Clovis Oncology Inc (CLVS) 2012 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Q2 2012 Clovis Oncology, Inc. earnings conference call. My name is Pareeta and I will be your operator for today. At this time all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of the conference. (Operator Instructions).

As a reminder, this call is being recorded for replay purposes. This call is hosted by Breanna Burkart, Senior Director of Investor Relations. I would like to turn over the call to Breanna. Please proceed, ma'am.

Good morning and welcome to the Clovis Oncology second-quarter 2012 financial results conference call. You should have received a news release announcing our first-quarter financial results. If not it is available on our website at www.ClovisOncology.com.

As a reminder, this conference call is being recorded and webcast. Remarks may be accessed live on our website during the call and will available in our archives for the next several weeks.

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

Also joining us on the call for Q&A is our Chief Medical Officer, Andrew Allen.

Before we begin, please 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 plans. 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.

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 statement.

Now I will turn the call over to Patrick Mahaffy.

Thanks, Breanna. Welcome, everybody. Thanks for joining us this morning. We had a good quarter and we made meaningful advances in all three of our existing clinical programs as well as adding a fourth potential program during the quarter. This morning I will take the opportunity to highlight each of our development programs.

First the CO-101, our lipid drug conjugate of gemcitabine, which is currently the subject of the pivotal LEAP study in metastatic pancreatic cancer patients from which we expect overall survival results during the fourth quarter of 2012. We are looking forward to these results as they have the potential to be practice changing in the management and treatment of metastatic pancreatic cancer, a disease for which I'm sure you know limited options are available today.

LEAP is an international randomized controlled 360 patient study designed to demonstrate that CO-101 improves overall survival versus gemcitabine in hENT1 low metastatic pancreatic cancer patients. For gemcitabine to kill cancer cells, it must enter those cells through specific membrane transporters on the surface of the cells and hENT1, human Equilibrative Nucleoside Transporter 1, has been shown to be the dominant transporter for gemcitabine.

LEAP is the first study that seeks to prospectively confirm this hENT1 hypothesis which has been demonstrated in retrospective analyses and published in multiple publications. These studies have shown a very strong correlation of overall survival outcomes for pancreatic cancer patients to hENT1 expressions, with patients that have low hENT1 expressions receiving little or more likely no benefit from gemcitabine therapy.

Earlier this year, the independent data monitoring committee for the LEAP trial informed us that 64% of the 360 patients enrolled in the LEAP study are classified as hENT1 low. This didn't surprise us. This percentage is consistent with all of the retrospective analyses that we and others have conducted.

On an interesting note, we received an additional and very important independent validation of this hypothesis during this quarter. Data was presented at the European Pancreatic Club Conference in Prague this June from the European study group for pancreatic cancer, ESPAC, that confirm patients with low tumor hENT1 expression receive far less benefit from gemcitabine therapy than those with high tumor hENT1. Researchers analyzed tumor samples from the ESPAC trials. These were large randomized studies of adjuvant gemcitabine in order to examine the association between tumor hENT1 expression and survival.

In 176 patients treated with gemcitabine in ESPAC-3, median overall survival was 17.1 months in the hENT1 low group compared to 26.2 months in the hENT1 high group. In patients treated with 5-FU, tumor hENT1 expression was not predictive of survival. There was no difference in the hENT high and hENT low patients.

These results from ESPAC effectively duplicate our own study from the RTOG study where we showed a 25-month versus 15-month survival for the hENT1 high versus hENT1 low. We were pleased to see the hENT1 hypothesis further validated in this robust and definitive study.

We believe CO-101 may also have application in other tumor types where gemcitabine is commonly used. We are expanding our clinical development program into these other tumor types, with a particular focus in lung cancer.

While gemcitabine is used as monotherapy in pancreatic cancer, it is commonly used in commendation with Cisplatin in other tumor indications. Accordingly, we recently initiated a Phase I study of CO-101 in combination with Cisplatin in non-small cell lung cancer and are currently dosing the first patients in this study. This is a two-part study. The first part of the study we will evaluate the safety, tolerability, and pharmacokinetics of ascending doses of CO-101 in combination with Cisplatin given to patients with advanced solid tumors and select a dose for further evaluation in the second part of this study.

