Curis Inc (CRIS) 2009 Q1 法說會逐字稿

Good day ladies and gentlemen, and welcome to the first quarter 2009 Curis earnings conference call. My name is Shiquana, and I will be your coordinator for today. (Operator Instructions).

I would now like to turn the presentation over to your host for today's call, Mr. Michael Gray, Chief Financial Officer. Please proceed, sir.

Thank you. Good morning and thanks for joining us. Today we will provide as usual a corporate update and discuss our 2009 first-quarter financial results.

Before we begin I would like to advise you that this conference call contains forward-looking statements regarding our 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 our internal targeted cancer programs including CUDC-101 and CUDC-305 as well as our Hedgehog pathway inhibitor program under collaboration with Genentech, and financial guidance including projections of our future 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, and our need to maintain our proprietary rights, our ability to successfully continue our collaboration with Genentech as well as 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 annual report on Form 10-K for the year ended December 31, 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 or 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 first quarter of 2009, and then we will open the call up for any questions. Dan?

Thanks Mike. Good morning, welcome, and thanks for joining us today.

The first quarter of 2009 was a highly productive period or Curis. We continue to make excellent progress with our ongoing Phase I trial of CUDC-101, our first-in-class proprietary HDAC, EGFR Her2 inhibitor. We've also progressed our Hsp90 inhibitor, CUDC-305, through GLP toxicology studies, and we recently presented data at an important cancer conference, the AACR annual meeting, demonstrating the molecule's favorable safety profile and other attributes that we believe suggest that CUDC-305 could be a best-in-class Hsp90 inhibitor. And I will update you on more details of that in a moment.

In addition our collaborator, Genentech, has made significant progress recently with its development of GDC-0449, and I will begin my program overview with a discussion of this molecule.

As most of you are aware, 0449 is a first-in-class, orally administered small molecule Hedgehog pathway inhibitor that's being developed in collaboration with Genentech. Genentech and Roche collaborate on the clinical development and commercialization of 0449, and Curis is eligible to receive cash payments upon the successful achievement of certain clinical development and regulatory approval milestones, and royalties upon commercialization of the drug.

During the first quarter of 2009, Roche acquired Genentech. Many of our shareholders have asked us recently to what effect if any that we believe Roche's acquisition of Genentech may have an effect on our inhibitor collaboration. We believe that Roche's interest in 0449 is evidenced by Roche's October 2008 licensing of 0449 for clinical development and commercialization in territories outside of the US.

We believe that Genentech and Roche will continue to provide significant global clinical development and commercialization experience that could greatly benefit the potential value of 0449, and we look forward to continued collaboration with Genentech and Roche.

From a collaboration operating standpoint, we expect to continue working directly with our counterparts at Genentech and that Genentech will continue its strong clinical progress of 0449. Genentech is currently directly overseeing three ongoing clinical trials of 0449 quitting a pivotal Phase II trial in advanced basal cell carcinoma, or BCC, that Genentech initiated in February 2009.

In addition Genentech initiated Phase II clinical trials in metastatic colorectal cancer and in advanced ovarian cancer in 2008.

In the pivotal Phase II clinical trial of the molecule, Genentech and Roche will evaluate approximately 100 patients with locally advanced or metastatic BCC in a global trial. This trial represents a significant development milestone for 0449 and locally advanced or metastatic BCC and builds upon the strong Phase I safety and efficacy data demonstrated by the drug, which showed clinical benefit in a substantial proportion of advanced BCC patients. We believe that advanced BCC represents a first to market opportunity that could enable first market entry for a compound that inhibits the Hedgehog signaling pathway.

As I mentioned earlier, 0449 also is undergoing Phase II clinical testing in colorectal and ovarian cancer indications. Both colorectal and ovarian cancers remain major unmet medical needs, particularly here in the US. According to the American Cancer Society, colorectal cancer is the second leading cause of cancer death in the US and ovarian cancer is the eighth most common, causing more deaths in women than any other cancer of the reproductive system.

Genentech has indicated that if the proof of concept data from the colorectal or ovarian cancer trials are positive, Genentech and Roche could consider a rapid expansion of development for the compound in additional cancer indications. In March Genentech indicated that these data are expected in late 2010.

I should note that our collaboration with Genentech, in addition to providing a world-class clinical development program for 0449, also represents an important source of non-dilutive capital to Curis, and we have received a total of $12 million for the initiation of these clinical trials.

