Curis Inc (CRIS) 2011 Q1 法說會逐字稿

Very good morning to you, ladies and gentlemen, and welcome to the Q1 2011 Curis Inc. earnings conference call, hosted by Michael Gray. My name is Gary, and I will be your coordinator this morning. Throughout the presentation, your lines will be on listen-only. (Operator Instructions). The conference call will be recorded for audio replay purposes.

I would now like to hand over to your host today. Michael, over to you.

Thanks, Gary. Good morning, and thanks for joining us. As always, during today's call, we will provide you with an update on our corporate developments and scientific program developments and discuss our first-quarter 2011 financial results.

Before we begin, I would like to advise you that this conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, without limitation, statements relating to our plans and expectations for advancing ongoing and planned clinical trials of CUDC-101 and CUDC-907; our and our collaborators' expectations concerning the further development of clinical stage programs under collaboration, such as vismodegib and Debio 0932, including the expected timeline for Genentech and Roche's regulatory submissions for vismodegib in advanced basal cell carcinoma; and the expected therapeutic benefits of our development candidates.

Actual results may differ materially from those indicated by forward-looking statements in this conference call as a result of various important factors, including the following. Genentech and Roche may be delayed in making planned regulatory submissions to seek marketing approval of vismodegib for advanced BCC. Genentech and Roche may not demonstrate to the satisfaction of the FDA or any comparable foreign regulatory agency the safety and efficacy of vismodegib in the treatment of advanced BCC or any other indication. We may not successfully advance the research and development of our proprietary network-targeted cancer programs, including CUDC-101 and CUDC-907, and Debiopharm may not successfully progress Debio 0932 through its ongoing Phase I clinical trial and into later stages of clinical testing.

Also, we face competitive pressures and risks related to our ability to maintain and enforce our IP, and we may be unable to successfully continue our collaborations with Genentech and Debiopharm or enter into new collaborations on favorable terms, if at all. We also face other risk factors described in our annual report on Form 10-K for the year ended December 31, 2010 and in 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 of these statements, even if events and developments subsequent to the date of this call cause these estimates and expectations to change.

With that, I would like to now turn the call over to Dan Passeri, our President and CEO, who will discuss our corporate highlights and provide an update on our pipeline. Following Dan's remarks, I will briefly touch on our Q1 financial results, and then we will open the call for questions. Dan.

Thanks, Mike. Good morning, and I would like to thank you for joining us on today's call. The beginning of 2011 has been a productive period for Curis, highlighted by our announcement in March that our collaborator, Genentech, achieved positive results in its pivotal Phase II clinical trial of vismodegib, which is also referred to as GDC-0449 or RG3616, in advanced basal cell carcinoma patients. We are looking forward to the presentation of the full data, which will occur on the 7th Annual Congress of the European Association of Dermato-Oncology in France, which will take place June 20 to 23 of this year, and to an anticipated US New Drug Application submission, or an NDA, by Roche later this year, which, if approved, would be transformative for Curis.

We've also continued to progress enrollment in our ongoing Phase I expansion clinical trial of our lead proprietary drug candidate, CUDC-101, which is a first-in-class EGFR, HER2 and HDAC inhibitor. Importantly, we've observed signs of clinical activity in this proprietary molecule, particularly in advanced liver cancer patients, in this study over the last several months. In addition, the safety profile appears consistent with that observed in the Phase I dose escalation study that was completed last year.

In addition to our ongoing Phase 1 study, we'd also expect to initiate a Phase I study of CUDC-101 in combination with cisplatin and radiation and first-line advanced head and neck cancer patients in the near term. The study would be conducted in patients that have not been previously treated with chemotherapy, radiation or a prior therapy that specifically and directly target EGFR, HER2 and HDAC.

We believe that the head and neck cancer indication is ideal as a patient population in which to study our current IV formulation of 101, as these patients receive radiation treatment every day for seven straight weeks in the clinical setting, and there have been third-party reports of reported synergy when one uses EGFR inhibition as well as HDAC inhibition concurrently with radiation therapy. I'll elaborate upon the details of this shortly.

We've also recently begun a formulation in IND-enabling studies as we seek to advance an oral formulation of CUDC-101 into clinical testing later this year.

Lastly, we've begun exploring clinical development options for treating advanced liver cancer patients based on our observations to date in the Phase I expansion study. Again, I will elaborate upon the details of that later.

In addition to CUDC-101, I am pleased to report that we further broadened our proprietary portfolio of network-targeted cancer drugs during the first quarter, with our selection of CUDC-907, which is an orally available, orally administered PI3 kinase and HDAC inhibitor, as a clinical development candidate. We are currently advancing this molecule through formulation in other IND-enabling studies and anticipate that we'll file an IND for this molecule later this year.

Regarding our research efforts, our scientists continue to endeavor to discover additional novel network-targeted drug candidates for cancer indications, including efforts focused on methyltransferase, B-Raf, HDAC, [SARC-able] HDAC, as well as POK HDAC inhibitors.

Lastly, our partner Debiopharm continues to treat patients in its ongoing Phase I dose escalation clinical trial of our Hsp90 inhibitor, designated Debio 0932.

I am now going to walk through all of these programs in further detail, prior to turning back to Mike to review the first-quarter financial results.

First, let me begin with an overview of vismodegib, a first-in-class Hedgehog pathway inhibitor which is being developed by our collaborator, Roche and Genentech. This under our 2003 collaboration agreement.

