Curis Inc (CRIS) 2009 Q3 法說會逐字稿

Good day ladies and gentlemen, and welcome to the third quarter 2009 Curis earnings conference call. My name is Francine, and I am your operator for today. At this time all participants are in listen-only mode. Later we will conduct a question and answer session. (Operator Instructions). I would now like to turn the presentation over to your host for today's call, Mr. Mike Gray, Chief Financial Officer. Please proceed sir.

Good morning, and thanks everybody for joining us this morning. We will provide a corporate update and discuss our third quarter 2009 and year-to-date financial results.

As always, however, before we begin I'd like to advise you this conference call contains forward-looking statements regarding 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 and benefits of our internal targeted cancer programs, statements regarding the planned development of our Hedgehog pathway inhibitor program under collaboration with Genentech, as well as our Hsp90 program that's licensed to Debiopharm, projections of our future cash position and other financial guidance.

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, including CUDC-101, Genentech's ability to successfully advance clinical trials of GDC-0449, and Debiopharm's ability to progress Debio 0932 -- which is the new name for CUDC-305, the Hsp90 inhibitor -- into Phase I clinical testing, competitive pressures, our need to maintain our proprietary rights, our ability successfully continue our collaborations with Genentech and Debiopharm as well as to 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, 2009 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 that we may not update any 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 provide an update on our pipeline. Following Dan's remarks I'll return to review our financial results for the third quarter of 2009 and year-to-date periods, and we will then open the call to questions. Dan?

Thanks Mike. Good morning and thank you for joining us today.

In the third quarter of 2009 Curis announced important developments for each of our three leading drug candidates. First, we announced the publication of Phase I data from GDC-0449, a Hedgehog pathway inhibitor under collaboration with Genentech, in the New England Journal of Medicine, demonstrating molecule's potential in locally advanced and metastatic basal cell carcinoma.

Next, we also achieved a key partnering goal of licensing Debio 0932, an Hsp90 inhibitor formerly known as CUDC-305, to the Swiss pharmaceutical company Debiopharm SA. The upfront anticipated near-term payments under this agreement, assuming near-term development objectives are met, would enable us to extend our cash runway from the fourth quarter of 2010 to the second half of 2011, encompassing what we expect will be a very important period for Curis.

Third, we continued to enroll patients in a Phase I dose escalation clinical trial of CUDC-101, our proprietary, first-in-class HDAC/EGFR/Her2 inhibitor. We have retained control of CUDC-101 for clinical development and believe that it is exemplary of our proprietary, multi-target inhibitor drug candidates in our pipeline. We currently expect that we will complete this dose escalation trial in late 2009 or early 2010.

In addition to these key milestones, we've made significant advances during the quarter with what we believe to be an attractive series of molecules targeting HDAC and PI3 kinase, and we expect to select a molecule as a lead development candidate from this series of compounds in early 2010.

I'm now going to move on to review our pipeline. I'd like to begin the discussion with GDC-0449, a first-in-class orally administered small molecule Hedgehog pathway inhibitor that's being developed under a collaboration agreement with Genentech, which is a wholly-owned member of the Roche group. As a reminder, Genentech and Roche are responsible for the clinical development and commercialization of 0449, and Curis is eligible to receive cash payment upon successful achievement of certain clinical development and regulatory approval milestones, and royalties upon commercialization of the drug.

As you are aware, Genentech is currently conducting three core clinical trials, including a pivotal Phase II trial in advanced basal cell carcinoma, or BCC, that was initiated in February 2009, with two Phase II clinical trials in metastatic colorectal cancer and in advanced ovarian cancer that began in 2008. Genentech has indicated that data is expected in 2010, and pending a successful outcome of the ongoing pivotal study, Genentech projects that regulatory submissions for 0449 in advanced basal cell carcinoma could occur in 2011.

In September two publications describing Phase I clinical data generated with 0449 appeared in the New England Journal of Medicine and attracted favorable attention from the oncology community. The first publication was entitled Inhibition of the Hedgehog Pathway in Advanced BCC. It provides an overview of highly encouraging Phase I data for the 33 BCC patients that were treated in this dose escalation study. These patients -- of these patients, 18 patients or 55% responded to 0449, including two complete responses and 16 partial responses. Of the remaining 15 patients, 11 patients had stable disease as the best response, and four patients had progressive disease.

