Avid Bioservices Inc (CDMO) 2015 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Peregrine Pharmaceuticals Incorporated first-quarter FY15 financial results conference call.

(Operator Instructions)

As a reminder, this conference call is being record. I'd now like to turn the call over to Christopher Keenan of Peregrine's Investor Relations Group, Mr. Keenan, you may begin.

Thank you, Nicholas. Good afternoon and thank you for joining us. On today's call, we have Steve King, our President and Chief Executive Office; Paul Lytle, our Chief Financial Officer; Joe Shan, our Vice President of Clinical and Regulatory Affairs; and Jeff Hutchins, our Vice President of Preclinical Research.

Steve will begin by providing a brief overview of the Company's progress over the last quarter, including advances in our SUNRISE Phase III trial; the achievements coming from our Preclinical Immuno-oncology development program; and the investigator-sponsored trials, or ISTs; and Company's strategy for the remainder of the FY15.

Jeff will then detail for you the advances arising from our IO program, with Joe then reviewing specific progress made in the SUNRISE trial. Paul will then finish with a summary of our financial results for the first quarter of FY15, as well as provide an update on our wholly-owned subsidiary, Avid Bioservices. 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 Security Exchange and Commission (sic -- see press release "Securities and Exchange Commission"), including but not limited to the quarterly report on Form 10-Q for the first quarter FY15 ended July 31, 2014, which was filed today. 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 expectations. We expressly do not undertake any duties to update forward-looking statements, whether as result of a new information, future events, or otherwise. With that, I'll turn the call over to Steve.

Thanks, Chris, and thanks to all of you for participating in this afternoon's call. We are continuing to execute and deliver based on the plans we laid out on our last quarterly call. We continued the expected global expansion of the bavituximab SUNRISE Phase III trial that now has over 130 worldwide clinical sites, nearing the total number of sites we expected to have involved in the study in order to keep us on track to meet our enrollment goals.

In addition, we saw the completion of enrollment in an important liver cancer study combining bavituximab with sorafenib. We expect to have data from this study, as well as data from a front-line non-small cell lung cancer study over this coming months. Joe will update you on a clinical developments during his prepared remarks.

In addition to the clinical trials, many of which also have translational data points built in to tie together preclinical data with the clinic, we have also continued to build momentum in our preclinical collaborations, which now number in the dozens. We are evaluating new combinations and dosing strategies, combining bavituximab with chemotherapy, radiation, and immune-oncology approaches, including those targeting CTLA-4, PD-1, as well as other downstream immune checkpoints.

In addition, we are evaluating combinations with other immune-based approaches, including vaccines and adjuvants. It is important to have a robust collaboration program so that we can identify those combinations and approaches that truly stand out and thus support advancing to the clinic. Data from these studies will also play a critical role in our ongoing discussions with potential corporate partners.

We have already started to see the fruits of these collaborations, with very encouraging results in preclinical models of melanoma, colon cancer, and most recently, breast cancer, when combining bavituximab with other immune-checkpoints inhibitors. Perhaps the most exciting thing about this data when taken as a whole is that the data are remarkably consistent, with respect to increases in mature T-cells, and in particular, CDA, both positive signals of immune activation.

It is studies like these that answer key questions and allow us to formulate the most ideal clinical pathway forward. We expect to be able to share this data and more over the coming months at key scientific and medical conferences. Jeff will update you on the collaboration front during his prepared remarks.

This is an exciting time in the battle against cancer, with new approvals for immuno-oncology agents, such as Ono and Merck's anti-PD-1 antibodies, which recently received regulatory approval. This opens the door for new clinical development avenues for novel bavituximab combinations that are already supported by preclinical data we have generated in a number of solid tumor animal models.

We are in a unique position with a late-stage clinical program for an antibody with a unique immunotherapy mechanism of action that appears to be an ideal fit for combination with approved immunotherapy treatments, such as the anti-PD-1 antibodies. Truly an exciting time for cancer treatment options and for the bavituximab program.