We currently announced a positive outcome from a pivotal Phase II clinical trial of vismodegib that was conducted by Roche and Genentech in patients with advanced BCC. As a reminder, the study was designed by Genentech such that endpoints, if positive, could serve as the basis for regulatory submissions by Genentech and Roche. Genentech informed us that the study met its primary endpoint of achieving a target overall response rate, showing that vismodegib shrank advanced BCC tumors in a predefined percentage of people in the study.

A preliminary safety assessment showed the most common adverse events were muscle spasms, hair loss, altered taste sensation, weight loss, fatigue, nausea, decreased appetite and diarrhea. Serious adverse events were also observed, including fatal events; however, these events do not appear related to vismodegib.

Roche has indicated that it anticipates submitting a New Drug Application to the US FDA in 2011 to seek approval to commercialize vismodegib. Roche has also stated that the timing of a European regulatory submission is subject to planned discussions with the European Medicines Agency.

Genentech has submitted the data from the clinical trial for presentation at the 7th Annual Congress of the European Association of Dermato-Oncology in France for June 20 to 23 of this year.

We are extremely pleased by the highly encouraging outcome of this study, particularly since there is currently no standard of care for patients with this serious disease, and we look forward to Genentech's planned presentation of the study data in more detail in the near future, and to its planned regulatory submissions for vismodegib.

As a reminder, vismodegib is designed to selectively inhibit signaling in the hedgehog pathway by targeting a protein called Smoothened. The hedgehog signaling pathway plays an important role in regulating proper growth and development in early stages of life and becomes less active in adults. However, mutations in the pathway that reactivate hedgehog signaling are seen in several different forms of cancer. Abnormal signaling through mutation on the Hedgehog pathway is implicated in the vast majority of BCC cases.

The pivotal Phase II study, called ERIVANCE BCC, is an international, single-arm, multi-centered, two-cohort, open-label Phase II study that enrolled 104 patients with advanced BCC, including metastatic and/or locally advanced BCC, defined as patients whose lesions are not appropriate for surgery or whom surgery would result in substantial deformity.

Study participants received 150 milligrams of vismodegib once daily until disease progression. The primary endpoint of the study was overall response rate; that is, tumor shrinkage, as assessed by independent reviewers. Secondary endpoints of the study included overall response rates as assessed by study investigators, duration of response, progression-free survival, overall survival and the safety profile.

Previously, Genentech had reported compelling proof of concept data from a Phase I clinical trial of vismodegib in patients suffering from advanced BCC, including the observation of a 55% response rate in 33 advanced BCC patients. In the Phase I study of vismodegib, the most frequent adverse events included muscle spasms, altered taste, weight loss and sodium imbalance.

In addition to the advanced BCC pivotal study, Genentech initiated a Phase II clinical trial of vismodegib as a single-agent therapy for patients with operable nodular BCC during the fourth quarter of 2010. In this study, Genentech expects to evaluate vismodegib in approximately 50 patients with operable nodular BCC in a US-based, open-label, two-cohort clinical trial. All patients will receive a daily oral dose of 150 milligrams of vismodegib for 12 weeks.

For Cohort 1, the primary outcome measure is the rate of complete histological clearance of the target nodular BCC lesions at the time of tumor excision, which may occur up to 12 weeks following initiation of treatment. For Cohort 2, the primary outcome measure is the rate of durable complete clearance of target nodular BCC lesions at the time of excision, which may occur up to 36 weeks following initiation of treatment.

The secondary outcome measure for both cohorts is to determine the time to complete histological clinical clearance of target nodular BCC lesions. In addition to the two clinical trials being conducted directly by Genentech and Roche, vismodegib is currently being evaluated by third-party investigators in a number of other clinical indications, including medulloblastoma, sarcoma, glioblastoma multiforme, as well as in pancreatic, small-cell lung, gastroesophageal junction, gastric, breast and prostate cancers, among others.

Vismodegib is also being tested in an investigator-sponsored Phase II clinical trial in patients with BCC who have Basal Cell Nevus Syndrome, or BCNS, which is also commonly referred to as Gorlin syndrome. Gorlin syndrome is a condition that affects many areas of the body and significantly increases the risk of developing BCCs. In essence, it results from an instability in the pathway from being born with one of two copies of the hedgehog pathway being mutated.

Interim clinical data from this study were presented by the principal investigator at the 2011 AACR annual meeting. The data presented showed that the drug reduced the rate of new BCCs from an average of 1.74 BCCs per month in the placebo group to 0.07 in the vismodegib group.

In this study, vismodegib also reduced the size of existing BCCs from approximately 24 centimeters versus 3 centimeters, cumulative diameter, of placebo versus vismodegib, respectively. No BCCs developed resistance during this period of time on the trial.

We believe that this data is significant, because it demonstrates proof of concept for the therapeutic utility of vismodegib for BCC in Gorlin patients for whom no pharmacological standard of care and intervention is approved.

Observations related to vismodegib's safety were similar to what was seen reported in previous clinical studies compared to placebo, with grade 1, 2 taste loss, muscle cramps, hair loss and weight loss compared to placebo (technical difficulty). There were two grade 3 to 4 adverse events observed, including one grade 3 muscle cramps, one grade 4 depression. Overall, 28% of patients taking vismodegib discontinued participation due to adverse events.

