Curis Inc (CRIS) 2007 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth quarter 2007 Curis earnings conference call. My name is LaTasha and I will be your coordinator for today. At this time all participants are in a 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 Mr. Michael Gray, Chief Operating and Chief Financial Officer. Please proceed.

Okay, thank you. Good morning, and thank you for joining us. I'm Mike Gray, Chief Operating and Chief Financial Officer at Curis. Welcome to the year end conference call. Today we're going to provide a corporate update and discuss the financial results for the fourth quarter and year end of 2007.

Before we begin, I would like to advise 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 Securities Litigation Reform Act of 1995 including statements relating to the expected progress of our internal programs, our programs under collaboration with Genentech and Wyeth, and our financial guidance for 2008. 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 collaborator's inability to successfully advance the research, clinical development of our product pipeline, our and our collaborator's failure to obtain and maintain necessary proprietary protection for our technologies and product candidates, competitive pressures, our failure to maintain our current collaborations with Genentech and Wyeth or to enter into new collaborations on favorable terms, if at all. Our need to raise additional funds to finance our operations, and other factors including those described in our quarterly report on form 10-Q for the quarter ended September 30, 2007, and the other reports that we periodically file with the SEC. I would now like to introduce Dan Passeri, Curis's President and CEO who will begin with our corporate highlights for the fourth quarter as well as the year. Dan will also provide an update on our pipeline and our goals for 2008. Then I will return to review our financial results for the fourth quarter and the year ended December 31, 2007. Following our remarks we will open the call to any questions. Dan?

Thanks, Mike. Good morning.

And thank you for joining us on today's call. 2007 was truly an instrumental year for Curis as we continued our transition from a discovery stage biology company to a development stage cancer company with a focus on the development of proprietary small molecules targeting networks involved in cancer cell signaling. During the course of the year, we continued to focus our resources and our pipeline toward the advancement of single and multi-targeted small molecule drug compounds generated by our targeted cancer drug development program. In addition to our efforts on our proprietary cancer programs, our collaborator Genentech made significant progress in the advancement of a systematically administered Hedgehog agonist program that Genentech is developing under our June, 2003 collaboration agreement.

As we look toward the remainder of 2008, we believe that our Hedgehog agonist program will continue to progress and that our portfolio of targeted cancer drugs will continue to expand and advance. I would like to now provide further detail beginning with an update of our pipeline projects and upcoming milestones. Firstly, I will discuss our Hedgehog agonist program. As many of you know, our most advanced program is a systematically administered small molecule agonist of the Hedgehog pathway.

One of the key developmental pathways involved in cell proliferation, differentiation and angiogenesis. Almost exactly a year ago, our collaborator, Genentech, began the phase one clinical trial of a first in class systematically administered small molecule Hedgehog agonist drug candidate in patients with locally advanced or metastatic cancers that are refractory to standard therapy or for whom no standard therapies exist. Primary objectives of this phase one trial were to evaluate the safety and tolerability of escalating doses of the drug candidate to establish the maximum tolerated dose and dose limiting toxicities and to characterize as pharmacakinetic and pharmaca dynamic properties.

In October, 2007, Genentech notified us that the initial objectives were achieved and that Genentech had initiated a phase one clinical trial expansion cohort to enroll additional patients in a specific cancer indication to assess preliminary signs of clinical response as well as to continue to accumulate phase one safety data. In connection with the initiation of this phase one expansion cohort, we received a $3 million cash payment from Genentech. In addition to meeting the initial objectives of the phase one clinical trial, Genentech disclosed during the 2007 year-end earnings call that it had observed regression of an established metastatic basal cell tumor in this trial. Genentech also stated that the phase one molecule appears to remain in the body long enough to adequately expose the tumor to drug compound. We are encouraged by this early evidence of clinical activity with this molecule, which could potentially represent a way to block Hedgehog signaling in those cancers utilizing the Hedgehog pathway. Additionally, we expect that Genentech will submit the phase one data for presentation at an upcoming scientific conference.

Finally, Genentech notified us of its decision to move forward with phase one testing of the Hedgehog drug candidate in 2008. The drug candidate is expected to be evaluated in one or more solid tumor indications. Curis will be eligible for an additional cash milestone payment under the collaboration for a limited number of Phase II trials of this Hedgehog agonist. We're highly encouraged by the early promising resulting that Genentech has disclosed from its phase one studies of this candidate around look forward to providing further updates on this program which is an important part of our evolving business model and product portfolio. We expect that we would provide further details as Phase II clinical testing is initiated, or as Genentech communicates other important scientific and clinical observations.

