Curis Inc (CRIS) 2012 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Third Quarter 2012 Curis Earnings Conference Call. At this time, all participants are in a listen-only mode. We will facilitate a question-and-answer session towards the end of today's conference. As a reminder, this conference call is being recorded for replay purposes.

I will now turn the call over to Mike Gray, Curis' Chief Financial Officer. Please proceed.

Okay. Thanks, John. Good morning and thank you all for joining us, as always. During today's call, we'll provide you with an update on our corporate plans and developments and also discuss our third quarter 2012 financial results.

Before we begin, I'd like to advise you this conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitations, statements relating to the following; our and our collaborator Genentech's expectations concerning the commercialization of and market opportunity for Erivedge; the timing and outcome of ongoing regulatory reviews for Erivedge, and the timing and potential outcome of ongoing clinical studies of Erivedge; our plans and expectations for advancing CUDC-101 and CUDC-907, and the potential therapeutic benefits of these development candidates; and finally, our and our collaborator Debiopharm's expectations regarding the advancement of Debio 0932 into additional clinical trials in the future.

Actual results may differ materially from those indicated by forward-looking statements in this conference call as a result of various important factors, including those risk factors described in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2012 and in other filings that we periodically make with the SEC. And we encourage you to review these risk factors carefully.

We caution you that we're making these forward-looking statements only 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.

All right. With that, I'd like to introduce Dan Passeri, Curis' President and CEO, who'll provide a corporate overview as well as an update on our pipeline. Following Dan's remarks, I'll return to review our financial results for the third quarter 2012. And then we'll open the call for questions.

Dan?

Okay. Thanks, Mike. Good morning, everyone, and thanks for joining us today. It's been a very strong quarter across all fronts for Curis. First, the US commercial launch of Erivedge by Genentech in advanced basal cell carcinoma continued to gain momentum, with quarterly net sales of Erivedge increasing to $8.9 million in the third quarter, which represents a 75% increase over the last quarter. Furthermore, we anticipate that regulatory approval decisions will be made for Erivedge in other global markets, including in Europe and Australia, among others, in the coming months.

In addition, we've seen continued progress in recent months with each of our Curis-controlled development programs. We've been primarily focused internally on advancing an oral formulation of CUDC-101 into a Phase I dose escalation clinical study, which began in September.

We've already fully enrolled the first three-patient cohort at the beginning dose level and are expecting to open the next dose level cohort within about one week. We're also continuing our Phase I clinical study of our IV formulation of CUDC-101 in locally advanced head and neck cancer patients, and that's in combination with standard of care.

In addition, we've recently filed an IND for our oral Pi3-kinase and HDAC inhibitor, designated CUDC-907, resulting in Curis earning a $750,000 milestone payment under an agreement with the Leukemia and Lymphoma Society, or LLS. And we're working with - currently working with leading clinical centers to begin Phase I testing of 907 in the near future.

Finally, our partner, Debiopharm, has also made important progress during this period with the advancement of the Hsp90 inhibitor designated Debio 0932 into a Phase I dose escalation portion of a Phase I/II clinical trial, which is in combination with various chemotherapy regimens in patients with advanced stages of non-small cell lung cancer.

I'd now like to provide greater detail on each of these development programs and I'll begin with Erivedge. This first-in-class Hedgehog pathway inhibitor received FDA approval during the first quarter of this year for the treatment of adults with a type of basal cell carcinoma or BCC that has - and this is a label that it received that has spread to other parts of the body, i.e. metastatic or that has come back after surgery. And we believe that second qualifier is important as it could also encompass Gorlin's patients that have recurring BCC or that their healthcare provider decides cannot be treated with surgery or radiation. I think this third qualifier on the label is very attractive and that it gives healthcare providers discretion. We refer to these categories of disease as advanced BCC and again we're highly encouraged by the label that Erivedge has received.

Under our collaboration agreement with Genentech, Roche which is for ex-US markets and its subsidiary Genentech for US markets are responsible for commercialization of Erivedge in advanced BCC are also working on its continued clinical development. During Roche's recent third quarter update, Roche indicated that uptake of Erivedge is positive with sustained growth since the US launch in February of 2012. Roche recorded net sales of approximately CHF18 million or approximately $19.4 million during the first nine months of 2012.

Erivedge net sales were $8.9 million in the third quarter, demonstrating strong sequential growth over the $5.4 million in the second quarter. Roche further noted that awareness of the product's availability and we believe a growing appreciation of the benefits of Erivedge are increasing and that second to third quarter average weekly demand grew by 44%.

Now based upon the early market launch metrics and the estimates of a potential market target -- market population of approximately 28,000 in the US and an additional 12,000 patients in the top five EU countries, we continue to strongly believe that the advanced BCC market with the label that it's received represents significant value for our shareholders and we anticipate Erivedge's continued growth in the coming quarters.

As I mentioned earlier, Roche is also working to secure approval of Erivedge and several other territories, including Europe, Australia, Canada, Israel and Switzerland, were eligible to receive potential additional milestone payments upon regulatory approvals of Erivedge in advanced BCC in Europe and Australia as well as royalty revenue in all territories in which Erivedge is sold.

Roche has indicated that it currently anticipates possible European approval by the EMA in either late 2012 or early 2013 and we estimate the potential regulatory approval in Australia could occur during the first half of 2013.

In addition to the lead advanced BCC indication, Genentech is also conducting a separate Phase II clinical trial of Erivedge in patients with operable nodular BCC, which is a less severe form of the disease and accounts for a significant percentage of the approximately 2 million cases of BCC diagnosed annually in the US.

This Phase II trial is the first study to assess the ability of Erivedge to provide complete histological clearance of a tumor, which is an important first step in determining the efficacy of Erivedge after these less severe forms of BCC where BCC lesions are generally treated with surgical excision.

