Curis Inc (CRIS) 2012 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the fourth 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 call much as a reminder, this conference is being recorded for replay purposes.

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

Thanks, Ben. And thanks, as always, for joining us. During today's call we'll provide you an update on corporate plans and developments, and will also discuss our fourth quarter and year end 2012 financial results.

Before we begin, as always, I'd like to advise you that this conference call contains forward-looking statements within the Private Securities Litigation Reform Act of 1995, including, without limitation, statements relating to 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 of potential outcome of ongoing clinical studies of Erivedge. Our plans and expectations for advancing CUDC-427, CUDC-907, and CUDC-101 and the potential therapeutic benefits of these development candidates, our and our collaborator Debiopharm's expectations regarding the advancement in Debio 0932 in presently ongoing clinical trials as well as into additional clinical trials in the future, and estimates of our 2013 year end cash position, as well as estimates regarding the period of time in which our available capital resources can fund our currently planned operations, also estimates of our 2013 research and development and general and administrative expenses.

Actual results may differ materially from those indicated by forward-looking statements in this 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 September 30, 2012 and other filings we periodically make with the SEC, and we encourage to you review these risk factors carefully. We caution you 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.

Okay, with that, I would like to now introduce Dan Passeri, Curis' Chief Executive Officer who will provide brief introductory remarks. Following these remarks, Ali Fattaey, our newly appointed President and Chief Operating Officer, and Dan will provide an update on our pipeline. I will then return to review our financial results for the fourth quarter and year end 2012, and we'll then open the call for my questions. We are asking today that you please limit your questions to one or two, since we have a number of people in the Q&A during recent calls.

With that, Dan?

Okay. Thanks, Mike. Good morning and thanks for joining us today. 2012 and the beginning of 2013 have been an important period for Curis, marked by several key achievements in our proprietary pipeline of targeted cancer drug candidates, including the in-licensing and exclusive worldwide rights from our partner Genentech, to and antagonist IAP proteins now referred to as CUDC-427, initiating Phase I clinical testing of our dual PI3-kinase and HDAC inhibitor, designated CUDC-907, Genentech's US launch and continued positive trajectory of Hedgehog pathway inhibitor Erivedge for advanced basal-cell carcinoma, securing $30 million in important non-dilutive capital for further advancing our pipeline of drug candidates, and enhancing our depth and capacity by bringing on Dr. Ali Fattaey as our President and Chief Operating Officer. Clearly, this has been an eventful and productive period for us, and I'll now cover these initiatives in further detail.

First, we're very pleased that Ali has decided to join our team. He brings to Curis over 20 years of experience and depth and developing molecularly-targeted cancer drug candidates, including his work with Nexavar and palbociclib, an inhibitor of CDK4 and CDK6 during his eight years at Onyx Pharmaceuticals, and his most recent work on telatinib and other drug candidates in development, while President and CEO of ACT Biotech. Working with our Chief Medical Officer, Dr. Maurizio Voi, Ali will have a fundamental role in helping to guide and further advance our overall strategic goals, as well as helping to oversee our research and development operations.

Next, our strategic initiatives, including our partnering and financing activities, have placed Curis in a solid position to advance our proprietary assets into later stages of clinical development. In particular, we'll focus on our internally developed candidates, including CUDC-427 and CUDC-907.

With regards to financing our strategy, the combination of meaningful revenues in 2012 combined with our completion of a $30 million Erivedge-secured debt transaction have allowed us, provided us with nearly $59 million year end capital that we currently estimate provides us with an adequate runway to fund operating our plans into mid-2015. We believe this financial strength will be further enhanced and augmented by potential milestones in 2013, including those for the potential of Erivedge approvals in Europe and Austria in the first half of this year. Also, we're eligible to obtain any Erivedge revenue that exceeds $1 million per quarter in 2013.