In addition to the progress of our Hedgehog agonist, we've made significant advances with the drug candidates under our targeted cancer drug development platform for which we're seeking to develop a number of small molecule targeted inhibited drug candidates. Our lead candidate under our platform is CUDC 101, a multi-targeted inhibited drug designed to inhibit HSAC, EGFR and Her2. CUDC 101 is nearing completion of an IND enabling toxicology and other studies and we expect to file an IND application with the FDA before the end of the first quarter. Early indications of our GLP toxicology testing appear favorable. The molecule continues to generate meaningful data and during the fourth quarter of 2007, we presented promising preclinical data appeared at the AACI,NCI International Conference on molecular targets and cancer therapeutics and at CHI's discovery on target developing inhibitors for promising drug targets conference in Boston.

To recap the highlights of the presentation, CUDC 101 demonstrated greater potency in 27 cell lines, major cancer types, over SAHA, a marketed HDAC inhibitor and our Lapatinib a marketed EGFR inhibitor alone or in combination. In addition, CUDC 101 demonstrated similar potency for inhibiting Her2, to that of Lapatinib, a marketed EGFR Her2 inhibitor. Interestingly, CUDC 101 also displayed potency in cell lines that are insensitive to SAHA or Lapatinib and also demonstrated pathway synergy in some cancer cell lines. CUDC 101 has demonstrated dose proportionate inhibition of in vivo growth of various human cancers in standard mouse tumor xenograft models where an inhibited HDAC, EGFR and Her2 in a manner consistent with data from our in vitro studies of the compound. Administration of CUDC 101 demonstrated inhibition of tumor cell proliferation as well as an increase in apoptosis or program cell depth. Tumor regression has been observed in EGFR sensitive non small cell lung cancer tumor models as well as acting in EGFR resistant models. CUDC 101 has also shown regression in preclinical breast and liver cell xenograft cancer models.

Our in vitro mechanistic data indicates that CUDC 101 most likely, through the epigenetic effects over HDAC inhibition is able to suppress signaling components that underlie resistance to existing EGFR and EGFR Her2 inhibitors. These internal observations corroborate third party publications demonstrating synergic effects, including in some cases overcoming drug resistance when EGFR inhibition is combined with HDAC inhibition. Based on these effects we believe that CUDC 101 could offer a significant benefit to cancer patients over current treatments, particularly where existing EGFR and/or EGFR Her2 inhibitors are shown to be ineffective. We continue to expand our CUDC 101 preclinical data, including mechanism of action and in vivo data, and relevant xenograft tumor models. In addition to CUDC 101, other programs under development include a proprietary orally available targeted HSP90 inhibitor, as well as multi-targeted drug candidates designed to inhibit HDAC in combination with one or more validated cancer targets. We expect to select a development candidate from one of these drug programs in the first half of 2008.

We selected these clinically validated targets because of their potential to achieve synergy with HDAC inhibition with the goal of enhanced efficacy across a broad range of cancers. In addition to potentially significant advantages in cost and convenience, we believe that our proprietary technology of combining synergistic anticancer mechanisms in a single compound may address some of the limitations of current therapies by providing enhanced potency, aligned pharmacakinetics, or PK, for controlled exposure, lower toxicity, and greater efficacy, than a combination of multiple separate agents. We believe that the improved efficacy over classic targeted drugs that has been observed in pre-clinical xenograft models in several indications may be due in part to the ability of these compounds to effectively block not only the key components of the cancer networks, but also those that are involved in the alternative resistance pathways, via the epigenetic effects of HDAC inhibition. These single agents that we're developing are intended to achieve this multi-targeted effect of the same cells at the same time with lower toxicity.

