Curis Inc (CRIS) 2007 Q1 法說會逐字稿

Good day, ladies and gentlemen and welcome to the First Quarter 2007 Curis Earnings Conference Call. My name is Carol and I'll be your coordinator for today. [OPERATOR INSTRUCTIONS]. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Mr. Michael Gray, Chief Operating and Chief Financial Officer. Please proceed, sir.

Okay, thanks a lot. Good morning and thank you. Welcome to Curis' First Quarter 2007 Conference Call.

Before we begin, I would like to remind you that this conference call may contain statements about Curis' future expectations, plans and prospects that constitute forward-looking statements for purposes of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including risks relating to both our and our collaborators' abilities to successfully research, develop, obtain regulatory approvals for and commercialize products based upon our technologies, our ability to obtain and maintain proprietary protection for our technologies and product candidates, competitive pressures, our ability to maintain strategic collaborations and licensing agreements, including with Genentech, Wyeth, Proctor & Gamble, and Ortho Biotech, our ability to raise additional funds to finance our operations and those factors described in our quarterly report on Form 10-Q for the quarter ended March 31, 2007 and other reports that we file with the SEC.

The forward-looking statements included in this conference call represent our views as of today, May 2, 2007. We anticipate that subsequent events and developments will cause our views to change. While we may elect to update these forward-looking statements in the future, we specifically disclaim any obligation to do so. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this call.

A telephone replay of today's conference call will be available through May 14, 2007 at 5 p.m. Eastern Daylight Time and information about how to access the telephone replay is available on our website at www.curis.com.

Now I would like to introduce Dan Passeri, Curis' President and CEO. Dan will begin our call with a discussion of our first quarter business highlights and then I will return to review our financial results for this past quarter ending March 31, 2007, Dan.

Yes, thanks Mike. Good morning. The first quarter of 2007 was quite successful and important for Curis and we begin the year with Genentech's initiation in January of 2007 of the Phase I clinical trial of a systemically administrated Hedgehog antagonist small molecule for the treatment of cancer.

In 2007 February, Wyeth elected to extend research funding on our Hedgehog agonist program for stroke for additional one-year period through February 2008 and in March we announced that we had selected the first development candidate, which we call CUDC-101 from our Targeted Cancer Drug Development Platform and we are pleased with the continued progress in these programs. I will begin my remarks by discussing our topical Hedgehog agonist program, which is under collaboration with Proctor & Gamble since this program is reaching a near-term development decision.

I will then briefly summarize the status of certain of our other programs under collaboration and discuss our plans for our proprietary programs that we are developing under the Targeted Cancer Drug Development Platform.

Our collaboration with Proctor & Gamble is currently focused on the potential development of the topical Hedgehog agonist for hair growth disorders, such as male pattern baldness. Proctor & Gamble is currently conducting extensive pre-clinical studies specifically toxicology studies and pending the successful completion of these studies, we continue to remain hopeful that we will achieve the second preclinical development objective that is selection of a development candidate in mid 2007, which would trigger a $1.8 million cash payment.

We believe that the topically applied Hedgehog agonist covered under this collaboration has demonstrated impressive efficacy in pre-clinical models as evidenced by the achievement of the first pre-clinical development objective in 2006.

We expect that the main decision criteria, however, to achieving the second pre-clinical development objective is the testing being completed at Proctor & Gamble on the potential lead molecules will result in an acceptable toxicity profile. We expect that tolerance for toxicity for this indication will be low since unlike stroke or cancer indications, male pattern baldness is not a life threatening medical condition. We remain hopeful that this pre-clinical development objective will be achieved and look forward to Proctor & Gamble's decision in coming months.

Should we achieve the second preclinical development objective we would expect the Proctor & Gamble would begin studies to advance the molecule for IND filing with the FDA. Should Proctor & Gamble determine to file an IND, we would have the option to co-development of product candidate through Phase IIB of clinical development. If we elect to co-develop, we would forego contingent cash payments that would otherwise be payable for the achievement of certain development objectives during the co-development period, but we would receive; however, a higher royalty rate on product sales, if product candidate derived from our collaboration are successfully developed and commercialized. I will now turn to our Hedgehog antagonist program under collaboration with Genentech.

In January 2007, Genentech initiated a Phase I clinical trial of a systemically administered Hedgehog antagonist small molecule for the treatment of cancer. The Phase I trial is designed as an open label study of a systemic Hedgehog antagonist and patients with locally advanced or metastatic cancers that are refractory to standard therapy or for whom no standard therapies exist. The primary objectives of the Phase I trial are to evaluate the safety and tolerability of escalating doses of the Phase I molecule and to establish the maximum tolerated dose and dose limiting toxicities.