Now I would like to introduce Ali and ask him to provide further detail on our internal drug candidates, then I'll follow-up with a summary of our partner programs. Ali will start with an overview of CUDC-427, which is our IAP antagonist program. We're very pleased that we were able to acquire the rights to CUDC-427 from our partner Genentech, which adds depth to our current pipeline of proprietary targeted anti-cancer agents, particularly in that it is a program closer to Phase II clinical development. Then Ali will also provide an update on CUDC-907, which our PI3-kinase HDAC oral inhibitor.

With this, I'll turn it over to Ali.

Thank you very much, Dan, and good morning. I'm very excited to join the Curis team in working with Dan, Mike, and Maurizio in this exciting year for Curis to advance our programs and our Company's goals. In joining the company, I will initially spend most of my efforts working with our Chief Medical Officer Maurizio and focus on our clinical drug candidates, and we'll be working with the team to establish and execute the development plan and regulatory path for each one of our drug candidates.

I'll start with CUDC-427 and, as Dan indicated, that's an IAP antagonist that we recently in-licensed from our partner Genentech. This drug is particularly interesting to me. First, because it is in a new class of targeted anti-cancer drugs, and it works by a different mechanism that in our industry, by and large, we focused on namely tyrosine kinase, receptor tyrosine kinases in components in their pathway. CUDC-427 works really by a different mechanism.

Secondly, we should node that evasion from programmed cell death, or apoptosis, is a hallmark characteristic of all human cancers, and is also a fundamental mechanism for developing resistance to current treatment regimens and anti-cancer therapies that are used. CUDC-427 targets this particular trait, the evasion of apoptosis in cancer cells, and does this by antagonizing the inhibitors of apoptosis, or IAP proteins, within tumor cells. The IAP's function really to regulate both the interim signals for apoptosis induction in cells, and also some of the IAP proteins are part of extrinsic signaling pathways, namely those of the tumor necrosis factor, or TNF family of receptors. By antagonizing the IAP proteins within cells, CUDC-427 interferes with these pathways, the intrinsic and extrinsic signaling pathways for apoptosis induction, and this really provides us with the basis to using the drug candidate, particularly in combination with other anti-cancer agents.

As a brief introduction, IAP proteins are a family of functionally and structurally related proteins, and it includes the X-linked IAP, or XIAP, two cellular IAPs referred to as CIAP1 and CIAP2, and the melanoma IAP, or MLIAP. CUDC-427 antagonizes the function of all of these four IAP proteins. Consistent with the roles of the IAP proteins in cancer development, we find of course mutations, amplifications, chromosomal translocations, and other alterations of the IAP genes in a number of solid tumor and hematologic malignancies, and we find increased IAP expression that's been associated with an unfavorable prognosis and a poor outcome for patients in a number of cancer settings.

With that introduction, moving on to CUDC-427 as a drug -- CUDC-427 is administered orally. And that's important, but it works as a monomer antagonized IAP. This differentiates it from other molecules in that class that work as dimers. The current consensus developing in the field with the clinical experience in this category of molecules is that the oral monomer inhibitors of IAP appear to be better tolerated in the clinic than those that work as dimers, and it's also obviously administered as an oral agent as opposed to being administered as an intravenous treatment regimen. Oral dosing using a daily schedule of administration is also likely to give us much greater flexibility when we combine CUDC-427 with other anti-cancer agents for different cancer indications.

As a reminder in 2012, Genentech completed a Phase I clinical trial of CUDC-427, in which 42 patients with either solid tumors or lymphomas received the drug as a daily oral dose as a single agent, and received the drug the first two weeks of the 21-day cycle, and these treatment cycles were repeated until disease progression or study discontinuation for any other reason. The primary end points of it are as expected for a Phase I trial and it was primarily evaluating the safety, tolerability, pharmacokinetics, and determining the maximum tolerated dose, as well as a potential recommended dose for further clinical studies, all of which we are currently evaluating.