I will now briefly touch on our Hedgehog agonist collaboration with Wyeth which is currently focused on the research and development of Hedgehog protein agonist for stroke. As part of our efforts with Wyeth and stroke, in 2006, we had identified a compound from a particular class of Hedgehog small molecule agonists that demonstrated efficacy in preclinical models. However, in the long term preclinical studies, the compound also demonstrated slight button detectable levels of toxicity. Since that time, we've been working with Wyeth to search for new small molecule Hedgehog agonists for use in treating stroke. During the fourth quarter of 2007, Wyeth determined that it would not continue to seek additional or alternative small molecule Hedgehog agonists and would instead continue internal testing of a Hedgehog protein agonist in stroke models of 2008. Wyeth will be responsible for all additional research and development of this program since our research term concluded earlier in February. In addition to our efforts with Wyeth and stroke, in 2007, Wyeth began internal testing of our Hedgehog protein in cardiovascular disease models.

In August, 2007, we were notified by Wyeth that preliminary data with protein agonists of the Hedgehog signaling pathway showed some promising results in an established early preclinical cardiovascular animal model. These positive results are consistent with previously published third party preclinical data in which up regulation of the Hedgehog pathway has been demonstrated to be efficacious. In February, 2008, however, Wyeth indicated that they had conducted two additional preclinical animal studies with inconsistent outcomes. As a result of the inconsistent experiments, Wyeth is determined to suspend further efforts in developing a protein for cardiovascular indications. While we're certainly disappointed that Wyeth has determined that it will not presently continue testing the Hedgehog agonist protein in cardiovascular settings, we are hopeful that Wyeth's ongoing Hedgehog protein agonist work for stroke will continue to progress in 2008.

Let me close with a few comments on our recent BMP-7 transaction with Stryker Corporation. Our BMP-7 assets were being developed under a license agreement with Ortho Biotech Products from November 2002 until the agreement terminated in August, 2007. Curis does not possess the scientific expertise in protein drug development, that would be required to advance this program, and clinical testing and we therefore sought to enter into another transaction for these important assets upon the termination of the Ortho Biotech agreement.

In December, we sold our BMP assets to Stryker Corp as part of our efforts to further focus our development efforts and resources on our targeted small molecule cancer pipeline. We received $1.75 million in our title to contingent cash payments as specified clinical and regulatory milestones are met and sales targets are achieved. Importantly, we also expect that the sale of these assets will relieve us of several hundred thousand dollars in patent expenses that we would have otherwise had to absorb in 2008 had we retained these assets.

In addition to the upfront cash received in future patent cost savings under the Stryker BMP transaction, we improved our financial position during 2007 with the completion of a $14.5 million private placement in August and the receipt of a $3 million cash payment from Genentech. This financing has significant strategic importance as it has provided us with a broader range of development and partnering options for CUDC 101 and our other targeted cancer programs. We look forward to updating you on future progress with our pipeline programs. Let me next review our potential upcoming milestones for 2008 in further detail. As I mentioned earlier, we expect this to be a very active year for the company with a great deal of progress in our pipeline programs. Our goals and expectations are as follows.

In 2008, we expect Genentech to progress systematically administered Hedgehog agonist drug candidate into phase II clinical testing. The drug candidate is expected to be evaluated in one or more solid tumor indications. Later this quarter, we expect to file an IND for CUDC 101, and to recap, it's an EGFR Her2 HDAC inhibitor and we expect to begin treating patients in a phase I clinical trial during the second quarter. We plan to select a second development candidate from the targeted cancer drug development platform in the first half of the year and a third development candidate in the second half of the year. We aim to file an IND for the second development candidate during the first half of 2009.

And lastly, we are pursuing collaboration strategies for our targeted cancer drug platform that would -- that we expect will allow us to retain proprietary development of CUDC 101 in the majority of the worldwide market, into early preclinical testing which we aim to accomplish by initially seeking an Asia-only territory partnering agreement for CUDC 101. We're also pursuing a collaboration for one or more of the earlier stage targeted cancer programs. During the course of 2008, we hope to establish a significant partnership for CUDC 101, on one or more of other targeted drugs such as HSP90 or HDAC HSP90. We believe that 2008 will be a significant year for Curis as we look to build and focus upon the progress we've made in 2007 on our proprietary pipeline of targeted small molecule cancer drug candidates as we seek to move our most advanced preclinical drug candidates toward the clinic and as we seek to make significant progress with our Hedgehog collaboration with Genentech.

I would now like to take this opportunity to thank the employees at Curis who have been extremely diligent and worked hard to progress our targeted cancer drug development platform programs and Hedgehog programs to where they are today. I look forward to providing all of you with a future update on CDC 101 and on other targeted cancer drug development platform programs as well as our Hedgehog programs under collaboration and development with Genentech and Wyeth. I would now like to turn the call back over to Mike.