At the time of the data cutoff for the paper, the median time of the study and the median duration of response for these patients was 9.8 and 8.8 months, respectively, with 19 patients still on study.

0449 also demonstrated good tolerability in these Phase I patients, with no dose limiting toxicity, no grade 5 adverse events, and only a single grade 4 adverse event that was determined not to be related to the study drug. There were several grade 3, grade 2 adverse events observed. 0449 has demonstrated favorable pharmacokinetic and pharmacodynamic profile with a [medium] steady state plasma concentration of 16.1 micromole and with a [median] time to reach this steady state level of 14 days.

Dose escalation from 150 milligrams to 270 milligrams did not result in a higher total plasma concentration of 0449, and as a result, Genentech has selected a daily dose of 150 milligrams for the ongoing Phase II clinical trial.

The second New England Journal of Medicine paper is a case study entitled Treatment of Medulloblastoma with Hedgehog Pathway Inhibitor 0449, which provides an overview of the treatment of a single adult medulloblastoma patient with GDC-0449. This brief report discusses a 26-year-old medulloblastoma patient who was refractory to multiple prior therapies including surgical resection followed by radiation therapy, which is often DNA damaging, and chemotherapy.

This patient was subsequently retreated with 0449 resulting in symptomatic improvement and rapid but transient tumor regression. The authors of this report note that it marks the first demonstration of a medulloblastoma tumor regression in a patient with a Hedgehog pathway inhibitor who had significant tumor burden and expense metastatic disease.

In addition to the pivotal Phase II advanced BCC trial and the Phase II colorectal and advanced ovarian trials, Genentech has indicated that is also sponsoring three additional studies that will further evaluate the pharmacokinetics, absorption, metabolism and excretion of 0449 and evaluate the potential for drug to drug interactions, all of which are routine studies for a drug at this stage of development.

While we are no longer eligible for additional milestones for further Phase I or Phase II clinical trials of the molecule by Genentech, we are encouraged by the breadth of Genentech's continued clinical research of 0449. We are still eligible for additional payments for later stage development objectives and for regulatory submissions and approvals, as well as royalties on any future sales in any indication.

Further, as a means of gaining additional clinical insight into 0449, Genentech, in the National Cancer Institute, or NCI, entered into a collaborative relationship that allows the NCI to explore 0449 in additional cancer indications that are not presently being evaluated by Genentech or Roche. Under this arrangement with NCI, third-party investigators began enrolling patients in a Phase I clinical trial that's designed to evaluate dose and safety of 0449 in pediatric patients with medulloblastoma, and a Phase II trial to test the molecule in adult medulloblastoma patients. A Phase I clinical trial in pancreatic cancer patients and a randomized Phase II clinical trial in small cell lung cancer patients were also initiated, and additional Phase II studies are planned to begin in a number of additional indications, including glioblastoma multiforme and advanced stomach and gastroesophageal junction cancer patients under this NCI arrangement.

Genentech is also facilitated an investigator sponsored trial in patients with basal cell nevus syndrome, that's also known as Gorlin syndrome. The further details of GDC-0449 clinical trials are posted to clinicaltrials.gov, and you can evaluate and review that -- those trials online.

We look forward to providing further GDC-0449 updates as additional clinical trials are initiated, as well as when Genentech or Roche communicate other important scientific and clinical observations.

I'm now going to move on to our Hsp90 inhibitor development candidate, CUDC-305, also designated Debio 0932. In the third quarter we achieved one of our core corporate objectives when we successfully licensed this candidate to Debiopharm SA, which is a Swiss pharmaceutical corporation. Under the agreement we granted Debiopharm a worldwide exclusive royalty bearing license to our Hsp90 inhibitor technologies, including CUDC-305. As I stated Debiopharm has since renamed the molecule Debio 0932 and put it into its development pipeline.

Under the terms of the agreement, Debiopharm has agreed to assume all future development responsibility, and this was important for us because it allows us to focus on our proprietary multi-target inhibitor platform, and as well as to incur all future costs related to the development, registration and commercialization of products under this agreement.

