Curis Inc (CRIS) 2008 Q3 法說會逐字稿

Good day, ladies and gentlemen and welcome to the third-quarter 2008 Curis earnings conference call. My name is Stacy and I will be your conference moderator 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 the 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. Mike Gray, Curis' Chief Financial Officer and Chief Operating Officer. Please proceed.

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

Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including risks relating to our ability to successfully advance the research and clinical development of our targeted cancer programs, Genentech's ability to successfully advance clinical trials of GDC-0449, competitive pressures in our need to maintain our proprietary rights, our ability to successfully continue our collaboration with Genentech and enter into new collaborations on favorable terms, if at all, unplanned operating expenses, our need to raise additional funds to finance our operations and risk factors described in our quarterly report on Form 10-Q for the quarter ended June 30, 2008 and other reports that we periodically file with the SEC. We caution you that we are making these forward-looking statements as of today and 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' 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 third quarter and year-to-date periods and then we will open the call to any questions. Dan?

Thanks, Mike. Good morning and thank you for joining us today. This quarter was a highly productive period at Curis. Two of the drug candidates from our proprietary pipeline of targeted cancer programs have progressed.

First, we initiated a Phase I clinical trial of our most advanced CUDC-101 in solid tumors and second, we selected CUDC-305, which is a Hsp90 inhibitor, as a development candidate. In addition, Genentech has stated that it plans to initiate two additional Phase II trials of another candidate, GDC-0449, which is our Hedgehog antagonist, one in advanced ovarian cancer by the end of this year and another Phase II trial in advanced basal cell carcinoma in the first half of 2009.

We continue to execute on our strategic objectives, including partnering. Our current business development strategy and preference is to enter into a license agreement or other collaborative relationship with respect to our Hsp90 inhibitors, CUDC-305. The field of research and development for Hsp90 inhibitors has become increasingly competitive and we are aware that several competing drug candidates targeting Hsp90 are currently in the clinic, as well as preclinical development. Based upon our preclinical findings to date, we do believe that the characteristics and properties of CUDC-305 have the potential to provide competitive advantages over existing Hsp90 inhibitors. Due to the competitive nature of this target, we believe that this program would be most effectively developed through the direction, support and resources of a large biotechnology or pharmaceutical company.

While pursuing ongoing CUDC-305 collaboration discussions, we are also engaged in parallel discussions with various companies pertaining to other collaboration possibilities, including codevelopment for our CUDC-101. For this drug candidate, we prefer to retain ownership through early-stage clinical development. Our core strategic plan is to establish a partnership as a means of addressing the risk of capital access while still retaining significant upside potential for our shareholders.

While we believe that we have had a productive quarter, we are planning ahead and have taken proactive steps in recent weeks that we believe will provide Curis with a greater opportunity to conserve our resources while at the same time allowing us to advance our proprietary assets. As a result of these measures, we believe that our current financial position is sound. We currently expect to end 2008 with between $26 million and $28 million in cash. This estimate includes an expected $3 million milestone payment from Genentech upon its initiation of the Phase II trial in advanced ovarian cancer that Genentech has stated it expects to initiate this year.

In an effort to extend our projected cash life and in addition to other proactive spending changes we affected at various times during 2008, we recently implemented spending reductions in various general and administrative, as well as early preclinical research areas. These spending reductions include decreases in contract medicinal chemistry and biology being performed on preclinical programs in China, as well as decreases in personnel, legal and occupancy costs.

Also included in these changes are decreases to executive cash compensation in exchange for equity. Curis' executive officers requested, and our Board of Directors approved these decreases, which we hope speaks to our confidence in the Company and our belief in the long-term value of Curis stock.

For example, my annual compensation was reduced by $100,000 and Mike's was reduced by $50,000 in exchange for stock awards. As a result of implementing these cost reductions, we expect that Curis will have adequate capital to fund its currently planned operations into the first half of 2010 and potentially longer if we should enter into any collaborations with the products in our pipeline.

