Curis Inc (CRIS) 2008 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the quarter two 2008 Curis earnings conference call. My name is Laura, 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 toward the end of today's conference. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Mr. Michael Gray, Chief Operating and Chief Financial Officer of Curis. Please proceed, sir.

Okay, thanks. Good morning. Thanks for joining us. Today we will provide a corporate update and discuss our 2008 second quarter and year-to-date financial results. Before we begin I would like to advise you that this conference call contains forward-looking statements about Curis's future expectations, plans and prospects within the meaning of the Private Securities Litigation Reform Act of 1995 including statements relating to the expected progress of our internal targeted cancer programs including CUDC-101 and CUDC 305, and our Hedgehog antagonist program under collaboration with Genentech.

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 Genentech's inability to successfully advance the research and clinical development of our product pipeline, our and Genentech's failure to obtain and maintain necessary proprietary protection for our technologies and product candidates, competitive pressures, our failure to maintain our current Hedgehog antagonist collaboration with Genentech 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 March 31, 2008 and other reports that we periodically file with the SEC.

We caution you that we may not update any of these statements even if events and developments subsequent to the date of this call cause these estimates and expectations to change. I would like to now introduce Dan Passeri, Curis's President and CEO, who will discuss our corporate highlights and will provide an update on our pipeline. Following Dan's remarks I will return to review our financial results for the second quarter and year to date, and then we will open up the call to any questions.

Thanks, Mike. Good morning, and thank you for joining us this morning. Before I begin the business update I would like to briefly comment on the shelf registration statement that we filed yesterday. While we have no immediate or near-term plans to access equity capital markets, we do believe that the shelf is simply a strategic tool that provides us with greater flexibility. The shelf replaces a previous shelf which expired approximately a year ago. We continue to believe that we are in good financial standing with the expectation that existing cash combined with an expected $3 million milestone payment from Genentech during the second half of 2008, will provide us with adequate capital to fund operations through 2009.

In addition, we expect to have opportunities to bolster our financial position through ongoing business development efforts as well as potential additional future milestone payments from Genentech. We are encouraged by recent developments in both our Hedgehog and proprietary programs and would like to emphasize that we continue to believe in the future of Curis's business and remain committed to creating and preserving shareholder value through execution of our corporate strategy.

I would like to now update you on the progress of our pipeline. Turning now to our business update, I would like to begin my update by reviewing the status of our research and development programs beginning with GDC-0449, which is a lead molecule under our Hedgehog antagonist collaboration with Genentech and currently in clinical testing.

Earlier this year Genentech stated its plans to initiate three Phase II clinical trials of GDC-0449, an orally administered, small molecule Hedgehog antagonist. In May Genentech initiated the first of these Phase II trials in first line metastatic colorectal cancer. As a result of the trial initiation, Genentech made a $3 million cash payment to Curis under the Company's June 2003 collaboration agreement.

The study is designed to evaluate GDC-0449 in approximately 150 patients with metastatic colorectal cancer in combination with current standard of care in a randomized, placebo-controlled, double-blind Phase II trial. Patients will receive either FOLFOX or FOLFIRI chemotherapy in combination with Avastin and will be randomized to receive 0449 or placebo. The primary objective of the trial is progression free survival from randomization to disease progression or death.

Secondary outcome measures include the measurement of Hedgehog protein expression in archival tissue and tracking of adverse events. We are hopeful that the addition of 0449 into the current standard of care in first-line metastatic colorectal cancer may provide improved therapeutic benefit in this patient population.

In addition to the colorectal cancer trial, Genentech has also stated that it plans to initiate Phase II trials of 0449 in advanced ovarian cancer and advanced basal cell carcinoma during the second half of 2008. Genentech is required to make a $3 million cash payment to Curis under the Company's June 2003 collaboration agreement within 30 days of the initiation of the ovarian trial. We have already received a $3 million milestone payment for the BCC under the Phase I expansion cohort as the expansion cohort method definition of a Phase II initiation.

0449 data was presented at two scientific conferences during the second quarter. During a plenary session in the AACR annual meeting in April, Dr. Daniel Von Hoff, a Phase I study investigator presented Phase I clinical trial data, which demonstrated anti-tumor activity in eight of nine BCC patients that were treated with 0449.

