Avid Bioservices Inc (CDMO) 2012 Q1 法說會逐字稿

Welcome to the Peregrine Pharmaceuticals first quarter of fiscal year 2012 conference call. I would like to remind you that today's call is being recorded. (Operator Instructions) I would now like to turn the call over to Amy Figueroa.

Thanks, Javon. Good morning and thank you for joining us. On today's call, we have Steve King, President and CEO; Paul Lytle, CFO; Joe Shan, Vice President of Clinical & Regulatory Affairs; and Rob Garnick, Head of Regulatory Affairs. Steve will begin by providing an overview of our clinical progress over the last quarter and highlight our upcoming clinical data and regulatory meeting milestones. Joe and Rob will discuss our clinical and regulatory plans as we advance our 3 Phase II clinical programs and Paul will wrap up with the review of our financial results for the first quarter of fiscal year 2012 and our financing strategy. After our prepared remarks, we welcome your questions. Before we begin, we would like to remind you that during this call, we will be making forward-looking statements that are subject to risks and uncertainties, that may cause actual results to differ.

These forward-looking statements reflect our current views about future events and financial performance, and are identified by the use of terms and phrases such as believe, expect, plan, anticipate, on target and similar expressions identifying forward-looking statements. These risks include but are not limited to -- the risk factors detailed from time to time in our filings with the Securities and Exchange Commission; including, but not limited to -- the quarterly reports on Form 10-Q for the first quarter ended July 31, 2011, which will be filed later today, and our annual report on Form 10K for the fiscal year ended April 30, 2010 which was filed July 14, 2011. Investors should not rely on forward-looking statements, because they are subject to a variety of risks, uncertainties and other factors that could cause actual results to differ materially from our expectations. And we expressly do not undertake any duty to update forward-looking statements, whether as a result of new information, future events or otherwise. I will now turn the call over to Steve.

Thanks, Amy. I thank all of you for participating in today's quarterly conference call. This quarter we've had continued progress in advancing our clinical programs, building from important clinical data and regulatory meeting milestones later this year and throughout 2012. One of the key highlights this quarter was clinical data for our Phase II trials treating cancer patients with Bavituximab and Cotara. What is particularly encouraging we're seeing here at Peregrine is that each data point continues to provide positive signs of safety and activity, not only for each trial, but for the programs as a whole. Positive tumor response rates, progression-free survival and most recently, median overall survival. Taken together, these results are further convincing us that these are active developable drugs which have the potential to make a real difference in the lives of the patients we are treating.

Beginning with Bavituximab, we recently reported a very promising median overall survival data from our single-arm Phase IIA trials, 1 in front-line non-small cell lung cancer and 1 in locally advanced or meta static breast cancer. Joe will be reviewing specific details of these data later in the call but let me say that we are all excited to see that the promising early data from these trials have correlated nicely with the most recent survival data for our patients. It is worth noting that we continue to monitor survival from a third Phase IIA single-arm trial in which we treated advanced breast cancer patients with Bavituximab and a combination with carboplatin and paclitaxel. Earlier data from this trial were promising and we are pleased that the patients from the trial which was completed around the time of our other breast cancer study haven't yet reached median overall survival.

While breast cancer is very large yet fragmented clinical indication, these compelling data motivate us to look at ways to move forward with future Bavituximab trials for these patients. One of these trials is already under way as an IST. So far, 8 data points of the 9 data points from these three prior trials have been very encouraging with 1 data point still yet to be reported. Encouraging to say the least, our focus is now to advance our 4 ongoing randomized Phase II trials for Bavituximab in cancer and HCV while continuing to find ways to advance the multitude of potential indications for Bavituximab. Joe will discuss these important clinical developments later on our call. It's important to remember that PS-Targeting Technology Platform has many potential uses and that researchers continue to explore Bavituximab and our other PS-targeting antibody's therapeutic and diagnostic potential. And we look forward to pursuing the full potential of the technology, both internally and with our developmental partners.

