Curis Inc (CRIS) 2007 Q3 法說會逐字稿

Good day ladies and gentlemen and welcome to the third quarter 2007 Curis earnings conference call. My name is [Shanique] and I will be your coordinator for today. At this time all participants are in listen-only mode. We will be facilitating a question and answer session towards the end of this conference. (OPERATOR INSTRUCTIONS).

I would now like to turn the call over to your host for today's call, Mr. Mike Gray. Please proceed.

Okay, thanks. Good morning and thank you for joining us. I'm Mike Gray, chief operating and chief financial officer at Curis. Welcome to the third quarter conference call.

Before we begin I'd like to remind you that this conference call may contain statements about Curis' future expectations, plans and prospects that constitute forward-looking statements within the meaning of the Private Security Litigation Reform Act of 1995 including statements relating to the expected progress of our internal programs and our programs under collaborations with Genentech and Wyeth.

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 and obtain regulatory approvals for and commercialize products based on our technologies, our and our collaborators' abilities to obtain and maintain necessary proprietary protection for technologies and product candidates, competitive pressures, our ability to maintain our current collaborations with Genentech and Wyeth and to enter into other collaborations on favorable terms, our ability to raise additional funds to finance our operations, and other factors including those described in our quarterly report on form 10Q for the quarter ended June 30, 2007, and other reports that we periodically file with the SEC.

The forward-looking statements included in this conference call represent our views as of today, October 30, 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 this conference call.

A telephone replay of today's conference call will be available through November 13, 2007 at 5:00 PM Eastern Time and information about how to access the telephone replay are available on our website at www.curis.com.

I'd now like to introduce Dan Passeri, our president and CEO. Dan will begin our call with a discussion of third quarter business highlights and then I'll return to review our financial results for the three and nine months ended September 30, 2007. Dan?

Thanks, Mike, and good morning. Overall the third quarter was a good quarter for Curis. In August we completed a $14.5 million private placement. The proceeds from this private placement improve our position as we continue to progress CUDC-101 toward IND filing, which we expect to occur in the first quarter 2008.

In September we disclosed that CUDC-101 is designed to inhibit HDAC, EGFR and Her2, three validated cancer targets. We believe that CUDC-101 is a first-in-class compound under development to simultaneously inhibit these three targets. We also disclosed for the first time the identity of HDAC as core target and in of our multi-targeted inhibitor drug programs that we are developing under our targeted cancer drug development platform.

We believe that the common HDAC inhibition element of all of our multi-targeted inhibitors is important since there's published evidence as well as Curis generated preclinical evidence demonstrating synergistic induction of cancer cell death between HDAC inhibitors and a diverse range of other targeted therapies or standard chemotherapeutic agents, potentially making HDAC inhibition more broadly effective in the treatment of cancer when used concurrently with other inhibitory activities.

Our multi-targeted inhibitor programs were initiated when our scientists noted that the active component of several HDAC drug compounds appeared to be well suited for integrating into the core chemical structure of other cancer drugs.

Using this insight, we have created a platform of preclinical small molecules that are designed to inhibit HDAC as well as at least one other validated cancer target in order to simultaneously inhibit the respective targets in tumor cells. The particular targets have been selected for their potential for synergistic mechanism of action with HDAC to potentially target multiple kinds of cancers.

For example, in CUDC-101 we believe that the inhibition of HDAC in cancer cells results in a greater sensitization to EGFR and Her2 inhibition leading to increased cell death. We believe that our single compound approach may address some of the limitations of current therapies by potentially providing enhanced potency, lower toxicity and greater synergies than a combination of single agents.

Furthermore, the results of our preclinical testing suggests that our multi-target approach also has the potential to reduce the occurrence of drug resistance.

In addition to our IND enabling efforts around CUDC-101, we made significance progress on other compound classes of drug candidates under the targeted cancer drug development platform most notably in our proprietary orally available Hsp90 inhibitor and several of our multi-targeted inhibitors including compound classes that target HDAC and Hsp-90 concurrently, HDAC Bcr/Abl and HDAC CDK2.