Secondary end points of the Genentech-sponsored trial of CUDC-427 included preliminary assessment of anti-tumor activity and the evaluation of the pharmacodynamics markers for this drug. I should note also that Genentech plans to, a Genentech investigator is conducting this trial plan to present the full study results at a medical meeting by midyear this year.

Now, with regards to our plan for CUDC-427, as an antagonist of IAP protein, we believe that the ability of CUDC-427 to work in combination and in concert with other anti-cancer agents such as chemotherapy is likely to provide us the most effective treatment for patients, provide us the opportunity to develop the drug candidate in the broadest range of different human cancer indications, and also likely to give us the fastest regulatory path to its approval as a new anti-cancer drug.

It's now well-documented that IAP antagonists synergize and work in concert with a number of different chemotherapy and other targeted anti-cancer agents as well. Now, while we evaluate all of the available data from our partner Genentech and the Genentech-sponsored study, and as we finalize our clinical development plans, we are preparing for development of CUDC-427 in Phase II clinical studies in combination with other anti-cancer agents, and we're also exploring the therapeutic potential for single-agent CUDC-427 in selected cancer patient populations that may have specific genetic alterations.

Our trials will also incorporate plans to evaluate each patient enrolled in those studies to help us identify sub-populations of patients that may be sensitive to CUDC-427 effect, and we look forward to elaborating on all of these trials and our clinical plans and indications in the combination therapies that will be used for the trials in our studies, closer to the time that the results of the Genentech-sponsored Phase I clinical study results will be presented again by Genentech and their investigators at a meeting the middle of this year. Finally, we believe that CUDC-427 is entering a very exciting emerging field where competing molecules are also in early stages of clinical development, and CUDC-427 will provide us with an opportunity to be a leader in this very promising anti-cancer treatment field.

Now I'd like to move on to CUDC-907, which is our proprietary PI3-kinase and HDAC inhibitor in one molecule. We believe that CUDC-907 may be able to overcome some of the potential limitations of single target PI3-kinase inhibitors that are in development at the moment by concomitantly inhibiting the cellular HDAC activity in one molecule. Again, I'd like to point out that Maurizio, our Chief Medical Officer's team have done an excellent job of starting the first clinical trial of this drug candidate, and the investigators have begun dosing advanced lymphoma and multiple myeloma patients with an oral formulation of CUDC-907 in this Phase I clinical study.

The Phase I clinical trial is designed as a standard dose escalation study, in which CUDC-907 is orally administered to patients, and the primary objective of the study, of course, being a Phase I is the safety, determining the safety, tolerability, the maximum tolerated dose, and potentially the recommended Phase II dose for further development of CUDC-907. The secondary objectives of this study, as we've indicated, are to assess pharmacokinetics of the drug and evaluate biomarkers of activity, and also to assess preliminary anti-cancer activity of CUDC-907 in this patient population of lymphoma and multiple myeloma patients.

To date, two patients have been treated at one of our trial centers, with a third patient expected to initiate dosing as of today, and again, congratulations to Dr. Voi for the rapid enrollment of patients in this trial, and this would conclude, or complete, the enrollment in the first cohort of patients in this study. Two additional leading clinical centers have been recruited by Dr. Voi and have expected to initiate patient enrollment shortly in this trial.

As we've noted before, in preclinical studies, CUDC-907 has demonstrated very potent anti-proliferative activity, and based on these results, we're optimistic that CUDC-907 as a single agent drug candidate targeting PI3-kinase and HDAC has the potential to provide improved clinical benefit in cancer patients. As we know, the PI3-kinase space has attracted a lot of attention in recent months, and we're pleased to be enrolling patients in this trial and look forward to discussing more details from this trial as data become available from this study.

CUDC-907 is being developed in collaboration with the Leukemia & Lymphoma Society, under which LLS, the Society, will support our ongoing clinical development of CUDC-907. Under the agreement, LLS will fund approximately 50% of our direct clinical costs for 907 through Phase IB or Phase IIA clinical testing, for total potential funding of up to $4 million. To date, we have recognized $1.1 million in milestone payments from LLS. In recent months as a result of advancing CUDC-907 to IND filing and beginning the Phase I clinical trial, and of course, this represents an important capital to support our continued development of this molecule, and we thank the Leukemia & Lymphoma society for their commitment to this drug candidate.