Before turning the call over to Rob, I would like to quickly review our upcoming clinical data and regulatory milestones. We recently completed patient enrollment in our randomized Phase II trial for Bavituximab in front-line non-small lung cancer, keeping us on track to report interim data by the end of this year and top line response data from all patients in the first quarter of next year. Our second-line non-small lung cancer trial is expected to complete enrollment of 120 patients early in the fourth quarter, putting us on track for primary endpoint tumor response data unblinded in the first half of next year.

For our randomized Phase II pancreatic trial, we continue to enroll patients and expect data from that study again in 2012. And for our randomized Phase II HCV trial we are nearing completion enrollment with a 12-week EVR primary endpoint data expected by the end of this year or early next year. For Cotara, we continue to plan for a meeting with the FDA in the fourth quarter of this year where our goal is to walk away with a Phase III registrational trial design for this unique approach to treating brain cancer patients. With that, I will turn the call over to Rob. Rob?

Thanks, Steve. I would like to review our overall regulatory strategy before discussing our specific plans for Cotara. We believe both Bavituximab and Cotara are active drugs. We have developed a regulatory strategy to increase the probability of successfully making it through new development and regulatory process. Our strategy is really focused on addressing indications representing high unmet medical needs which offer a fast path to regulatory approval. Bavituximab is an antibody that has broad therapeutic potential. We are focusing on second-line non-small cell lung cancer as a first potentially approvable indication. Our ongoing Phase II trial is a randomized, double-blinded, placebo-controlled trial in 120 patients. It was designed to have all of hallmarks of a small registrational study that could be part of a registrational package of our data support Phase III development.

We are also conducting a front line non-small cell cancer trial which is designed to replicate and confirm the promising data from our prior Phase II single-arm trial. In addition to confirming the prior data in a randomized trial setting, the purpose of this open label trial is to use the interim data to help determine our investments which we would need to make shortly in preparing for future Phase III development. If the interim data are consistent with our prior positive data, we will certainly move ahead with Phase III trials and preparations. As we saw over the last couple of weeks with the most recently approved therapy for non-small cell lung cancer drugs can, in fact, receive accelerated approval based on objective response rate data generated from single-arm studies, and we are very eager to assess Bavituximab's potential in our ongoing trials.

Switching to Cotara, we are making progress preparing for an end of Phase II meeting with the FDA in the fourth quarter this year. A novel single administration approach to treating deadly recurrent GMB which has shown promising 8.8 months median overall survival really helps to stage for what we expect will be a productive meeting with the FDA. Our goal remains to determine the optimum registration path to support registration of Cotara. What do we intend to walk away with following this meeting? First, we need to negotiate a reasonably sized trial that we, or with a potential partner, are able to enroll within a 24-month period. We expect the trial will be multi-center and international with sites in both the US, Europe and India. Following this FDA meeting, we expect that this information will inform our development path and we will communicate this information as it transpires. I will now turn the call over to Joe.

Thanks, Rob. Now let me provide an update on the Bavituximab clinical program. First, I would like to say how encouraged we are to see the recent survival data coming out of our prior Bavituximab signal-seeking Phase II trials in lung and breast cancers. The promising initial data from those trials, that is the consistently positive tumor response and PFS results, supported that Bavituximab has anti-tumor activity and fuels our enthusiasm to advance the development of this compound. But the ultimate goal of developing new cancer treatments is to prolong patient survival. Now we are starting to see the promising overall survival and we are eager to confirm these prior results in the current randomized Phase II trials.

Before talking about our 4 ongoing randomized Phase II trials for Bavituximab, I would like to quickly summarize the most recent data reported from the single-arm Phase II studies. In the front line non-small cell lung cancer trial treating patients with Bavituximab in combination with carboplatin and paclitaxel, we recently reported a median survival of 12.4 months, which is 20% longer than the 10.3 months reported in patients treated with carboplatin and paclitaxel alone in a published study which we used as a historical benchmark. It is important to point out that data from this single-arm study, with the basis for ongoing randomized Phase II front-line lung cancer trial that recently completed patient enrollment.