We expect we will select a development candidate from one of these drug programs by the end of 2007. It'll most likely come from the Hsp90 inhibitor program and the dual targeting HDAC/Hsp90 inhibitor program.

In addition to the progress on CUDC-101 and other targeted cancer drugs we're seeking to develop, we believe that our Hedgehog based programs under collaboration with Genentech and Wyeth have made progress during the third quarter and early in the fourth quarter.

I'll begin with our Hedgehog antagonist program under collaboration with Genentech. And in January 2007 Genentech had initiated a phase I clinical trial of a systemically administered Hedgehog antagonist for the treatment of cancer. The phase I trial is designed as an open label study of a systemic Hedgehog antagonist in patients with locally advanced or metastatic cancers that have relapsed after first and second line therapy or for whom no clinically beneficial therapy exists.

The primary objectives of the phase I trial will evaluate the safety and tolerability of escalating doses of the phase I molecule to establish the maximum tolerated dose and dose-limiting toxicities and to characterize the pharmacokinetic and pharmacodynamic properties of the drug candidate.

We received a $3 million payment from Genentech in October 2006 in connection with Genentech's IND filing for the trial and we have the right under the agreement to receive additional cash payments should the program advance beyond the current phase I expansion cohort.

In October 2007 Genentech notified us that the initial objectives of the phase I clinical trial of a systemically administered Hedgehog antagonist had been achieved and that Genentech had initiated an expansion cohort in its ongoing phase I clinical trial, which is expected to enroll additional patients in a specific cancer indication for preliminary signs of clinical response as well as continued accumulation of phase I safety data.

As a result of the achievements of this clinical development milestone, we received a $3 million payment from Genentech. Genentech determined it was obligated to make the $3 million cash payment because the phase I clinical trial expansion cohort satisfied the criteria for a phase II clinical trial under the June 2003 collaboration agreement in which a phase II clinical trial is defined to include a limited number of patients that are designed to establish the safety and biological activity of a drug for its intended use.

Also in October Genentech announced that it expected to make a decision regarding whether to advance the phase I molecule into phase II clinical testing during the fourth quarter of this year. Should this phase I molecule advance into phase II clinical testing, we would be eligible to receive additional phase II clinical trial milestones.

We look forward to providing updates on progress of this program in the future regarding the initiation of phase II clinical trials should Genentech determine to advance the phase I molecule into phase II clinical testing.

Under our systemically administered Hedgehog agonist collaboration with Wyeth we're continuing efforts in the stroke program to search for additional small molecule Hedgehog agonists with improved toxicity profiles. We're currently with Wyeth to make progress on the new Hedgehog agonist compounds. We anticipate providing further updates regarding this program.

In addition to the small molecule Hedgehog agonists work being done with stroke, earlier this year Wyeth began testing our Hedgehog protein in cardiovascular disease models. In August we were notified by Wyeth that preliminary data with protein agonists of the Hedgehog signaling pathway showed promising results in an established early preclinical cardiovascular animal model. These positive results are consistent previously published third party data in which upregulation of the Hedgehog pathway demonstrated to be efficacious.

Research using Hedgehog protein agonists in various cardiovascular disease models is ongoing at Wyeth under our February 2004 collaboration agreement. If Wyeth's preclinical Hedgehog protein studies are successful and if Wyeth successfully advances the development and commercialization of the systemic Hedgehog protein for cardiovascular disease, we'd be eligible to receive cash payments that are contingent on the achievement of certain preclinical and clinical development objectives as well as royalties on future products sales that escalate with increasing sales.

I'm now going to turn to our internal cancer programs that we're seeking to develop under our targeted cancer drug development platform. Again, to recap, we're currently developing a number of small molecules, single and multi-targeted inhibitor compounds under this platform. Each multi-target compound is designed to inhibit one or more validated targets such as Hsp90, Bcr/Abl, ASrc, CDK2, MEK, VEGF along with others along with inhibition along with histone deacetylase, our HDAC, a validated non-kinase cancer target.