To the three ongoing clinical trials that are run directly by Genentech, Genentech in a national Cancer Institute, or NCI, entered into a collaborative relationship during the first quarter of 2009 that will allow the NCI to explore 0449 an additional cancer indications not presently being evaluated by Genentech. We believe that clinical trials conducted under this arrangement may have a significant impact on the overall development of the molecule since they provide an opportunity to generate additional data in tumor types not already under investigation and could help continue to discover potential new applications for the drug.

Under this arrangement with NCI, third-party investigators began enrolling patients during the first quarter of 2009 in a Phase I clinical trial that's designed to evaluate dose and safety of 0449 in pediatric payments patients with medulloblastoma. Medulloblastoma is a rare but unfortunately highly malignant brain tumor that occurs most often in children.

In addition to this trial, an additional Phase I clinical trial in pancreatic cancer patients as well as a randomized Phase II clinical trial in small cell lung cancer patients are also planned under this NCI arrangement.

Trial details of all studies are available on clinicaltrials.gov.

We look forward to the potential future initiation of additional clinical trials under this NCI collaboration. Such future trial information is expected to be posted also on clinicaltrials.gov as the respective trials near initiation. And we also look forward to providing further updates on 0449 as additional clinical trials are initiated as well as when Genentech and/or Roche communicates other important scientific and clinical observations.

Now moving on to our internal programs, we are currently conducting a Phase I dose escalation clinical trial of our novel proprietary molecule CUDC-101, which is a first-in-class small molecule inhibitor targeting HDAC, EGFR and Her2, and this is the first of our proprietary targeted cancer programs to progress into the clinical testing.

The 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 101 and to establish the maximum tolerated dose and dose limiting toxicities. Secondary objectives will be to assess the pharmacokinetics properties of the drug, efficacy, and the ability of CUDC-101 to inhibit the HDAC, EGFR and Her2 targets in this patient population.

The study is being conducted right now at two sites within the United States and is expected to enroll between 18 and 40 patients across several dose escalating cohorts. We have enrolled a total of 11 patients in the study to date as of Friday, and we believe that a 12th patient began treatment yesterday.

We doubled our dozing over three cohorts, which included four patients treated at 75 mg per meter squared, three patients treated at 150 mg per meter squared, and two patients treated at 300 mg per meter squared. The drug was well tolerated at 75 mg and 150 mg levels with the most common side effects including grade 1 to 2 dry skin, decreased hemoglobin, and hypoglycemia. Dry skin, by the way, is indicative of the EGFR inhibition, although rash has never appeared so far in the clinical setting. And decreased hemoglobin and hypoglycemia are suggestive of HDAC inhibition.

At the 300 mg per meter squared dosing level, both patients encountered a transient, grade 2 adverse event which was deemed possibly related to the study drug. Both effects were reversible upon discontinuation of the drug. Although the events were only grade 2 in severity, under the terms of the protocol they were deemed dose limiting toxicities as the patients missed the scheduled treatment day. As a result we plan to treat three additional patients at the 150 mg per meter squared dose level. Assuming this dose level remains well tolerated, further increased dose levels will be explored until the maximum tolerated dose is determined.

Our other clinical observations to date include a mixed response in one head and neck cancer patient in the second cohort. That was at the 150 mg per meter squared dose level. In this case, one target lesion appears to have been significantly reduced in size by greater than 30% while other metastatic tumors unfortunately did progress. To date this represents the first biological activity that we've observed with 101 in this trial.

The trial also has yielded certain biomarker observations such as a reduction in total Her2 protein in a patient tumor sample following four infusions of CUDC-101 treatment, and an apparent inhibition of EGFR signaling observed in skin biopsies obtained from patients treated with 101. In addition to these biomarker signals, which suggest that 101 appears to be hitting at least two of its intended targets in humans, we've also observed does-dependent pharmacokinetic data, with the patient exposure to 101 approximately doubling from the first to the second cohort.

We are encouraged by the early signs of this Phase I dose escalation trial and are currently estimating that it will be completed in mid 2009, dependent of course on a number of factors including the rate of patient enrollment and the number of cohorts that we are required to dose to reach the maximum tolerated dose.

In addition to CUDC-101, we are actively advancing our other preclinical drug candidates including CUDC-305, which is an orally available, wholly synthetic, novel small molecule inhibitor of the heat shock protein 90, or Hsp90, which is a highly sought after and attractive target right now. CUDC-305 has completed GLP toxicology testing with data suggesting that 305 has a favorable safety profile.

In addition to the toxicology data, we are conducting additional work to progress towards an IND application filing, including the manufacture and testing of clinical material, and we currently anticipate filing an IND application for 305 in mid 2009.