This trial is designed to test Erivedge as a single-agent therapy in a three-cohort trial of approximately 75 patients with operable nodular BCC in a US-based open-label trial. Genentech reported data from the first cohort earlier this year, including safety and efficacy of 12 weeks of daily 150-milligram dosing of Erivedge in 24 patients with newly diagnosed nodular operable BCC.

In this cohort, pathologically confirmed complete clearance was reported in 10 patients or 42% of the cohort, while clinical complete and partial responses were reported for 23 patients out of the 24 or 96% of patients treated.

We view this early read-out data to be highly encouraging, particularly if an expansion into operable BCC is meant to augment the surgery rather than replace it as a neoadjuvant for more severe and/or complicated forms of operable BCC that while designated operable would be suboptimal in outcome. For instance, such as removal of a portion of an ear lobe, nose or other disfiguring surgeries.

The most frequent adverse events or AEs were similar to those observed in previous studies with Erivedge and included muscle spasms, alteration of the sensation of taste, alopecia, dysgeusia fatigue and nausea. Most AEs were a Grade 1 to 2. Grade 3 AEs were reported in seven patients, including four patients with muscle spasm, no serious AEs were reported in the study.

Eight patients continued - I'm sorry - eight patients discontinued from the study, including two due to AEs. Cohorts two and three are fully enrolled and accrual to cohort three is ongoing with full study results expected in the first half of 2013.

In addition to the operable BCC study being conducted by Genentech, multiple trials in other cancers, various solid tumors are ongoing by third-party investigators, including exploring Erivedge in basal cell nevus syndrome or Gorlin syndrome, medulloblastoma, which is a pediatric brain cancer, sarcoma, glioblastoma multiforme, as well as in pancreatic, small cell lung, gastroesophageal junction, gastric, breast and prostate among others. We look forward to providing additional updates on Erivedge in the ongoing studies in the future.

I'd like to next turn to CUDC-101, which represents our first-in-class EGFR, Her2, HDAC inhibitor, and is our most advanced proprietary program. We recently initiated a Phase I clinical trial testing of an oral formulation of CUDC-101 and are continuing an ongoing head and neck cancer clinical study with the IV formulation of this drug candidate. That trial is in combination with standard of care.

During the third quarter, we filed an IND and successfully advanced into Phase I clinical testing of the oral formulation of CUDC-101. The first cohort is now fully enrolled after we treated the first patient last month and rapidly accrued two additional patients. Assuming that no dose limiting toxicity event is observed in this cohort, we anticipate that we'd be eligible to begin recruiting patients and a second cohort within a week or two.

The Phase I clinical trial is designed as a standard dose escalation study in which a tablet form of CUDC-101 will be orally administered to patients with advanced or refractory solid tumors at two study centers in the United States. The primary objectives are to determine the maximum tolerated dose or MTD and recommended Phase II dose of oral CUDC-101 and to assess the bioavailability and pharmacokinetics of orally administered CUDC-101. Clearly, if we're successful with a good absorption rate and good PK, an oral form would dramatically enhance the competitive positioning of potential competitive positioning of 101.

The secondary objectives of this study are to assess safety and tolerability and to evaluate biomarkers of CUDC-101 activity and to assess a preliminary anti-cancer activity. The bioavailability of oral CUDC-101 will be assessed among patients enrolled in the first three dose-level cohorts who will initially receive single, matched IV and oral doses of CUDC-101 prior to initiating oral twice-daily study treatment in the dose escalation portion of the study. That so, we can compare the IV exposure and PK with the oral in the same patients since this variability patient to patient. The initiation of this Phase I clinical trial of an oral formulation of CUDC-101 is an important milestone for Curis.

As I stated, a successful outcome of this Phase I clinical study could greatly expand the potential for 101 to be further studied in several cancers, including, but not limited to, non-small cell lung and gastric cancers where single pathway targeted agents have demonstrated clinical efficacy, albeit still wanting regarding the scale of response in addressing refractory and resistance mechanisms.

We're also continuing to recruit patients in the ongoing Phase I clinical trial of CUDC-101 and in combination with cisplatin and radiation in patients with locally advanced head and neck cancer, and this is with the IV formulation.

The primary objective of this study is to evaluate the safety and tolerability of 101 when administered in combination with the current standard of care of radiation and intermittent cisplatin. And to remind everyone, we believe there is a synergy when using 101 in combination with chemotherapy such as cisplatin as well as radiation.

We're currently enrolling patients in the second of two planned CUDC-101 dose levels at 275 milligrams per meter squared, having successfully progressed through the first dose cohort in which patients received every other day dosing of 101 at 225 milligrams per meter squared dose level.

Our current goal is to continue enrollment in the second cohort. And if no additional dose limiting toxicity events are observed, to complete the dose escalation portion of this study at 275 milligrams per meter squared, then we plan to treat approximately 10 additional patients at the maximum tolerated dose in order to further characterize its suitability as a recommended Phase II dose and to formalize further development plans.

And again, it's the balance of the data we're observing with the IV, where we're learning about the drug's characteristics, ability to combine with standard of care. And then the data that we observed with the oral will decide whether we proceed with the IV and/or oral.

Moving on to the next proprietary asset in our pipeline, we have advanced an oral formulation of CUDC-907, which is a synthetic small molecule dual inhibitor of Pi3-kinase as well as HDAC and we have successfully filed the IND. And preclinical studies, CUDC-907 has demonstrated very potent anti-proliferation activity and we believe that this approach of disrupting multiple signaling networks with a single-agent drug candidate has the potential to show superior activity in cancer patients of refractory or resistant to standard of care or single target approaches.

As I mentioned earlier, we are currently working with clinical centers to initiate Phase I clinical trials of the molecule. CUDC-907 is being developed in collaboration with the Leukemia and Lymphoma Society or LLS, under which LLS will support our ongoing clinical development of 907.