As consideration for the exclusive license rights provided in the agreement and subject to the terms of the agreement, Debiopharm has agreed to pay us up to an aggregate of $90 million comprised of the following structure. We received a $2 million upfront license fee, which we received September of 2009, but we also have a couple of very early milestones connected to this early consideration up front with the milestones. We also receive a payment upon the first regulatory approval in a major market of an open IND. So they file the IND, and upon that IND being accepted, we will trigger an additional milestone, or a clinical application or human clinical trials. And then we also receive a payment upon the administration of the drug in the fifth patient in the first Phase I clinical trial.

So I just want to underscore that prior to the transaction, we had consistently stated that we expected to realize between a $10 million to $15 million upfront for any transaction, and while we structured this deal slightly differently where we took the upfront and broke it into upfront and early milestones, we feel this structure is -- represents a very low risk to Curis of not receiving the intended capital with the achievements of the early milestones. So the upfront and the early milestone payments put us in that range that we had stated publicly, between $10 million to $15 million, and this represents a significant extension of our runway, which I'll get into in a moment.

So in addition to these upfront and early payments, we are eligible to receive additional contingent payment, assuming the successful achievement of additional specified clinical development and regulatory approval objectives.

We currently expect that Debiopharm will file an application with the regulatory authorities to begin Phase I clinical testing for this compound in the fourth quarter of 2009, and as stated earlier, pending acceptance by regulatory authorities and subsequent initiation of Phase I clinical testing by Debiopharm, that these payments may be received in early 2010. So the upfront and anticipated near-term payments under this transaction are expected to provide Curis with capital to fund our planned operations into the second half of 2011. Prior to our entry into this transaction, we estimated that we had adequate capital resources to fund our operations into the fourth quarter of 2010.

In addition, Debiopharm will pay us a specified percentage of all sublicensing payments received by Debiopharm and its affiliates from prospective sub licensees, a specified percentages of royalties that Debiopharm and its affiliates receive from prospective licensees, and a specified percentage of royalties on net sales of products by Debiopharm or its affiliates if sold directly.

We are very pleased to have Debiopharm as our collaborator and are also very proud to have been able to consummate this transaction in what we believe to be a challenging strategic partnering environment. We have been highly impressed with the depth of Debiopharm's development expertise and commitment of working with our team, both during the contract negotiations and due diligence process, and more importantly, in our subsequent interactions in creating a clinical development plan and advancing Debio 0932 towards regulatory filing in order to begin Phase I clinical testing.

I look forward to providing you with further updates on Debio 0932, particularly as Debiopharm receives regulatory approval to begin Phase I clinical testing and as Debiopharm treats the fifth patient in Phase I trial, as each of these near-term events provides Curis with additional material cash payments from Debiopharm.

I'm now going to turn to CUDC-101, our first-in-class small molecule inhibitor of HDAC, EGFR and Her2. And it's the first of our proprietary multi-targeted cancer programs to progress into clinical testing.

As I mentioned earlier, we are continuing to enroll patients in a Phase I dose escalation clinical trial of this molecule and currently expect that we will complete this trial in late 2009 or early 2010.

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 trial are to evaluate the safety and tolerability of escalating doses of CUDC-101 and to establish the maximum tolerated dose and dose limiting toxicities. Secondary objectives will be to assess the pharmacokinetics, to evaluate pharmacodynamic biomarkers, and to assess efficacy and ability of CUDC-101 to effectively inhibit HDAC, EGFR and Her2 in this patient population.

The study is being conducted at two sites within the United States, and it is expected to enroll up to 40 patients across several dose escalating cohorts. We have enrolled a total of 20 patients in the study to date at four dose levels, and I'll give you some of those details in a moment.

We doubled the dose of CUDC-101 over three cohorts in which the first nine patients included four patients treated at the starting dose of 75 milligrams per meter squared, three patients treated at 150 milligrams per meter squared, and two patients treated at 300 milligrams per meter squared. The drug was well-tolerated at 75 and 150 milligram levels, with most common side effects including grade 1 or 2 dry skin, which is indicative of EGFR inhibition, and decreased hemoglobin and hypoglycemia, which are suggestive of HDAC inhibition.

At the 300 milligram per meter squared level -- dosing level, both patients encountered transient grade 2 adverse events which were deemed possibly related to the study drug. The adverse events were both reversible upon discontinuation of the drug, and though the events were only grade 2 in severity, under the terms of the protocol they were deemed dose limiting toxicities as both patients missed a scheduled treatment day. And as a result we then dosed down and treated three additional patients at 150 milligrams per meter squared dose level, noting that the drug was well-tolerated at this level, consistent with the three patients we had previously treated at this level. We then increase the dosing to 225 milligrams per meter squared and dosed an additional four patients, noting that the drug continued to be well-tolerated. We have recently enrolled three patients at a dose level of 275 milligrams per meter squared with the drug also appearing to be well-tolerated, although it's not completed quite yet.