Part two of the study will explore the clinical activity of CO-101 in combination with Cisplatin in patients with non-small cell lung cancer. If the LEAP results are positive and with the dose established from this Phase I study, we would then be in a position to pursue clinical development programs in non-small cell lung cancer and potentially other tumors where gemcitabine is widely used as well.

Now a brief update on our second-line metastatic pancreatic cancer study for CO-101. This study enrolled 19 patients who failed to respond to first-line treatment with gemcitabine and immediately progressed and who also hENT1 no. As you can imagine, these patients have a terrible prognosis. To be eligible for this study, patients also had to have tumors classified as hENT1 no by the UCLA pathology team using their own hENT1 IHC test. We had established our test at the time this trial was initiated.

We chose to study this population because it represents a stringent test of the hENT1 hypothesis, and any responses or, importantly, any impact on survival seen in this group of gemcitabine failures would be very positive evidence of CO-101 activity with each patient acting as their own negative control.

We have treated 19 patients, and three of those patients had objective clinical benefit response although one of the responders did not meet the strict eligibility requirements of the study. Two of the responders were [resist] partial responses. No clear relationship has ever been established between response rate and survival for gemcitabine and pancreatic cancer, which has the response rate in the single digits as front-line therapy. And this may be equally true for CO-101, which, of course, is the gemcitabine analog.

Median overall survival in the second-line trial dated from the time of inclusion in the trial will be between four and seven months. This is extremely encouraging, given the initial gemcitabine refractory nature of these patients. In fact, three of the 19 patients lived beyond 12 months, two of whom are still alive at 14 and 16 months.

No formal cross trial comparisons can be made since we are not aware of any other study done in this extremely challenging patient population. There were no unexpected toxicities in this trial and we plan to meet with investigators in the next couple of months to determine next steps in the second-line setting.

The study is in a very difficult to treat population and took approximately 15 months to enroll just 19 patients. As a consequence, we are unlikely to continue to limit any second-line study to just this patient population. It is more likely that we would begin a new second-line study with more conventional eligibility criteria.

Turning now to CO-1686, which is our oral small molecule covalent inhibitor of the mutant forms of epidermal growth factor or EGFR for the treatment of non-small cell lung cancer. 1686 targets both the initial activating EGFR mutations as well as the dominant acquired resistance mutations, T790M, and it has the potential to treat non-small cell lung cancer patients with EGFR mutations, either as a first-line or as a second-line treatment or as both a first-line and second-line treatment.

Because it spares wild type or normal EGFR, we believe CO-101 -- excuse me, CO-1686 has the potential to cause a lower incidence of toxicity, such as skin rash and diarrhea, normally associated with currently used EGFR inhibitors.

The Phase I/II trial we initiated last quarter in the US and EU is progressing as planned. We are pleased with the exposure rates and PK profile we are seeing and we have not seen any skin, GI or, for that matter, any toxicity through the fourth cohort of patients treated. Following the establishment of the appropriate dose, we intend to study 1686 and expansion cohorts of 25 to 60 non-small cell lung cancer patients who have failed either Tarceva or Iressa, and had developed a T790M-resistant mutation.

We also, at the urging of the clinicians involved in our program, intend to study 1686 and an expansion cohort of newly diagnosed patients who expressed the activating mutations of EGFR. If successful, this would position us to move rapidly into the front line setting as well.

Partly because of the speed at which these cohorts are enrolling, we have decided to delay our planned Phase I study in Japan until next year. In particular we would like the Japanese Phase I study to be informed by our current ongoing Phase I/II study, ideally starting the Japanese Phase I at a dose close to our selected dose. And we would rather conduct the Japanese study with the tablet formulation we are developing as our commercial formulation of CO-1686, which we expect will be available for use next year.

We expect to have proof of concept data in the T790M population from the ongoing Phase I/II study in the second half of 2013 and, if results are positive, our goal is to advance 1686 development from IND to NDA submission in approximately four years.