I am now going to turn to a brief update on our research and development programs. I would like to begin my review of the status of GDC-0449, an orally-administered, small molecule Hedgehog pathway inhibitor. Earlier this year, Genentech stated that it plans to initiate three Phase II clinical trials of GDC-0449 in colorectal cancer, ovarian cancer and advanced basal cell carcinoma.

In May, Genentech initiated the first of these Phase II trials in first-line metastatic colorectal cancer and in August, Genentech disclosed that the ovarian cancer Phase II trial was designed to test GDC-0449 as a maintenance therapy for advanced ovarian cancer patients. GDC-0449 will be evaluated in approximately 100 patients with ovarian cancer in second or third complete remission in this randomized, placebo-controlled, double-blind, multicenter, Phase II trial. Patients will be randomized in a one-to-one ratio to receive either GDC-0449 or a placebo comparator and will be stratified based upon whether their cancer is in a second or third complete remission.

The primary endpoint of the trial is progression-free survival and secondary outcome measures include overall survival, the amount of Hedgehog protein expression in archival tissue and the tracking of adverse events. Genentech has indicated that it expects to initiate this Phase II trial during the fourth quarter of 2008. We look forward to the initiation of this trial in the next couple of months.

In addition to the colorectal and ovarian trials, data were also recently presented from the ongoing Phase I clinical trial of GDC-0449 in advanced basal cell carcinoma, including promising safety and efficacy data. Last week, Dr. Charles Rudin of Johns Hopkins University and a Phase I study investigator presented a poster with an update on safety and efficacy data from the ongoing Phase I trial. Earlier interim data had previously been presented at the AACR annual meeting in April 2008 and the ASCO annual meeting in June 2008. As of the data cut-off of June 1, 2008, the open label, multicenter, three plus three Phase I study enrolled a total of 42 patients in two stages.

Stage one is designed as a dose-escalation study that enrolled 20 patients in three cohorts with daily dosing of 150, 270 and 540 milligrams. 22 additional patients were enrolled in stage two of the study, which it is an expanded safety cohort that is designed to collect additional safety pharmacokinetic and pharmacodynamic data.

In this Phase I study, including both patients in stage one and two, a total of 13 patients have, with locally advanced or metastatic BCC, received continuous once-daily dosing of GDC-0449 at 150, 270 and 540 milligrams per day. As confirmed by an independent review facility, two patients experienced partial response per the response evaluation criteria in solid tumors or RECIST. As of June 1, 2008, data cut-off, responses are ongoing with durations of 9.2 plus and a plus months.

In addition, four patients have experienced partial responses, assessed by clinical examination, with observations of shrinkage or resolution of subcutaneous masses, reepithelialization, and [oscisation] of bleeding or discharge of ulcerated tumors and/or flattening of nodular tumors. Of the remaining BCC patients enrolled, one patient experienced progressive disease as a best response, four patients had stable disease and two patients are too early to evaluate.

No dose-limiting toxicities have been observed in Phase I study. Most frequently observed adverse events, regardless of relationship to drug were fatigue, dsyguesia, which is altered taste sensation, nausea, anorexia, cough, abdominal pain, diarrhea, hyponatremia, increased weight, back pain and decreased appetite. Two cases of drug-related grade three fatigue and one case of grade three drug-related asymptomatic hyponatremia, which is a sodium imbalance, were reported and were reversed with temporary discontinuation of the drug.

We are very encouraged by the early yet promising results of GDC-0449's Phase I studies and we look forward to providing updates on this program as further Phase II clinical testing is initiated or as Genentech communicates other important scientific and clinical observations.