And just a few weeks ago, we reached a median overall survival of 20.7 months from a second prior signal-seeking trial. This one in advanced breast cancer patients treated with Bavituximab and docetaxel. This is nearly twice the reported survival of 11.4 months for patients treated with docetaxel alone in a study cited in a docetaxel package insert. Now breast cancer is certainly a significant opportunity for an agent like Bavituximab and we have been asked what our development plans are in this indication in light of the survival data. For the near term, we have an ongoing investigator sponsored trial in HER2-negative meta static breast cancer patients.

In the future, we will continue to evaluate development options for breast cancer as our resources permit. We have 1 more prior signal-seeking Phase II trial which has not yet reached median overall survival. This trial treated front-line advanced breast cancer patients with Bavituximab in combination with carboplatin and paclitaxel. We're continuing to follow these patients and will report on survival when the median has been reached.

Turning to our 4 ongoing Company-sponsored trials, we recently completed enrollment of 86 patients in our randomized Phase II trials and front-line non-small cell lung cancer. This was an impotent milestone for this program as we can now shift our focus to data collection and analysis. We are trying to report interim data by the end of this year and estimate top line tumor response data from all 86 patients will be available in the first quarter of next year. Meanwhile, we will continue to monitor secondary endpoints, such as progression-free survival and overall survival. We are also getting closer to completing patient enrollment in our second-line non-small cell lung cancer trial which is a randomized, double-blinded, placebo-controlled trial in 120 patients. We are on track to complete enrollment early in the fourth quarter which should result in having unblinded data in the first half of next year. This trial currently has over 50 open clinical sites actively recruiting in treating patients and we are eager to assess the data once we are able to unblind.

Next, I would like to quickly provide an update on our 2 additional Company-sponsored trials. We are continuing to advance our randomized Phase II trial in pancreatic cancer. This is a very difficult to treat and lethal disease and it's challenging to identify and screen patients as their expected survival is unfortunately less than 6 months from time of diagnosis. We currently have about 15 actively enrolling sites and continue to add more sites in the US and internationally to complete enrollment of the 70 patients and report data next year. Shifting to the hepatitis C trial. We are on track to complete enrollment of 66 treatment naive genotype-1 patients in this randomized Phase II trial by the end of this month and report 12-week EVR data by the end of this year or early next year.

Before turning the call over to Paul, I would like to just reiterate how encouraged we are about the collective set of data from our earlier Bavituximab trials. And a total of 8 completed early phase trials comprising over 250 patients with cancer, and HCV, Bavituximab has consistently shown promising data, pointing to its broad therapeutic potential. With Bavituximab's unique target and mechanism of action, we are excited to be developing this first-in-class monoclonal antibody for the treatment of cancer and HCV. And we look forward to providing important data updates from our randomized Bavituximab Phase II trials starting towards the end of this year and into 2012. I would like to now turn the call over to Paul.

Thanks, Joe. Since our financial results for the first quarter of fiscal year 2012 can be found in our press release, I would like to spend the next few moments reviewing our financial goals and strategy. First, I would like to emphasize that we are closely managing our business, our cash position, and our sources of capital as we advance our later stage clinical programs. Our stated goal over the last several quarters has been to match our investments in research and development with the various sources of capital and we continue to hit the target.

During the quarter, we reported $5.4 million in contract manufacturing revenue from our wholly owned subsidiary, Avid. This represents one of our important sources of capital. This increase in revenue was primarily due to an increase in the number of manufacturing runs completed and shipped during the quarter. As we have seen in past quarters, it is normal for Avid's revenue to fluctuate from quarter to quarter based on the level and timing of services and most importantly, the timing of lot release. With the first quarter's increase revenue and Avid's expected services scheduled for the remainder of this fiscal year, we are increasing our revenue guidance for the fiscal year from $8.5 million to a range of $10 million to $12 million. While Avid's goal is to continue to drive the highest level of services to its third-party clients, having Avid's built-in manufacturing capabilities allow us to be prepared for potential later stage clinical trials and commercial launch of both Bavituximab and Cotara.