In addition to favorable GLP toxicology data, we recently presented data in two presentations at the 2000 AACR annual meeting, that support CUDC-305's potential to be a best-in-class Hsp90 inhibitor. The first [presentation] (technical difficulty) entitled -- anti-tumor activity of CUDC-305, a novel Hsp90 inhibitor (technical difficulty) solid and hematological tumor xenograft models showed preclinical data in which CUDC-305 demonstrated potent anti-tumor activity in preclinical, non small cell lung cancer models including those containing mutations conferring resistance to marketed drugs.

In addition, CUDC-305 demonstrated tumor regression in breast, colorectal, and glioblastoma preclinical cancer models as a single agent or in combination with other targeted drugs or standard chemotherapeutics. It also exhibited significant brain penetrability and significantly enhanced survival in preclinical, intracranial tumor models.

Lastly, CUDC-305 demonstrated efficacy in preclinical hematological cancer models, inducing complete regression in an acute myeloid leukemia model. The compound also has exhibited a favorable safety profile in these studies as well as the GLP toxicity studies.

The second presentation, poster entitled -- a novel, tumor-specific Hsp90 inhibitor with long-lasting biological activity, reported that CUDC-305 exhibited significant potency against a broad range of solid and hematological tumor cell lines in anti-proliferation assays. The data demonstrated that 305 induced tumor regression in a subcutaneous xenograft model for glioblastoma and showed 305's favorable pharmacological profile in vitro including a higher binding affinity to cancer chaperone complex and prolonged biological effects to cancer-associated Hsp90 client proteins.

(technical difficulty) the data indicated that the potency of the compound was unaffected by the expression level of a key mediator of drug resistance, the multi-drug-resistance protein 1. The compound displayed significant tumor retention (technical difficulty) of 20.5 hours and an oral bioavailability of 96%, which is excellent bioavailability.

(technical difficulty) currently involved in multiple late stage discussions with several pharmaceutical and biotechnology companies regarding a potential development collaboration for this compound.

Backed with the full data set of CUDC-305, we believe this to be an attractive asset for a potential partner, and we hope to enter into a transaction around this molecule.

In addition to our progress with 101 and 305, we continue to engage in active preclinical development efforts on our other targeted cancer programs including building out our multi-target inhibitor platform, and we hope to select another development before the end of the year.

I would now like to turn the call back over to Mike for financial discussions. Following Mike's remark, we will open the call for questions.

Thanks Dan.

The first quarter 2009 we reported net income of $1.1 million or $0.02 per share as compared to a net loss of $3.4 million or $0.05 per share for the same period in the prior year.

Revenues for the first quarter of 2009 were $6 million as compared to $2.1 million for Q1 2008. We recognized $6 million in license revenues during the first quarter of 2009, which were related to the receipt of a contractual payment from Genentech for the initiation of a Phase II clinical trial of GDC-0449 in metastatic and locally advanced BCC.

In Q1 2008 we recognized $1.9 million in license revenue, $1.75 million of which was related to the revenues associated with the sale and assignment of our remaining BMP-7 assets to Stryker Corporation.

Operating expenses for the first quarter of 2009 were $5 million as compared to $5.9 million for the first quarter of 2008. In the fourth quarter of 2008 we had implemented spending reductions in various preclinical research and G&A areas, which accounted for some of this decline.

R&D spending was $2.9 million for the first quarter of 2009 as compared to $3.5 million for the first quarter in 2008, a decrease attributable to decreased spending on our targeted cancer programs as well as elimination of spending on our Hedgehog agonist program, which had been partnered with Wyeth, as that collaboration ended in February 2008.

(technical difficulty) [G&A] spending was $2.1 million for the first quarter of 2009 as compared to $2.4 million for the same period in the prior year. This decrease was primarily due to decreases in personnel costs, travel costs, and stock-based compensation expense. Offsetting these decreases we incurred increases in legal services associated with foreign patent applications.

As of March 31, 2009 our cash, cash equivalents, and marketable securities totaled $30 million, and there were approximately 63.7 million shares of our [common] (technical difficulty) outstanding. We believe that this $30 million should enable us to maintain our current and planned operations into the second half of 2010. We currently project that the cash actually gets us roughly through Q3 2010.

That wraps up the financial remarks, and we would like to open the call for questions. Operator?

(Operator Instructions). Ren Benjamin, Rodman.