In addition to our multi-targeted compounds, we're also seeking to develop several classes of targeted small molecules that are not targeting HDAC such as our proprietary orally available targeted Hsp90 inhibitor.

CUDC-101 is Curis' lead multi-target inhibitor drug candidate under development. CUDC-101 is designed to inhibit HDAC, EGFR and Her2 concurrently. CUDC-101 is currently undergoing IND enabling toxicity and other studies. We anticipate that we file an IND application with the FDA in the first quarter of 2008, assuming that such ongoing preclinical studies are satisfactorily completed.

As we continue to advance CUDC-101 towards our planned IND filing, we continue to generate meaningful preclinical data, some of which we presented at the recent AACR international conference on molecular targets and cancer therapeutics in San Francisco as well as CHI's discovery on target developing inhibitors for promising drug targets conference in Boston.

Our AACR poster presentation focused on in vitro activities and a potential mechanism of action for CUDC-101 while the CHI poster focused on CUDC-101's in vivo efficacy in certain preclinical animal models as well as pharmacodynamic preclinical study results. Both of these posters are available within the CUDC-101 section at Curis' website located at www.curis.com.

At AACR we discussed potency data for CUDC-101, which has a molecular weight of under 450, meeting requirements of small molecules. This molecular weight is similar to Erlotinib, an EGFR inhibitor and smaller than Lapatinib, which is an EGFR, Her2 inhibitor. CUDC-101 was demonstrated in our preclinical data to be five-- to ten-fold more potent than SAHA and HDAC inhibition, 10-- to 20--fold more potent than Erlotinib and EGFR inhibition and demonstrates similar potency to Lapatinib regarding Her2 inhibition.

CUDC-101 also appears to display potency improvements ranging from 3-- to 20--fold as compared to the combination of HDAC inhibitors currently administered to patients with either an EGFR inhibitor or an EGFR/Her2 reference drug.

These potency improvements were observed in 27 cell lines of major cancer types including lung, breast, prostate, colon, liver and pancreatic. CUDC-101 also appears to inhibit all three targeted pathways in vivo and have shown to be efficacious in various mouse xenograph models of human cancer.

In addition, our AACR poster presentation included preclinical data which appears to support a potential synergistic mechanism of action for CUDC-101. It has been observed that many cancers either display resistance to the marketed EGFR and EGFR/Her2 inhibitors or become resistant with time, which has resulted in continued development efforts to find more effective anticancer drugs.

Published third party data suggests that cancer cells often utilize the Her3 cMET and AKT survival pathway mechanism to escape the effects of the marketed EGFR or EGFR/Her2 targeted cancer drugs. CUDC-101 represents a potentially important therapeutic advance in that it mechanistically targets EGFR/Her2 and simultaneously appears to overcome resistance to EGFR or Her2 inhibition by epigenetically blocking the alternative survival pathways involving Her2, cMET and AKT.

Curis believes that by synergistically blocking both HDAC and EGFR/Her2 activity, CUDC-101 may provide for the improved killing of cancer cells by rapidly and durably suppressing several intervention points at the same time. Curis data demonstrates improvements in both in vitro antiproliferation assays and in efficacy measures against various cell lines and xenograph tumor models.

At the CHI meeting Curis scientists presented CUDC-101 in vivo data, which demonstrated that administration of CUDC-101 results in the inhibition of in vivo growth of various human cancers and standard mouse tumor xenograph models. In these cancer xenograph models CUDC-101 has been demonstrated to inhibit HDAC, EGFR and Her2 in a manner similar to that previously observed in Curis' in vitro studies.

In addition, in vivo efficacy observed in these mouse xenograph models has shown to be proportionate to the dose administered.