Finally, we look forward to providing updates as this molecule 907 progresses further in its ongoing Phase I clinical study, and as I indicated, I'm very pleased to join the Company and we have a very exciting year with our clinical programs going forward. At this point, I would like to point back to Dan who will provide more update on our partner program.

Thanks, Ali. I'd like to now turn to our partnered programs, including Erivedge, which is a commercial-stage product for the treatment of advanced BCC, and Debio 0932, which is an oral HSP90 inhibitor in development for treatment of non-small cell lung cancer. Erivedge is first in class hedgehog pathway inhibitor, which received FDA approval during the first quarter of 2012 for the treatment of adults with a type of basal-cell carcinoma or BCC, that has spread to other parts of the body, that is metastatic or that has come back after surgery, or that their health care provider decides cannot be treated with surgery or radiation. We believe that third category gives physicians discretion and is very important on a going forward basis. We refer to these categories of disease as advanced BCC.

Under our collaboration agreement with Genentech and Roche, they're commercializing Erivedge in advanced BCC worldwide, and are also working on its continued clinical development. The uptake of Erivedge continues to be positive, with sustained growth since the US launch in February of 2012. Roche recorded net sales of approximately SFR28.8 million, or approximately $30.6 million, during 2012.

Erivedge net sales were $11.2 million in the fourth quarter, demonstrating strong 26% sequential growth over the $8.9 million in net sales in the third quarter. Based upon the early market launch metrics and Roche's estimates of a potential target population of approximately 28,000 in the US alone, with an additional 12,000 in the top five EU countries, we continue to believe the advanced BCC market represents significant value for our shareholders, and we anticipate Erivedge's continued growth in coming quarters.

Roche is also working to secure approval of Erivedge in several other territories, including Europe and Australia among others. We're eligible to receive additional milestone payments upon additional regulatory approvals for Erivedge in advanced BCC in Europe and Australia, as well as royalty revenues in all territories in which Erivedge is sold. Roche has indicated that it currently anticipates possible European approval by the EMA during the first half of 2013, and we estimate that potential regulatory approval in Australia will occur also during the first half of 2013.

In addition to the lead advanced BCC indication, Genentech's also conducting a separate Phase II clinical trial of Erivedge in patients with operative modular 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 within the US. We believe positive data from this ongoing Phase II study will allow expansion of the potential market for use in those cases where a patient would benefit from using Erivedge prior to surgery to improve the therapeutic outcome.

It's believed that this poor surgical candidate category represents approximately 2% of the total BCC population, which would represent potentially an additional 40,000 patients annually, and that would be in the US alone. As such, we believe that this ongoing study represents a very significant market expansion potential for Erivedge. This Phase II trial is the first study to assess the ability of Erivedge to provide complete histological clearance of a tumor, an important first step in determining the efficacy of Erivedge and the less severe forms of BCC, where BCC lesions are generally treated surgically. This trial is designed to test Erivedge as a single-agent therapy in a three-cohort trial of approximately 75 patients, again, with operable modular BCC in a US-based, open-label trial.

Genentech reported data from the first cohort of this ongoing Phase II earlier in 2012, including safety and efficacy of twelve weeks of daily 150 milligrams dosing of Erivedge in 24 patients with newly diagnosed non-operable BCC. In this cohort, pathologically confirmed, complete histological clearance was reported in 10 patients, or 42% of the cohort, while clinical complete or partial responses were reported in 23 patients, or 96% of patients treated.

The most frequent adverse events, or AEs, were similar to those observed in previous studies with Erivedge, and included muscle spasms, alteration or loss of the sensation of taste, alopecia, fatigue, and nausea. Most AEs were of grade I or II. Grade III AEs were reported in seven patients, including four patients with muscle spasms. No serious AE's were reported. Eight discontinued from the study, including two due to AEs. Cohorts two and three are fully enrolled and full study results are expected in the first half of 2013, and we clearly look forward to providing you those data updates when they become available.