Thanks for taking the questions and for the thorough update. So I guess maybe just starting off with GDC-0449, Dan, I think you mentioned in your remarks that Genentech had previously stated that the data would be available from all three of these trials in 2010. Do we have any additional clarity as to when in 2010 it could be available? I understand it's all related to how enrollment goes and stuff, but do you have any sense as to how enrollment might be going in these trials?

An excellent question. The update that we have from Genentech on the program and what they've stated publicly is that we're likely to get an update in Q4 2010. Enrollments are going very well. And that's really as much as we know right now.

And is that Q4 2010 for all three trials? Or do we see the pivotal, 100-patient BCC trials coming in first? Or do we have any clarity on that?

This is Mike. I don't think we have great clarity on that. I think for now we will have to assume it's all sort of late 2010 time frame.

And just to kind of characterize the relationship -- and maybe it's too early to call, but do you foresee or have you seen any sort of a change in the responsiveness to people at Genentech or at Roche? I imagine that, like you mentioned earlier, Roche has this program on a pedestal and would like to move this thing forward, but clearly there's a lot of things going on right (technical difficulty) can you give us any sort of sense as to how the interaction is going with the parent company now?

I think the key metric is the fact that Roche stepped up and exercised their right to license ex-US prior to the acquisition of Genentech. So that's I think an important metric that underscores their interest in the program. And in terms of the dynamics of the relationship, I mean certainly nothing seems to have changed or been modified, and Roche seems to be fully supportive of the program. They are participating in the global trial, and our discussions with Genentech have continued on course.

And just to add something to that, I interact I guess as Curis's representative with Genentech, and we still -- our interactions are still mainly with Genentech, and the team that we interact with is still the same as it has been for over a year.

Moving on to the collaboration with the NCI, you mentioned that the medulloblastoma trial has already started. Can you give us a sense as to -- I know it was pretty recent, but is it enrolling quite briskly? Is it kind of slow? Just give us a sense as to how that trial has started. And then I believe you mentioned that it's a small cell lung cancer trial and a pancreatic trial that will likely get started later on. Do we have any idea as to the timing of those trials?

This is Mike. I think it's important just to distinguish those NCI trials from Genentech controlled trials. So Genentech is obviously on the metastatic colorectal, ovarian, advanced BCC trials, directly overseeing and running those trials. Their role is much more limited on these NCI studies. They definitely have input on the protocol up front, and they have the right to either provide drug or not provide drug, but the clarity that even Genentech will get and then in turn that we'll get is much less than on the Genentech controlled trials, so we don't really have a great update on enrollment. I think that Genentech will get periodic updates from NCI, and we'll in turn get updates from Genentech.

I will say if you're looking at clinicaltrials.gov, the medullo trial has been recruiting for -- off the top of my head -- a couple of months now, and the pancreatic cancer trial is now recruiting, whereas I think a couple of weeks ago it was not, and the small cell lung cancer trial is still not recruiting, but the trial description is on clinicaltrials.gov. But unfortunately that's really all that we have on those trials right now.

Then regarding 101, you had mentioned that at the 300 mg dose there is a transient grade 2 adverse event. What was the adverse event that you saw?

Yes. We had -- one patient had elevated creatinine levels, went up to a grade 2, and one patient where before going into the trial, we had a report that the patient was not cleared yet because they may have had a met in the pericardium. They were then cleared. The patient developed a transient pericarditis, and we don't know whether it's drug-related or not, so that patient is suspect because the pericardium was brought to our attention prior to being entered.

So the fact that we had two grade 2s and both missed the third day of drug, it's deemed to be a DLT, possibly drug-related, so we're backed down now and we're dosing again at 150 mg, and we're -- hopefully we started the third patient yesterday.

And you mentioned that at least from the elevated creatinine levels it was transient, so I imagine once they were off drugs, things came back to normal?

Yes.

And are these patients being treated at the 150 mg or are they off the study?

They came off the study.

Oh, they did. Okay. And then going forward, if the -- you expand the 150 cohort, everything looks fine, do you go back to the 300 mg or do you go to some in-between dose? How does that look?

We are going to be dose escalating an in-between dose and working our way systematically back up.

And then you mentioned that there was this mixed response in the head and neck patients and that the target lesion had decreased by about 30% or so. Do you have any other results as far as maybe stable disease is concerned from any of the patients that have been treated? And probably more importantly, even with this mixed response, do we have any sort of data as to the duration of the response?

Yes. Bear in mind, Ren, this is Phase I. So we're not looking at the various metrics as carefully as you would on a dose escalation in the expansion cohort or a Phase II. So the mixed response to date is the only one that's been reported to us. Bear in mind we've only treated seven patients at the 75 mg and 150 mg. We are hopeful that at 150 mg, 200 mg we'll start seeing some more responders.