Curis research has also presented data at the CHI conference showing that the administration of CUDC-101 in xenograph models results in inhibition of tumor cell proliferation as well as an increase in apoptosis or program cell death. The poster presentation included data demonstrating that after treatment with CUDC-101 tumor regression has been observed in two non-small lung cancer tumor models, which have been reported previously in third party publications as sensitive to EGFR inhibitors. Tumor regression has also been observed in liver cancer xenograph cancer models.

Lastly, data was presented at CHI meeting demonstrating that tumor inhibition effects of CUDC-101 have also been observed in two non-small cell lung cancer xenograph tumor models that have previously been reported in third party publications as insensitive or resistant to the marketed EGFR or EGFR/Her2 inhibitors.

We believe that this is particularly important since overcoming drug resistance observed with existing EGFR and/or EGFR/Her2 inhibitors or having the ability to treat cancers that are not effectively treated by these existing drugs could, assuming that CUDC-101 clinical evaluations are successful, provide a significant benefit to cancer patients as well as provide a broad market opportunity to Curis.

Before wrapping up my remarks, I'd like to review Curis' potential upcoming milestones. We have already mentioned that under our internal programs we expect to file an IND for CUDC-101 in the first quarter of 2008. In addition to CUDC-101 we continue to progress other targeted small molecule drug candidates and expect to select a second development candidate from the targeted cancer drug development platform by the end of 2007.

Assuming that subsequent IND enabling preclinical studies are successful; expect to file an IND application with the FDA for the second development candidate in the second half of 2008. In addition, we anticipate that we will select at least one additional development candidate from this platform in 2008.

If we're able to achieve these objectives, we believe that we have significantly advanced our goal of creating a robust, proprietary pipeline of targeted small molecule cancer drug candidates. From our Hedgehog programs under collaboration we're awaiting Genentech's phase II clinical trial decision for our phase I Hedgehog antagonist compound. We expect that Genentech will make this decision during the fourth quarter of this year.

We and Wyeth also continue to progress preclinical Hedgehog agonists programs in cardiovascular disease and stroke and we're hopeful that we can provide further updates on these programs in the future.

And lastly we're also hopeful that we'll consummate our license agreement for our BMP-7 protein program during the fourth quarter of 2007.

I'm very pleased with the progress that we've made to date and the efforts of Curis employees that have worked extremely hard to progress our targeted cancer drug development platform programs as well as those working in support of our Hedgehog agonist program under collaboration with Wyeth. I look forward to providing future updates on CUDC-101 and on our targeted cancer drug development platform as well as our programs under collaboration with Genentech and Wyeth.

I'd like to now turn the call back over to Mike.

Okay, thanks Dan. I'll now review our financial results.

For the third quarter 2007 we reported a net loss of $3.7 million or $0.06 per share as compared to a net loss of $1.5 million or $0.03 per share for the same period in the prior year.

Net revenues for the third quarter of 2007 were $1.3 million as compared to $4.3 million for the third quarter of 2006, a decrease of $3 million.

Revenue under our R&D contracts was $766,000 for the third quarter of 2007 as compared to $2 million for the same period in the prior year, a decrease of $1.2 million. The decrease was primarily the result of the following:

The conclusion during the fourth quarter of 2006 and the first quarter of 2007 of the research funding portions of our ongoing Hedgehog agonist and [inaudible] signaling pathway in collaboration with Genentech;

Our fourth quarter 2006 termination of a sponsored research agreement with the Spinal Muscular Atrophy Foundation;

And the conclusion of our BMP small molecule screening agreement with Centocor, which occurred in the first quarter of 2007.

During the third quarter 2007 license fee revenues were $557,000 as compared to $2.6 million for the same period in 2006, a decrease of $2.1 million. The decrease was primarily the result of $2.3 million in non-recurring license fee revenue recognized in 2006 as part of the settlement agreement with Micromet, our former collaborator.

In addition we did not record any contra-revenues during the third quarter of 2007. We had previously recorded contra-revenues related to our participation in a co-development arrangement with Genentech, which concluded in August of last year.

