Clovis Oncology Inc (CLVS) 2011 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Clovis Oncology Inc. fourth quarter 2011 earnings conference call. My name is Jenata and I will be your operator for today. 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, Ms. Anna Sussman, Senior Director of Investor Relations. Please proceed.

Thank you, Jenata. Good morning and welcome to the Clovis Oncology fourth quarter and year-end 2011 conference call. You should have received the news release announcing our fourth quarter and year-end results. If not, it's available at our website at www.ClovisOncology.com. As a reminder, this conference call is being recorded and webcast. Remarks maybe accessed live on our website during the call and will be available in our archives for the next several weeks.

The agenda for today's call is as follows. Patrick Mahaffy, Clovis' President and CEO will discuss the highlights of 2011 and our strategic accomplishments for 2012. Then Erle Mast, Clovis' Chief Financial Officer will cover the financial results for the quarter and year in more detail and comment on the Company's outlook for 2012. Patrick will make a few closing remarks and then we'll open the call for Q&A.

Before we begin, please take note that during today's conference call, we may make forward-looking statements within the meaning of the Federal Securities Laws including statements concerning our financial outlook and expected business plan. All of these statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Please refer to our recent filings with the SEC for a full review of the risks and uncertainties associated with our business. The forward-looking statements speak only as of the date on which they are made and Clovis undertakes no obligation to update or revise any forward-looking statements. Now, I will turn the call over to Patrick Mahaffy.

Thanks, Anna. Welcome, everyone, and thank you for joining us this morning. 2011 was an extremely important year for us with progress in each of our clinical development programs and the completion of our IPO, where we raised about $130 million in net proceeds. This morning I'd like to take the opportunity to highlight each of our development programs in the context of 2011 accomplishments and anticipated 2012 milestones. Let's begin with CO-101, our lipid-conjugated form of gemcitabine, currently the subject of the pivotal LEAP study from which we expect top-line data in the survival study by the end of 2012.

CO-101 is currently focused on patients with pancreatic cancer whose tumors express low amounts of a membrane transporter protein on the surface of the cancer cell known as human equilibrative nucleoside transporter 1 or hENT1. These patients are expected to be resistant to standard gemcitabine-based therapy. CO-101 was designed to enter tumor cells independent of hENT1and thus, overcome this resistance mechanism. Tumor cells with low hENT1 expression have been shown to be resistant to gemcitabine therapy in vitro and in vivo. Retrospective analyses from multiple published studies of gemcitabine and pancreatic cancer have shown a strong correlation of overall survival outcomes to hENT1 expression with patients that have low hENT1 expression receiving effectively no benefit from gemcitabine therapy.

We refer to this as the hENT1 hypothesis. We are testing this hypothesis in pancreatic cancer in our LEAP study, which is the first trial that seeks to prospectively demonstrate this correlation. LEAP is an international randomized controlled 360 patient pivotal trial designed to demonstrate that CO-101 improves overall survival versus gemcitabine in hENT1-low metastatic pancreatic cancer patients.

Patients enrolled in the trial are being randomized on a one-to-one basis to receive either CO-101 or gemcitabine. It is an unusual trial in that it seeks to show not only that CO-101 is an effective therapy for hENT1-low pancreatic cancer patients, but also that the standard of care gemcitabine currently used in approximately 80% of patients provides little if any benefit in that same patient population. We expect to complete enrollment in the LEAP study by the end of the first quarter of this year.

Metastatic tumor tissue is collected from all patients to enable hENT1 assessment although investigators and Clovis are blinded to each patient's hENT1 status until the end of the study when the primary analysis is completed. We are collaborating with Ventana Medical Systems to develop an in vitro diagnostic or IVD to reliably measure tissue hENT1 expression and enable prospective classification of patients as either hENT1-high or hENT1-low.

During 2011, we utilized this IVD to establish the definition of hENT-high and hENT-low patients from a number of clinical studies of gemcitabine. All of which demonstrated that the percentage of hENT1-low patients with pancreatic cancer was approximately two-thirds. Earlier this year, this percentage was prospectively confirmed in LEAP. In January, we announced that the independent data monitoring committee informed us that 65% of the 250 patients enrolled in the study through late October of 2011 were classified as hENT1-low, this represents over two-thirds of the planned 360 patients expected to enroll in the study. As reminder, the hENT1-low patients are our target population and the subject of the primary overall survival analysis in LEAP.