In addition to the development efforts, we also continue to see a solid performance from our wholly-owned manufacturing subsidiary Avid Bioservices, that coming off a record year has already begun 2015 strongly with $5.5 million in third-party contract revenue for the quarter and the expansion of our client base. Paul Lytle will update you on the Avid developments, as well as the rest of the financial highlights during his discussion.

In summary, we have continued to make significant progress across all aspects of the Company. That has us positioned for data presentations, continued revenue performance, and getting closer to the data from the pivotal SUNRISE trial, as well as the ongoing expansion of our immuno-oncology development program. With that, I will now turn the call over to Jeff to discuss preclinical developments efforts. Jeff?

Thanks, Steve. The purpose of our broad, highly collaborative preclinical approach is to guide the direction of future clinical trials in this rapidly evolving IO space. Our goal is to identify the most robust immune-oncology combination that unlocks the full capacity of an anti-tumor response without systemic immune-related side effects. The breadth of this approach speaks to the wisdom of working directly with highly recognized individual experts in this space.

We are now seeing and presenting the fruits of these efforts and yielding encouraging statistically significant results to date, and most importantly, building the preclinical rationale to help guide our future clinical trial designs. To that end, we have shown this progress of our immune-oncology program with data recently presented at ImVacS, The Annual Immunotherapies and Vaccine Summit, highlighting the combination of a PS-targeting antibody equivalent to bavituximab and an anti-PD-1 antibody in an immune competent animal model breast cancer.

Results show statistically significant tumor suppression, while also demonstrating a significant increase in tumor-fighting CD8 T-cells that are into the tumor microenvironment compared to an anti-PD-1 antibody alone. Additional data from this study, as well as follow-up data from our melanoma study, will be presented at the 29th Annual Meeting for the Society of Immunotherapy of Cancer, SITC, to be held in November.

As Steve mentioned, these data align with what we have seen in models of colon and melanoma, and as such, warrant expanded investigation with further immune-checkpoint inhibitors, agonist, adjuvants and therapeutic vaccines. With that, I'll turn the call over to Joe to update you on our clinical programs.

Thanks, Jeff. Let me start by giving a quick update on our Phase III lung cancer trial, SUNRISE. With nearly 140 clinical sites now open for enrollment, planned site activation is nearing completion and we remain on track to complete enrollment of approximately 600 patients by the end of calendar year 2015, with two planned interim analysis that are event-driven. As I mentioned during our call just a couple months ago, in conjunction with site activation and enrollment activities, we are implementing an ongoing site engagement and education initiative for investigators and thought leaders in conjunction with scientific and medical conferences, including the upcoming European Society of Medical Oncology, the ESMO Congress, later this month.

Turning to some of our other pipeline indications, starting with liver cancer. Today we announced the completion of enrollment of 38 (sic -- see press release "48") patients in the Phase II part of a Phase I/II IST evaluating bavituximab in combination with sorafenib in patients with advanced hepatocellular carcinoma. We continue to be encouraged by the updates from the principal investigator, Dr. Adam Yopp of University of Texas Southwestern Medical Center in Dallas, and look forward to his presentation of the full clinical results at a future conference.

Meanwhile, as part of this trial, we have been able to generate translational data showing immune changes in patient tumor samples, which are consistent with the immuno-modulating mechanism observed in preclinical models. These data will be presented at the 29th Annual Meeting of the Society of the Immunotherapy of Cancer conference at the beginning of November.

Today we also announced that data from a Phase Ib investigator-sponsored trial evaluating bavituximab in combination with carboplatin and pemetrexed in 25 patients with previously untreated Stage IV non-small cell lung cancer has been accepted for presentation at the 2014 Chicago Multidisciplinary Symposium in Thoracic Oncology at the end of October.

Lastly, as you just have heard from Jeff, we continue to generate preclinical data to inform clinical development of bavituximab in breast cancer. We are also looking forward to the manuscript publication of the final results of the Phase I trial, which combine bavituximab and paclitaxel in the near future. Recall, preliminary results demonstrated at an encouraging 85% tumor response rate in patients with HER2-negative metastatic breast cancer.