And in terms of the one patient that responded, they had other mets that continued to grow, so they came off drugs.

Then regarding the 305, can you give us a sense -- you mentioned that you are in late stage discussions pharmaceutical partners. I thought the data at AACR was outstanding. And can you give us a sense as to I guess not necessarily how those discussions are going, because you might not be able to comment on that, but what the general environment is for partnering earlier stage compounds right now versus let's say later stage?

That's a good question. I think that the general trend (inaudible - background noise) pharma companies are looking for later stage compounds. However, that being said, certain targets, certain molecules are still highly sought after, and I think Hsp90 fits into that category. It's a growingly competitive niche right now of focus, but a significant number of pharmaceutical companies are still very much attracted to that field. It's considered to be a validated target, and we actually have had a lot of interest, and we are in what I classify as late stage. We've had thorough due diligence by several companies, and they are continuing to engage in active discussions with us, so we are very encouraged at this point.

And is it -- are you -- we still on track? I think it was mentioned in the previous conference call or in discussions that you would seek for at least a $10 million to $15 million up-front from -- for this stage of an asset and from the data that you've seen so far. Does that still look reasonable?

Yes. That's still in the range of what we are seeking.

Okay. Great. And then I guess one final question, because I don't want to leave Mike out of these questions. Regarding the quarterly burn going forward, I know you've been very descriptive as far as how long you think the cash will last you, until the very end, I think you mentioned the third quarter of 2010. But just regarding the quarterly burn for the rest of this year, is there anything that we should be looking out for, any additional milestone payments that you can foresee coming through, outside of this 305 partnership?

No. I think outside of this three -- I think the 305 partnership (inaudible - microphone inaccessible) next material cash inflow. I think all the Genentech, the next Genentech milestones are 2010 events.

And so the cash out -- outflow for this year will be?

Cash outflow for this year, we should (inaudible - microphone inaccessible) on the I think year end guidance that we gave at Q4 was $12 million to $15 million. I think we will be at the high end of that guidance. So we are still burning roughly, gross, $5 million a quarter.

Perfect. Thanks guys and good luck.

Jason Kantor, RBC Capital Markets.

I'm going to ask a couple fewer questions. The creatinine increase, was this of cardiac origin? Do you know? Or was this a skeletal muscle toxicity or cardiac toxicity?

What we think the creatinine was from was typically a kidney response. We don't really understand the mechanism at this point, but it was a transient grade 2 in one patient, so we don't really have any confidence that we know the mechanism presently.

Oh, okay. And then was there any sign of any left ventricular ejection fraction changes for any of these patients?

No, there have not been (inaudible - microphone inaccessible)

Then on 101, in terms of what you're going to do next, what do you think the right path is in terms of Phase II to either clearly establish efficacy or to kill the program? What tumor types would you look at? It sounds like you don't have too much of a signal to go on from the Phase I. Do you go for head and neck? Or do you go for some of these other tumor types? What's your strategy going forward?

Yes. That's an important question, Jason, and let me underscore, in typically a Phase I, you're not really looking for efficacy. It's tolerance and safety. We are looking for efficacy. We've had very impressive responses in preclinical models with a good tolerance, so our objective -- we're not even sure at this point we'd want to go straight into a Phase II.

What we're looking at now, and we're talking to our clinical investigators, and -- as was a group of potential clinical centers about the prospects of expanding the Phase I where we would enrich up to 10 patients in each of a number of cohorts, for instance, in non-small cell lung cancer where we would seek EGFR positive but refractory patients. Pancreatic cancer, liver cancer, head and neck cancer is another one we are considering. So the objective would be to get a signal in one or several of these cancers and then use that data to proceed.

Our real objective is to show that we have a safe and well tolerated drug that has shown efficacy and clinical signals in the Phase I, where we could then take that data package and either look to raise money around that data package subsequently, or seek a pharmaceutical partner to subsidize the further development.

When would you suspect the earliest you might have that kind of proof of efficacy data would be?

Our estimates right now, Jason, are that we'll complete the Phase Ia sometime midyear and then proceed with a Phase I expansion, which would probably take up to an additional 12 months to complete.

(Operator Instructions). At this time there are no further questions. I would now like to turn the call over to Mr. Daniel Passeri for closing remarks.

Thank you. I just want to thank everyone for your support and interest in the company, and we continue to providing you with further updates as they become available. Thank you very much.

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