So further details for all vismodegib clinical trials are currently available at clinicaltrials.gov.

I would like to now provide an update on CUDC-101, our lead proprietary drug candidate, from our network-targeted cancer programs. As many of you are aware, we believe that CUDC-101 is exemplary of our overall approach to designing novel drug candidates in which we aim to enhance the therapeutic effect and durability of clinical response by designing molecules that attack cancer cells at multiple, complementary and potentially synergistic points of intervention. We refer to this approach as network disruption.

In April of 2010, we completed a dose escalation Phase I clinical trial of CUDC-101 in 25 patients with advanced refractory solid tumors in which the primary objectives were to evaluate the safety and tolerability of escalating doses of CUDC-101, and to establish the maximum tolerated dose, or MTD, and dose-limiting toxicities. Secondary objectives include the assessment of clinical activity.

We determined in this study that 275 milligrams per meter squared represented the maximum tolerated dose of CUDC-101 in this study. CUDC-101 demonstrated promising evidence of anti-tumor activity in this study at doses ranging from 150 milligrams per meter squared and 275 milligrams per meter squared -- and we now view this as an attractive therapeutic window -- including one confirmed partial response that was achieved in a gastric cancer patient at 275 milligrams per meter squared. We also had stable disease of greater than three months observed in a refractory breast cancer patient at 150 milligrams per meter squared.

We also had two head and neck cancer patients, including one patient with salivary gland adenocarcinoma and one patient with squamous cell carcinoma of the tongue, both of which exhibited anti-tumor activity, with a decrease of greater than 20% in their respective target lesions. I'd also like to emphasize in each of those patients, one responded at 150 milligrams and the other at 275. So we believe that is the therapeutic window.

CUDC-101 also exhibited dose-proportionate increases in pharmacological parameters and what we believe to be a favorable safety profile. The most frequent adverse events were mild to moderate, and included fatigue, vomiting, shortness of breath, fever, and dry skin with some mild rash.

In August of 2010, we initiated a Phase I expansion trial to test CUDC-101 in approximately 50 patients with specifically-selected tumor types, including head and neck, non-small cell lung, breast, gastric and liver cancers, and have treated 43 patients to date in this study. The Phase I expansion trial was designed as an open-label study in which these patients are treated with CUDC-101 at the MTD dose of 275 milligrams per meter squared.

Primary objectives of the study are to compare the safety and tolerability of CUDC-101 in subjects with advanced -- excuse me -- specific advanced solid tumors when the drug is administered either on a five-days-per-week schedule, in which one week on, one week off, which was the dosing schedule we used in our Phase I dose escalation clinical trial. Or alternatively on a three-times-a-week schedule for three weeks on, one week off.

The secondary study objectives include evaluation of the pharmacokinetics, pharmacodynamic biomarkers following CUDC-101 administration, and to assess the activity of CUDC-101 in indications being surveyed.

We are encouraged by the data we've generated to date in this Phase I expansion study. Importantly, the safety profile observed to date for both dosing schedules -- that is the five-times-a-week, one week on, one week off versus three times a week for three weeks, on one week off -- appear to be consistent with what we observed in the Phase I dose escalation study.

We've also observed significant (technical difficulty) disease in multiple patients within this study. Most notably, we've observed stable disease in five patients with advanced liver cancer. Two patients have been treated with CUDC-101 for over seven months, with one patient remaining on study drug, while two additional patients achieved stable disease for approximately four months prior to disease progression.

Importantly, some of these patients had previously received and then developed resistance to or failed sorafenib, the only approved targeted therapy for advanced, unresectable liver cancer. It is important to note that the average progression free survival, or PFS, for sorafenib failure patients is approximately two months.

So based on these promising, albeit still early, observations, we're evaluating various options for further testing of 101 in liver cancer setting and expect to update you later this year on the intended path forward in liver cancer.

In addition, we've observed stable disease for four months in a head and neck cancer patient, as well as stable disease for six months in a breast cancer patient, who remains on study today.

As an additional update, we've been collecting circulating tumor cells, or CTCs, from all of the patients involved in this study in an effort to demonstrate that CUDC-101 is hitting its intended targets. A preliminary analysis of the circulating tumor cells isolated from 14 patients enrolled in the Phase Ib study show that in approximately 65% of patients, at least two or more of the protein targets, that is EGFR, HER2 and HDAC, were modulated following CUDC-101 therapy in a way consistent with the drug's proposed mechanism of action. More samples are being collected from all patients enrolled in the study, and data will be presented in future updates.

In the second quarter of this year, we plan to initiate a Phase I clinical trial of CUDC-101 in advanced head and neck cancer patients whose cancer is human papilloma virus, or HPV, negative. HPV-negative head and neck cancer comprises approximately two thirds of all head and neck cancer patients, and typically have a poor prognosis compared to HPV-positive head and neck cancer patients.

The primary objective of this study is to evaluate the safety and tolerability of CUDC-101 when administered in combination with the current standard of care for head and neck cancer patients, which is cisplatin, a chemotherapeutic drug, in combination with radiation. Upon determination of the MTD, and assuming the otherwise successful completion of the Phase I trial, we intend to conduct a randomized Phase II, two-armed clinical trial in which head and neck cancer patients will receive cisplatin and radiation, plus or minus CUDC-101. The Phase II study would seek to evaluate whether the addition of CUDC-101 can improve the efficacy and durability of cisplatin and radiation therapy in this patient population.