The trial is expected to enroll approximately 50 patients spread across several dose escalating cohorts and we received the $3 million payment from Genentech in October of 2006 in connection with Genentech's IND filing for the trial and would receive additional cash payment should the program advance beyond Phase I clinical testing including a cash payment upon the first patient treated in a Phase II clinical trial. We look forward to providing updates on the program in the future.

Under our collaboration agonist program for the treatment of neurological disorders we are continuing our efforts with Wyeth to search for additional agonist with toxicity profiles that are more attractive than the initial compound class that we evaluated. We believe that Wyeth remain committed to this program as evidenced by their recent election to extend their funding through February 2008 of five of our scientists to continue the preclinical development of Hedgehog agonist and neurological disorders, particularly stroke. We expect that Wyeth would increase the number of funded scientists, once we have identified compound to begin preclinical animal testing. We intend to update our development timing estimate assuming we progress further on the new Hedgehog agonist compounds.

In addition to the Hedgehog work being done in neurological applications, Wyeth has begun testing the Hedgehog protein in cardiovascular disease models. If Wyeth's preclinical Hedgehog protein studies are successful and if Wyeth successfully advances the development and commercialization of a systemic Hedgehog protein or agonist program for cardiovascular disease, we would be eligible to receive cash payments for the contingent on the achievement of certain preclinical and clinical development objectives, as well as royalties on future product sales.

Now, lastly I will turn to our BMP Protein and small molecule technologies. The BMP Protein is under license to Ortho Biotech but under development at Centocor both subsidiaries of Johnson & Johnson and the small molecule was the subject of our recently concluded screening effort with Centocor on the identification of small molecule agonist of the BMP pathway. We are currently in discussion with Centocor concerning the prospects of entering into a new screening collaboration. We are also discussing with Centocor potential development plans for the BMP Protein in an effort to work with Centocor, Ortho Biotech to develop path towards clinical testing. If we are unsuccessful in our efforts to enter into a new screening collaboration, or want to reach agreement on the development path for our BMP Protein, we plan to pursue with Centocor, Ortho Biotech the possibility of working with other possible collaborator that may have interest in moving this technology forward. I expect we will be in a position to update the status of this program during our next quarterly call.

I will now turn our efforts with respect to CUDC-101 Curis' first internally developed candidate -- development candidate and broader Targeted Cancer Drug Development Platform from which this drug candidate has been produced. Using our proprietary Targeted Cancer Drug Development Platform we are seeking to develop a number of promising new small molecule candidates, each of which has been designed to target multiple distinct validated cancer molecules or pathways.

We are currently developing a number of multi-target inhibited drug programs that combine a non-kinase target A with various B targets including EGFR, HSP-90, multi-protein tyrosine kinases, receptor tyrosine kinases, Bcr-Abl and others. We believe that by focusing on clinically or biologically validated cancer targets and designing a variety of targeted drug pharmacophores that may be differentially selective as well as combining potentially synergistic A/B pharmacophore combinations into single small molecules, we could develop one or more drug candidates that has the potential of providing anti-tumor activities across a broad range of resistant solid tumors -- solid tumors and hematological cancers as well as potentially reduced off target toxicities, chief-grade efficacy and potentially reduce the occurrence of drug resistance.

We believe that we have generated promising pre-clinical results and are optimistic about the future of these drug candidates. We have also aggressively pursued our patent protection in this area and have filed several patent applications to date including broad omnibus application that covers a drug design concept that is the basis of our targeted cancer drug development platform and several species of patent filings relating to specific classes of compounds such as target AEGFR.

In March 2007, we selected CUDC-101 as our first development compound from our targeted cancer drug development platform. CUDC-101 is a multi-target small molecule where the first active drug component is designed to inhibit target A which is currently undisclosed for proprietary reasons and the second active drug component is designed to inhibit target B which in this case is the epidermal growth factor receptor AEGFR. In addition, to the inhibition of AEGFR we have observed inhibition of HER2 another kinase target that is believed to play an important role in certain cancers including breast cancer. We believe that CUDC-101 has the potential to offer therapeutic benefit in several cancer types.

We believe that emergence of CUDC-1 as a development candidate demonstrates our ability to effectively conduct pre-clinical activities for small molecule cancer drug candidates through development candidate selection. We are working to add clinical development and regulatory capabilities and capacities as we seek to progress CUDC-101 and other potential future candidates from our targeted drug development platform to IND application filing and into human clinical testing.