Under the agreement, LLS will fund approximately 50% of an anticipated $8 million in direct cost of development of 907 through Phase Ib or Phase IIa clinical testing, for a total potential funding of up to $4 million. By advancing 907 to IND filing, we recently earned $750,000 milestone payment from LLS, representing important non-dilutive capital to support our continued development of this molecule.

The completion of 907's preclinical testing in subsequent IND filing is a very significant milestone and we plan to initiate a Phase I clinical trial in patients with relapsed or refractory lymphomas or multiple myeloma possibly late December of this year or in early 2013.

The Phase I clinical trial is designed as a standard dose escalation study in which CUDC-907 will be orally administered to patients with relapsed or refractory lymphoma or multiple myeloma at up to four study centers in the US. The primary objectives of the trial are to determine the maximum tolerated dose and recommended Phase II dose of oral CUDC-907.

Secondary objectives of the study are to assess safety and tolerability, to assess pharmacokinetics, to evaluate biomarker activity and to assess preliminary anti-cancer activity of CUDC-907 in this patient population. And obviously, we look forward to providing updates on this molecule as it reaches Phase I clinical testing.

Our Hsp90 program, which we're going to turn to now, is being developed by our licensee Debiopharm and the lead candidate, just to remind everyone, is designated as Debio 0932, which is an orally available small molecule Hsp90 inhibitor. Also to remind everyone this is a de novo synthesized non-geldanamycin small molecule, so it does not share the toxicities that have been observed with other Hsp90 inhibitors of the geldanamycin class.

Debiopharm completed the dose escalation portion of Phase I clinical trial of Debio 0932 in late 2011 and presented data from the study at the annual meeting of the American Society of Clinical Oncology in June of 2012. In August, Debiopharm began testing patients in a Phase I/II clinical trial of Debio 0932 in combination with chemotherapy regimens in patients with advanced non-small cell lung cancer. The HALO study, H-A-L-O, which is an acronym for Hsp90 inhibition And Lung cancer Outcomes is a Phase I/II clinical trial of the safety and efficacy of Debio 0932 in combination with standard-of-care agents in first and second line therapy of patients with advanced non-small cell cancer.

In early August, Debiopharm initiated a Phase I portion of this clinical trial. The Phase I portion is designed to determine the recommended Phase II dose of Debio 0932 in combination with various chemotherapy regimens in patients with stage IIIb or IV non-small cell lung cancer with disease that is characterized as wild-type EGFR. Debio 0932 will be administered in this study in combination with cisplatin/pemetrexed and cisplatin/gemcitabine in treatment naive patients and with docetaxel in previously treated patients.

Once the recommended Phase II dose of Debio 0932 in combination with each of the three chemotherapy regimens described above has been identified, the randomized, double-blind placebo-controlled Phase II portion of this study is expected to begin where approximately 140 eligible patients will be randomized to receive chemotherapy with either placebo or Debio 0932. The primary objective of the Phase II study is to determine the efficacy of Debio 0932 in combination with chemotherapy. Also importantly, the KRAS mutation status will be assessed and used as a potential stratification factor going forward.

We're eligible for our next milestone payment under our license agreement when Debiopharm treats its fifth patient in a Phase II clinical trial assuming that Debiopharm advances Debio 0932 into Phase II clinical testing. We currently anticipate the Phase II testing could commence in 2013.

Just in this section, I'd like to just reiterate, we've had a very successful quarter with a lot of very important advancements in our programs both partnered and proprietary. And we believe we're very well positioned now as we go into the latter half of 2013 and begin to - latter half of 2012 and to begin 2013.

I'd now like to turn the call over to Mike for further discussion. And following Mike's remarks, we'll open the call up for questions.

Mike?

Okay. Thanks, Dan. I'll be brief and then we can get to the Q&A session. For the third quarter of 2012, we reported a net loss of $3.4 million, or $0.04 per share on both a basic and fully diluted basis, as compared to a net loss of $4.2 million or $0.05 per share on both a basic and fully diluted basis for the same period in 2011.

Revenues for the third quarter of 2012 were $600,000 as compared to $150,000 for the prior year period. The increase is a result of the $450,000 in royalty revenues that we earned from Genentech sales of Erivedge during the quarter.

Operating expenses for the third quarter of 2012 were $5.5 million as compared to $5 million for the same period in 2011. Cost of royalty revenue was $22,000, which represents 5% of the royalties that we earned on Genentech's sales of Erivedge during the third quarter.

R&D spending was $3 million for the third quarter - for both third quarter of 2012 and 2011. Within the quarter, spending on our CUDC-907 program as well as our 101 program both increased by $200,000 year-over-year, as those programs continue to move forward. Those increases were offset by a decline of approximately $450,000 in spending on our other network-targeted cancer programs as a result of the focus of our resources in advancing 101 and 907 development programs.

G&A spending was $2.5 million for the third quarter of 2012 as compared to $1.9 million for the same period in 2011. The increase was primarily due to an increase in stock-based compensation of $500,000 over the prior-year period as a result of an increase in the number of, and the grant-date fair value of, stock options issued in 2012 as compared to the prior-year period.

Other income was $1.6 million for the third quarter of 2012 as compared to $600,000 for the prior-year period. The $1 million increase is primarily the result of a decrease in the fair value of a warrant liability.

As of September 30, Curis' cash, cash equivalents and investments totaled $41.9 million, and there were 80 million shares of our common stock outstanding. Factoring in our recent $750,000 milestone payment from LLS, we currently expect that our year-end cash position will approximate $36 million to $38 million, excluding any royalty revenue or potential milestones that we could earn under our collaboration with Genentech.