In addition to the revenues generated from Avid, we also look to the capital markets and although the overall market conditions over the last several months have not been favorable, we were able to raise $3.7 million during the quarter under our cost-effective and warrant-free financing vehicle called aftermarket or ATM program. Since the end of the quarter, we raised an additional $9 million in gross proceeds, including $7 million placed to 3 institutional investors in a warrant-free registered direct offering, further strengthening our balance sheet as we fund our investments in our advancing pipeline. Also, this transaction increased our institutional ownership from 20% to approximately 26% and we will continue to target new institutions as we approach our upcoming milestones.

We have just completed enrollment in the front-line lung cancer study and we are close to completing enrollment in the second-line lung cancer study. These enrollment goals set the stage for multiple clinical data points expected over the coming months. These are the inflection points that many investors and potential partners have been waiting for since we started the ongoing lung cancer studies mid-last year.

Before opening the call to questions, it's important to remind everyone that our later stage clinical assets, Bavituximab and Cotara, remain mostly unencumbered and represent another source of capital that we expect to help fund our development efforts. As we have randomized data for Bavituximab and a registration path for Cotara, we believe a great amount of value may be added to these 2 programs as they become Phase III-ready programs. We look forward to keeping you updated on our progress and we will now open the call up for your questions. Operator?

(Operator Instructions) Charles Duncan with JMP Securities.

Hi, this is Jason in for Charles. Thanks for taking the question. Congratulations on the good quarter progress. My question on the ongoing lung cancer trials, could you maybe talk a little bit about the details of the patient population there in terms of histology, smoking status, previous therapies for the second-line trial?

Sure. I think most of the information is available on clinicaltrials.gov. In short, the patients are non-small cell lung cancer patients which, with squamous cells histology is excluded and these are patients who have not received one-on-one prior therapy. Most therapies are allowed, of course, prior docetaxel will be excluded. Other than that, we don't have significant restrictions, for example, smoking status or other amutations of Bavituximab path way or a mechanism is not expected to be different.

Okay. So you are not focusing enrollment on a specific type of smoking status that you're looking for as general -- or representative of the population?

Correct.

Thanks for taking the question.

(Operator Instructions) George Zavoico with MLV.

Hi, everyone. Congratulations on a really good quarter. Nice to see the Avid revenues ramping up again. I know it's not always a steady ramp-up, but nice to see the dips be somewhat transient. My question revolves more about I think what is going on this weekend or over this weekend, you have got some posters at an imaging conference, and this is something that your associates, Phil Thorpe, talked about the AACR or [ASCO] this year. It seems to be that this technology or this application of your PS-targeting antibody is progressing fairly well. Could you talk a little bit about what your plans for that application more?

Sure. Thanks George. I think that, as I mentioned in my prepared remarks, there's a lot of utility for the PS-targeting platform and I think it includes imaging diagnostics as well as potentially antibody drug conjugates. So there's just a wealth of new programs that can sprout from the PS-targeting platform. In particular, what you're talking about this weekend is an extension of basically the data we did present to the AACR this year where we had actually some of our internal group that represented some data that actually won a nice award at AACR, really demonstrating that you actually utilize PS as a marker basically of the effectiveness of chemotherapy. So the content being that you give chemotherapy that [regulates] the target so if you scan a patient or in the preclinical models animals with tumors then you can really see a difference pre-therapy and post therapy. I think that we do see a very nice utility here.

