. Thank you, guys, and good luck.

Thanks, Juan.

And our next question comes from Brian Lian with GH Securities. Please proceed.

Hi. Thanks, guys, for taking the question. I guess just if RENAISSANCE 3 is in some way disappointing, can you just help us in how we should think about RENAISSANCE 4 and 5 and what are the differences in your confidence level flex dosing versus fixed dosing. And I guess a quick follow up on that is are -- is it possible for RENAISSANCE 4 and 5 to report simultaneously?

Well, you know, I don't know what all these outcomes are going to be, but our sense is is that the two flexible dose trials are smaller trials, so they're reading out earlier than the fixed-dose trials. We're -- we know that we'll need two trials positive out of the four to be able to get approval. And we're optimistic that out of that mix, we should get two positive, if not three or four. So we're -- based on our -- on the previous work that's been done with the racemate and now this enantiomer, we feel good about the prospects. As to whether a -- you know, the two trials we've run previously, one with the racemate and one with the enantiomer, both were flexible-dose designed, so we have the most experience with that.

I don't -- I haven't really, in my mind decided that one is going to be more likely to be successful or not, but it's just that where we have most of the experience. We haven't done fixed-dose trial design, but we're working in dose ranges that we have data to indicate that people -- depressed patients, randomized to 2 milligrams, for example, total daily dose for eight weeks, it's been efficacious. So, you know, we would expect that could be repeated or replicated in a fixed-dose trial where you have that dose exposed to people for eight weeks.

Great. Thanks. And then just with 4 and 5, is it possible we could see those two datasets at the same time?

I think it's too early to tell right now. I mean, we're on track. We've disclosed that the full program will read out in the first half of 2012. So we'll keep you posted as time progresses.

Thanks very much.

Thank you.

At this time there are no questions queued. I would like to hand it back to Mr. deBethizy.

Well, I want to thank everybody for joining us. This is a very exciting time for Targacept, AstraZeneca and our partner Quintiles as well. So I know the teams have been working very hard. We're all looking forward to the outcome on 5214. And I just want to remind everybody that we also continue to work very hard on moving our other programs forward. So thanks to everybody for being on the call today. Take care.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.