In addition to the operable BCC study being conducted by Genentech, multiple trials in other cancers are ongoing by third party investigators, including exploring Erivedge in basal cell nevus syndrome, or Gorlin syndrome, and that's a category of patients where they are born with one copy of the two, or they mutated so they're subject to ongoing multiple BCCs throughout life, medulloblastoma, which is childhood brain cancer, sarcoma, glioblastoma multiforme, as well as in pancreatic, lung, breast, prostate cancers and others. And again, we look forward to providing you with updates as data becomes available.

I'm now going to witch to Debio 0932, which is an orally available small molecule inhibitor of HSP90 and is being developed by our licensee Debiopharm. Debiopharm completed the dose escalation portion of a Phase I clinical trial of Debio 0932 in late 2011, presented data from this study at an annual meeting of the American Society of Clinical Oncology in June of 2012.

In August, Debiopharm began treating patients in a Phase I/II clinical trial of Debio 0932 in combination of chemotherapy regiments in patients with advanced non-small cell lung cancer. The HALO study or Hsp90 inhibition and lung cancer outcomes study is a Phase I/II trial of the safety and efficacy of Debio 0932 in combination of standard of care agents in first and second line therapy of patients with advanced non-small cell lung cancer.

In early August, Debiopharm initiated the 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 with chemotherapy regimen with patients stage IIIB or stage 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-naïve patients and with docetaxel in previously-treated patients.

Once a recommended Phase II dose of Debio 0932 in combination with each of these 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 of Debio 0932. The primary objective of the Phase II study is to determine the efficacy of Debio 0932 in combination with chemotherapy. We'll be eligible for our next milestone payment under this license agreement with Debiopharm when they treat the fifth patient in the Phase II clinical trial, which we currently expect will commence in sometime 2014.

In addition to the study, Debiopharm has completed a Phase IB study of Debio 0932 in 30 patients, including patients with non-small cell lung cancer, and will present this data at a medical conference in the second half of 2013. Lastly, Debiopharm is expanding its development efforts around this molecule by planning to initiate a Phase I/II study in patients with renal-cell carcinoma in the second half of this year.

Overall, we think Curis has made tremendous advancements over the past year in both strategic and operational areas and in advancing our highly promising drug candidates through clinical development. We believe we are very well poised for 2013 to be an even more important period of our corporate evolution, and we're hopeful that the promise of our pipeline will begin to demonstrate significant value and growth potential for our shareholders. We obviously look forward to updating you on the progress as data emerges.

I would like to turn the call back over to Mike for financial discussions, and then following Mike's remarks, we'll open the call for questions. Mike.

Okay. Thanks Dan and Ali.

For the year ended December 31, 2012, reported a net loss of $16.4 million, or $0.21 per basic and fully diluted share, as compared to $9.9 million or $0.13 per basic and fully diluted share, for the year ended December 31, 2011. For the fourth quarter of 2012, we reported a net loss of $12.4 million, or $0.16 per share on both a basic and fully diluted basis, as compared to net income $6.1 million or $0.08 per basic share and $0.07 per fully diluted share for the same period of 2011. The fourth quarter and full year 2012 net losses include a one-time expense of $9.5 million pursuant to our November 2012 CUDC-427 license agreement with Genentech.

Revenues for the year ended December 31, 2012, were $17 million, as compared to $14.8 million in 2011. Revenues for the fourth quarter of 2012 were $1.7 million, as compared to $14.1 million for the same period in 2011. Fourth quarter 2012 revenues primarily consisted of $560,000 that we earned from Genentech's $11.2 million in US net sales of Erivedge during the fourth quarter of 2012, as well as $1 million in milestones that we received under our grant with LLS. We earned $14 million in milestone payments under our collaboration with Genentech with each of the years ended December 31, 2012 and 2011, related to the achievement of regulatory objectives for Erivedge. The increase in revenues to 2012 to 2011 is primarily the result of $1.5 million in royalty revenue and $1 million of milestone revenue that we received under our agreement with LLS.