Thanks, Dan. I will now discuss our 2007 financial highlights as well as an outlook for 2008.

For the fourth quarter of 2007, we reported net income of $4.3 million, or $0.07 per share, as compared to net income of $680,000, or $0.01 per share for the same period in the prior year. Net revenues for the fourth quarter of 2007 were $11.5 million, as compared to $6.1 million for the fourth quarter 2006. The increase in our revenue is primarily the result of our recognition of $10.5 million in license revenue under our June 2003 Hedgehog antagonist collaboration, with Genentech. We recognize this revenue because of the fact and circumstances surrounding the joint steering committee had changed such that we concluded that our joint steering performance obligation had become perfunctory and inconsequential to the agreement during the fourth quarter of 2007.

Accordingly, during the fourth quarter of 2007 we recorded license fee revenues of $7.5 million, previously deferred revenue, as well as $3 million cash payment that we had received in October of 2007. Our increase in license revenues was partially offset by decreases in research and development contracts, and substantive milestone revenues. Operating expenses for the fourth quarter of 2007 were $7.7 million, as compared to $5.8 million for the same period in the prior year. Our research and development spending was $5.2 million for the fourth quarter of 2007, as compared to $3.6 million for the same period in the prior year.

Fourth quarter R&D expense included $900,000 of license fee payments, $750,000 of which was made to a former collaborator as a result of our December BMP-7 transaction at Stryker Corporation under which Stryker provided us with an upfront cash payment of $1.75 million. In addition, we incurred $1.5 million in the fourth quarter related to toxicology testing of CUDC 101 in support of our plan to IND application filing later this quarter. Offsetting our increased expenses relating to our targeted cancer drug candidates was a decline in spending on all of our other programs of $1.5 million, primarily since funded research under most of our programs in the collaboration had concluded in late 2006, or early 2007. General and administrative spending was $2.4 million for the fourth quarter of 2007, as compared to $2.2 million for the same period in 2006. The increase in G&A expense is primarily due to an increase in legal expenses related to our patent portfolio.

For the year ended December 31, 2007, we reported a net loss of $7 million, or $0.13 per share, as compared to a net loss of $8.8 million, or $0.18 per share, for the prior year. Net revenues for the year ended December 31, 2007, were $16.4 million, as compared to $14.9 million, for the prior year. The increase in net revenues was primarily the result of the previously discussed recognition of $10.5 million in license fee revenue related to our Hedgehog antagonist collaboration with Genentech, offset in part again by increases in R&D contract revenues and substantive milestones revenue. Operating expenses were $24.8 million for the year ended December 31, 2007, as compared to $25 million for the prior year. R&D expense was $14.8 million for the year ended December 31, '07, as compared to $14.6 million for the prior year. This is a result of several offsetting variances in our R&D program spend, primarily related to our increased efforts on CUDC 101, and our other targeted cancer drug programs offset by reduced spending on previously-funded and other internal research programs. G&A expenses were $10 million for the year ended December 31, 2007, as compared to $10.4 million, for 2006.

This decrease is attributable to decreases in occupancy costs, professional and consulting services and stock-based compensation expense, offset in part by increased spending related to legal services surrounding our patent portfolio. As of December 31, 2007, our cash, cash equivalents, and marketable securities, totaled $41.5 million, and there were 63.2 million shares of common stock outstanding. I will now briefly provide financial guidance for 2008.

We expect to end 2008 with cash, cash equivalents, and marketable securities of $17 million to $21 million, this number excludes any potential payments from existing or new collaborators in 2008. We expect existing cash, cash equivalents and marketable securities will be sufficient to support the current operating plans into the second half of 2009. We expect that our 2008 R&D expenses will be between $16 million and $19 million, and that G&A expense will be between $8 million and $10 million, just note the expense projections include $500, to $700,000, and $1.2 million to $1.4 million of stock based compensation expense for R&D and G&A, respectively. I would now like to open the call to questions. Operator?

Thank you. Ladies and gentlemen, (OPERATOR INSTRUCTIONS) I have no questions in the queue.

Okay. I would like to thank everyone for joining the call this morning, and we look forward to giving you continual updates, and hopefully we will continue the progress we're making. Thank you very much for your time on the call. Take care.

This concludes the presentation and you may all now disconnect. Good day.