Operating expenses for the third quarter of 2007 were $5.4 million as compared to $6 million for the third quarter of 2006, a decrease of $600,000.

R&D spending was $3.2 million for the third quarter of 2007 as compared to $3.7 million for the same period of 2006, a decrease of $500,000.

Overall spending decreased as the research funding portions of a majority of our programs under collaboration concluded during the 2006 and in the first quarter of 2007. As a result, we began reallocating many of these resources to our preclinical development efforts for CUDC-101 and the other preclinical cancer programs that we are seeking to develop under our targeted cancer drug development platform.

Spending on CUDC-101 and such other cancer programs accounted for $2.6 million or 81% of our third quarter 2007 R&D expenses.

GNA spending was $2.2 million for the third quarter 2007 as compared to $2.3 million for the same period in 2006, a decrease of $100,000. The decrease was due to expense declines in several areas, most notably in stock-based compensation expense, which decreased by $205,000. In addition, occupancy costs decreased by $100,000 as the result of a facility lease termination earlier in 2007.

Offsetting these decreases, legal services increased $406,000 as a result of increases spending related to our patent portfolio, which was primarily due to the filing of several patents in the third quarter of 2007 related to our proprietary cancer programs.

In the nine-month period ending September 30, 2007, Curis reported a net loss of $11.3 million or $0.22 per share as compared to a net loss of $9.5 million or $0.19 per share for the same period in the prior year.

Net revenues for the nine months ended September 30, 2007 were $4.9 million as compared to $8.9 million for the same period in 2006, a decrease of $4 million. The decrease in net revenues was a result in the decrease in R&D contract revenue and license fee revenues offset by a decrease in contra-revenues.

Operating expenses were $17.1 million and $19.2 million for the nine-month periods ended September 30, 2007 and 2006 respectively for a decrease of $2.1 million.

R&D expenses were $9.5 million for the nine months ended September 30, 07 as compared to $11 million for the same period in the prior year, a decrease of $1.5 million, while GNA expenses were $7.5 million for the nine months ended September 30, 07 as compared to $8.2 million for the same period in 2006, a decrease of $700,000.

As of September 30, 2007, our cash, cash equivalence and marketable securities totaled $41.1 million and there were 63.2 million shares of our common stock outstanding.

That's it for my remarks. I'll now turn the call back to Dan for some closing remarks.

Thanks, Mike. We'd like to thank everyone for joining us on today's call and we look forward to updating you in the future. I'd now like to open the call up for questions. Operator?

(OPERATOR INSTRUCTIONS) Please stand by for your first question.

Our first question comes from the line of Robert Satov with Caris. Please proceed.

Yeah, when will you be seeking or in need of additional financing?

Well as you know we just recently acquired some financing and our objective is to execute on the strategic plan we have in front of us. We have a couple of alternatives that depending on which alternatives we choose is going to determine when we're going to need financing.

Our burn has gone up over the past year due to requirements for toxicity studies and preparing for an IND filing so right now we expect we have right around two years of cash depending on achievement of milestones with additional cash coming in and achievement of partnering objectives, looking at what alternatives are best for our strategy.

So certainly not within the near term but probably a year out we'll start looking at whether or not we need more financing or not. And again, it's going to be predicated on which strategy we choose.

Okay, other questions?

Our next question comes from the line of John Sullivan with Leerink Swann. Please proceed.

Hi guys. Good morning. Congratulations on your progress.

Thanks, John.

My pleasure. A couple of questions regarding CUDC-101 if that's okay. Can you talk about the selectivity that you've seen in animal model testing so far? What is the candidate doing to [inaudible] or not target cells?

That's a really good question, John. So one of the things we're striving for is with this approach of having a single molecule as opposed to administering separate compounds with enhanced potency our expectation is that because of the enhanced potency we need lower concentration of the drug to hit the target and the objectives and anticipated results should be that we have lower off-target toxicity.