In June, Dr. Patricia LoRusso, another Phase I clinical investigator, presented additional Phase I clinical data at the ASCO 2008 annual meeting. Dr. LoRusso reported that 0449 appears to demonstrate favorable pharmakinetic and pharmacodynamic profile with high sustained plasma concentrations and a prolonged terminal half-life of greater than seven days, and that no dose limiting adverse events were observed. Gli-1, a biomarker of Hedgehog signaling activity, was down modulated greater than twofold in skin biopsies of 11 of 14 patients analyzed. Genentech stated that it is currently preparing a design of the Phase II advanced BCC trial, and Curis expects to learn more about the BCC trial design during the second half of 2008.

Genentech has also indicated that it has received a number of requests from investigators that wish to test 0449 in various tumor types, and we look forward to the potential initiation of additional future trials of 0449. We are encouraged by the early, yet promising results of the drugs Phase I studies and by Genentech's initiation of the metastatic colorectal cancer Phase II clinical trial. We look forward to providing additional updates on this program as further Phase II clinical testing is initiated or as Genentech communicates other important scientific and clinical observations.

Moving now onto our proprietary internal programs, our research efforts are focused upon our proprietary cancer drug development programs, in which we are employing our platform of proprietary technologies in our effort to develop novel, small molecules targeting one or more clinically validated targets or pathways known to play roles in development and maintenance in cancer. Using this platform, Curis has generated single small molecules that combine the epigenetic effects of HDAC inhibition with suppression of targets that include EGFR, Her2, VEGF, BCR-ABL, MET, CDK, Aurora, RAF and MEK, to potentially provide enhanced efficacy over existing drugs.

In addition, Curis's targeted cancer drug development programs include single targeted drugs that are being designed and developed to potentially achieve best-in-class status, including candidates that target Hsp90 and CDK.

The past quarter has brought significant progress for these cancer programs including our May IND filing for CUDC-101, a first in class molecule inhibitor, small molecule inhibitor of HDAC, EGFR and Her2. This IND is now open and we expect to enroll first patient in a Phase I clinical trial in the third quarter of 2008. The Phase I trial is designed as an open-label study of CUDC-101 in patients with advanced refractory solid tumors. The primary objectives of the Phase I trial are to evaluate the safety and tolerability of escalating doses of Phase I molecule, and to establish the maximum tolerated dose and dose limiting toxicities.

Secondary objectives will assess the pharmacokinetics, efficacy and ability of CUDC-101 to inhibit HDAC, EGFR and Her2 in this patient population. The study will be conducted at two sites within the United States, and is expected to enroll between 18 and 40 patients spread across several dose escalating cohorts. Our clinical centers include South Texas Accelerated Research Therapeutics or START and San Antonio Texas with Phase I principal investigator Dr. Anthony Tolcher, and at the Barbara Ann Karmanos Cancer Institute in Detroit, Michigan with Dr. Patricia LoRusso. The successful completion of the Phase I trial will be dependent upon, among other things, patient enrollment, observed toxicities and whether CUDC-101 achieves the Phase I trial objectives.

In the second quarter we had the opportunity to present data from our 101 at two industry related conferences. In April we presented a poster at AACR and provided preclinical data supporting the potential of 101 as a therapeutic for liver cancer. Our poster highlighted data from preclinical xenograft liver cancer models and demonstrated 101's ability to effectively induce tumor graft inhibition or regression while maintaining a favorable safety profile.

These studies included in vivo comparisons to treatment with marketed HDAC or EGFR inhibitors, and in each case animals treated with 101 exhibited greater inhibition or regression than observed with the administration of the marketed drugs. Published reports have demonstrated a correlation between liver cancer development and abnormal HDAC expression, which is one of our primary targets of the compound. Based on both internally generated and third-party data we believe that the combination of HDAC, EGFR and Her2 inhibition may be synergistic, that HDAC inhibition sensitizes the tumor cells to the effects of EGFR inhibition, and importantly suppresses several components of the resistant pathways that compensate for EGFR blockade.

Although drugs that specifically inhibit EGFR signaling have been developed and marketed, none have yet been approved for the treatment of liver cancer. Earlier in April we presented a poster on 101 at the ASCO national meeting in New Orleans, Louisiana. Our presentation described the strategic compound design and research underlying the development of proprietary drug compounds belonging to a class of chemical structures called quinazolines, which includes 101. These compounds were designed to inhibit multiple validated biological targets known to play key roles in the development and maintenance of certain cancers, and which may provide therapeutic synergy when concurrently inhibited.