And now to our third product,rucaparib, which is our orally available small molecule inhibitor of PARP-1 and PARP-2, which we are developing as both a monotherapy and a combination of chemotherapeutic agents in patients who are predisposed to PARP inhibitor sensitivity.

We have been pleased with the progress in both our ongoing sponsored monotherapy and combination chemotherapy Phase I/II studies as well as the investigator-sponsored monotherapy and combination chemotherapy studies. Our Phase I/II monotherapy study is advancing as planned and once the optimal dosing schedule has been established we intend to expand the study to assess the efficacy of rucaparib in patients with breast and ovarian cancers associated with germline mutations in the BRCA gene.

And in 2013, we intend to initiate a global registration study in platinum-sensitive ovarian cancer patients with deficiencies in BRCA and other DNA repair genes.

Earlier this week, we took the first step in developing a companion diagnostic through rucaparib, announcing an agreement with Foundation Medical to identify the additional genetic mutations beyond those in germline and somatic BRCA that are associated with defective DNA repair or may be useful in identifying those additional patients who could benefit from rucaparib.

In high-grade serous ovarian cancer, for example, this has the potential to increase the percentage of ovarian cancer patients potentially eligible for rucaparib from the 15% typically found to have germline mutations of BRCA to an estimated 40% to 50% of ovarian cancer patients who have DNA repair deficiencies caused by somatic mutations in a variety of genes.

We were pleased last week to learn as well that the FDA has designated rucaparib as an orphan drug for the treatment of ovarian cancer.

Finally, I would like to talk about the agreement we announced last month with Array BioPharma. Array is a company with a great track record in the discovery of novel drugs and they also happen to be our neighbor here in Boulder, Colorado.

Clovis and Array will collaborate on the discovery of a novel KIT inhibitor targeting resistant mutations for the treatment of GIST. GIST is a GI cancer for which currently approved therapies include the TKI's [feedback insutim], typically used first and second line respectively. Each inhibits certain KIT mutations, but acquired resistance due to secondary KIT mutations is common, resulting in progressive disease.

Exon 17 mutations are the most difficult to treat of these mutations and usually emerge after other TKI therapy in at least half the patients with progressive disease. None of the approved TKIs inhibit all of the exon 17 mutations. We are seeking to discover a potent oral inhibitor of KIT mutations, including exon 17. We will be fully responsible for all the aspects of preclinical and clinical development, commercialization, and development of a companion diagnostic to prospectively identify patients with these specific KIT mutations.

This program is highly complementary to our current programs in development, and dovetails nicely with our pipeline. Now I'll turn the call over to Erle to discuss the financial results and guidance for the rest of the year.

Thanks, Pat. Good morning, everyone. Our full financial results are included in this morning's press release, so I would like to direct my comments just to specific highlights for the quarter and year to date.

We reported a loss of $15.7 million for the second quarter of 2012 or $0.61 per share. Our loss for the first six months of 2012 was $34.7 million or $1.45 per share. The loss of the first half of 2012 includes a $4 million milestone paid in the first quarter in connection with the exceptions of the IND for CO-1686. Research and development expenses totaled $12.6 million for the second quarter of 2012 and $25.2 million for the first six months of the year.

Now as expected, these amounts increased significantly over R&D expenses for the comparable periods of 2011 reflecting the end licensing of rucaparib in June 2011, the advancement of CO-1686 into human clinical trials and increased development activities for CO-101.

We ended the second quarter with cash and cash equivalents totaling $176.9 million. And as a reminder, in April, we raised net proceeds of approximately $70 million from the sale of 3,750,000 shares of common stock.

Now as we previously stated, we expect cash burn for 2012 of $67 million to $72 million ending the year with approximately $140 million in cash and cash equivalents.

Now I'll turn the call back to Patrick for some closing remarks and then we'll open it up for Q&A.

Thanks, Erle. So we had a productive second quarter as we advanced all three of our clinical developer programs and added a fourth potential program in our partnership with Array. We have a very strong foundation in place and look forward to completing 2012 with milestones, in particular one milestone, that we hope will be transformative for our Company.