So we project that our existing resources will fund our operations to mid-2014. When combined with anticipated milestones from Genentech, as well as Debiopharm over the coming months, we expect that we would have adequate capital to fund our operations through 2014. During this time, as Dan mentioned, we also believe that Erivedge royalty revenue will significantly increase, further improving our capital position.

So that concludes our prepared remarks. And, John, if you could go to Q&A, that'd be great.

Thank you. (Operator Instructions) Adnan Butt, RBC Capital Markets.

Thanks for taking my question. My first question is on Erivedge, naturally there has been recent prescription strength. And is there anything that you can shed further light on whether it's Roche's selling effort could have changed somehow, or whether it's uptick in a certain subset of physicians, whether they're dermatologists, oncologists, they're partly driving this?

Thanks, Adnan. Yes, I think it actually underscores what we have been saying consistently, which is - this is a very attractive label. The drug has really impressive efficacy. Let's also remember, the drug was approved on a Phase II pivotal trial. So this is a drug that, I think the advantages and understanding the AEs associated with it, need to be clearly articulated to the physician population and I think as Roche and Genentech are penetrating the market, educating physicians, more has learned about the drug through word of mouth, publications, conferences. I think it's a growing sort of awareness strategy. So we're very pleased with what you just articulated was the prescription strength continues on a nice slope upward and we believe that this is going to end up being a very significant market and a very important drug.

And is it too early to shed some light on use between different physician subsets and compliance?

Yes. I think it's too early to really ascertain any of those characteristics. But we're sure there will be separations out into different uses and groups.

And if I can ask a question on the royalty rate. It seems to have gone up this quarter versus the last quarter. Is that the kind of ramp that we should expect? And then, can you get some more color on the royalty rate, plus does it - I assume it presets every year, but does it preset every year? Thanks.

Okay. Yes. The royalty is still at the 5% level right now and it does escalate in a few incremental steps based on global sales. To answer the latter question, it will reset every year.

And if I may just a question on the pipeline. When do you expect Phase II data from the Phase I 907 study, please?

By the end of 2013 -- end of 2013 is when we're expecting that to start reading out.

Okay. Great. I will get back in queue. Thanks.

Thanks, Adnan.

Jason Kantor, Credit Suisse.

This is [Jeremiah] calling in for Jason. Just had a few questions. One is, when could we get the data for the oral formulation for 101?

Yes. So we just started that dose escalation again. We've just completed enrollment of the first cohort. So depending on how far up we can dose, we're expecting probably mid -- sort of mid-year to Q3 we'll start having data that we'll be discussing publicly.

Okay. And then -- and also is there any preclinical data that could support the use of Debio 0932 and specific non-small cell lung cancer, genetic mutation backgrounds?

Based on some publication data and also there was observation in the Phase I dose escalation where we had a confirmed PR in a KRAS mutant patient. And that was consistent with our -- the thought process from preclinical work and from what was known in the field. So we were very pleased to see that.

So I think as most targeted therapies, you're going to have a sort of stratification of patients based on particular molecular aberrations that will make the patients elegantly sensitive as a single agent or sensitive in combination based on what particular aberrations are present. So the KRAS being a particular mutation where we think it will be sensitive as a single agent potentially. So the intent here is to do a biomarker survey of patients retrospectively and that should guide prospective stratification approaches going forward.

And one last question, it's a financial question. We noticed that the R&D was trending down sharply this quarter. Is this kind of a run rate we should expect for the near term or would it be growing in the future?

Yes. I think that there were actually specific guidelines in prior quarters associated with regulatory approval of Erivedge earlier this year and then also associated with the NDA filing in Australia. We had about $2.5 million that are included within our R&D numbers in Q1, Q2 timeframe that are sort of non-recurring items. So I think near term we're likely to have a similar R&D number for the next few quarters. I think we'll provide a little bit more guidance on that when we give our 2013 financial guidance at our next call. But it shouldn't increase dramatically.

Okay. Thank you for taking our questions.

Thank you.

Joe Pantginis, ROTH Capital Partners.

Hey. Good morning. Thank you. Couple of questions, please. First, on Erivedge, how quickly is Roche ready to hit the ground running, if they do get the European approval?

Yes. I mean this is Roche, the premier oncology company. We think they've -- based on the launch that Genentech has achieved, sales force training, marketing materials, they're ready to basically launch as soon as approval is achieved, if it is achieved.

Sure. Great. And, Mike, in the past, with regard to your collaboration with Roche, you've provided sort of updates on the milestones about what's being left on the table. Can you do that today?

Sure. I mean, I think, right now, it's limited to the lead indications. So we have milestones -- near-term milestones in both European approval and Australian approval. And what we've commented on in the past, obviously, the amounts are confidential for the terms of the contract. But they are roughly equivalent to what we received on NDA submission, which in the case of Australia was $4 million and in the case of EU was $6 million.

Okay. And then, I guess, I'll also ask just sort of when we can anticipate the data, and this is for the IV head and neck cancer study?

Yes. We're aiming at completing that study, let's say, certainly, first half, but hopefully Q1 will be to release data.

Okay. Great. And then maybe just a little more, if you don't mind, if you could just spend a moment on the biomarker work that you're doing and the importance of this work. How you're prospectively identifying or getting tumor samples from patients? And how you're looking at these biomarkers and how they sort of play into the potential path forward for these drugs?

Yes, this is a real important question, Joe, and I think it's a real important strategic positioning for any company involved in oncology today. Translational medicine is sort of no longer a promise of the future, I think it's now a requirement. And what we're doing with our programs is trying to identify patients -- particular patient populations that may have a given mutation making them elegantly sensitive to your drug as a single agent. And then what sort of constellation of permutations are present in a tumor that will make it sensitive to various combinations.