As you can see, several ISTs are expected to read out over the next few months, and these clinical results, together with our expanding preclinical IO pipeline support not only expanding the potential combination uses of bavituximab in the clinic, but also advancing clinical development in breast cancer and liver cancers as resources permit. And with that, I'll turn alter the call over to Paul.

Thank you, Joe. Now turning to our financials. It is important to note that we continue to closely manage our operations in line with our [cap] position, while balancing our various sources of capital. One important source of capital is derived from our contract manufacturing business, where we generated $5.5 million in revenue this quarter and we anticipate that contract manufacturing revenue will be between $19 million and $23 million for the full fiscal year, as mentioned on the previous call.

In addition, we supplemented our cap position this quarter with $9.5 million in net proceeds received from the sale of Series E preferred stock, sold at $25 per share. This funding vehicle represents less dilutive capital to the Company since it's convertible into common shares at a conversion price of $3 per share.

With these additional source of capital, and taking into consideration our statement of operations, we ended the quarter with over $73 million in cash. Based on our current projections, this represents sufficient capital to execute on our business plans for at least the next 12 months.

Now turning to our statement of operations, we saw an expected increase in our net loss this quarter as we continued to execute on our number one R&D goal, advancing the Phase III SUNRISE trial. As we invested in this Phase III trial, R&D spend increased to approximately $10 million this quarter, thereby increasing our net loss to approximately $13 million. As a result, we saw a similar increase in our cash burn from operations to $11 million this quarter, representing our net loss minus non-cash expenses.

Our financial goals are centered on maintaining a solid cash position and investing these proceeds into our novel immuno-oncology program, led by bavituximab and the Phase III SUNRISE trial. We will continue to closely manage our operations in line with our cash position, while balancing these various sources of capital. We look forward to keeping you updated on our progress and we will now open the call up for your questions. Nicholas?

(Operator Instructions)

Joe Pantginis, ROTH Capital Partners.

Hey, guys, good afternoon and thanks for taking the question. A couple of questions, if you don't mind. Some logistics here. With regard to the site openings, that's great progress, about 130 sites you said, and enrollment trends that you've been seeing, how well have they been tracking with your projections before the study started?

We haven't given a lot of additional details other than the fact that, again, the trial itself is getting up to close to full steam as far as the number of sites involved in this study. And that's most critical, because, of course, once you get all the sites up and running, then that's when you reach your maximum enrollment rates.

At this point, we are simply saying that we are on track for the initial estimate of less than two-year enrollment and if we start to deviate significantly one way or another from that, we will let everyone know, but to this point we feel comfortable that we are on track.

Okay, that's fair. Then with regard to, I know Joe mentioned, maybe at SITC we'd be seeing some translational data from the liver cancer study. So I was just wondering if there's any potential teaser there? And then the next layer for that question is, with regard to your ongoing business development activities, have you have seen any change in the tenor of those discussions with the recent approval of KEYTRUDA?

Sure, I can get things started, and then maybe turn it over to Jeff and Joe for a little bit more color as far as the translational work goes. But yes, there's been an awful lot of interest spurred by the recent regulatory successes of the anti-PD-1 antibodies and moving those into the marketplace. That clearly opens up some very nice opportunities down the road for new clinical trials that can be run, but also in ways to best use bavituximab.

Because, again, we really feel like we're in a unique position with a late-stage immuno-oncology agent that really look like it should be a perfect fit with these agents that are now coming under on to the market from a combination standpoint. So that's definitely heated up the discussions, as well as a lot of the translational data and other study-related data from the preclinical models that we've been running.

As far as a teaser, we've said right from the beginning that one of the things we've been looking for out of a number of the investigator-sponsored trials are really the correlative data that goes along with the animal studies we've completed showing basically the symptomatic changes in the profile of the immune cells that are present in the tumor microenvironment, and more broadly, in the animals themselves. That's data in general that of course we're looking to present. I will let Jeff or Joe add a little bit to that.

As Joe said, really the tease is that we are seeing some consistency between what we first identified in the animal models as this increased in CD8 positive T-cells translating quite nicely with these liver samples. Joe, you want to comment further?