Our presentation also discussed the design of this chemical class, presenting structure and activity relationship requirements along with preclinical data in which 101 demonstrated potency and efficacy across 30 different cancer cell lines in several preclinical xenograft models collectively including lung, liver, colon, pancreatic, breast and other cancers. The presentation provided data showing greater efficacy of 101 in comparison to marketed HDAC, EGFR and dual EGFR Her2 inhibitors when such drugs are administered either alone or in combination. And highlighting 101's promising activity and preclinical xenograft cancer models of cell lines that are resistant to inhibitors that target only EGFR and/or Her2.

We continue to believe that with increasing trends towards combination therapies for the treatment of cancers, the targeting of HDAC, EGFR, and Her2 in a single molecule could potentially provide cancer patients with the advantages of pathway synergies, without the costs and administrative burdens associated with the delivery of multiple separate drugs.

Additionally, we believe our approach has the added benefit of providing aligned pharmacokinetics, meaning that the drug with these multiple targets is degraded simultaneously for better control of drug exposure and therefore may translate into having the potential for a better safety profile.

In addition to 101, we are actively advancing our other preclinical drug candidates. And last week we announced the selection of CUDC 305 as a development candidate from our targeted cancer drug development platform. 305 is an orally available synthetic, small molecule inhibitor of heat shock protein 90 or Hsp90. Hsp90 has become a target of great interest in the field of cancer therapeutics in recent years. Briefly, Hsp90 is a member of a class of proteins called molecular chaperones that play a fundamental role in the folding stabilization and protection of other cellular proteins or clients, client proteins under normal or stressful conditions.

Hsp90 in particular has become an attractive therapeutic target for the treatment of cancer because a majority of its client proteins are involved in cellular signaling transduction, and have been identified as potential contributors to various aspects of cancer cell growth and survival. Inhibitors of Hsp90 activity may be of therapeutic value if they can prevent Hsp90 proteins from complexing and protecting the particular client proteins involved in cancer and allow them to be degraded, thereby inducing a cancer cell death.

In addition to demonstrating efficacy across a broad range of cancers in preclinical cancer models, 305 exhibits promising pharmacological features, particularly its high oral bioavailability, high tumor penetration and extended tumor retention. 305 demonstrated high potency in vitro and/or in vivo across a wide range of cancers. Most notably curious scientists observed complete tumor regression following oral administration of 305 in a mouse xenograft model of acute myelogenous leukemia or AML.

Tumor regression has also been observed after treatments of 305 in mouse xenograft models of breast non-small cell lung, gastric cancer and glioblastoma brain cancers. In preclinical testing the compound effectively crosses the blood brain barrier and demonstrated extending survival in an intracranial glioblastoma model.

Non-GLP toxicity studies suggest that 305 may have a better therapeutic window than several leading Hsp90 inhibitors that are in clinical development. So we expect to initiate IND enabling studies shortly and anticipate that should further testing be favorable we will file an IND application for 305 in mid-2009. We continue to engage in active preclinical development efforts on our other targeted cancer drug programs, and we hope to select a third development candidate in the first half of 2009.

We are also actively pursuing collaboration strategies of our targeted cancer drugs including potential collaborations for CUDC-101 and CUDC-305 and other targeted cancer drug candidates under development at Curis. Generally we are seeking to establish a relationship that will allow Curis to maintain development responsibility through early-stage clinical testing. For example, Phase I or Phase IIa development as well as retention of US codevelopment and copromotion option rights.

So we have initiated early but promising discussions with several pharmaceutical companies regarding potential collaborations as we continue to seek to advance this candidate towards the clinic. We remain optimistic that we can enter into a collaboration towards the end of 2008 or 2009, and obviously the key to this is finding the right structure and balance in any transaction.

As always, I would like to thank our employees and our supporters. I look forward to providing you all with further updates of our pipeline and preclinical programs as the year progresses. I would now like to turn the call back over to Mike.

Thanks, Dan. I will now discuss our second-quarter 2008 financial results. For the second quarter of 2008 Curis reported a net loss of $2 million or $0.03 per share. This compared to a net loss of $4 million or $0.08 per share for the same period in the prior year.

Revenues for the second quarter of 2008 were $3.1 million as compared to $1.2 million for the second quarter of '07, an increase of $1.9 million. License fee revenues were $3 million as compared to $500,000 for the same period in 2007, an increase of $2.5 million. The increase was primarily the result of the receipt of a $3 million cash payment from Genentech upon Genentech's initiation of a Phase II metastatic colorectal cancer trial in May 2008.

During the second quarter of 2008 R&D contract revenues were $100,000 as compared to $700,000 for the same period in '07, a decrease of $600,000. This decrease was a result of a decrease in research funding revenues under collaborative arrangements with Procter & Gamble which concluded in November of '07 and Wyeth, which concluded in February of '08.