We believe that head and neck cancer represents a promising clinical indication for CUDC-101. Based on the molecular characteristics of head and neck cancer condition pertaining to EGFR and HER2 signaling, and HDAC as well, a combination of EGFR, HER2 and HDAC inhibitors reportedly synergize with radiation therapy. And the strength of our preclinical data in head and neck cancer cell lines, as well as the clinical activity observed in two head and neck cancer patients in our Phase I dose escalation study, as well as the evidence of stable disease observed in our ongoing Phase I expansion study, we believe that this is a very attractive indication for us to be launching this trial.

There are approximately 43,000 newly-diagnosed advanced head and neck cancer patients in the US annually, of which we estimate that approximately 60% to 70% have tumors that are HPV negative. It has been shown that head and neck cancer tumors that -- overexpress EGFR in approximately 80% to 100% of cases and also overexpress HER2 in approximately 20% to 40% of cases. CUDC-101 is designed to inhibit both EGFR and HER2, potentially providing an added benefit to patients. CUDC-101 is also designed to inhibit HDAC, which has been reported to provide synergistic effects when combined with radiation therapy.

Finally, we believe that CUDC-101's current IV formulation will be suitable for this patient population due to the fact that the patients are required to receive daily radiation therapy for seven weeks at their respective clinical centers.

We are also working on an oral formulation of CUDC-101, which we believe will make the molecule more competitive in certain cancers, such as non-small cell lung cancer, where patients are generally on therapy for several months and there are competing commercially-available molecules that are orally administered. Pending the successful completion of ongoing formulation and preclinical development work, we intend to file in late 2011 the appropriate regulatory documents to test an oral formulation of CUDC-101 in clinical trials.

In summary, 2011 promises to be a very productive year as we seek to continue the advancement of the development of CUDC-101 and look forward to providing you with future updates as they become available.

I am now going to turn to CUDC-907, which is an orally available, synthetic, small-molecule inhibitor of PI3 kinase and HDAC. We selected CUDC-907 as a development candidate from our network-targeted cancer programs during the first quarter. We believe that our selection of this compound, along with previously-selected candidates CUDC-101, as well as Debio 0932, formerly CUDC-305, continue to provide validation of the quality of our science and our efforts for developing innovative, next-generation targeted therapies for treating cancer for a wide range of cancer types.

We expect to initiate IND-enabling studies for CUDC-101 in the near term, and assuming a favorable outcome, we plan to file an IND application for this compound in late 2011.

We chose to develop the PI3 kinase and HDAC inhibitor because activation of PI3 kinase signaling pathways are believed to play a crucial role in cancer development and progression. As a result, the inhibition of this pathway is currently being investigated extensively by a number of companies as a potential cancer therapy.

However, primary or acquired resistance appears to present a major challenge to the success of single, targeted molecules that are designed to inhibit the PI3 kinase pathway due to the existence of redundant and compensatory pathways in cancer cells. This is where we believe that our approach has a real advantage in competitive positioning; particularly CUDC-101's synergistic inhibition of PI3 kinase and HDAC may enhance anti-tumor activity and overcome the limitations of single-point intervention through durable blockade of cancer networks, as opposed to single-target inhibition.

Curis currently -- I'm sorry -- Curis recently presented data on CUDC-907 at the 2011 AACR annual meeting that demonstrated CUDC-907 is more potent than reference compounds in proliferation assays of hematological cancer cell lines and inhibits survival pathways commonly upregulated upon PI3 kinase inhibition. That underscores the advantages of our approach, where we believe we have a more durable blockade of the network, as opposed to a single point of intervention, which often results in bypass mechanisms.

The presentation also showed that CUDC-907 induces apoptosis at low concentrations in vitro, demonstrating the compound's ability to suppress multiple nodes of survival pathways as a result of the epigenetic modifications resulting from the inhibition of its non-kinase HDAC target. By contrast, the majority of cancer cells treated with a single-target PI3 kinase inhibitor remain unaffected.

The data presented further show that CUDC-907 displays high exposure, a long half-life in tumor tissue and oral bioavailability in preclinical models, resulting in a promising anti-proliferative and pro-apoptotic activity in hematological cancer models. We look forward to providing further updates on CUDC-907 as this molecule advances towards IND filing and Phase I initiation.

I would like now to briefly turn to our Hsp90 program, which is exclusively licensed to Debiopharm. The lead candidate under this agreement is designated Debio 0932, which is a synthetic, non-geldanamycin, small-molecule Hsp90 inhibitor. This candidate is being developed by Debiopharm under our August 2009 license agreement. Under this agreement, we granted Debiopharm a worldwide, exclusive royalty-bearing license to all of our Hsp90 inhibitor technologies, including Debio 0932, which to remind you, was previously designated CUDC-305.

Debiopharm initiated a Phase I clinical trial of Debio 0932 in April of 2010. The Phase I clinical trial was designed to evaluate the MTD and safety of Debio 0932. The first part of the study, a Phase Ia trial, is an open-label, multi-centered, dose-escalation trial evaluating the safety and tolerability of escalating multiple dose levels of Debio 0932 as a single agent given orally in patients suffering from advanced solid tumors.