We have been actively working towards our goal of filing an IND for CUDC-1 by early 2008 while at the same time engaging in a potential collaboration discussions and we remain hopeful that we will be able to consummate a collaboration for CUDC-101 during the second half of 2007 or early 2008, while we advance CUDC-101 toward clinical testing we are also continuing to advance other drug candidates in our Targeted Cancer Drug Development Platform including multi-target inhibitor that is designed to inhibit HSP-90 and the same non-kinase target, target A in CUDC-101. We are hopeful that we can advance at least one additional compound into development status in late 2007 or early 2008 continuing to build out our pipeline.

I am pleased with the progress that we have made to date and of the efforts of Curis employees that have worked extremely hard to progress our Targeted Cancer Drug Development Platform programs in a highly effective and efficient manner. I look forward to providing future updates on CUDC-101 and our targeted development drug platform and right now, I will turn the call back over to Mike. Mike.

Okay, thanks Dan. For the first quarter of 2007 we reported a net loss of $3.5 million or $0.07 per share as compared to a net loss of $4 million or $0.08 per share to the prior year period. Net revenues, which are those revenues generated under our ongoing collaborations and net of any contra-revenues were $2.4 million for the first quarter of 2007 as compared to $2 million to the first quarter of 2006, an increase of $400,000. The increase in our net revenues is primarily the result of three things, first a decrease in contra-revenues which resulted in an increase to net revenues. Second, an increase in our license fee revenues and three, these were partially offset -- these two increases were partially offset by decreases in our research funding revenues. Operating expenses for the first quarter of 2007 were $6.2 million as compared to $6.4 million for the first quarter of 2006, a decrease of $200,000.

The changes in our R&D and G&A operating expense categories are as follows; research and development expenses were $3.3 million for the first quarter of 2007 as compared to $3.5 million for the same period in the prior year a decrease of $200,000. Overall spending decreased as research funding for a majority of our research programs under collaboration concluded during 2006, or early 2007. We reallocated certain of the internal employee resources to our internal Targeted Cancer Drug Development Platform Programs during the 2006, and early '07 period. Spending on our Targeted Cancer Drug Development Platform Programs accounted for $1.7 million, or 52% of our first quarter 2007 R&D expense. Our R&D expense included stock-based comp of $242,000 and $255,000 for the first quarters of 2007 and 2006 respectively.

General and Administrative expenses were $3 million for the first quarter of 2007 as compared to $2.9 million for the same period in the prior year, an increase of $100,000. The increase is a result of increased spending related to our patent portfolio including filings of foreign patent applications, for which our collaborators will reimburse at least a portion of those patent costs as well as for patent filings related to our Targeted Cancer Drug Development Platform Programs.

Other spending for our G&A expenses as a whole, remained reasonably consistent with that of the prior year period. Our G&A expense includes stock-based comp of $673,000 and $508,000 for the first quarters of 2007 and 2006, respectively. Other income for the first quarter of 2007 was $344,000 as compared to other income of $302,000 for the same period in 2006. Other income in each period was principally due to interest income of $365,000 and $374,000 recorded for the first quarter of 2007 and 2006 respectively.

As of March 31, 2007, cash, cash equivalents and marketable securities were $32.7 million and there were approximately 49.4 million shares of our common stock outstanding. With that I'll conclude the financial remarks and now I turn the call over to Dan for some final remarks.

Thanks Mike. I would like to thank everyone for joining us on today's call and I look forward to updating you in the future and I will now open the call up for questions.

Thank you, sir. [OPERATOR INSTRUCTIONS]. And the first question comes from the line of John Sullivan with Leerink Swann, please proceed.

Hey guys, good morning.

Hi John.

Good morning, John.

I had a couple of quick questions if that's okay, both financially and based on therapeutic approach. First of all regarding financial, Mike can you just talk about cash consumed in the quarter on operations and what is reasonable to expect on a going forward basis regarding cash trend?

Yes, sure. Our cash consumption increased as probably part of your question when compared to the last couple of years -- last couple of years mostly all of our employees were working on funded programs with Genentech and Wyeth in particular. Those programs -- the research side of those have all concluded, so we have shifted most of our internal resources to work on the Targeted Cancer Programs. In -- at our year-end call and our year-end earnings release that have provided cash guidance, which is still accurate for 2007, which is -- I expect to run the year with between $20 million and $23 million in cash, so we will consume about between $14 million and $17 million in cash during the year.

Okay, thanks very much for that and then Mike can you just address a question that I have gotten from investors in the past, it's pretty challenging to find a drug that successfully mediates a single-target, in your dual-target program, might be sought by some to be even harder, what would you say to investors that why you have got a dual-target program -- is it more complex than a single-target approach?