Moving on to our internal programs, in August, we began dosing patients in our Phase I clinical trial of CUDC-101, our first-in-class small molecule inhibitor of HDAC, EGFR and HER2. Phase I trial is designed as an open label, dose-escalation study of CUDC-101 in patients with advanced refractory solid tumors. The primary objectives of the Phase I are to evaluate the safety and tolerability of escalating doses of CUDC-101 and to establish the maximum tolerated dose in dose-limiting toxicities.

The secondary objectives of the Phase I study will be to assess the pharmacokinetics, efficacy and ability of CUDC-101 to inhibit its targets, namely HDAC, EGFR and HER2 in this patient population. Study is expected to be conducted at two sites within the United States and to enroll between 18 and 40 patients across several dose-escalating cohorts. Further trial details are posted at clinicaltrials.gov.

Our clinical centers are the South Texas Accelerated Research Therapeutics or START in San Antonio, Texas with Phase I principal investigator, Dr. Anthony Tolcher, and the Barbara Ann Karmanos Cancer Institute in Detroit, Michigan with Dr. Patricia LoRusso. We are currently estimating that the Phase I trial will be completed in mid-2009. 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. We look forward to updating you on the Phase I trial progress with this molecule in the future.

In addition to CUDC-101, we are actively advancing our other preclinical drug candidates and during the third quarter, we announced that we selected CUDC-305 as a development candidate from our pipeline of targeted cancer programs. CUDC-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 referred to as molecular chaperones that play a fundamental role in the folding, stabilization and protection of various cellular proteins known as client proteins. Hsp90, in particular, has become an attractive therapeutic target for the treatment of cancer because the 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 protecting the particular client proteins involved in cancer and allow them to be degraded, thereby inducing cancer cell death.

Last week, one of our scientists presented a poster entitled CUDC-305, a novel synthetic Hsp90 inhibitor with unique pharmacological properties. This was presented at the 20th European Conference Symposium on molecular targets in cancer therapeutics in Geneva, Switzerland. The poster highlighted key preclinical data demonstrating that CUDC-305 appears to have a strong combination of pharmacological properties that may contribute to its potent efficacy in preclinical cancer models.

In preclinical xenograft mouse models, the orally administered compound exhibited high oral bioavailability and a prolonged terminal half-life of 20.5 hours in tumor tissue versus approximately six hours in plasma. In addition, preclinical brain pharmacokinetic data demonstrates that CUDC-305 is highly brain penetrable, suggesting that the compound could have potential advantages for the treatment of primary or metastatic brain cancer.

In mouse xenograft models of brain cancer where tumor cells were derived from a human glioblastoma implanted subcutaneously, 305 exhibited dose-dependent inhibition of tumor growth. The poster included pharmacodynamic data following this efficacy study, demonstrating upregulation of HSP 70 expression, which is a biomarker of Hsp90 inhibitor activity and also demonstrated downregulation of cancer biomarkers, including c-MET, cyclin D1 and RAF-1 protein levels in addition to Akt signaling. Tumors also were collected for immunohistochemistry analysis revealing a dose-dependent reduction of cell proliferation and microvessel density, which is indicative of an anti-angiogenesis effect.

Furthermore, in a separate mouse xenograft study in which glioblastoma tumor cells were implanted intracranial, CUDC-305 treatment significantly prolonged survival in treated mice. The poster also provided data demonstrating potent in vitro antiproliferative activity across a diverse range of preclinical cancer cell lines, representing both solid tumor and hematological malignancies, using doses well below concentrations effective in most xenograft models.

In a hematological mouse xenograft model, CUDC-305 demonstrated the ability to induce complete tumor regression following a three-week dosing regimen while maintaining a favorable safety profile. We anticipate filing an IND application for CUDC-305 in mid-2009 and as I referred to earlier, we are currently involved in multiple discussions with several pharmaceutical companies regarding a potential development collaboration for this compound.

In addition to our progress with 101 and 305, we continue to engage in active preclinical development efforts on our other targeted cancer on-drug programs and we hope to select a third development candidate in the first half of 2009.