Yes, it's the totality of the immune changes, and of course the CD8 changes are interesting, but we basically are recapitulating all of the preclinical steps within the immune system changes within the tumor. So it is more than just CD4, CD8, Tregs, for an example. There's a lot of information on it that we will be sharing at SITC.

The eventually, to expand on that, I will say the ability to [tease in] correlate this with patient outcome. This is all very important data from a partnering standpoint also and this is exactly the kind of data that is driving a lot of interest we are seeing now from both a partnering standpoint, as well as, of course, from collaborative standpoint.

In particular, data like liver cancer, as we've stated before, our goal is ex-US partnering. Liver cancer is a huge indication throughout the Asia-Pacific region, so that's clearly a very attractive next potential target outside of non-small lung cancer for some of those territories.

Okay, thanks a lot guys. That was helpful.

Charles Duncan, Piper Jaffray.

Hi, guys. It's Roy in for Charles. Thanks for taking the question. Just a quick one. I wonder if you can go into a bit more detail about the combo programs with the vaccines and adjuvants, specifics around which vaccines and adjuvants, maybe what we might see over the next 12 months?

I will let Jeff address that.

Sure. We can go back quite a ways to published data where actually radiotherapy works quite well as an adjuvant and a vaccine, if you will. So what we are trying to do is go back and really revisit some of those early observations now that we understand how well bavituximab does to repolarize these myeloid cells that are so important in vaccine presentation and so forth.

So you really could go through and reevaluate some of the recent failures in clinical vaccines and really ask the question now, if you repolarize and change the local microenvironment around the tumor, will these vaccines now be much more effective. So that really summarizes our excitement around this area.

Okay. Is there any specific platform or technology that you are looking at first? Dendritic cells or--

As Steve mentioned, we have a number of collaborations that really cover all these areas, and it is not really -- it is really a focus in a sense to make sure we are hitting the right combination to put, really if you will, put the immune system back together to respond appropriately to the tumor.

Our goal is to look at all the different areas, so we just haven't been out public with what the collaborations are, but our goal is to touch on the dendritic cell vaccines, as well as antigen-base vaccines where we see some promising results and things we can build on from again this growing body of evidence of the immune system changes we are seeing with the changes in the tumor associated with macrophages, as well as some of the other immune components.

Okay, that make sense. I'm guessing you probably can't answer this because it is an enrollment question maybe, but do you have any expectations on when we might see the first interim? For SUNRISE?

Yes, it's really impossible to predict. Obviously, it's event-driven, so at this point we are not trying to project that.

Okay.

We're focused on enrolling the patients and we'll collect when--

It's obviously event-driven so there's other variables besides just the enrollment patterns themselves and just how the patients are doing and what have you.

Very good, thank you.

(Operator Instructions)

George Zavoico, MLV & Company.

Hello, everyone. Good afternoon and thanks for taking my questions. A brief one first, regarding the breast cancer data, the last time this data was presented there were four patients still on therapy. And you said in your press release that the results might be revealed in a publication. Do you anticipate that happening before an update at a medical conference, which is the usual sequence of events?

Not necessarily. The investigator has prepared a manuscript, which we expect that to be submitted for publication shortly. It is going to contain obviously the results previously, but in a more fuller description and then we will have some updates on the clinical endpoints like progression-free survival, for example.

Okay, so there will be new data obviously then.

Yes.

With regard to patents, this whole -- bavituximab is an immune-checkpoint inhibitor. It's a new a look to the antibody. It wasn't how it was originally conceived. Does that present an opportunity for you to file new patents for method of use in combination with immune-checkpoint inhibitors or how does that effect or approve your patent portfolio on bavituximab or PS-targeting antibodies, if at all?

Yes, sure. Obviously, as we've gone through the development stages, we've filed additional patents that build on the original patents, particularly with different combinations, as you are saying, and new ways to look at how the drug is used. So we think that those certainly help broaden the estate; certainly some of the combinations are covered well beyond the original patent, the original patents that cover things like the antibody and the target itself.

So yes, we are always continuing to evaluate new inventions, the impact of those on the overall portfolio, length of time for coverage. We feel pretty comfortable that at this point we have everything pretty much covered from what we currently have in the clinic. Again, that's an ongoing process and it never stops and we have a number of committees that do nothing but simply look at those aspects of the development of the drug.