And with that, thanks for joining us and we would be happy to answer any questions you may have.

(Operator Instructions). Ravi Mehrotra, Credit Suisse.

Good morning. Congratulations on a pretty busy quarter. Just a couple of questions. On 101, the second-line trial that you talked about, you said more conventional anti-criteria. Any color on that would be useful.

Also on 101, I know it is really early stages, but just conceptually, can you just talk about what you think about the pricing environment for that product? If it was indeed successful in Q4?

And then on 1686 -- sorry, there is a lot of data points there. You may have said this and I may have missed it, but when would you expect to complete enrollment for this phase [1719] mutation trial? Thank you.

So, I will answer those three quickly. Andrew may add some color to it. As to conventional criteria, the criteria for this trial were pretty straight. You had to have had no response to gemcitabine. You basically had to blow through gemcitabine therapy and progress very rapidly. And secondly you had to be classified as hENT no, which is pretty limiting in terms of entry criteria.

If we go forward with another second-line study, which I imagine and intend to do, it would probably be a very standard second-line study where patients who were hENT low and who had failed gemcitabine or a gemcitabine containing regimen or even folfirinox would be eligible for enrollment in that study. So one that is more sort of second line to anything anybody has had as long as they would be hENT low. We will focus our energies on the hENT low population.

As to pricing, you know I am not going to answer that question. But I admire you asking. Obviously the pricing environment remains very good for novel oncology drugs that demonstrate meaningful clinical benefit. And in our case that clinical benefit is driven by survival. And so, to the extent that we show the doubling of survival that we have designed the trial to show, we obviously would be in a very strong position in terms of pricing for the drug.

And as to the enrollment, when we complete enrollment in 1686 I am going to let Andrew as I said answer that question because he hates that question because it is a hard one to answer. Andrew?

Well, thanks, Pat. Appreciate that. (laughter). Yes, Ravi, as you know the challenges Phase Is are unpredictable. We don't know the human PK and animals are poorly predictive of humans. And so we are in this escalation and we don't know when we are going to achieve [our MTD]. Obviously that is the -- one of the key endpoints of the study is to determine the human MTD. Because, you know, this drug was designed to have a large therapeutic window.

So we hope to achieve efficacious exposures some way before the point at which we are achieving toxicity. We don't know what will be driving toxicity, whether it would be EGFR-related or related to one of the other off targets so that obviously, eventually, our drug at very high exposures will start to inhibit. That is what makes it obviously such a hard study to predict the conclusion of.

When it finishes, obviously, we will then be rolling into an efficacy study in the T790M population. You have got to be careful overinterpreting early data because in each of our mutant patients, when they receive early on presumably at some point in their course Tarceva, when they progress and typically will receive other either chemotherapies or experimental therapies, that original activating clone can reaccumulate and then become dominant in disease.

So, it is not a given that a patient who is resistant to Tarceva at one point early in their clinical course will remain resistant to Tarceva later. And in fact, it is quite common these days to treat, retreat patients with Tarceva after an interval with some alternative therapy if they have mutations in their EGF receptor.

All of this is a way of saying once we've achieved the appropriate dose it's really the expansion into very carefully and tightly defined T790M population that is critical. And the key is to make sure that they are T790M driven as they enter your efficacy study. And that is a very carefully defined population, different from the Phase I dose escalation population where obviously we are just looking for safety in PK.

One thing to add in terms of timing. We are fortunate that investigators are really enthusiastic about this program. And so, each of our dose escalation cohorts has been rolled in about a week. So that the speed is about as good as it can get for a Phase I study.

And I anticipate that when we do get to that dose and just to endorse what -- obviously what Andrew said, we don't know that it is going to be MTD-driven, given the profile of this drug, so maybe exposure-driven. But when we get to that dose, I think the expansion cohorts both in the first- and second-line setting will enroll relatively rapidly.

Thank you.

(Operator Instructions). Ravi Mehrotra, Credit Suisse.