Now, I'd like to spend a moment on what we hope is a potential for CO-101 beyond LEAP. CO-101 is a hENT story related to gemcitabine's ability to enter tumor cells and is not uniquely related to pancreatic cancer. While pancreatic cancer is our initial priority due to the evident unmet medical need and the traditional monotherapy approach to treatment, CO-101 may also be applicable in other tumor types where gemcitabine is commonly used and where hENT1 levels may influence outcomes. We intend to test that hypothesis.

As example, there is emerging evidence that responses and survival outcomes in non-small cell lung cancer patients treated with gemcitabine in combination with a platinum agent are determined by the patient's hENT1 status, with hENT1-low patients having far worse outcomes. We will commence a Phase I study of CO-101 in combination with cisplatin, a widely-used platinum agent in non-small cell lung cancer during the third quarter of 2012. As part of this study, we will utilize a companion diagnostic to identify the hENT1-high and hENT1-low patients.

To develop the diagnostic test, the hENT1 assay developed for pancreatic cancer in the LEAP trial will be optimized by Ventana for use with non-small cell lung cancer tissue. Once optimized, the hENT1-high and hENT1-low cut-off will be established using tissue from the previously-completed clinical study of gemcitabine in non-small cell lung cancer. The assay optimization and establishment of a hENT1 cut-off for lung cancer will occur in 2012 and is expected to be available for use in the Phase I CO-101 plus cisplatin clinical trial. If the LEAP results are positive, we would then seek to expand our CO-101 development programs to other tumor types where gemcitabine is used in combination with cisplatin, most importantly in hENT1-low patients with non-small cell lung cancer.

Let me turn now to CO-1686, which is our oral small-molecule covalent inhibitor of the mutant forms of epidermal growth factor receptor or EGFR for the treatment of non-small cell lung cancer. 1686 targets both the initial activating EGFR mutations as well as the primary resistance mutation T790M, and it has the potential therefore to treat non-small cell lung cancer patients with EGFR mutations both as a first-line or a second-line treatment in those who are T790M positive. In addition because it spares wild-type or normal EGFR, it has the potential to cause a lower incidence of toxicity such as skin rash and diarrhea normally associated with other EGFR inhibitors.

EGFR activating mutations occur in approximately 10% to 15% of non-small cell lung cancer cases in Caucasian patients and approximately 30% to 35% in East Asian patients. These patients experience significant tumor response to Tarceva and Iressa, which are the first-generation EGFR inhibitors widely used. However, most patients ultimately progress on Tarceva and Iressa therapy with approximately 50% of patients developing acquired resistance from a second or gatekeeper mutation, which of course, is T790M.

During 2011, we entered into an agreement with Roche Molecular Systems and advanced the development of a companion diagnostic for 1686 to identify activating EGFR mutations in patients with non-small cell lung cancer including the T790M mutation. The diagnostic test will be developed in parallel with the clinical development of 1686 with the goal of filing a PMA with the FDA at the same time we would file the NDA for CO-1686. Preclinical data presented in the poster at the EORTC-NCI-AACR meeting in late 2011 demonstrated that 1686 causes significant tumor shrinkage in T790M-driven, non-small cell lung cancer xenograft models and resulted in significant tumor growth inhibition at a variety of doses.

In late 2011, we filed an IND application with the FDA, which was cleared in January 2012. Initial Phase I/2 studies are expected to commence in the US and Europe during the second quarter of 2012, and a second Phase I/2 study will initiate in Asia during the third quarter of 2012. Following the establishment of the appropriate dose, Clovis intends to study 1686 in expansion cohorts of 25 to 60 non-small cell lung cancer patients who have failed either Tarceva or Iressa and have developed the T790M mutation. We expect to have proof of concept data in the T790M population from those studies by the end of 2013. If the results are positive, our goal is to advance 1686 development from IND to NDA submission in approximately four years.

Now to our third product, rucaparib. In mid 2011, we licensed from Pfizer global rights to rucaparib, an orally available small molecule inhibitor of PARP1 and PARP2. We intend to develop rucaparib both as a monotherapy and in combination with chemotherapeutic agents in patients who are predisposed to PARP inhibitor sensitivity. Initially we'll focus our development efforts in tumors with defective BRCA function in ovarian and breast cancers. Rucaparib has been studied in multiple Phase 1 and Phase 2 studies in both its oral and IV formulations, largely in combination with cytotoxic chemotherapy. These studies characterize the safety profile of rucaparib as well as providing preliminary evidence of activity.

However, an oral continuous daily dosing schedule has not been robustly established to date for rucaparib monotherapy. Therefore, in the fourth quarter of 2011, we initiated a Phase I/2 monotherapy study to determine the maximum tolerated dose and recommended dose for subsequent clinical development. Once the optimal dose and schedule has been established, we intend to expand the study to selected ovarian and breast cancer patients to assess the efficacy of rucaparib in these patient populations.