Yes. That is actually an extremely important question, John, and if you look at the trend in development of drugs in oncology, if you look back several years most companies were trying to develop highly specific Isoform Inhibitors, ERISA is an example of that, Tarceva is an example of that and they are showing some efficacy, which is very important because we have lower tox -- off target toxicities associated within the traditional approaches. However, there is a growing trend in what we call dirty kinanses, or multi kinanses inhibitors such as Sprycel that are inhibiting more than one pathway. Tumor cells are complex heterogeneous populations of dis-regulated cells using various means to foster their growth and spread. And hitting one specific Isoform targets will typically attenuate growth rates but the tumor will respond either through clonal expansion of cells that don't have -- aren't dependant on that specific pathway or by using redundant pathways. So to further underscore this growing trend there is an impressive trend emerging with combination therapy and its likely to turn out that cancer is going to be a manageable disease treated much in the same manner in which HIV is treated whether using cocktails and they're changing those cocktails over time, because you have a dynamically responding cell population and that's really what this dual-target inhibiter is predicated on. If the observation that targeted therapy is the emerging trend that is likely to hold the most promise for cancer therapy and that combination therapy hitting the tumors with more than once intervention stress point is likely to hold the greatest promise for efficacy and reduced off target toxicities.

So in particular Target A, which we don't disclose by the way because we filed the provisional application series of them and we have a 12-month grace period to continue to bolster those applications. We don't want to compromise our IP position with a disclosure of Target A, but Target A is a non-kinase and there has been reports in the literature of clinical efficacy with combination therapy of inhibiting Target A and other targeted intervention. Though, that really is what led our scientist to the insight and innovation of combining the Target A moiety with other drug pharmacophores and we are just fortunate that this approach has been tried with other drug structures, we are fortunate that the selection of the Target A pharmacophore lends itself to integration into other drug skeletons allowing us to retain small molecule status, so these molecules are under 500 molecular weight and the structure of A&B are such that we don't have [steric] interference, so that when the Target B moiety binds to Target B, the Target A components doesn't interfere with that binding and vice-versa and we also think, we have advantages in the kinetics of the drug, so that when it binds to one target usually, that was called a stoichiometry balance where you have association, disassociation kinetics and the advantage is that we are binding to Target B if it disassociates to the percentage of that drug that is likely bind to Target A. So in -- what we are expecting is that we should be able to achieve greater efficacy with lowered dose requirements and should be able to do this with lower off-target toxicities. I want to underscore that our provisional filing was in September 2006, so we have been holding off on disclosing Target A, we are likely to disclose at sometime subsequent to September 2007 when we have filed our final utility patent.

Thanks very much, that was very helpful.

Okay.

[OPERATOR INSTRUCTIONS]. We have follow-up question from the line of John Sullivan, please proceed.

Hi guys, just on the same program I did have another question.

Sure.

You talked about filing an IND by year 2008 potentially in this therapeutic approach. Is the preclinical work with toxicology work, is it much more complex when you are trying to mediate two targets at the same time? I have heard of -- from a preclinical and toxicology testing sampling?

Yes. Again John these are really important questions because I really think it underscores the advantage of this approach. Now bear in mind we don't -- just we are going after validated targets.

These targets already have a defined clinical past. The toxicities associated with these targets are already known. So we have learnt from what's already been done out there. There are combinations studies by the way that are showing increased efficacy. And this is a single agent, so single chemical entity. What we are anticipating is that the [inaudible] should not see greater toxicities than what you have seen with the single agents either alone or in combination. And we are hoping because of the impressive enhanced potency that we have been able to achieve, which is the binding affinity of these in terms of ability to inhibit 50% of the pathway out of certain concentration. So we have seen increased potencies, so we are expecting lower dose requirements and therefore lower off target toxicities.

Okay, very helpful. And then would you anticipate that the molecules that you develop in this Targeted Cancer Drug Development Platform, do you anticipate that all be small molecule drugs?

Yes. That's we are aiming for, so far we are now looking at anything that has molecular weight over 500 as a viable candidate, so we are really working very diligently and driven by the synthesizing compound that are in the small molecular range and also enhancing potency of the prototype drug pharmacophores.

Thanks very much again.

There are no additional questions in the queue at this time, I will now like to turn a call back over to management closing remark.

Okay. Again, we want to thank everyone for joining us this morning and we look forward to continue to provide you with updates as we progress both on our partner programs and our proprietary platform of cancer drugs. And thank you for joining the call and again looking forward to give you continual updates in the future. Thank you.

Thank you for joining in today's conference. You may now disconnect. Good day.