Operating expenses for the second quarter of 2008 were $5.3 million as compared to $5.4 million for the second quarter of '07 or a decrease of $100,000 or 2%. Our R&D spending was $3.2 million for the second quarter of 2008 as compared to $3 million for the same period in 2007. The increase was due to increased spending approximately $800,000 on our targeted cancer drug development programs including 101, as well as CUDC-305, which as Dan mentioned we named as a development candidate last week. The spending increase on these programs partially offset by decreased spending on our other research programs.

G&A spending was $2.1 million for the second quarter of 2008 as compared to $2.4 million for the same period of the prior year, a decrease of $300,000. The decrease in G&A expense is primarily due to a $400,000 decrease in stock-based compensation expense.

For the six-month period ending June 30, 2008 we reported a net loss of $5.4 million or $0.09 per share as compared to a net loss of $7.5 million or $0.15 per share for the same period in the prior year. Revenues for the six months ended June 30, 2008 were $5.2 million as compared to $3.6 million for the same period in 2007, an increase of $1.6 million. The increase in revenues was primarily the result of an increase in license fee revenues related to the June 2003 Hedgehog antagonist collaboration with Genentech and the sale and assignment of Curis's BMP assets to Stryker Corporation, offset by a decrease in R&D contract revenue discussed earlier.

Operating expenses were $11.2 million and $11.7 million for the six-month periods ended June 30, 2008 and 2007, respectively, representing a year-over-year decrease of $500,000. R&D expenses were $6.7 million for the six months ended June 30, 2008 as compared to $6.3 million for the same period in the prior year, an increase of $400,000. This increase primarily related to increased spending on Curis's targeted drug development programs offset by reduced spending on other research programs as funded research under these programs concluded.

G&A expenses were $4.5 million for the six months ended June 30, 2008 as compared to $5.3 million for the same period in the prior year, a decrease of $800,000. This decrease is attributable to decreases in stock-based compensation, legal expenses related to our patent portfolio and professional and consulting services offset by increased spending on occupancy and travel.

As of June 30, 2008 our cash, cash equivalents and marketable securities totaled $33.9 million and there are 63.4 million shares of our common stock outstanding. As Dan mentioned earlier, we expect our existing cash, cash equivalents and marketable securities will provide us with adequate capital to fund our currently planned operations into the fourth quarter of 2009, note that this excludes any payments that we may receive in connection with the potential advancement of Genentech's clinical trials of GDC-0449. For example, we would receive a $3 million payment from Genentech within 30 days of its initiation of a Phase II advanced ovarian cancer trial, which Genentech has indicated it expects to initiate in the second half of this year.

So that wraps up the financial portion of the call, and we will open up to questions now. Operator.

(OPERATOR INSTRUCTIONS) Ren Benjamin, Rodman.

Good morning, guys, and congratulations on your progress. A couple of questions. I guess starting off with the Hedgehog inhibitor program; when might we see updated data from the expansion cohort of the ongoing Phase I? Maybe some follow-up or final data from the Phase I study. And then also do you have any idea as to -- I know the trial just started, but do you have any idea as to when we might see completion of enrollment or data from the CRC study?

The first part of the question on the expansion cohort, we don't know the exact timing but we are expecting the possibility in the second half of 2008. We may be able to get some further information that we could disclose but we don't have the specific date at this time, Ren. And on the enrollment completion, we are anticipating probably about 18 months. That is our estimate. That is the best clarity we can give at this time.

Okay. I guess shifting very quickly to the CUDC-101 trial, can you talk to us a little bit about, it is a dose escalating study, sometimes dose escalating studies, depending on how low you start, could last quite a while. What are the doses that you are starting off with, and how long do you think this trial will take before we see some meaningful results?

Regarding the CUDC-101 dose escalation, starting dose, we were actually very encouraged and pleased with our pre-IND meeting with the FDA. That allowed us to start the dosing at 140 milligrams, which is actually a dose that we are expecting the possibility of seeing some hint of efficacy based on extrapolating from preclinical data. And the IND is open and we are anticipating treating first patient imminently.

And how long do you think -- it is usually pretty unusual to I guess start off with such a higher dose. I assume you believe that you won't have to enroll that many cohorts I guess before you reach a maximum tolerated dose. How long are you internally thinking that this trial may last?