And I think Erivedge, for instance, we don't talk about this much, but it's a perfect example that mutation in BCC makes those patients the tumor addicted to the Hedgehog pathway. So there is an elegant example of single-agent efficacy based on a fatally addicted mutant phenotype of the tumor.

And then in the solid tumors they're surveying multiple combinations to find where the drug can be used to disrupt networks. So that's the general theme we're using here. So what we're doing is trying to get biopsies from patients pre and post-treatment to do a retrospective analysis both gene mutation analysis, overexpression and amplification. So doing a FISH analysis looking at immunohistochemical staining for overexpression and mutational analysis, and then from that data trying to elucidate underlying aberrations that are making one group of patients sensitive to the -- more sensitive to the drug than others and then using that to guide our thinking going forward.

Thanks a lot, guys.

Thanks, Joe.

Brian Skorney, Brean Capital.

Good morning, guys. Thanks for taking the question. Just maybe I could get a little color on kind of the therapeutic index for the two oral Phase I assets. Just based on the preclinical data for 101, what sort of dose are you hypothesizing that you'll need to get to, to match the IV dose of 275 mgs per meter squared and it has the preclinical talks for the IV and oral formulations matched up or is there something different like a GI talks for the oral?

And then for 907 sort of similar vein of question, what do you think is the safety threshold you see in preclinical exposure compared to what you need exposure-wise based on IC50s for delta Pi3K inhibition and HDAC inhibition?

Sure. Good question. So I think on both of them, we're aware that GI talks is something that we need to be following carefully, one would not be surprised to see some GI talks. The question is does it manifest at a dose level that you're in the therapeutic range? From that standpoint, regarding 101, what we have to see, Brian, is what the absorption rate is, that's really going to determine our dosing requirements. So if we have a 40% absorption versus a 50%, 60% absorption, that's going to really determine how much we have to dose to achieve the IV levels.

We're also looking at a possibility of -- so it's daily and a possibility of twice daily, which would give us greater flexibility of controlling exposure. And those may have different toxicity profiles, particularly with GI.

Regarding preclinical, 101 was very well tolerated, as we saw, with the IV. We did see toxicities emerge, but beyond the level where we would expect to have a therapeutic efficacy emerging. With 907, in animal models, we clearly saw GI tox. So that's going to be a primary AE to watch. And again, the key is that you can dose at a therapeutic range without those AEs being limiting. So that's where we are.

Okay. Great. Thanks, guys.

I really appreciate it.

Simos Simeonidis, Cowen & Company.

(inaudible) I'm calling in for Simos. Sorry, I think, I dropped off in the middle. If you could give us some insight into the sales and marketing efforts that Roche is putting on Erivedge in Europe? I mean we know that the approval is expected soon. So do you think we can draw any parallel within the US launch?

Yes. I think Roche is likely to be very well poised with a sales staff that's already been built and trained. They have marketing materials all set based on the US launch. But personally, there's a personal belief. I believe the (inaudible) even smoother because we have data from the (inaudible) to learn from and experience from US physicians for use and the education process. So we expect this to be a, if they have approval to be a very successful and deliberate launch strategy.

All right. Great. And then moving on to 932 regarding the HALO trial design, how many patients will be enrolling in the dose escalation portion and then if you can recap us, what milestone would you expect from Debio?

Yes. First, touching upon the milestone, we can't disclose the amount that will be triggered if the fifth patient in Phase II. The Phase I milestone was $3 million, so this next milestone is north of that. And I apologize regarding your second part of that question, in terms of the number of patients in the HALO study. I don't recall off the top of my head, but would be happy to get you those numbers shortly.

Okay. And then when it goes to the randomized portion, I believe you mentioned 140 patients will be enrolled?

Yes, yes.

All right, thanks.

Thanks (inaudible).

Ren Benjamin, Burrill & Company.

Hi. Good morning, guys. Thanks for taking the questions and congratulations on the progress. I'm a little bit blind to the script trends, could you talk to us, I know that you guys followed us. Can you talk to us a little bit about the trends that you're seeing in the scripts currently and I guess, sort of, looking forward and based on what you've learned regarding the launch here in the US, is it fair to say that you might see a similar trajectory as compared to the US once the EU and Australia comes on or do you think there might be some types of different trajectories?

I'll comment first on the script data. We do track that data and we see weekly script data, both total and new prescriptions. And recently, I think actually, Adnan Butt from RBC referenced the strong -- recent strong script data. A couple of weeks ago the total scripts jumped about 50% from the prior week and they've stayed at that level in the subsequent weeks.

So whether you can say two weeks is really a trend, we'd like to see this continue, obviously, for a few more weeks and then obviously grow from there. But it's definitely moving in the right direction and it sort of speaks to what Roche has been saying that it has been an education process, there's greater awareness of the drug now. And perhaps it's starting to show up in stronger script data.

As far as EU and Australia, I don't think we have a real good handle on what the trajectories would look like relative to the US. I think one potential advantage in those territories is that there's been a lot of education efforts in the -- both in the US and then also through scientific presentations at major conferences on this drug in EU as well. So hopefully, we can get a little bit stronger uptick right out of the gate, but we'll have to see how that goes.

And just a follow-up to Adnan's question regarding who's prescribing drug, can you give us any sort of a sense, is it primarily more oncologists, are they primarily from the academic settings or is it more community based, how many dermatologists are involved, or do they even prescribe it? Can you give us any color regarding that dynamic?

Yes. Actually, it's an extremely important question, Ren, because I think what it underscores, the fact that you're not dealing with a uniform prescribing population. In advanced -- situations where it's metastatic, you have typically oncologists would be prescribing and I think they are clearly going to be more educated on the drug, because these are patients that have no alternative. They have patients with a short life expectancy, anything that's available that will help they'll be eager to use.

And then with -- so the advanced BC setting, you have a Mohs surgeon, surgeons treating patients and prescribing as well as treating dermatologists. And you have, if you look at it in a bell curve, you have sort of different characteristic prescribing phenotypes within that bell curve.