In addition, the first patient treated at this 275 dose level, which is an advanced gastrointestinal cancer patient that has recently been scanned for pretreatments versus post-treatments analysis and has shown a partial response of approximately a 35% reduction in tumor size, this patient remains on drug and continues to be on the study. So we are very encouraged by this. Albeit early stage anecdotal data, it's very encouraging.

We have recently received approval to retest additional patients at the 300 milligram per meter squared level, pending the successful completion of the 275 milligram per meter squared cohort and if the data continues to show the drug is well-tolerated.

Our other clinical observations to date include a mixed response in one head and neck cancer patient in which one target lesion appears to have been significantly reduced in size by greater than 30% while other metastatic tumors did progress, one metastatic breast cancer patient that showed evidence of stabilization of disease and remained on study drug after receiving a total of six cycles or 12 weeks. So both of these patients were dosed at the 150 milligram per meter squared dosing level.

So we continue to dose escalate. We don't know where the MTD is going to fall out quite yet, but we are encouraged by the data that has emerged at the doses that we have been dosing at.

The trial is also yielded certain biomarker observations such as a reduction in total Her2 protein in a patient tumor sample following four days of CUDC-101 treatment, and an apparent reduction in EGFR signaling observed in skin biopsies obtained from patients treated with 101. We've also observed dry skin in patients at dose levels below 225 milligrams per meter squared, and a grade 1 to 2 rash in the first two patients that were dosed at the 275 milligrams per meter squared level, with the third patient still being treated and monitored.

In addition to these biomarker signals, which suggested that CUDC-101 appears to be hitting at least two of its intended targets in humans, we have observed dose dependent pharmacokinetics with the patient exposure to 101 increasing proportionately with 101 dose levels for the first three cohorts examined to date. So we are hopeful that we will continue to see evidence of biological activity in additional patients at or above the 275 milligrams per meter squared dose level.

We are highly encouraged by the early data from this Phase I dose escalation trial, demonstrating that CUDC-101 appears to be well-tolerated, and we look forward to providing future updates to this program as new relevant metrics become available.

As I mentioned earlier, we are diligently advancing our preclinical pipeline and expect that we may select a new development candidate from a series of small molecules targeting HDAC and PI3 kinase in early 2010, and we also are making good progress on our HDAC/BCR-Abl program.

I'd like to now turn the call back over to Mike for financial discussions, and then following Mike's remarks we will open the call up for questions. Mike?

Thanks Dan. For the third quarter of 2009 we reported a net loss of $4.1 million or $0.06 per share as compared to a net loss of $4.6 million or $0.07 per share for the same period in '08.

Revenues for the third quarter of '09 were $800,000 as compared to $100,000 for the same period in 2008. The increase in revenues over the prior year period was due to license fee revenues recognized under our Debiopharm license.

Operating expenses were $4.9 million in each of the third quarters of 2009 and 2008.

R&D spending was $2.3 million for the third quarter of 2009 as compared to $3.0 million for the same period in 2008. The decrease is primarily attributable to lower spending on our CUDC-305 program -- now Debio 0932 -- as a result of licensing this program to Debiopharm on August 5 of this year. It resulted in all subsequent development costs being assumed by Debiopharm. Offsetting this decrease, our spending increased on other targeted cancer programs, as Dan just mentioned. We continue to seek to select additional -- of our preclinical candidates for future clinical development.

General and administrative spending was $2.6 million for the third quarter of 2009 as compared to $1.9 million for the same period in 2008. The increase in G&A expenses was primarily due to our business development efforts to support the Hsp90 inhibitor technology licensing.

For the nine-month period ending September 30, 2009 we reported a net loss of $7.1 million or $0.11 per share as compared to a net loss of $10 million or $0.16 per share for the same period in the prior year.

Revenues for the nine months ended September 30, 2009 were $6.9 million compared with $5.3 million for the same period in 2008.

Operating expenses were $14.2 million for the nine months ended September 30, 2009 as compared to $16.1 million for the same period in 2008.