Before we move on to the financial discussions, I would like to thank our employees and our supporters. I look forward to providing you all with further updates on our pipeline and preclinical programs as the year progresses. I would to now turn the call back over to Mike.

Thanks, Dan. I will now very briefly discuss our third-quarter 2008 financial results and then we will open the call up for questions. For the third quarter of 2008, we reported a net loss of $4.6 million, or $0.07 per share, as compared to a net loss of $3.7 million or $0.06 per share for the same period in the prior year. Revenues for the third quarter of 2008 were $100,000 as compared to $1.3 million for the third quarter of 2007, a decrease of 92%. Research and development contract revenues were $100,000 as compared to $800,000 for the same period in 2007. This decrease was the result of a decrease in research funding revenues under collaborative arrangements with Procter & Gamble, which concluded in November of 2007 and Wyeth, which concluded in February 2008. We did not recognize any license revenues during the third quarter of 2008 as a result of the conclusion of these collaborations as compared to $500,000 of license revenues recognized in Q3 2007.

Operating expenses for the third quarter of 2008 were $4.9 million as compared to $5.4 million for the third quarter of 2007, a decrease of 9%. Our research and development spending as $3 million for the third quarter of 2008 as compared to $3.2 million for the same period in 2007, a decrease of 6%. This decrease is primarily attributable to decreased spending of $300,000 as a result of the conclusion of the Hedgehog agonist program under collaboration with Wyeth, which concluded earlier this year. G&A spending was $1.9 million for the third quarter of 2008 as compared to $2.2 million for the same period in 2007, a decrease of 14%. This decrease is primarily due to a $200,000 decrease in personnel costs.

For the nine-month period ending September 30, 2008, Curis reported a net loss of $10 million or $0.16 per share as compared to a net loss of $11.3 million, or $0.22 per share for the same period in the prior year. Revenues for the nine months ended September 30, 2008 were $5.3 million as compared to $4.9 million for the same period in the prior year, an increase of 8%. Operating expenses were $16.1 million for the nine months ended September 30, 2008 as compared to $17.1 million for the same period in the prior year, a decrease of 6%.

R&D expenses were $9.7 million for the nine months ended September 30, '08 as compared to $9.5 million for the same period in the prior year. And G&A expenses were $6.4 million for the nine months ended September 30, '08 as compared to $7.5 million for the prior year. As of September 30, 2008, our cash, cash equivalents and marketable securities totaled $29.9 million and there were 63.4 million shares of our common stock outstanding.

Before we open the call up to questions, I would just like to make a couple quick comments on our financial guidance that we issued earlier this year, which included ending year-end cash of $17 million to $21 million. That number had excluded all milestone payments in '08. We've already received a $3 million milestone payment from Genentech and as Dan noted, we expect to receive an additional $3 million payment on the initiation of five Genentech (inaudible) advanced ovarian Phase II trial later this year. So rolling that forward, that would bring our -- add those $6 million in milestones to the initial guidance, which rolls that to $23 million to $27 million, Dan earlier mentioned a $26 million to $28 million year-end cash target, so we are right up at the upper end of our earlier projected range.

On the R&D and G&A expense guidance that we issued earlier this year R&D, we expected $16 million to $19 million, including $500,000 to $700,000 in stock-based comp. We expect to fall below the low end of that range now, between $14 million and $15 million. Stock-based comp guidance remains the same.

On G&A spending, our earlier guidance was $8 million to $10 million, including $1.2 million to $1.4 million in stock-based comp. We expect we will be at the low end of the G&A range, somewhere in the $8 million to $8.5 million range, which includes about the same range for stock-based comp of $1.2 million to $1.4 million. So with that, I will ask the operator to turn the -- open up the call for questions.

(Operator Instructions). Jason Kantor, RBC Capital Markets.

Hi, thanks for taking the call. I don't know if you covered this, but could you tell us, in the CUDC-101 trial, what was your dose you had to start at and where are you in terms of cohorts and moving up the doses? How does that compare relative to what you think an active dose might be for the drug?