R&D expenses were $15.5 million for the year ended December 31, 2012 as compared to $13.7 million in 2011. R&D expense was $2.7 million for the fourth quarter of 2012, as compared to $4.4 million for the same period of 2011.

During the year ended December, 2012, we incurred $2.1 million sublicense expenses related to our obligations to university licensors, as compared to $700,000 in the prior year. In addition, our stock-based compensation increased by $350,000 over the prior year.

In-process research and development expense of $9.5 million was recorded for the year ended December 31, 2012, as well as for the fourth quarter of 2012, as a result of upfront payments related to our previously mentioned 427 agreement with Genentech. We had no in-process R&D recorded in 2011.

G&A expenses were $10.4 million in 2012 as compared to $8.3 million in 2011, and $2.9 million in the fourth quarter of 2012, as compared to $2.1 million for the same period in 2011. The increase was primarily due to increases in stock-based compensation expense of $1.5 million in 2012 versus 2011.

Other income was $2.2 million for the year ended December 31, 2012 as compared to other expense of $2.7 million in 2011. Other income was $1.1 million in the fourth quarter of 2012, compared to $1.5 million for the same period in 2011. The change is primarily result of the decreases in the fair value of a warrant liability, which was largely caused by a decline in the market value of our common stock.

As of December 31, 2012, our cash, cash equivalents, marketable securities and investments totaled $58.7 million, and there were approximately 80 million shares of our common stock outstanding.

Let me just quickly touch on financial guidance for 2013. We expect to end 2013 with cash, cash equivalents and investments of $31 million to $36 million. Just note that this expectation excludes any future milestone payments from existing or new collaborators that we could receive in 2013, including those for the potential approval of Erivedge in Europe and Australia, which we continue to expect approval decisions in the first half of 2013. In addition, under our 2012 Erivedge royalty secured debt financing transaction, we're entitled to receive Erivedge royalties that exceed $1 million per quarter the first $1 million is applied to debt repayment. So any royalties in excess of $1 million per quarter would flow back to Curis, and our cash expectations exclude these amounts.

We expect that 2013 R&D expense will be between $17 million and $20 million, and that G&A expense will be between $10 million and $12 million. These estimates include approximately $800,000 and $1.7 million of stock-based compensation expense in research and development and G&A expense respectively.

So that concludes our prepared remarks. I would like to open the call for questions. And just as a reminder, if we could ask to please limit questions to one or two, we would appreciate it, and then jump back into the queue. Thanks.

Ben.

(Operator Instructions). Our first question comes from the line of Edward Tenthoff from Piper Jaffray. Your line is open, please go ahead.

Thank you very much, and thanks for the thorough update -- a lot of moving pieces, and I think a lot of progress that may not be being recognized necessarily in the stock. And my question, I'll ask one and then jump back in line. Maybe kind of using 4Q as an example, and I'm trying to remember how the loan agreement worked in the fourth quarter and whether or not you had to pay any of the royalties out to pay off the loan in the fourth quarter, or whether the royalties all came to Curis in the fourth quarter?

Fourth quarter royalties, they will go to service the debt. Our contract works that we received the royalty payments 60 days after the respective quarters where the sales are recorded by Genentech and Roche, and in turn where we reported the royalties. The royalty for Q4, which is paid in Q1, will service the debt.

Okay, thank you.

Thank you. Our next question is from the line of Simos Simeonidis your line is open. Please go ahead.

Good morning, thank you for taking the questions. This one is for Dan. Dan, assuming positive data from Erivedge in the operable setting or the BCNS/Gorlin Syndrome setting, would you and Roche file an SNDA, or would you need to do additional trials to extend the label?