Research and development expenses were $7.5 million for the nine months ended September 30, '09 as compared to $9.7 million for the same period in '08.

And G&A expenses were $6.7 million for the nine months ended September 30, '09 as compared to $6.4 million for the same period in '08.

As of September 30, 2009 our cash, cash equivalents, and marketable securities totaled $27.2 million, and there were 66.5 million shares of our common stock outstanding.

Now I would just like to spend a quick minute briefly updating the 2009 financial guidance that we had originally issued in February this year.

So now we expect to end 2009 with cash, cash equivalents and marketable securities of $21 million to $24 million. This excludes any potential payments from existing or new collaborators, including the two anticipated near-term milestone payments under our Debiopharm license agreement.

We increased our projected year-end cash balance as a result of a number of factors, including lower than anticipated research and development expenses in 2009, the receipt of $2.7 million of the proceeds from the exercise of two warrant agreements in July of this year, and the upfront payment received under the August 2009 Debiopharm license agreement.

We now expect that 2009 R&D expenses will be between $9 million and $11 million and that G&A expenses will be between $8 million and $9 million. These projections include $400,000 to $600,000 and $1.0 million to $1.2 million of stock-based comp expense for research and development and G&A, respectively.

We've decreased the 2009 R&D expense primarily due to lower than projected costs associated with CUDC-101 in our ongoing Phase I trial as well as the inclusion in our original projections of Hsp90 related development expenses for the full year of 2009. As I mentioned earlier, Debiopharm has assumed all Hsp90 costs subsequent to the August 5, 2009 effective date of that license agreement. And we narrowed our estimated G&A expenses primarily as a result of additional development -- business development efforts to support our Hsp90 licensing efforts.

That concludes the prepared remarks, and I'll now turn the call over for questions. Operator?

(Operator Instructions). Joe Pantginis, Merriman Curhan Ford.

Congratulations on the progress. A quick question, you mentioned that in 2010 I think you said, or in early 2010 you might select an additional candidate targeting PI3 kinase. Can you add any more color on that and what the other compounds that the molecule might target beyond HDAC?

Sure. So we have a -- as you know, a platform where we are developing these combinations of HDAC and kinase inhibitors. The next in line is a PI3 kinase HDAC inhibitor. There have been some third-party publications demonstrating a synergistic effect when one targets simultaneously HDAC inhibition and PI3 kinase.

One of the challenges, first of all, PI3 kinase has become a relatively hot target as of late for cancer. One of the challenges is just what we've seen with EGFR targeting, that when you specifically blockade PI3 kinase, which as you know is a phosphorylation cascade, the tumor can adapt by utilizing an alternative route through RAF. So you see MEK and ERK up-regulated, and it bypasses the PI3 blockade. So we are seeing data with our HDAC PI3 kinase very similar to what we saw with 101, that is, we are knocking out a network. So we are seeing good synergistic affect where we are successfully blocking the PI3 kinase's ability to signal and phosphorylate, and we are also preventing the bypass arm from being accessible by the tumor.

The other thing I would like to underscore is the quite dramatic enhancement of potency that we have seen on the PI3 kinase side. This -- we are working with a series of drugs that are very potent, substantially more potent than the prototype drugs currently in the clinic. And I don't want to give out the specifics yet until we select a candidate, but we have a broad range of activities that are nanomolar, and some are even picomolar. So we are very encouraged by the data that we have to date, and we expect selecting a lead candidate in early 2010, once we complete the efficacy in preclinical tox studies.

Thanks a lot.

Jason Kantor, Arc Capital Management.

A question on the milestone structure for the Genentech collaboration. You say it might have some data in 2010. When do those milestones start kicking in? And what kind of size are we talking about?

So the Genentech relationship is structured so that we receive a milestone at the initiation of Phase III. That milestone was triggered in the advanced BCC trial with the pivotal Phase II. It met the definition of a Phase III, and that milestone was $6 million in cash, and the -- we have two more remaining that get triggered at the initiation of Phase III. So that would be for the metastatic colorectal cancer and the ovarian -- would be equivalent to what we received with BCC, and that is $6 million at the initiation.

We are expecting in the range of -- the first half of 2010 possibly to have the colorectal trial data reported on, and any time in that time frame that we may have the Phase III initiated. So we are expecting let's say mid to second half of 2010.