So we were fortunate to be requested by the FDA to consider starting off at a relatively high dose because of our GOP safety profile. So our starting dose was 75 milligrams per metered square and we are treating three patients in each cohort and then expanding the dosing from that point.

Initially, what we are thinking is each cohort will be a doubling and then if we see any [DLTs], we'll work backwards. We have been very successful at enrolling patients. To date, we are just about in the final stages of completing cohort one and expect to begin cohort two say in the November timeframe.

Okay. And with respect to the upcoming BCC trial, clearly this could be an accelerated approval strategy for the drug, but will you get a milestone for that trial if it is officially a Phase II trial and not a Phase III trial?

Well, it depends on the structure of the Phase II, if it meets the definition of what a Phase III would be. So it is not based on actually initiating a Phase III; it is that it would be the definitive patient cohort for submission for approval. So if the Phase II is a pivotal, it would trigger a milestone payment.

Okay. So that is something you could potentially get first half next year?

Yes.

Okay, thank you.

Ren Benjamin, Rodman & Renshaw.

Hi, good morning and thanks for taking the question. I guess just following up on Jason -- with the 101 trial, you mentioned the dose and that you would be completing cohort number two hopefully by the end of November. Can you give us an idea as to the types of patients that have been enrolled to date? I understand they are small, but is it one particular cancer type over another or is it just pretty much randomized?

It is intended to be randomized and it is all comers, basically refractory solid tumors. However, there are certain cancer subtypes that we are particularly intrigued by based on the biology. So if we are able to get a sampling of those patients in the Phase I, that is, obviously, a positive attribute for the study. So that is where it stands right now.

How would you character those patients that you would be more interested in?

Yes, so the preclinical data suggests and supports the premise at a molecular level that the drug should be effective for breast cancer, in particular looking at basically HER2 positive, HER2 negative, as well as the triple negative patient population. And as you know, the majority of breast cancer patients are not HER2 positive. We think that is a real competitive advantage and positioning for the drug if we can show efficacy in that broader patient population.

Also with non-small cell lung cancer, we would be looking at EGFR positive, but refractory patients that are nonresponsive to EGFR inhibitors. And then we also have some data supporting the prospects of head and neck cancer and liver cancer.

And when might we see these results in either final form or some sort of interim form? When do you guys plan on releasing these?

Yes, that's a difficult issue, Ren, because you don't want to put anything out publicly based on preliminary data. So we want to hold off until we have real confidence in the compilation of data because you can really run afoul if you start making statements of observations you make early on. So we would like to wait until completion of Phase I and really at the earliest, it would be towards the end of year, beginning of '09. We are expecting the Phase I trial to be completed in the timeframe of say Q2.

Okay, okay. So moving on to the Hedgehog program, you gave us an update that was presented at the [URTC] conference and can you just remind me how this data, the updated data compares to the previous ASCO data? It seems to me that there was less -- there were more stable diseases, but the number of patients with partial responses have stayed the same. Is that correct?

Yes, I think there were eight out of nine presented between AACR on the efficacy front and then at ASCO I think there is more of the PK of the drug and toxicity profile of the drug presented at that conference. Yes, there were 13 -- so there were 13 now patients instead of the nine and the partial responses, two confirmed clinical, four -- sorry -- two confirmed RECIST and four clinical observation partial responses. That number has not changed.

And would the -- you mentioned --.

Keep in mind, Ren, that two of those 13 patients are too early to evaluate.

Right. Okay. And you mentioned or you gave us an update as to how long the clinical responses, the partial responses were going forward. Do you happen to know the data for the stable disease?

I don't.

Okay. And then because I wasn't at the conference in Geneva and I haven't necessarily seen a press release from you guys regarding this data, is there anything new regarding the status of GLE1 in these newer patients?

No, it is still downregulated.