Yes, thanks, Simos. It's an important question, and I will give you my own opinion of this, and this is based on substantive discussions. We believe the existing label may allow for an expansion because it gives physicians discretion. If you look at the current language of the label, it has three distinct categories, connected with ors, so they're distinct and isolated. The third one gives physicians basically the discretion to determine if a patient is amenable for surgery or radiation. If this is going to be potentially used as a neo-adjuvant to use Erivedge prior to surgery for better therapeutic outcome, we believe it's possible that it is currently covered by that category where the physician could determine rather give this patient Erivedge now, at least shrink the lesion before I go surgery or verify that it's a complete histological clearance. And I think that's really our current reading on the situation.

Okay, great. My second one for Ali. On 427, do you have to wait to see the full data presented for 427 or what is the rate- limiting step on deciding what to do next in terms of either the subpopulation to going to a monotherapy, or which combinations to decide on? Because I know you spoke about solid tumors and hematologic tumors, and different combinations with chemotherapy and targeted agents. Are you still analyzing the data from the Phase I? Can you give us a little more color on what the process is until you decide what to do?

One more thing is, would these two types of trials, the monotherapy in a specific patient population, versus the Phase II in combination, happen sequentially or do you have to do the one after the other? Thank you.

I'll articulate it this way. In terms of the analysis of the data in our plans, we currently hold all of the data that Genentech and the investigators have generated regarding the Phase I clinical data, so that is really not rate-limiting terms of selecting it. but I'll refer back to my comments.

The way we look at the development plan is, A, the types of indications and patient populations to take the drug into, and B, more importantly, what the regulatory path would be for that in terms of approving it. I think the process is really evaluating those and assessing which one would be the best suited and the fastest path for Curis in terms of developing it. It's not really data, but analyzing the approval path and designing the clinical development plan and the trials, the Phase II trial based on that. That's the process that we're currently undergoing.

With regards to your question two in terms of the combination treatment trials and monotherapy -- they're not mutually exclusive and so they do not need to be sequentially done. It's really two different approaches and likely to be different indications in patient population, so they can be done at the same time. Obviously, this is all subject to assessment of our budget and the planning around our budget associated with it as well. But the trials can run simultaneously, they're not mutually exclusive and they don't need to be sequential.

Thank you very much for taking the questions.

Sure.

Thank you. Our next question comes from the line of Adnan Butt from RBC Capital Markets. Your line is open. Please go ahead. Please check to ensure that your line is not on mute. Our next question comes from the line of Joe Pantginis from Roth Capital Partners. Your line is open, please go ahead.

Good morning, this is Luca Pancratov in for Joe. Thank you very much for taking my questions. So, first on Erivedge, if it gets approval in the EU, do you have any thoughts on Roche's commercial strategy there? Any thoughts on potential pricing compared to the US?

In terms of strategy, we believe at this time that it's consistent with the US strategy, and that is to reach out to physicians that have patients with no therapeutic alternative as the initial market launch, then expand out from there. Pricing, we haven't had any guidance on to date, but from historical data we would about expect it to be a bit more conservative than the US, but we don't know at this point.

Thank you, that was very useful. And then also just quickly for the Erivedge clinical data flow. Can you just point to some conferences in 2013 where we might see updates from all of the ongoing studies?

We believe there will be some updates as ASCO. The operable BCC data, which I think is an important study, we don't have a specific conference. I know it won't be presented at ASCO. Last year, the first cohort of that three cohort society was presented at the Society of Investigative Dermatology, which is in May, but Genentech did an update call yesterday, and did reiterate that they expect to have the data available in the first half of this year, so the timing is still fixed. We're trying to sort out where it will be published or presented.

Okay, thank you very much.

Thank you. Our next question we'll try again from the line of Adnan Butt from RBC Capital Markets. Please go ahead.

Thanks for taking my question. I have two. First is on the Erivedge royalty. Are those royalties now normalized in that as the quarters progress, we should see the percentage royalty increasing? There's some confusion in my head based on the sales number and the reported royalties for the past quarter.