We expect initial efficacy data from this trial in 2013, and if these data are positive, plan to initiate registration studies in serious ovarian and/or breast cancer. As with CO-101 and 1686, we intend to partner with a diagnostic development company to develop a molecular diagnostic test to identify patients most likely to respond to a PARP inhibitor. Now let me turn the call over to Erle to discuss fourth quarter 2011 financial results and guidance for the year.

Thanks, Pat, and good morning, everyone. Our full financial results are included in yesterday's press release. So, I'm going to direct my comments to highlights for the fourth quarter and for the full year of 2011 and provide some additional analysis and commentary.

Our operating results for both the fourth quarter and the full year of 2011 were driven largely by the expansion and development activities for CO-101 and 1686 as well as the in-licensing of rucaparib. Research and development expenses totaled $12.4 million for the fourth quarter and $40.7 million for the full year of 2011. Now as expected, the majority of our R&D costs for 2011 supported development activities for CO-101, as CO-1686 had not yet advanced into human clinical trials and our rights to rucaparib were not obtained until mid 2011. Also in 2011, we incurred a $7 million charge for in-process research and development associated with the upfront fee paid in connection with the licensing of rucaparib.

General and administrative expenses totaled $2 million for the fourth quarter and $6.9 million for the full year of 2011. Again, these amounts increased significantly from the comparable periods in the prior year, as we expanded our facilities and our administrative functions to support our expanded regulatory and development activities for our three programs. Now, the operating expenses that I just summarized are inclusive of $1.3 million of stock compensation expense. We reported a net loss of $14.9 million for the fourth quarter and $55.6 million for the full year of 2011. The net loss attributable to common stockholders for the fourth quarter of the year was $1.30, and $14.42 for the full-year ended 2011.

Now, as a reminder, the number of common shares outstanding for periods prior to November 2011 do not reflect shares issued in our IPO or the conversion of our preferred stock into common stock, which also occurred in conjunction with our IPO. As a result, the per share results for 2011 are based on weighted average outstanding share numbers that are much lower than the actual common stock outstanding at the end of 2011. As Pat mentioned, during the fourth quarter of 2011, we raised net proceeds of just over $129 million from our IPO in which we sold 10.7 million shares of common stock. We ended 2011 with cash and investments totaling $140.2 million. We had no outstanding debt and 22.4 million shares of common stock outstanding on December 31.

Now, let me turn to our financial guidance for 2012. As we previously stated, we expect cash burn of $67 million to $72 million for 2012, and to end the year with approximately $70 million in cash. We expect that our cash position will allow us to complete the LEAP study and demonstrate proof of concept data for CO-1686 and for rucaparib. Our planned cash burn for 2012 includes a $4 million milestone payment associated with the CO-1686 development program, which we paid in the first quarter of this year upon filing of the IND for 1686. With that, I will turn the call back to Pat for some closing comments and then we'll open it up for Q&A.

Thanks, Erle. In summary, 2011 was an extremely important year for us. The investments we made in our development programs during the year support the progress of our Company and our opportunities for growth in future years. Let me talk about how we're going to use the cash that Erle just spoke of and describe our milestones to look for in 2012.

First for CO-101, we have three strategic milestones for the year. Number one, we are close to completing enrollment in the LEAP trial. We anticipate this will be complete by the end of this month. Secondly, as I discussed earlier, we intend to begin to test the hENT1 hypothesis beyond pancreatic cancer. Accordingly, we plan to initiate a Phase I study of CO-101 in combination with cisplatin in non-small cell lung cancer during the third quarter of 2012. If the LEAP results are positive, we would then seek to expand our CO-101 development programs to other tumor types where gemcitabine is used as monotherapy and in combination, most importantly, in non-small cell lung cancer.

Lastly, but most importantly, during the fourth quarter, we anticipate announcing top-line overall survival data from the LEAP study. If the LEAP data are positive, we expect both NDA and MAA submissions in the US and EU respectively by the middle of 2013. Our collaborator on the companion diagnostic, Ventana, intends to submit the PMA in parallel with our NDA submission. For CO-1686 we will initiate a US-EU Phase I/2 study in the second quarter and a Phase I/2 study in Asia in the third quarter. Finally for rucaparib, we intend to complete the ongoing Phase I monotherapy study in the fourth quarter and initiate the expansion phase of the study. In summary, we have a strong foundation in place, and look forward to completing 2012 milestones that we hope will be transformative for our Company. With that, we would like to thank you for joining us today and will now open the call for any Q&A.