We have seen that corroborated in preclinical models and you know obviously the key metric is going to be human data but to date what we have seen is a broader therapeutic window potentially available to us because of the enhanced potency lower dosing requirement. And then with the synergistic effect we should be able to achieve a therapeutic window well below where the maximum tolerated dose is.

So because you're hitting multiple targets you'll be able to use a less potent dose hopefully?

Well--

I'm sorry. Less of the drug to get the same effect.

Right. And the objective would be that we would have lower off-target toxicity.

Right. Understood. Another question on CUDC-101. Are you anticipating that multi-target candidates like this one will be able to target multiple molecular pathways?

Yes, that's the objective. The growing trend in cancer is a body of knowledge that's pointing in the direction that your cancers are fundamentally disregulated networks and hitting at one nodal point, although attractive because it may be at least semi-selective to cancer, as evidenced with the results of EGFR inhibition, are on average not enough. You need to hit more than one intervention point simultaneously, similar to what we see in HIV therapy.

So the objective is to synthesize novel drug compositions that are hitting targets HDAC as well as other targets that have shown in preclinical studies to have synergistic effects.

And that are ultimately blocking multiple molecular pathways.

Yes, simultaneously.

Understood. Okay, and then last question from me regarding this is what do we know about the side effect risks of inhibiting HDAC? It looks like decreased activity of HDAC is implicated in advancement of COPD for example. What do we know about the normal human functions that HDAC facilitates?

Well HDAC as you know at increased levels of HDAC are associated with cancer cells but HDAC under normal conditions plays a role in regulating access to genes. So it's basically whether the histones are acetylated or not plays a role in the accessibility of genes for transcription. So when the chromosomes are tightly wound around histones because of acetylation, what you end up with is a situation where these disregulated cells in tumors don't have access to the normal cell cycle regulation cascades available to them. So it's what's called an epigenetic effect. By inhibiting HDAC, you provide access to these cell cycle regulation pathways.

In terms of the normal role, they're fundamentally involved in the regulation of transcription in cells but HDAC in and of itself has not proven tremendously efficacious in cancer patients. It's showing the most promise in combination.

So our objective is that by hitting multiple targets concurrently we should at least have semi-selective effects on tumor cells because tumor cells should be more susceptible for those pathway intervention points.

Okay. Thanks very much. And then could you just go over again briefly, you talked about Wyeth potentially seeking to advance a protein Hedgehog agonist. Can you just catch us up again? Does that mean that they're no longer working with the small molecule candidate?

Sure. So just to give it context, John, we made a lot of progress with a small molecule, a class of compounds where we had very promising efficacy in animal models of stroke. That program did not progress because we saw unwanted toxicity systemically at high doses and extended exposure.

And the primary reason is the small molecule was bypassing the normal self-regulation of the pathway, the protein for that self-regulation. So they're looking at the protein on two fronts. One is for systemic application to cardiovascular, but they're also considering it for stroke as well because we do have some preliminary evidence that it crosses the blood-brain barrier based on damage to the brain.

But concurrently we're also looking at additional small molecules that may bind to a different location on the pathway that would still provide the efficacy of turning the pathway up and keeping it on longer but also providing for the self-regulation to lower the unwanted toxicity.

Okay, so it sounds like this program is comprised currently of a small protein, small enough to cross blood-brain barrier that they're working in animal models on stroke and then they are seeking to also develop small molecule Hedgehog agonists. Is that--?

Yeah, they're working on both small molecule agonists looking for non-smoothing binders and then using the protein principally for cardiovascular but also investigating the promise of using it in stroke patients. It's not that it's a small protein. It's that upon stroke, the blood-brain barrier becomes compromised and the protein's able to cross.

I understand. Okay, thank you so much guys.

Thank you, John.

(OPERATOR INSTRUCTIONS) There are no additional questions at this time.

Okay, again, we appreciate everyone listening in. Thank you very much for your attention and we look forward to giving you continued updates. Thank you very much.

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