We are first anticipating a pretty rapid enrollment. We've already had a couple of patients identified, and we are expecting that within a nine month period possibly, so 9 to 12 months that we should be able to complete this and report something.

Okay, switching gears very quickly to 305, how does this differ -- how does this compound differ from the other Hsp90 inhibitors that are out there, and there has been quite a bit of interest in the space and several acquisitions that have taken place. Can you comment a little bit on any sort of activity or interest from other players?

That's an important question because the one thing we don't want to do as a small biotech, is just join an already crowded field with yet another Hsp90 compound. So we are optimistic at this point that we may be able to achieve best-in-class status based on a couple of attributes of this molecule. First it is a small molecule that is a non-geldanomycin-based molecule, and that is important because of some of the concerns about the geldanomycin class, such as liver toxicity.

The attributes of the compound that we are encouraged by is its high oral bioavailability and the fact that it very readily crosses the blood brain barrier. So we think we have the potential of carving out a niche competitive position on treating primary metastatic brain cancers. We have had interest from several large pharma companies. This is a hot area right now, and we continue those discussions and we are optimistic that we should be able to consummate a relationship around either 305 and/or 101.

Moving very quickly to the pipeline, you mentioned that a third candidate will likely be selected for an IND filing or for pre-IND studies. Can you talk to us a little bit about what is in the pipeline and what do you think is the lead to -- which candidate out of all of them do you think will actually make it as the third candidate?

We have a couple of compounds right now that are showing very promising preclinical data. Out of our multi-target inhibitor platform we have an HDAC BCR-ABL program that we are focusing on, and that is showing good synergy between those pathways. The trend that we are starting to see in our platform is we are seeing the best activity synergies when we combine HDAC inhibition along with kinase inhibition activity. And then we have a CDK compound; both an HDAC CDK and a CDK standalone that we are working on. So those are the most promising right now based on the stage of development.

Not to leave Mike out of this, maybe Mike you can talk to us about the expenses for the rest of the year. It came in really nice this quarter. Should we expect similar quarters going forward? You are starting your Phase I so I assume things will be bumped up, but how much would this Phase I trial cost and how should we be looking at the burn for the rest of the year?

I think the Phase I trial will cost around $3 million, rough figure. For the rest of the year our initial guidance at the beginning of the year was that we'd end the year with $17 million to $21 million in cash without any milestone payments. We've received one milestone payment for $3 million. We expect we will receive an additional $3 million. So I think that beginning year end guidance suggested for the $6 million in Genentech related payments sort of brings us up to the $23 million to $27 million year-end cash, and I think that is reasonable. I think we will end somewhere around the $25 million cash number, maybe a little north of that.

Perfect. And just one last question; drivers for the remainder of the year. Are there scientific presentations or -- clearly you will be starting a clinical trial relatively soon. Anything else that we can talk about?

In terms of our pipeline we don't have a specific date right now, but we are optimistic that we should be able to learn something about the expansion cohort with BCC and get resolution on that. CUDC-101, we are as I stated we have an open IND, and we are anticipating initiating patient enrollment imminently. So we are hopeful that by the end of the year we actually may have some trend that starts to emerge. And from a scientific standpoint that is probably the two most relevant ones.

Perfect. Thanks very much, guys.

Jason Kantor, RBC capital.

I guess a lot of things have been asked. Just around the partnership you are saying that you think you might consummate a partnership by year end or sometime early 2009. And you threw out the Hsp90 and also CUDC-101 as possible partnering assets. Would year end '08 be the optimal time to get a partner for CUDC-101 given that you would probably be six months away from some meaningful data for that drug?

Yes, it's an important question to be addressed, Jason. Our discussions are basically looking at various structures that allow us to retain upside. So we would not be interested in partnering CUDC-101 for a lower consideration because we haven't generated the clinical data yet. Our objective is to actually get an infusion of non-dilutive capital that is significant and extending the runway but allows us to take the drug through Phase I and maybe even Phase IIa.

It's like an option payment of some sort?

Yes, that's exactly right. And then have trigger. So we would basically have a risk sharing for greater upside retention.

And on the Hsp90 would be the same type of situation, since you could be starting clinical trials there at some point?

Yes, potentially the difference with Hsp90 where it is already a crowded field, we would like the muscle of a large pharma to help augment our capabilities.

Got you. Thanks.

Sir, you have no question at this time. (OPERATOR INSTRUCTIONS). Sir, you have no questions at this time.

Okay. Thank you very much for joining us on the call, and we look forward to updating you on our progress in the coming months. Thank you very much.

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