You're going to have sort of early adopters more aggressive in treatment strategies on patients that are really advanced. More of your academic setting are going to be more aware of the drug and I think this is what Genentech's been really focusing on, is an education process with the sales force, marketing material, conferences and most importantly, the experience of key opinion leaders. And I think the fact that this is an approved drug based on pivotal Phase II data necessitates more information being available.

I also think the Phase II -- three cohorts in the Phase II operable studies are also going to be important in this overall market penetration education process. When you can produce data showing their histological clearance, the way the lesion is regressing, the evidence of apoptosis from the base level up, the durability of response, all of this material is relevant in the awareness and education process and the acceptance of the drug by the broader derm community. So we're very encouraged by what we're hearing and what we're seeing, and I think it's based on a sort of multi-tiered strategy to penetrate a sort of segmented market dynamic.

And just one last question on Erivedge. Are you seeing an increase in the number of maybe institutional-sponsored trials in the basal cell setting, where they have this approved drug, but now they're looking -- trying to look at different uses within that same indication, or is it still pretty much the exploratory trials that you mentioned earlier, the gastric, the breast and on and on?

There are a couple of basal cell studies. And I apologize, Ren, I don't have the details at my fingertips. But there is definitely some additional work being done in this lead indication under ISTs and those study designs are available, obviously, at ClinicalTrials.gov. But still the vast majority of the studies are the exploratory ligand-driven cancers.

Got it. And just switching gears real quick to 907. Can you talk to us a little bit about the preclinical evidence that you've seen so far to justify the lymphoma and the multiple myeloma indications? And I guess, where I'm going with this is how this might compare to other isoform-specific Pi3K inhibitors that are out there. I believe you had mentioned in the past that this is a pan inhibitor, but maybe you can just remind us of the mechanism as well.

Yes. So, Ren, the reason we are focusing on hematological cancers is; one, there is quite a bit of data out there showing Pi3 activity and involvement in a number of hematological tumor types, including lymphoma and multiple myeloma. We believe that 907 has the added feature and benefit of the HDAC component that in our hands has demonstrated to be synergistic with the Pi3 blockade.

What we believe is occurring, so again this follows the theme we've been talking about consistently in translational medicine. There will be particular segments of patients within the hematological indications that have isoform mutations that will be elegantly sensitive to an isoform-specific and selective drug.

The issue there is those are very small markets and in the broader application patients may have a mutation, but they also have bypass mechanisms accessible. For instance, if it's also PTEN null that may play a role. And then where you don't have a given activating mutation, but you have upregulation of the mechanism, these isoforms exist for biological redundancy. So if you block one the tumor will typically access another.

So the concern here has always been -- what we're always hearing consistently is yes, but there is a lot of concern that the pan are going to be toxic. Well, there a lot of pan inhibitors being evaluated in the clinic and it still remains to be seen. The toxicity profiles, I think, are going to be tolerated in a number of settings.

Regarding 907, we think the drug has the added feature of synergy so that we are probably going to need less drug than just a pan inhibitor alone. And we appear to have a more durable suppression of the sort of Pi3 signaling cascade, so that it's not just blocking at the level of signal transduction at Pi3, but it's also through the HDAC moiety altering the access to bypass mechanisms. So the preclinical data is actually quite strong in a number of hematological models where we compared with other Pi3-kinase inhibitors, even in terms of the other Pi3-kinase inhibitors in combination with HDAC inhibitors 907 appears to be more potent.

So I think the key feature here is we have rapid suppression of Pi3-kinase and then it's durable because of the HDAC component. So we're very eager to launch the Phase I dose escalation in this patient population.

And just one final question with several conferences coming up, ASH notably in December, can you give us a sense as to which conferences you may have data presentations there?

We're presenting 101 Phase Ib data at ENA this week. We don't have data at ASH obviously since the study -- that's it for the fall, that’s the last scientific presentation for us.

Great. Thanks guys and congratulations.

Thank you.

Wayne Rothbaum, Quogue Capital.

My question has been answered. So thank you, I'll see you tomorrow.

Thank you, Wayne.

Thanks, Wayne.

Boris Peaker, Oppenheimer.

Many of my questions have been answered. But just quickly maybe for, Mike, what is the current inventory level that Roche has and how does this affect quarterly results?

So we don't have clarity on current inventory levels. What I can say is that some of the data that we track, which isn't perfect, but it's directional, suggest that a lot of the inventory that caused a little bit of the confusion around Q1, Q2 numbers based on -- as I think you're referring to the Q1 sort of inventory stocking associated with the launch, it seems like it's flushing out. But we don't have exact inventory levels.

Okay. And I guess an extension of that, any feedback from Roche in terms of how many weeks of demand they plan to keep in the channel?

Also -- no, I think the inventory levels are down. But it's unclear how many weeks they'll keep in the channel.

Okay. And my last question is, specifically in terms of epidemiology of advanced basal cell carcinoma, I recall Roche had one abstract when they looked at the market. But now as they are moving forward in commercialization certainly in US, in Europe and other geographies, do you know if they're running any studies to better understand and segment this market?

I'll answer it in the following way, Boris. I think when you look at what's categorized as advanced, falling under the existing label, our opinion is that label is very attractive. It has three separate categories and I think the -- self-explanatory. It's metastatic, which is epidemiologically a very small percentage of the overall BCC number recurring, which -- and I read also could encompass the Gorlin's syndrome patients.

The prevalence of that is about 4,000 to 5,000 in the US, so globally I don't know what that number is. Or -- and the third one is really important, it gives the physician discretion. And I think that -- in terms of the epidemiology of this category of advanced, if a physician has a treatment option and discretion I think what is classified as advanced and untreatable based on surgery or radiation could expand over time. It's really a cost benefit analysis and benefits of the drug's therapeutic application, particularly as a neoadjuvant.