The dose-limiting toxicities, MTD and pharmacokinetic parameters will be determined using both every-other-day and the daily administration regimens to guide the recommended Phase Ib dose and schedule. The secondary objectives will be to assess whether changes in pharmacodynamic biomarkers indicative of Hsp90 inhibition by Debio 0932 can be reliably measured in patient samples.

The objective of the Phase Ib study, an expansion cohort of certain solid tumor patients, will be to further assess the safety profile, pharmacokinetics and pharmacodynamics of Debio 0932 at a potential Phase II dose level, and to make a preliminary assessment of anti-tumor activity in patients with advanced solid tumors.

Just to remind you, we are eligible for our next milestone under the agreement if and when Debiopharm treats its fifth patient in the Phase II clinical trial, assuming that the compound successfully completes the ongoing Phase I trial and that Debiopharm advances Debio 0932 into Phase II clinical testing.

We continue to be highly impressed by Debiopharm's professionalism and its efforts to date, and we look forward to providing you with further development updates regarding Debio 0932 as they become available.

I would now like to turn the call over to Mike for financial discussions, and following Mike's remarks, we will open the call for questions and answers.

Thanks, Dan. The first quarter of 2011, we reported a net loss of $6.8 million or $0.09 per share on both a basic and fully-diluted share outstanding basis, as compared to net income of $4.8 million or $0.07 per share -- basic share outstanding and $0.06 per share fully-diluted last year.

Revenues for the first quarter of 2011 were $100,000 as compared to $12.6 million for the same period in 2010. We received no license revenue from our ongoing collaborations with Genentech and Debiopharm during Q1 2011. During the first quarter of 2010, we recorded license fee revenue of $8.3 million under our agreement with Debiopharm, and we also received settlement proceeds of $4 million under a settlement agreement that we entered into with a former collaborator in February of 2010.

Operating expenses for the first quarter of 2011 were $5.5 million as compared to $6.9 million for the same period in 2010, a decrease of $1.4 million, or 20%.

R&D spending was $3.1 million for the first quarter of 2011 as compared to $2.5 million for the first quarter of 2010, an increase of $600,000, or 24%. That increase was primarily driven by our ongoing Phase Ib study of CUDC-101.

G&A spending was $2.4 million for the first quarter of 2011 as compared to $4.4 million last year, a decrease of $2 million or 45% year-over-year. This decrease was primarily due to decreased spending for legal services. During the three months ended March 31, 2010, we incurred approximately $1.5 million in expenses related to an arbitration proceeding against a former collaborator. The arbitration was settled in February 2010 with no legal expenses incurred by Curis beyond the first quarter of 2010. In addition, last year, we incurred personnel costs that were approximately $300,000 higher than the first quarter of 2011.

Other expense net was $1.5 million for the first quarter of 2011 compared to $900,000 last year, an increase of $600,000, or 67%. This amount is primarily driven by the change in the fair value of a warrant liability established in connection with our January 2010 registered direct offering.

As of March 31, our cash, cash equivalents and marketable securities totaled $36.5 million, and there were 76.3 million shares of our common stock outstanding.

That concludes the prepared remarks. We would now like to open the call for questions. Operator?

(Operator Instructions) Jason Kantor.

Thanks for taking my question. Interested in hearing that the data is going to be out at this meeting, which is one I'm not familiar with.

Do you know when -- first of all, is that going to be an oral presentation? Do you know which day it is going to be? And also, will there be abstracts released from that conference ahead of time, and do you know what that date will be?

We don't have a lot of detail on it right now. We do know that it will be a speaking slot, a large presentation. We don't -- they don't have a defined date yet. It is within that range. We will have to update going forward.

And what will you be able to have at ASCO? I assume you won't have anything from this study, but will there be other data on GDC-0449 that we can look to?

We haven't seen data, but there are a couple of abstracts that we've seen related to some of the other NCI-related studies. So I think we will see a little bit around those studies. I think the abstracts come out in a few weeks -- become public in a few weeks. But yes, there won't be anything around the advanced basal cell program.

Okay. And do you know what the timing is for Roche to make some sort of decision on a European filing?

What I can say is they've had -- they have planned discussions very near term, a couple of meetings at least already set up with the EMA, and I think we need to get through that to get the timing down.

I think we feel -- and this is our estimate -- but that is more likely to be a first-half 2012 versus 2011 event. I feel very confident 2011 NDA submission in the US, but less confident that the European submission would be made in 2011.

One last question. You described the potential approval as transformative. Do you believe that this can be a product that could drive profitability, or is this just a revenue source to help push the proprietary pipeline forward?

I think it is potentially both. The market is quite significant, certainly from our perspective. It is estimated to between 10,000 and 20,000 patients annually. So obviously, based on pricing, it is going to determine what that revenue number is.

But we have currently a burn rate that is approximately $20 million a year. So if you just extrapolate -- all of this is predicated on what the pricing is -- but we could end up with a reliable revenue source that could cover substantially the majority of our burn rate. And potentially, if we get an expansion of the label and the revenue continues to grow, this could result in a significant annual revenue source for the Company.

I think just to add on that, the numbers that Dan just mentioned are US numbers. Obviously, without pricing, it is really hard to sort of project what the annual cash flow would be. But with a normal targeted therapy price, you could -- and our royalty, which to remind everyone is a mid to upper-single-digit royalty on this program, which escalates with global sales at sort of reasonable step-ups -- and then you add on other territories, like Dan mentioned -- Europe, possibly Australia -- you could see this making us profitable in a couple of years.