If no one else wants it, I'll take it. Could you just give us a little bit more color on the PARP diagnostic collaboration and the expansion from just plain BRCA to DNA repair deficiencies? Just any additional color on that would be useful. Thank you.

Andrew?

So, as you know, a lot of other PARP inhibitor programs are centered on germline BRCA mutant patients where, obviously, the drugs have been demonstrated. I use the term loosely, the drugs, meaning the class have been demonstrated to have activity -- olaparib, obviously, and then the Merck compound as well.

Now that is obviously a small slice of ovarian cancer and it has become clear that the major, most common and most lethal form of ovarian cancer is high-grade serous ovarian cancer. And some epidemiology studies suggest that if you take 100 patients with high-grade areas of varying cancer, on average about 15 of them or so will have mutations in their germline BRCA genes, and an additional 7% or 8% will have somatic mutations in BRCA, i.e., mutations present only in the tumor and not present in their peripheral blood and their germ line.

So the data that we have from outcomes suggests that somatic BRCA mutations functionally behave in exactly the same fashion as the germline mutations. So one attraction of doing tissue-based sequencing to identify appropriate patients for chemotherapy with rucaparib is that you are obviously increasing the group of patients you have. These apparently are very, very good responses driven by mutations in BRCA. And I use that term to encompass both the germline and somatic. That is one attraction of somatic sequencing.

Another attraction is there are many other gene members of the DNA repair family. And there are data now particularly from the TCGA data set. This is the Cancer Genome Atlas sponsored by NIH and others that reported in ovarian cancer in the middle of 2011 that suggested around 51% of high-grade serous ovarian cancer is associated with genetic defects in DNA repair genes. And obviously that group of patients is believed to be what we would call the BRCAness population.

When you look at their clinical outcomes on platinum, which is regarded as a proxy for BRCAness, they have very good outcomes. Now they are somewhat intermediate between the sort of traditional quote wild type population and the mutant BRCA. They are somewhere in between. And that defines obviously a BRCAness population that we think would also be a very good set of candidates for treatment with rucaparib. And again, these patients can be identified with somatic DNA sequencing.

So, somatic sequencing is obviously an attractive possible diagnostic pathway for us to follow. And Foundation Medicine is, I'm sure you are aware, are leaders in that space and are already offering a lab developed test sequencing around 300 human genes and interpreting those sequences. And so, they were a natural partner for us to sign up with to explore this diagnostic possibility.

That's pretty useful. Thank you, Andrew.

Sure.

Cory Kasimov, JPMorgan.

Good morning, this is Karen Jay in for Cory Kasimov. I just want to apologize for getting on the call a little bit late. So you may have covered some of my questions. But I'm just wondering if I could get an update on the diagnostic for a CO-101 and how that is tracking in terms of being able to file together with the drug.

It has been on track and remains on track. They will file the CMA simultaneously with our NDA. In fact certain of the modules will go in before our NDA is submitted. Ventana has been a superb partner and we are very much on track with them from a regulatory and development standpoint.

Okay, and then just on, any of the data still expected in 4Q and filing still expected in 2013. Is that correct?

Absolutely. The intent is to have data in the fourth quarter to file for approval depending on when that data comes late some time in the second quarter with the possibility, depending on FDA's timelines, to have it approved before the end of the year.

Okay and just with that mid-2013 timeline, just wondering what are the -- if you go all the way to the middle of 2013, is that a fair amount of a good window? Just wondering what the leading factor is for filing after the data.

Well, part of the dating factor for that timeline is when we actually have the data. So depending on when the data comes, I think we would intend to be in a position to file for approval within five or six months of having the data. Pretty normal timeline in terms of an NDA submission. And I am confident that we will be able to do that.

We have no questions. I would now like to turn the call over to Breanna Burkart for closing remarks.

We thank each of you for your interest in Clovis Oncology today. If you have any follow-up questions please call me at 303-625-5023. This call may be accessed via a replay of our webcast at www.ClovisOncology.com beginning in about one hour and will be available for 30 days. Again, we appreciate your interest and time. Thank you and have a good day.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect and have a good day.