Just to add a little bit on that, just on the total scope of the milestones, so there are $115 million in milestones associated with small molecule development, Hedgehog small molecule development, and we've received $18 million to date. Those are all pre-commercial milestones, so there's a significant amount of material milestones left for us on this molecule.

And then assuming the BCC trial works, do you get paid on successful data? Or on NDA filing? Or on NDA approval? What's the next -- in terms of regulatory milestones?

So the way it's structured, if they proceed with NDA submission and approval and then royalty, so we would get potentially a series of milestones.

Thanks.

Ren Benjamin, Rodman.

I guess a couple of questions, maybe starting off with Debio 0932 -- I think I have that number right.

That's right.

Yep.

Can you give us maybe a little bit of clarity. You mentioned that this is a very good collaboration. Can you talk to us a little bit about what's been happening so far. I understand it's early, but they are going to file an IND or a CTA this quarter. Can you give us a sense as to where or what sort of trial Debiopharm might want to conduct going into the new year? And I imagine it's an all-comers trial, but are there any thoughts for where this drug will be evaluated going forward?

Yes. It's -- I'd love to be able to give you clarity, but we haven't disclosed any of this publicly yet. And we are still in the early stages of this relationship. So until Debiopharm wants to state publicly what they're filing for, I can't clarify it, unfortunately.

But we are making good progress on the package for submission. We have been impressed by their commitment to the program. Our respective staffs are coordinating and collaborating on the compilation of the data and information for the filing, and we are confident that will take place in this quarter.

Is the filing going to take place in the US or the EU? Or we still don't -- or we're still sort of having a [neck and neck race]?

I think all the clarity we can give is it will be in the EU. It's substantial -- the filing is very near. So -- and it will be in the EU, a CTA.

I guess just moving on to 0449, you mentioned quite a few of the studies, especially in conjunction with the NCI, have initiated. Any -- I know this is going to be tough for you guys, but is there any sort of a sense when or how well those studies are recruiting or when we might see some initial results from those studies? And correct me if I'm wrong, there's probably about five or so studies that are ongoing?

I think there's a couple more than five actually. Or at least are planned to start shortly. Yes. There are four or five ongoing right now and then a couple more planned under the NCI.

Genentech -- unfortunately Genentech has advised us -- they are -- their role in these trials is basically more or less limited to reviewing protocol and deciding whether or not they want to supply drug. And then these studies are all conducted as you know under an NCI -- under NCI guidance, and through third-party investigators. So even Genentech is a couple steps removed from these, relative to the trials that they directly control. So we right now don't have a great -- actually any real insight on where these -- when these studies will report out, how they are enrolling and the like.

I think though the first trial -- if you go by what's on clinicaltrials.gov, the first trial that should be completed is a Phase I trial in pancreatic cancer patients in combination with Tarceva, which according to clinicaltrials.gov should end in '09. But we don't have an update on that right now.

Regarding the ongoing Phase II studies and the pivotal study that Genentech is in control of, you had mentioned on the call that you hope that the CRC data could be available in the first half of 2010. And I thought that's -- I thought that maybe that data, that it's going to become available a little bit sooner than what at least I had originally thought. I thought all the data from all three trials would be coming out in the second half of 2010. Can you just give us a quick update on sort of where enrollment is for all three trials? If you know? And then just when you think the data for the pivotal BCC or the ovarian studies may be available?

Yes. I'll take a crack at that. So we updated last quarter that the enrollment for the Phase II colorectal trial was completed in Q2. Actually I do think it's probably more accurate to push that data point to sometime in mid 2010. Broadly it's a 2010 data point that Genentech had mentioned earlier for all trials. That, the colorectal trial, had completed enrollment early enough that our expectation is that data would be the first of the three trials to report out and that the others would be later in 2010.

We are anticipating having a clinical develop update meeting with Genentech in November, so I don't really have sort of real-time feedback on what's the current enrollment process -- progress rather of the ovarian and BCC trial.

Okay. And I guess just moving on to 101, so one thing new here is this patient with the GI cancer who's seen this 35% reduction at this 275 milligram dose. Can you give us a sense as to how heavily pretreated this patient was? Was he a salvage patient? Did he see this response after the first dose? And how many doses has he had so far? Just any sort of additional details regarding this patient.