Awesome. Thank you very much.

Brian Skorney.

Good morning, guys. Congratulations on all the success in the first quarter. Real quick question on vismodegib. Just in terms of milestones, can you remind us -- should we be expecting milestones at regulatory submissions and approval, or is it just one of those?

Yes, it's both.

Okay (multiple speakers). And then just moving on to the proprietary platform, it looks like you are seeing some pretty good rates of at least stable disease -- (multiple speakers). Sorry.

(multiple speakers) just to clarify -- on the milestones, that is both US and Europe as well.

Okay.

Separate milestones on submissions in each territory and then on approval.

Okay, and just moving back to 101. I'm trying to back out what sort of rate of stable disease we are seeing right now. Can you tell us how many patients on the trial have made it to the first scan at eight weeks, and what proportion -- I assume it is the five from liver, one from breast, one from head and neck, so that would be seven stable diseases. Versus how many have actually made it to a scan.

So I can tell you that we have -- out of 43 patients, we've actually had 12 patients that dropped out for reasons other than progressive disease. So we are looking at re-enrolling those patients so we can get representation. Bearing in mind, in a Phase I, these are refractory patients with a very poor prognosis.

So we have -- we've seen, again, stable disease in -- I think you are right -- it is about seven patients. So all of those patients have had scans. 12 out of the 43 have had to drop out for reasons other than progressive disease. So I think it is probably half of the patients, maybe even two -- do you have the graph in front of you?

I am looking at the graph of the patient profile right now, and let me -- bear with me one second.

Sure.

Yes. So we've had, I think, 10 patients to 11 patients -- 10 patients currently that have been able to get to the first scan.

Through the first scan.

Through the first scan. And that's an important metric, because the other patients were in such bad state that they didn't stay on drug long enough. So you get post that, we see a significant number of them are able to get to the next scan.

So what we are seeing here essentially is -- of the patients who actually get scanned, we're seeing a stable disease rate of 70% then? Am I thinking about that right?

Yes, I think that's right.

Okay. That's good. And then also on the oral formulation of 101, can you give us an idea of what's going to need to be done clinically to kind of get this formulation at the same stage as the IV formulation? Are you going to have to redo some sort of Phase I trial, or is it just kind of demonstration of bioequivalence and then you can flip-flop?

We're going to have to redo the Phase I dose escalation, since it is a completely different route of administration. So it will go through a dose escalation -- standard dose escalation trial. I think, based on our insight with the activities that we've been seeing with the IV formulation, that may motivate us to do some enrichment of certain patient types in the Phase Ib.

Okay. And then just moving on to 907, I've been pretty excited about this. And just wondering if you can kind of speculate on your opinions of what the different activity of targeting different isoforms of PI3 kinase. And can you give us any details on the breadth of 907's PI3 kinase inhibition, what relative inhibitory activity there is for each of the isoforms? And is there any benefit really, specifically because it is a combination of PI3 and HDAC at more specifically targeting the delta isoform, which has shown some pretty compelling activity in hematological malignancies?

It is an important question. So different scientific perspectives on the right approach. 907 is a Pan PI3 Class 1, so it is fitting alpha, beta, delta and gamma. Delta has shown some good activity; however, resistance remains an issue, with highly-specific, particularly isoform, inhibition.

The other thing to bear in mind is there is a subset of patients that appear to be responsive to isoform. But if you have -- for instance, p10-null tumor types are resistant to delta inhibition, and you need to be hitting the other isoforms. So we believe that a broader coverage in the PI3 space is advantageous, in that you should be able to hit a broader range of cancer types.

And then the bypass mechanism that you typically see with PI3 kinase inhibition is through Ras, Raf and MEK. And what you are seeing is a number of large pharma are now combining their proprietary PI3 kinase inhibitors with novel MEK inhibitors.

So this is a complicated scenario, where you have two novel targeted therapies having to go through Phase I together. We think this is really the advantage of our approach. We have one drug molecule that is hitting PI3K and preventing the bypass mechanism from being accessible. So we believe we have a number of advantages in terms of aligned potency, controlled exposure, because the drug is degraded concurrently rather than two separate drugs. And obviously, practical advantages of pricing and IP issues.

Great. Thanks for answering the questions, guys.

Mark Monane.

Thank you. Good morning and thanks for the comprehensive review on the program. It is spring -- no matter pretty much where you are, Spring is in the air, which brings me to the next question.

And that is as you spring towards development of 101 as an oral compound, are you looking for this opportunity maybe for a chronic therapy -- patients turning on IV and then moving to an oral formulation? Or are you thinking of potentially dividing the different indications, where some might be better treated with other IV drugs, perhaps, and maybe the oral 101 with other oral cancer therapeutic agents? Can you talk about that, please?

Yes, it's a very important question, Mark, and appreciate your asking it. So it is likely that if we were to have both an IV and oral formulation available, that they would have their respective applications and niche, both as single agents, combination, acute and chronic.

So what we've seen with the IV formulation is activity in a number of cancer types. The concern is for long-term use, and IV can become cumbersome for a patient. So it may be that what you want to do is use the IV for a hard hit, and then use the oral for then chronic inhibition and suppression of these mechanisms to keep the cancer at bay.