I view it in 3 different ways and we are very interested in moving this technology toward the clinic and it is getting to the point where we really are in a position where we could move it in that direction. I think our goals for the imaging agents themselves are, one, just really further proof of principle showing that PS is a very specific target and that it can be a nice marker of solid tumors as well as potentially metastatic disease. Second, being then the, really this utility of modulating or following the effectiveness of therapy. You can imagine the use there would be something along the lines of you would give a scan before patients begin a chemotherapy regimen. You start to do scans as they receive their courses of therapy and look for the effectiveness with the idea being that you could potentially stop therapy that wasn't being effective and move to hopefully another chemotherapy regimen that might be more effective in those patients.

Then the third is, of course, as a potentially companion diagnostic and which you may be able to actually select patients who are more PS positive or who might, in some way, do better on therapy and that's the other avenue we are pursuing. But I think we are all really excited about the technology. I think the data speaks for itself. It is pretty phenomenal the types of images we get. We are really looking forward to seeing this move from the clinical models to right into patients.

Look forward more on that in the future. With regard to the more PS-positive patients, being able to select out that patient population prospectively, there's really no way of doing that now, is there?

Right now, it's more of an idea than it is something where we've got really strong proof of principle. I think that what you see is even if you did have a slightly more positive PS-wise patients, when you give chemotherapy, it really even things out amongst the [tumors] that you've looked at in that it really causes up regulation of PS and now really basically, all the tumors become very positive for PS. So at this point, it is more of a theoretical idea, but I think it's one of the things that, in fact, it wouldn't surprise me if we see this pop up in some of our ISTs where we actually look at scans of patients and then follow them through the therapy and then see how they do on treatment and I think you just have to empirically look at that.

Okay. That's pretty cool. One just quick follow on with regarding Cotara, and the possible protocol designed for that. Rob, I think you said you are looking for a 24-month period for enrollment? Is that -- did I hear that right?

Yes. Hi, George. We're -- I think one of the important things with Cotara is that we are able to design a trial and work with FDA that we can actually execute. As you know, these patients are difficult to find and to really conduct a trial and get the results in a reasonable timeframe, our thinking is that we would like to really focus on be able being able to do that within a 24-month period. So that's really fundamental in our thinking with respect to the to the number of patients that will ultimately try and work into this trial.

Okay. All right, great. That is all. Thank you very much and congratulations.

And maybe just to expand on that little bit. I think that obviously we are very much looking forward to this interaction with FDA and the coming away with this, with really a program that, at the end of this process, we will end up with a registration pathway that's, as you just talked about that's executable within a defined timeframe. Secondly, that's a reasonably sized trial which, of course, then directly correlates with the overall cost of the trial. And really, I think that's what partners are most interested, is what does that pathway look like, what is the total cost of that pathway and then how does that match up with the expected market of the drugs? So all those -- there's a lot of balls in the air there obviously and we want to make sure that, again, at the end of this process, we only come away with something we can be happy with and execute.

Yes, taking it a step further, with a 24 -- if it's going to be a 24-month period of enrollment, and we've got a median overall survival of, in the year's timeframe, to make it a reasonable trial, it can be, in terms of cost and in terms of total time of execution before you get to a readout where you may or may not be able to go to the FDA for a registration package. Median overall survival really can't be a primary input, can it, unless it's going to be a really, really long trial?

I think it's important to, with any of these trials that when we are talking about the enrollment timeframe of 2 years, that is obviously on the long side of what we would hope we could accomplish. But, again, I think it is all driven by the trial design itself. Again, median overall survival expected for patient population around 6 months if we are able to approach, again, 9 months as we had in our earlier study, then clearly, there's a window once you complete patient enrollment before you would have the final results from the trial.

It doesn't make it all that bad then. Yes, you're right. You're right.

Unfortunately for the patient, it is a pretty rapidly progressing disease and that's -- we are hoping to move that bar a little bit longer and make the trials more effective.

Yes.

I think to jump in that, in our discussions, meeting overall survival while you are right, is somewhat lengthy, nevertheless, as Steve said, the survival is typically only 9 months. So it's actually quite doable and it is really the registration standard by which we are going to be able to have the program that I think will be acceptable to both the agency and entice partners to work with us.