Yes. So the only clarification I can give you is what we had in discussion with the principal investigator. We know it's an advanced gastrointestinal patient that had an aggressive cancer, had received several other therapeutic regimens that was refractory. So the PI was very encouraged by seeing this regression. We saw the response after four cycles, so the patient receive four cycles and was scanned. And we did a pretreatment/post-treatment scan comparison.

The other metric I can give you clarification on is, we also received some insight on the measurement for alkaline phosphatase, which is apparently associated with the growth of gastrointestinal cancers, and we saw a marked decrease in the levels of alkaline phosphatase in the blood. So it's very encouraging. The patient is still on drug.

Regarding this program, and it's tough to always time Phase I dose escalating programs, as you guys are finding out. But can you give us -- obviously you've had much more exposure to this drug, you are seeing a lot more patients being treated with this drug at varying doses. Any sort of a sense as to when this trial may complete? What the final sort of dose limiting toxicity, what that dose may be? Do you think you might get stopped again in this 300 milligram dose range? And I guess finally, regarding any sort of cohort expansion, I think at one point we were talking about expanding the cohort in this trial itself. Have those plans changed? Do you have a better sense as to what sort of patients might be enrolled into that cohort? Any sort of insight there?

Sure. So a couple of components to the question. The first part I'll take is the MTD and what we are expecting. We are not expecting that we are going to hit an MTD at 300, just based on our preclinical data and extrapolating and what we saw at 300. We do not believe that these were dose limiting toxicities, they were grade 2 transient, so it met the definition because the patients didn't receive consecutive dosing. So we are hopeful we will get past the 300 dose range.

Where the MTD is, this is just a guesstimate at this point. We are hopeful that we will be north of 300. We may dose up from there to 350, possibly 400. We just don't know where the MTD is going to play out. How long it takes us to get there is really going to be based on how soon we hit that MTD. So right now we are extrapolating that this dose escalation trial will at least take us to the end of the year, and most likely it'll take us into Q1.

Then from there we will do a dose escalation -- I mean, an expansion cohort looking at various tumor types. We are still evaluating which tumors we want to focus on, but the ones we are most bullish on -- non-small cell lung cancer looks like an attractive one, simply because it's sort of a head-to-head comparison with performance of the prototype EGFR inhibitors such as erlotinib.

Liver cancer, we very intrigued because of the robustness of our preclinical data. We are currently evaluating various strategies to conduct those trials, one being that we may conduct them in Asia where it's much more of a prevalent indication.

We are looking at breast cancer still, particularly since we showed preclinical efficacy in Her2-positive, Her2-negative as well as triple negative.

And we saw a really good robust preclinical in this one responder in head and neck cancer. So we are going to have a clinical advisory board meeting to take a look at the compilation of data and define the strategy at that meeting.

Okay. And I think that's it for me. Thank you very much, and congratulations on your progress.

Ling Wang, Brean Murray.

I was wondering whether you have disclosed the nature of the grade 2 adverse event you've seen for the 101 program at the dose in 300 mix.

Yes. So -- thank you for the question. So yes. To clarify the grade 2, we had two. The first two patients treated. The first patient was questionable whether they would be enrolled or not because they appeared to have some cancer involvement in the pericardium. And then the patient was subsequently cleared, and it turned out after two doses we had pericarditis appear. So the fact that there was a question of the pericardium having a cancer involvement to begin with, and that patient was questionable, gives us confidence that there's not a true dose limiting tox.

The second patient had a rapid creatinine level increase, but it was still a grade 2, which was transient. It was reversible upon cessation. And one of the possibilities of that can be a patient with a liver met, for instance, is going to be more susceptible to -- if the drug is starting to have an effect on the tumor, for instance, you may see elevated creatinine levels.

So those were the two AEs that we had observed at the 300 milligram level. And again, both of them were transient and reversible once we ceased drug. So we are confident we will be able to get through the -- into the 300 range, and we are not expecting to hit an MTD at that level.

I see. And with regard to the first patient treated at the 275 mg per meter squared, I believe you mentioned partial respond, but then you mentioned the tumor reduction at 35%?

Yes.

Can you maybe give a little bit clarification on this?