In some cancer forms, you may want to start with the oral. So for instance, non-small cell lung cancer, 90% are known to be EGFR overexpressers, and you have drugs like erlotinib, ERESSA, that have demonstrated efficacy. What we are looking at there is demonstrating that 101 has a competitive advantage in terms of its mechanism.

So with the IV form, we are surveying non-small cell lung patients that have been demonstrated to be EGFR-positive, have been put on erlotinib, have responded to erlotinib and then developed resistance. So this is a very select patient population. If we can demonstrate that 101 is able to resensitize these patients and keep the tumor at bay, we've got a real competitive niche there, possibly with the IV formulation for that niche. But for the broader population to displace a drug like erlotinib, we are going to need an oral formulation.

So we are looking at a number of different sort of competitive positionings of each formulation.

That was helpful additional information. And then another question, also on 101. There was a quote in the press release from Dr. Wang which talks about drug resistance and tumor metastases effects with 101. Do you believe there is an FDA pathway looking at this specifically, or will we likely see this effect [or] 101 if it plays out in the Phase III trials as a result of decreased -- prolonged time-to-tumor progression or increased survival?

This refers to this mechanism called epithelial mesenchymal transition, or EMT, which has plagued drugs such as erlotinib and ERESSA regarding bypass mechanisms. And what happens -- when you expose a tumor to a specific single-target agent, the tumor adapts in a number of ways. And one is it transitions itself and it upregulates alternative compensatory bypass mechanisms, and it becomes more aggressive.

The adhesion of one cell associating with another, such as epithelial phenotype, becomes attenuated and the cell becomes mobile, and we think that is related to metastasis, that this EMT process is related to the metastatic condition of a tumor.

And we've demonstrated pre-clinically that 101 keeps the adherents intact so the cells stay associated with each other, and decreases the epithelial mesenchymal transition. So we believe that the drug may, in fact, end up creating greater stability for a more durable period of time by suppressing this transition process.

Thanks again, and we look forward to future events.

Ren Benjamin.

Good morning, guys, and congratulations on all the progress and the positive results. A couple of questions. The majority of mine have been answered, but I might have one or two more.

Regarding the Roche Genentech submission of the NDA in the second half of 2011, I think you've already mentioned that it is a US submission. Can you give us a sense as to what type of review clock you believe will occur? Will this be a priority review, standard? Do you have any clarity on this?

That is our expectation. I mean, our internal clock would suggest that this, if approved, would be a sort of priority -- priority review, and then if approved, would be a sort of first-half or mid-2012 event.

So if we are looking at milestones from this collaboration, could you give us -- I mean, we can probably back-calculate -- but could you give us a general sense as to what sort of milestones you would expect in 2011 and what you would be expecting in 2012?

That's a tough one. What I can say is -- let's see if we can sort of back through a few things that are out there. So one is that there are $97 million left in milestones on the compound, all through development and regulatory approval.

Of those, we know that there are three milestones of $6 million each that are paid on Phase III initiation or registration trial initiation, and we've received one of those to date for the advanced basal cell study. So within the $97 million there are 12 more related to future Phase III initiations, and that leaves us with $85 million for the regulatory, submission and approval process.

There are more than one indication included in this, but from US and EU alone, 2011, 2012, we will receive, if they are both approved, not quite half, but in the tens of millions of dollars related to those. That is about the best clarity I can give you.

Actually, that is really good. That is actually perfect. And I guess just an update on the operable trial that is ongoing right now. Can you give us a sense as to how that is enrolling? Is enrollment complete? When might we see results from this trial?

I think we need to get a further update from Genentech on that. That study is ongoing; I don't think enrollment is complete. And just based on the timing -- I think Dan went through this -- but just that all patients are dosed for 12 weeks and then half of them, so 25 patients, are then followed for 24 weeks to measure a durable, complete response as a primary outcome. So I think we are looking at, most likely, early 2012 for data on that study. That's our estimate, and we need to definitely circle back with Genentech.

Okay. And I know the answer for this is -- I probably know the answer for this, but I figure they'll go ahead and ask it anyway, since you are getting this close to NDA submission. Has there been any discussion between you and Genentech-Roche or any sort of dialogue regarding how this drug will be marketed, to whom it would be marketed and what sort of price point we might be starting to think about?

If you were assuming that your answer was going to be we can't comment, then (multiple speakers).

It was a good assumption?

It was a good assumption, yes. No, we really don't -- we really can't share a lot there. And I think -- and Genentech, in truth, hasn't fully disclosed a lot of the details to us as well.

Okay, I just figured I'd ask. Just switching gears to 101 real quick. You had mentioned the circulating tumor cell results and that 65% of patients showed some sort of modulation of greater than two of the targets that obviously 101 affects.

What I'm kind of interested in is the remaining 35% that didn't respond. And have you guys started looking at as to the reasons why they didn't respond? Or another way to look at it is of the 65% that did respond, is there anything that is coming up that may help you moving forward with Phase II studies to help you select those patients who are more likely going to be responders than not?

Yes. Very complicated question, because this field is still sort of an art form and not a defined science. There really is no direct correlation right now with circulating tumor cells and biomarker responses and clinical response. You see trends.

And what is encouraging is we are clearly seeing that the targets appear to be affected by the drug, and we see a strong trend of down-regulation of the three targets the drugs are designed.