Okay, that really helps a lot. Thank you so much.

(Operator Instructions) Roger Adams, Investor.

Thank you, gentlemen. My question continues the Cotara discussion with regards to a possible development partner. One of the hopes investors have is that a Cotara license in 2012 will relieve some of the downward pressure on the stock price from constant ATM selling. I'm wondering if you could give us some guidance on the range of values that might be received in upfront licensing fees from a regional Cotara license. I understand my -- there are a number of assumptions so I am assuming you get favorable outcome from the FDA meeting and that the license is typical in terms of industry norms for royalty rate and that it is regional license which I know you're hoping to achieve like Western Europe or Pacific Rim. But with those assumptions, can -- is it possible for you to, based on -- I'm not asking you to predict what the outcome of your negotiations will be, but just based on industry norms you have seen in other deals, some guidance as to the range of upfront values that might be realized from a regional license?

Yes, thanks for the question, Roger. I think it's a very complex question you're asking. I think it's impossible to just answer that there's a -- like one-size-fits-all because that is just not the case. I think our goal, if you look this at this from a partnering standpoint, is really to get value from the program and to use that as a future value driver as well. So simply moving Cotara off the plate is not the goal here. The goal is to see Cotara move forward, to generate revenues eventually that really make a significant difference for the Company. As you said, our goal is eventually to have marketed products. I think that is how we are building our manufacturing thinking internally with the commercial capabilities at Avid. So I think there's no way to say, well, we are going to get X number of dollars upfront or even that we would have that mindset.

I think it is going to really depend on the clinical trial design, the overall cost of that trial, executing that. Clearly, the goal of partnering would be to reduce that burden or eliminate that burden from the Company and to see the technology move forward. And I think those will remain our primary goals for the program. And I think that is the best way to build value for the shareholders and to achieve the maximum value we can from the program because obviously we have put a lot of effort into it. We're very happy with the results. We are very happy that to see the long-term survivors in the trials and getting the product into market is really the primary goal. And of course, for Bavituximab, it may be a similar situation, although it's a little bit more dynamic because of the broad potential of Bavituximab in so many different solid tumor indications.

Clearly, ex-US partnering there we think has some significant potential when it comes to what that could mean for the Company. So the goal there is a little bit different in that we do want to utilize ex-US partnering to really allow us to drive US developments from a financial standpoint. So I think that it's -- each program has its own possibility so I think, again, for the HCV program, it's really, I think if we have positive data and it validates the potential of Bavituximab as an immunotherapy in HCV then that's a program we might want to just outright license to someone because it's a specialty area, it's a never evolving area.

And it's probably the type of indication where a partner wants to customize it for their particular portfolio products in that area. So but partnering discussions are ongoing. A lot of interested parties actually in both Bavituximab and Cotara, so that's a matter of having that meeting with the FDA getting the trial design and getting the clinical results from the rest of the Bavituximab studies and then we will see where that takes us.

Well, that is a very complete answer and it's interesting to hear that, from a financial point of view, HCV or Bavituximab may end up being more of an early shot in the arm for the Company than Cotara. I gather that is the import of what you're saying.

I look at this as what our opportunities for success reside in those 3 Phase II programs and there are programs in addition to Avid. I think Avid is another area of success for the Company and we want to continue to achieve its full potential. So we are pushing on all these fronts and we think good things can happen by being diligent, generating more data and just taking care of business.

Thank you very much.

At this time, I would like to turn the call over to Steve King, CEO, for any closing remarks.

Well, I would just like to end up by, again, thanking everyone for participating in today's quarterly conference call. I would also like to thank our patients who are enrolled in our studies and are receiving treatments that will help really make a difference in their lives. We certainly look forward to the next opportunity to update you on the Company's activities. With that, thank you very much.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may all disconnect. Everyone, have a great day.