The only information that I have access to at this time, as the patient data is still being compiled, was that they did a pretreatment scan, post-treatment scan, we saw, as I stated, approximately a 35% regression in tumor size. It's an advanced GI tumor, and as I stated, the clinician also stated that they monitor alkaline phosphatase levels and they saw a pretty marked decrease in alkaline phosphatase. The patient is still on drug and still participating in the cohort. And that's all I have for information right now.

I see. And also lastly, can you maybe share with us your thought on the potential of 449 maybe in earlier stage basal cell carcinoma? Whether there is any plan in pursuing in the earlier stage patients?

At this stage, Genentech is just publicly talking about the advanced and metastatic BCC trial. I think that is a more rational approach for prospective fast-track because these are patients that don't have a therapeutic regimen available to them. The broader market where surgical incision is utilized and successful, their strategy of penetrating that market has not been clarified. And I don't think I can make an attempt at it until they clarify it publicly.

Thank you very much for taking my questions.

(Operator Instructions). Brian Skorney, ThinkEquity.

Two, one for Dan and one housekeeping one for Mike. Could you just go over the biomarker data that we have from the 101 trial again and help us put that in perspective with what else is out there as far as approved drugs and later stage drugs and their activity against EGFR and HDAC, and do you think the doses that we were at were at a sufficient inhibitory activity to wind up seeing efficacy? Or do you think we still need to get up to a more substantial dose?

Yes.

And for Mike, just the $2 million upfront from Debiopharm, how is that being recognized? I see you have 765 in revenue booked on this quarter. Is that just deferred until next quarter?

We are booking all -- basically we have a -- our Q will be filed later today, but we have a six month period that we are spreading all payments over. So it will be spread over six months. And there will be more -- there will be great -- more detail in the Q filed today, in the footnotes.

So addressing your biomarker question, the key biomarkers that we are evaluating is when a biopsy is accessible we are looking at Her2 levels, so we've had a -- we'll have one breast cancer patient that was a Her2-positive breast cancer patient, and that was at the starting dose, 75 milligrams per meter squared. We saw a noted decrease in Her2 protein, pre-treatment versus post-treatment. I think that was approximately a 50% reduction in Her2 protein that was measurable. So that's very encouraging, particularly since that was at the starting dose.

We are also monitoring EGFR in skin, taking some punch biopsies, but also as you know, looking at skin involvement as a biomarker for EGFR inhibition. We have seen dry skin at the lower doses. At 275 the first two patients treated, we saw a grade 1, grade 2 rash, so this is the first time we've seen rash. So I think that's indicative of effective EGFR suppression.

Also note that there has been literature -- the role of EGFR in the skin is that it plays a role in inflammation. And EGFR activity inhibits the inflammatory response. So when you inhibit EGFR, you are inhibiting this anti-inflammatory mechanism. So that's why we think you end up seeing this rash. There is evidence that concurrent HDAC inhibition attenuates the inflammatory mechanism. So we think we are seeing rash, but we are effectively suppressing EGFR even at levels where we are not seeing the rash.

And then on the HDAC side, we have metrics from hemoglobin and hyperglycemia. so hematological involvement, which is indicative of HDAC suppression.

I'll also note that there is a growing body of preclinical evidence that there is synergistic effect when you can currently inhibit HDAC with EGFR. There are a number of studies saying that you can re-sensitize resistant cells that are resistant to EGFR inhibitors, such as Tarceva. You can re-sensitize them with HDAC inhibition. There's some evidence that what you're doing is de-differentiating a cell from mesenchymal backed at epithelial. So the data continues to build from preclinical evidence that there is a synergistic correlation between these two pathway inhibition so you're knocking out the network that tumors have access to for assistance.

And I'll also just add that there was a clinical trial by Merck and OSI where they attempted to combine [sahar] and erlotinib had to take advantage of this preclinical -- these preclinical observations, and they could not dose at efficacious levels because of exacerbated toxicity. So we are very encouraged to date that we appear to be dosing at relatively high levels, and the drug appears to be well-tolerated. We are starting to dose at a dose level where we are starting to see some clinical responses here, so we are encouraged that if we can dose up the next cohort and maybe a couple more cohorts from here, we will have a good therapeutic window.

Great, thanks so much.

We have no further questions. I would like to turn the call back over to Mr. Dan Passeri.

Thank you very much for joining us this morning, and we look forward to continuing to give you updates as more data becomes available. Thank you very much.

Ladies and gentlemen, we thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a good day.