It is basically consistent with previous observations.

Okay, great. And I guess just one final question then regarding the financials. It seems like you guys have reined in the burn a little bit and significantly extended your runway. In our models and when we think about the Company, we think about a robust Phase II trial starting let's say sometime toward the end of next year, at least for 101 and significant burn increase at that point. Are you guys thinking along the same lines as well and does that incorporate -- do the current burn projections incorporate that?

Well, in light of the current market conditions, we are proactively thinking about sort of mitigating financial access risk. So we are looking at a couple of alternatives in terms of partnering. One is doing a Phase I expansion cohort to get better statistical insights on how to design the Phase II. We are looking at some codevelopment partnering alternatives. We are in discussions with several companies that would allow us to retain upside, but mitigate the risk of capital access. And then it also is predicated on our success or not of partnering Hsp90.

But just to be clear, the financial model that we have in place does assume that we are going forward without a partner, without -- the burn does not factor in partnering revenue or anything like that, so it really is about focusing on 101, 305, reducing a bit of the earlier stage pipeline costs in light of the market reducing some of the administrative costs wherever we can find places to reduce those costs without impacting, really impacting our ability to move subsequent drugs forward and also 101 and 305. So it does assume that we are going into Phase II testing. I think it's sort of, in our model anyway, late next year.

Terrific. Especially in this environment, it is very good, prudent and proactive. I guess one final question just regarding milestones for the next six to 12 months, do you have any clarity as to maybe when we will be seeing additional data? You mentioned, Dan, I know when you think the IND for 305 will be filed, when you think the trial will be complete for 101, but is there anything else that we should be aware of?

I think a key important milestone is going to be, pursuant to Jason Kantor's earlier question, is the BCC trial with Genentech, if that triggers a milestone. And then our success or not of partnering, if we consummate a collaboration, we would like to be able to achieve that end of year earliest, more likely early 2009 during Q1.

Okay. And you mentioned it earlier in your talk, but the BCC trial, I guess I had originally thought about it as starting in the second half of this year, but it looks like it has been pushed out a little bit to the first half of '09. Is that correct or did I hear it wrong? 0

No, that's correct. The Genentech updated that at their Q3 call. I guess it was last week or a couple weeks ago.

Okay, great.

(multiple speakers) just working right on -- we have got to be -- I can't really speak for Genentech, but working on finalizing that trial design and so we will hopefully be able to provide an update on that sometime in Q4, if not early next year.

Terrific. Thank you, guys, very much and good luck.

(Operator Instructions). [Andrew Peters], SIG.

Yes, thanks, guys. I was wondering if you could quickly comment on Celgene's discontinuing their program with MethylGene for their HDAC program and if that has any implications for your pipeline?

Yes, so I think it bodes in our favor from the standpoint of the question of whether isoform-specific HDAC inhibitors are advantageous over pan-inhibitors. There has been this dispute as to whether isoform are going to be better tolerated and I think that was indicative of the data generated by MethylGene. But I don't know the details on that data set, but I don't think it really has any negative implication for our inhibitor. In fact, we think it helps us from a competitive positioning standpoint. The argument being that we are hitting class one, class two Hsp90 inhibitors so that you are having a much broader epigenetic effect.

Okay. And then also can you briefly talk about any potential, I guess, size of any potential partnership for the Hsp90 program, what sort of deal terms will you be looking for?

Yes, we are looking at achieving what we would consider a substantive transaction that would give it guidance. I would say $15 million upfront would be sort of the low end of what we would consider to be adequate compensation on that in terms of extending our runway, but we would expect to have significant financial upside through milestones, etc.

Okay and I think that is it for me.

(Operator Instructions). With no further questions in the queue, I would like to turn the call back over to Mr. Gray for closing remarks.

I would just like to thank everybody for joining us again this quarter and we look forward to updating you in a few months at the year-end call. Thanks.

Okay, thank you very much.

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