(Operator Instructions) Your first question comes from the line of Cory Kasimov with JPMorgan, please proceed.

Good morning. Thanks for taking the questions. I have a couple for you on CO-101. First of all, given the New England Journal article that came out yesterday on the inter-patient heterogeneity of cancer, can you just remind us what information you have on the consistency of hENT1 expression in pancreatic cancer patients? And then my second question is on the Phase I study looking at the combination with cisplatin in lung cancer. For the Phase I component of this, is this just standard Phase I dosing study and are you going to be prescreening for hENT status to ensure that there's hENT1-low patients? I wasn't sure based on your comments. Thanks.

Sure. So first, I'd say inter-patient heterogeneity, that's always an issue in cancer; and in fact, looking at the heterogeneity of pancreatic cancer in general, the number of mutations involved in that disease are very, very high, and there's no one mutation; for instance; BRCA1 or BRCA2 or PI3 kinase, whatever it is that is the primary or dominant cause. That being said, when we look at hENT status, which isn't necessarily a genetic mutation per se, we see that it is very commonly defined as hENT1-low in two-thirds of the patients who we've evaluated, and we looked at sample sets now from probably six or so different studies, most notably in the LEAP trial itself, and we see this very consistent two-thirds of patients being hENT1-low as defined by our algorithm, which is consistent with what you see in publications which go beyond what we have evaluated ourselves with our own antibody. So I don't think that heterogeneity will be an issue as to hENT status in the LEAP trial or broadly in the event that LEAP is successful and we become a commercial organization in the pancreatic cancer field.

As to the Phase I study, the Phase I element, the dose finding will be a standard MTD-based dose finding. We will start at a dose that is backed off to some extent from the CO-101 dose in the trial, but not that much because since the gemcitabine dose as monotherapy is the same as the gemcitabine dose when it's combined with cisplatin, we would anticipate that directionally is where we are going to land on CO-101 with cisplatin as well. And so I think we could get to a dose relatively quickly. The design of that study is to treat effectively all comers to begin with, Cory, to get to the dose, partly because in a study like that, often the patients are third, fourth, fifth line patients where the requirement of a biopsy, which would be required to determine hENT status would be very impossible -- almost impossible to imagine in that setting. There is however, an expansion cohort in that study once we achieve the dose that will be specifically directed to patients who are hENT1-low with either newly-diagnosed or maybe second-line non-small cell lung cancer.

Okay, great, that is helpful, thank you.

Thanks, Cory.

Your next question comes from the line of Ravi Mehrotra with Credit Suisse, please proceed.

Hi. Good morning. Congratulations on a very interesting 2012. Three questions here if I may. On 101, thanks for the update on non-small cell lung cancer. Can you just remind us of the evidence of hENT source so prevalent in ovarian and breast cancer and just outline conceptually your development plans and those indications? Secondly, can you just confirm that we will get an update on the percentage of hENT1-low patients once the LEAP study is completely enrolled? And thirdly, a sort of philosophical question about the in-licensing environment. Do still see interesting targets out there, which aren't appreciated by others which you find interesting? Thank you.

So first, the largest number of publications that describe the role of hENT1 in outcomes is in pancreatic where there are probably now 15 or 16 different publications, plus the work we have done that has not been published that demonstrate the role of hENT in the performance of gemcitabine. There are a number of publications now in lung cancer and many of them are pre-clinical that support the hypothesis, but there are also some clinical publications that demonstrate response rates and survival are influenced greatly by hENT status. There are publications as well, I'm aware of only one in breast, there are probably or may well be more, but I'm aware of only one. There was a recent publication in bladder cancer, again, where -- it says gemcitabine plus cisplatin is the widely used treatment and shows meaningful differences in response rate.

I am not aware of any publication yet in ovarian cancer, Robbie, so if we were go down the route of ovarian or breast, we would do what we have done for pancreatic, what we are doing for non-small cell lung, and that is gain access to tissue samples from ovarian studies where gemcitabine has been used and where outcomes data are available and determine whether hENT status plays a role in those outcomes. I will say that the evidence is pretty clear that this is about hENT and gemcitabine, and it is not about hENT and pancreatic cancer. So I think that given the publications, albeit there are fewer that show exactly this same outcomes relationship to hENT status now in pancreatic, non-small cell lung, and to some extent bladder, I think there is a publication in biliary cancer too, which is highly related to pancreatic. But were we to go down the route of breast and-or ovarian studies, we would do that work ourselves to confirm it.