So we think they are learning as they're talking to physicians and it's a mutual two-way process. I think physicians will sort of alter their thinking of what patients they would put into this category based on experience with the drug, if that hopefully answers your question.

Well, yes. I guess -- that's very helpful, but I'd like to also know if they plan on publishing any kind of a formalized market analysis and update to their epidemiology studies, just for the investment communities to kind of get a better sense of how many patients there are really out there at peak if you --

Yes. Well, I think, what they've done to date is based on kind of a restrictive read on advanced, they've come out with published numbers of 28,000 in the US and 12,000 in the EU top five countries, as the market potential for the drug and it's really a matter of penetration.

But yes, Boris, short answer to those, we're not aware of any near-term publication like that.

Okay. Thank you very much for taking my question.

Thanks, Boris.

Jim Birchenough, BMO Capital Markets.

Well, good morning. This is Nick standing in for Jim. First, congrats on the progress on two unique and really exciting oral compounds, and I've got a couple of questions. The first one is on -- what strategies are being undertaken to try and improve the tolerability of Erivedge?

I seem to recall that, perhaps, it's the Gorlin's trial has a rest period built in. But I also read a recent publication, and I apologize, I can't remember the title of it, that was suggesting that there was an unexpected reason for cramping that was easily addressable. And I'm wondering, if that's something that can be looked at or is being looked at in the clinic.

And the second question is on the head and neck 101 trial. I'm wondering, how happy you are with the progress? There was some very exciting initial data. I know that you relaxed the enrollment criteria to allow high-risk HPV-positive tumors into the trial. It just seems like to me the trial is taking longer to run than I would have expected.

Yes. So, first, the Erivedge question, and then I'll go to 101. So on Erivedge, as an important issue and this is really sort of a cost benefit analysis with patients in terms of the emergence of AEs. This is an important issue that Genentech is looking at in terms of altering the dosing schedule, particularly with the survey of a drug holiday.

So the third cohort that they are presently conducting in operable nodular BCC is treating patients for a period of eight weeks, then putting them on a four-week drug holiday, and then putting them back on drug for eight weeks and the logic and rationale of that is you start seeing good efficacy emerging within that eight-week period.

We also believe, because of the drug's T-Half, it has a T-Half of greater than seven days. So when you cease administering drug at eight weeks you still have active drug circulating for at least a week or plus. So the ninth week possibly into the 10th week, you still have drug.

There's also a thesis that the lesions will continue to undergo apoptosis during that drug holiday period and what you're achieving with the drug holiday is ameliorating, attenuating the onset of the AEs, making them more tolerable for the patient and then putting the patient back on drug and that's a really important survey.

I think this would really enhance the attractiveness of the drug for a broader population in addressing the onset and severity of the AEs. Regarding the muscle spasm, I'm not aware of any report that you're talking about, but we'll certainly look into that, but I think that's going to be an ongoing process of trying to assess how AEs can be managed or ameliorated so that they can increase the acceptance of the drug.

The second question on 101 with the head and neck IV. You're asking how we feel about the enrollment rate, personally very frustrated at the rate of enrollment. We would have expected a more robust rate of enrollment based on the enthusiasm of the PIs and some of the data that we've seen. I think the general consensus is, first of all, HPV-positive numbers are going up pretty dramatically. But the patient response to accepting an experimental drug with standard of care is actually a harder play than we were expecting. And I think, principally, that it's an IV.

This IV formulation is really problematic for general market acceptance. Patients really don't favor going into the clinic every other day for a one-hour IV infusion, even though they're already at the clinic for radiation therapy. I think this one-hour infusion requirement three times a week is difficult for us.

I think the oral is really an important study right now, because we have generated what appears to be very attractive data with the IV, if we can learn to exploit the oral for greater exposure. So we continue to seek to enroll and complete the Phase I on the IV, but we certainly are recognizing the limitations of an IV where it requires and necessitates every other day patient access.

Thank you. And maybe just one quick follow-up, and it relates to the oral drugs. Presumably, the centers you go to test these drugs, they have their own internal priority list as to how excited they would be. I'm sure if you were just going with a Pi3-kinase inhibitor, you'd probably be number 25 on the priority list and you wouldn't be getting, perhaps, the highest level of attention. Can you just provide some qualitative comments on how excited these Phase I sites are to get a combination drug that's a Pi3-kinase and an HDAC or an EGFR and an HDAC?

Sure. I'll start with 907 first, as it started off as an oral, rather than having to push this to clinical centers we've actually had -- we've had pull. We've had a number of potential PIs approach us wanting to use the drug because they're really excited by the combination of Pi3-kinase and HDAC. So our CMO, Maurizio Voi has had calls from a number of clinical centers asking about the drug, wanting to learn about it and wanting to participate in any forthcoming trial. So that's been very encouraging.

On 101, similar, I think the oral has proven to be a really important event and we had that feedback with the IV. We had a number of PIs convey that they were really excited by the drug design, but concerned that the IV is going to make it really difficult. I think qualitatively one that was really telling was we had a leading non-small cell lung cancer academic clinician approach us about 101 and when he learned that it was an IV said that please call him if we have an oral. And that's where we are.

I think the only other comment I'd make on the eagerness to test an oral form of 101 is that we enrolled a cohort in a month, which is fast, I mean three patients in -- at the one center that's open right now. And they were able to fully enroll that first cohort in and as fast as sort of the protocol allows.

Yes, and you compare that with the IV experience, which has been -- yes.

Okay. Excellent. Thank you very much, gentlemen.

Thank you.

Ed Arce, MLV and Company.

Hi, Dan. Hi, Mike. Thanks for taking my question.

Hey, Ed.