Okay so we can anticipate perhaps some extensions in the patent life here then, for certain combinations it sounds like.

With regard to the budget, Paul, you outlined how long you expect the cash to last. What exactly is included in the budget because what you're implying with all the results that are coming out in breast and liver, it seems that it would behoove you to try and get into additional trials in other indications as quickly as possible. And with the liver results coming out, the breast results coming out, it is quite possible the next trial could start next year if you find the right partners or if you decide to go on your own. Are any of those new indications included in your budget?

Right now, George -- that's a very good question -- our goal right now is really executing on Phase III trial, the SUNRISE trial. Obviously that's currently in our budget. When we talk about having sufficient cash resources to fund our operations for at least the next 12 months, that's a conservative estimate, so we really mean at least the next 12 months; we only project out 12 months or so in terms of providing that type of forecast. So this is conservative type estimate when we put out our projections.

In terms of new indications, you hit the target. We do want to start some new collaborations. That could come through other funding opportunities. That could come through partnering opportunities and other avenues. So we're definitely going to pursue that. We're as excited as you to initiate some of these new studies and we just want to make sure, first and foremost, we can execute on the Phase III trial first and then as new opportunities come to fruition, we can expand our R&D pipeline to include some of those other things.

Just to extend on that. One of the points Paul made on the partnering is very important because, really at this point, I'm bringing on board a partner who is going to help us complete executing the clinical trial. It could bring capital, but from an operation standpoint, the trial is already underway and basically is on track.

So when we think about partnering, we are really looking at expanding into some of these new indications, and clearly breast cancer, liver cancer are right now right at the top of the list based on the totality of the preclinical and clinical data we've generated to date. So we view that as a great way to move the program forward to expand it and really then also be able to cover commercialization in various territories.

Okay. Final question is philosophical in the sense that the immune-checkpoint space has been very exciting lately and you've made an effort to educate everyone about the potential of bavituximab in that space. And yet, if you look in market capitalization, since about April, it really hasn't moved very much. Apart from the spike in March, it really hasn't moved much since January. So what do you attribute, if you wish to comment on it, that plateau performance and what can you do, what you think you can do to help change that perception?

We are really approaching this on a number of different fronts. First is getting out and really telling the story to as many funds and institutions within the investment space. Also the collaborations that we've entered into and the presentation of clinical data at these key medical and scientific conferences is also critical, because up to the last few years, we typically may not have been present at most of the major immunotherapy type conferences, whereas now clearly we are constant figures at these conferences and presenting data.

Maybe most importantly is that our data is very consistent with what people are showing with other test systems. So it really is resonating with people in a way it hasn't in the past. But it is a ground effort. It is publications, presentations, and then of course clinical data will eventually trump all that and that's the reason executing Phase III SUNRISE trial is so important as a backbone to getting the recognition for this program. But is just going to be continue to execute, be on the road, and again, the more the word gets out there, we think, the more we will be clearly in the middle of this space.

As I said in the prepared remarks, to me we're in a really unique position because, while there's a lot of interest in immunotherapy, there's not many that are in the middle of their pivotal Phase III study like we are. So we view that as a real benefits and something that will drive a lot of interest because once the drug is on the market, now, of course it opens up all kind of avenues for combinations and other ways to use the drug. So we are really looking forward to continuing to execute on that and take advantage of that position being more advanced than a lot of the other immune-checkpoints at this point.

I see. All right, thanks. Good luck with continuing in that direction. Thank you.

Thanks, George.

With no further questions in the queue, I would like to the call back over to Mr. Steve King, CEO, for any closing remarks.

I'd like to start by thanking all of you again for participating in today's call. We have begun the fiscal year well-positioned with clinical data expected in the near-term from multiple trials, as well as preclinical data from our immune-oncology program. As I said earlier, we believe that we are in unique position and feel this is an important time for the Company and its programs as we work to understand the full potential of this novel immunotherapy. So again thank you and we look forward to updating you with this progress throughout the quarter.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Have a good day, everyone.