As to the update on the hENT status, we would not have that update at the time we announced enrollment has completed. I do not know if at the next meeting of the IDMC, which is in the next several months, we will be informed or not. I think it may be that they'd feel they have answered the question and the confidence intervals in that answer were such that it would be highly unlikely that the number, that 65%, is going to move more than 2 or 3 points either way. So I don't have an answer for you as to whether we will know it or not. I do have an answer as to whether it will move that much and it just will not.

And then finally as to in-licensing, we are in the toe-dipping phase of in-licensing. We haven't made it a goal of the year to acquire another compound. As you probably remember, when we are acquired rights to rucaparib from Pfizer in May or June of 2011, we basically shut down our in-licensing activities for financial and operational considerations. When we completed the IPO, our commitment to investors was to ensure that not only would we have sufficient cash to get through LEAP data but to get to proof of concept data from the other two programs, which required us to get to the end of 2013 or into 2014 with the cash we have on hand.

So that is somewhat limiting as to the type of program that we would be able to acquire rights to. That being said, we have wondered about entering into a transaction over the course of this year not unlike the original transaction for 1686 with Avila, which was really an early-stage discovery-based collaboration with the goal of getting from signing of that deal to an IND in about 18 months. And we would be attracted to that. We have identified internally some targets we find very attractive and we have identified some companies who are interested in perhaps working with us along those lines.

So that's the sort of -- to the extent we bring in a fourth compound this year, I think it would be along those lines. I will say as an aside, we do get a number of inbound calls for later stage assets. Some of which I think could conceivably be attractive. So I think that there remains an opportunity for us for our financial resources to be greater in 2013 or 2014 following LEAP data to bring in additional assets that would be very attractive to us and consistent with our theme of identifying a patient population that will benefit from a specific therapy through the use of a companion diagnostic.

All right, thank you.

(Operator Instructions) Your next question comes from the line of Josh Schimmer with Leerink, please proceed.

Good morning, and thanks for taking the question, it's on 1686, and just curious for the dose evaluation phase, what is that going to look like? How many patients are you going to be evaluating? What kind of patients are you looking at? What are the criteria you're going to be using to select the dose to move forward?

Good question. If Andrew were here he would say, don't predict the time it would take to do a Phase I study. So I will just say I cannot predict the time it will take to do a Phase I study or the number of patients it will require to get to a dose. So with patient population, we'll do the study and initially it will be Tarceva and Iressa failures. In the dose finding phase, we are not going to be requiring they be T790M positive.

Of course, in the expression cohort, which we'll get to once we achieve a dose, they will only be, of course, T790M positive patients who have failed Tarceva or Iressa. We are curious ourselves about the dose finding phase of the study because as you know, this is a very specific covalent inhibitor ofthe activating mutations of EGFR and of the T790M mutation. We have terrific evidence in a number of animal models that we do not inhibit wild-type EGFR except at a concentration far higher than that at which we inhibit those activating mutations in T790M. And further, when we look at one of these kind of kinomes we find very little activity against any other kinases. This is not just a standard kind of dirty kinase inhibitor, but a very specifically directed drug.

As a consequence, we aren't sure that a standard MTD-type dose finding study is going to be the way in which we are going to be able to achieve the appropriate dose for this drug. More likely, it will be driven by exposure, and once we achieve our fairly consistent exposure, we would I think imagine that is likely going to be the dose at which we would move forward. By the time we see that, I hope and believe that we will begin to see evidence of response in the patient population at that dose prior to moving into the expansion phase of the study.

How do plan on defining Tarceva or Iressa failures? And for that population, what percent would you expect to be T790M on an all comer basis?

So first of all in the first phase, we're not testing for T790M, it would be somebody who begins to progress on either -- so the failure on Tarceva and Iressa will be evidence of progression. And that would be done primarily through a radiological scan. And the patient population for the T790M population has been published in multiple studies now. And it is always 50% of the patients who fail on Tarceva or Iressa fail because of the T790M mutation. So effectively 50% of the patients on Tarceva or Iressa fail because of the emergence of this gatekeeper mutation.

Got it. Very interesting. I'll look forward to updates on that program. Thanks.

Thank you.

At this time I show we have no further questions. I would now like to turn the call back over to Anna Sussman for any closing remarks.

Thank you very much. We thank each of you for your interest today in Clovis Oncology. If you have any follow-up questions, please call me at 303-625-5022. This call can be accessed via a replay of our webcast at our website beginning in about an hour and it will be available for 30 days. Again we appreciate your interest and time. Thank you, and have a good day.

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