You've got a myriad of circumstances that one has to factor in. Is EGFR, HER2 even relevant to driving the tumor for which the CTC is originated? When they metastasize and start circulating, are those proteins even expressed any more? Does circulating tumor cell count number correlate to any insight on drug activity?

So there is just a lot of unknowns right now, Ren. Circulating tumor cells are a sort of interesting surrogate for biopsies. In even direct biopsies from the tumor itself, we still don't have a direct correlation. So what is relevant about biomarker data right now is just demonstrating that your drug is hitting the target for which it is intended. And then if you see clinical responses correlating with that, then you are extrapolating and tying it together. But it is still not a direct correlation to date.

Okay. I think in response to one of the questions, you had mentioned that 12 patients had dropped out for reasons other than progressive disease. Can you talk a little bit about what those reasons were? Did it have to do with the drug?

And then I guess more importantly, when might we be seeing the data from this ongoing cohort expansion trial, and would it be this year at a scientific conference?

Let me answer the second part of the question first, which is -- the second part of the question about when. We are expecting to complete enrollment by midyear. We've just started enrolling, several weeks ago, on the non-small cell lung cancer cohort. And that data is too early to comment on, except it is already looking interesting in that these patients have a very poor prognosis. They have a PFS of one month, approximately one month, and we have had a patient go past the first scan and show stable disease. Purely anecdotal -- [it's a net] of one, but intriguing.

The answer to the first part, which is the reasons why patients have come off, there are a number of them. Some are just patients withdrawing consent, and those are for a wide range of reasons. They are personal reasons for patients who have been through hell and back in terms of all the clinical trials they've been involved in. And that is one of the problems with Phase 1 trials. These patients are allowing themselves to be experimented upon.

We've had a few patients -- I think three or four -- that have had, upon the first dose, elevated creatinine. That is two patients have had -- two patients have had elevated creatinine. And that is one of the -- that is the DLT of the drug at 300 milligrams.

What we've seen consistently is about 5% of patients have this phenomenon that upon the first exposure to the drug, their creatinine levels go up. We don't really understand the mechanism quite yet. The good news is it is transient and manageable, so those patients -- the physician could decide to keep them on by lowering the dose to the next lowest dose, and the creatinine level resolves. But those patients came off from that.

We also had clinical deterioration that did not have to do with the tumors that were being monitored. So for a variety of other clinical metrics that were being monitored, patients were just a poor state of health.

Okay. And so you mentioned that the non-small cell lung cancer cohort has just begun enrolling. You hope to complete enrollment of the entire trial by the middle of the year. So am I safe to assume that all the other cohorts have been fully enrolled?

Yes, all the other cohorts have been fully enrolled. And so gastric is still early. We have a number of outpatients still on drug; that is still active. We have a number of patients that remain on drug. And we have actually a liver patient that has been on drug for -- in the eighth month now; still stable disease. So that is very encouraging.

And Ren, just to shed a little more light, too, on the reasons for coming off. There were -- trying to get the exact number here -- but it's somewhere between seven and 10 of the patients that came off due to a withdrawal of consent. So basically just tired -- this is the feedback we got -- all of them probably have their own reasons, but not for disease progression.

Got it. Okay.

And then, Ren, just one point I wanted to make. You asked about the circulating tumor cells. To shed more light on this, what we are now doing -- I mentioned earlier that we are going to repeat enrolling the 12 patients that dropped out prior to the scan, if it wasn't due to disease progression. We are going to require that those patients that we get pretreatment/post-treatment tumor biopsies, so we have a closer nexus to drug activity.

Great. Maybe I missed this during the prepared comments, and I just need some clarification. The randomized Phase II trial for head and neck is scheduled to begin, I guess, later this year, in the second half of this year. And so there is -- the Phase I portion of this trial, has it already started and is ongoing right now or is it soon scheduled to start?

The Phase II will be in 2012. The Phase I is scheduled to start any time now. We are looking at enrolling patients.

The first patient will be treated probably end of this month, beginning of June, is what we are expecting.

We're at the IRB approval process with four centers.

Got it. Okay, good. Thanks for the clarification. And then just very quickly -- again, I probably heard this wrong -- but did you talk about Debiopharm moving into a sort of a Phase Ib portion of the ongoing trial right now, kind of like what you guys did with an expansion cohort in particular tumors? And if so, when would that happen, and does that delay sort of when the Phase II begins?

So we have a joint steering committee coming up with Debio soon, so I don't want to give too much detail right now. But what I will say is the Phase I dose escalation data is looking very promising in that the drug appears to be very well-tolerated with both dosing schedules.

There has been a sign of clinical activity. And what they are looking at now doing is a Phase Ib to survey several tumor types, with the drug being used as single agent to survey several tumor types to see about activity and to establish a Phase II dose.

Phase Ib is being used more and more frequently as a means of getting further insight into how to position the drug under various scenarios, so that you have a higher probability of success in your Phase II. So that is basically the strategy they are using. And as I stated, we are going to be meeting with them shortly to get an update on the clinical strategy, and happy to update you after we get that information.

Terrific, guys. I think that is all I got for you. Congratulations again. We look forward to seeing the data.

(Operator Instructions) We have no further questions.

Great. I want to thank everyone for your attention and support, and we look forward to giving you updates as they become available. Thank you very much.

Thank you very much, ladies and gentlemen. That now concludes your conference call for today. You may now disconnect. Thank you very much.