Hi, Ed.

A lot of good questions have been asked already, but just had another couple here. So you've mentioned a couple times now that the addressable market opportunity for the US and EU five is 28,000 and 12,000 patients, respectively. I'm wondering if there's any data that you have or Roche has about the size in Australia, and also perhaps what if anything have they shared with you in terms of the pricing strategy across the different geographies?

Yes. I'll touch on the Australia market and Mike can touch upon the pricing. The Australia market is an interesting one. The incidence rate is probably the highest globally. However, because the incidence rate is so high and most of the population is along the coastal regions where -- so it's a concentrated population. They have a greater awareness of BCC screening than most countries.

So although the incidence rates are very high, I think the number for advanced BCC is probably not going to be as large as the EU market. What that number is going to be? I don't have the details at this point. But it is a unique characteristic based on it's primarily a European population in a equatorial zone.

And, Mike, do you have [on the pricing]?

The only other thing I'd add on Australia is that the starting total population is so much smaller than either of the other territories there. The incidence rate is, if I recall a couple times that of the US, but there are only 23 million in Australia. So you're probably looking at the patient numbers in the 3,000, 4,000, 5,000 number, I think would be sort of around where that would shake out.

On pricing, we really don't get exposure to pricing until an approval decision is made and that's consistent with the US -- the experience in the US approval. So we don't -- we can't add anything on that.

Okay, sure. And then on the operable nodular BCC ongoing trial and obviously you've talked about it before that such -- it's great results in the first cohort and I'm just wondering. I know that you've said that you expect the full results from all three cohorts sometime in the first half of next year. But if you could remind us or remind me what the overall objective of having these three cohorts is and how that's going to inform your designs for the next trial.

Yes. So real important question on this. So the three cohorts are meant to further delineate, characterize, elucidate the activity of the drug and the treatment of this lesion. And sort of understanding how the dosing schedule affects response, the AEs that manifest how one can manage them better.

And I think the overall data package is really designed to show potential customers treating physicians that the drug induces apoptosis, that -- if you can demonstrate that, apoptosis is induced from the base or bottom of the lesion up. The one thing you don't want to have is you look like you have clearance on the surface and you have an active lesion deep and deep down in the basal layer. So that's a really important dataset. And that's why this operable study is really important. They do a serial excision and they're basically showing so far that the lesion appears to be clearing as one would hope, but we need to complete that dataset. It clearly is inducing apoptosis.

One of the interesting questions, Ed, is when you stop dosing you still have drug there and even if you have what appears to be a residual lesion albeit a diminished lesion. Is that lesion still undergoing apoptosis? Because the question that emerges is it doesn't quite appear like a normal lesion, so that's part of the survey.

And then durability of response. You want to demonstrate that you don't have these little micro lesions remaining that re-emerge. So the key here is to give the potential treating physician, particularly the more conservative ones evidence to give them confidence that if they give Erivedge in lieu of surgery that this lesion is in fact being cleared and/or if it's being -- if it's shrinking that the residual lesion can be excised with a much better outcome.

So it's the culmination of all that data along with safety data and that's the intent of the third cohort would be drug holiday. So the objective here is to just build a more robust dataset to continue this education process for greater market penetration and acceptance.

Okay. Great. Thanks, Dan.

Okay. Thank you. Any other questions?

Ling, your line is open. Ling, your line is open. Please go ahead.

Oh, okay. Thank you. Thank you for taking my question. Just wanted to follow up on the trial design for the oral formulation for 101. Can you -- I mean you mentioned, you wanted to explore once daily and twice daily, but it looks like you started with the twice daily. So can you comment on when are you going to -- I mean what are you going to make the decision on when to add that once daily? And also you have the idea in oral to start with before you start the dose escalation for the twice daily. Can you comment on how long you would do the IV and the initial oral and what are the starting dose for the dose escalation or--?

So the objective here is with the IV, it's a one-hour infusion and what we're doing is within the same patient, you want to basically determine the concentration of drug based on what you're infusing into the circulatory system and then look at the PK of that drug, which is the T-Half and the overall exposure. And we believe that's the sort of limitation we're dealing with, with the IV is the fact that we're limited to a one-time exposure and then the T-Half of the drug. So the objective with the twice daily is to determine with the oral if we get adequate absorption and then by giving it twice daily, can we effectively and durably suppress its targets consistently, and do we possibly see a buildup of drug concentration in the circulatory system that would give us even greater exposure.

So as far as the objectives of looking at the twice daily and comparing it with the IV infusion, it's just to learn if we can enhance the amount of drug in the circulatory system and the sort of biomarker suppression or EGFR suppression, for instance, durably over a 24-hour period. So that's the objective of comparing the IV to the oral, and I apologize I forgot the other part of that question.

So the once daily -- I mean, are you going to add a once daily later in the process, or --?

Yes, so obviously the once daily versus twice daily it's all cost benefit of AEs. So we need to see, are we going to see more AEs emerge with the twice daily that limit the amount we can dose and then compare that to a higher dose with a once daily, or are we going to be limited to a once daily we just don't know yet. So the objective is to compare exposure, PK biomarker activity and the adverse events that one can see with the once daily versus two daily -- twice daily and we'll make development decisions based on that data comparison.

Okay. And therefore, the IV is just a one-time exposure for the purpose of the trial, right?

That's exactly right. It's just simply to look at the exposure, the infusion and look at the PK of the drug in that given patient because as you know PK is going to be variable on a patient-by-patient basis.

Great. Thank you. Congratulations on the progress.

Thank you very much.

Thank you.

I'm not showing any questions in the queue at this time, gentlemen.

Okay. Well, thank you very much everyone for your attention, really appreciate your support. And we look forward to giving you further updates as more data becomes available. Thanks again.

Thank you. Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the conference. You may now disconnect. Good day.