Then secondly, on the pipeline compounds, both 907 and 427, what is the timing of initiating more studies? Is that something that will happen in the first half? And for 907 specifically, do you find any competition in terms of enrolling given the machinable fashion, or do you expect the trial to enroll quickly and have data by sometime at the end of this year? Thanks.

Starting off with question one, having to do with the royalty. I think what you're asking is have we seen any scale up or expect to see scale up. We start off at 5% and scale up to high single digit. I think that's what the question is?

That's right, thanks.

The royalty starts at 5% and escalates up to high single digits. The only guidance we've given is that there are several tiers to the scale before it reaches high single digit, and it reaches the maximum royalty well before $1 billion dollars in annual sales. So it is really going to be based on the ramp up we see during 2013-2014 as to what level is guaranteed. Right now I just don't have enough guidance or clarity on that to give you further guidance and when we expect those tiers to be reached.

I don't know if you're -- if you're trying to recalculate to the 5% royalty, you're probably having rounding issues. The actual royalty, we disclosed it as $1.5 million for the year, but it was $1.530 million. I don't know if that changes your math at all.

Mike, it probably does. Thank you for catching that.

Okay. On the second question, which is the progress on 907, are we experiencing any competition that's posing difficulty? I think the short answer is we've been extremely pleased with the enrollment rate. Mauricio and his team have been working diligently with clinical centers. We have one open center presently and they've actually done a great job in enrolling patients, so we haven't been concerned from that standpoint.

I would just like to emphasize I think also part of it is positioning of the drug. It's not just another PI3-kinase inhibitor, but it has the potential benefit of having synergistic activity of PI3 as well as HDAC, so I think the physicians, the PIs have expressed interest in using this drug and to date, just from the experience of the one center, we've enrolled patients at a really impressive rate. So I don't think that's going to be an issue going forward, and we look forward as new centers come on to that enrollment rate expanding out.

I think 427, if could you repeat the particulars of the question?

It was regarding both 427 and 907. I think you mentioned conducting additional studies and my question was on the timing for those basically.

I think, Ali, if you wanted to cover what you said in your overview, but it's consistent with what you stated before.

Yes, with regards to 427, at about midyear is when we should have most of our plans addressed in terms of, again, the indications, discussions with the investigators, and the right path for the drug. So being in February now, it will take us roughly to that time. So I think by midyear is when we would be initiating and submitting further trials for 427.

907, as Dan indicated, it's in Phase I currently. First cohort should be completed in terms of enrollment as of today. Clearly, we'll wait to see the results of that and before initiating other studies with 907, but we do look towards this year initiating other studies with 907.

Thanks, that's it. Ali, congrats on joining the team.

Thank you.

Thank you. Our next question is from the line of Boris Peaker of Oppenheimer. Your line is open. Please go ahead.

Good morning. My first question is for Ali. You gave a good description of 427 and that you're considering monotherapy as well as combo studies. I'm curious, mechanistically, is there any particular combination that you think would be more sin synergistic than perhaps another combination for this compound?

I think that in regards to the combination, the IAPs in general have shown good activity with a number of different chemotherapeutic agents as well as targeted therapies. This is a preclinical setting, but more recently also in the field and some clinical studies that are being conducted. In general, looking at the pathway itself that gets targeted and the involvement of tumor necrosis factors, signaling pathways, I think anything that synergizes with that should be a good candidate. I think that in particular fluoropyrimidine chemotherapy agents, such as (inaudible), gemcitabine, all those molecules, which are fluoropyrimidines, should be very good candidates as a start for CUDC-427, and I think in the field we're see something good data also with the taxanes, in particular, paclitaxel, which I think would be an appropriate one for us, and some of the ones we're evaluating at the moment.

Great. In terms of you mentioned there are other oral combinations that have been investigated. What are the key competitors in the IAP space that we should be paying attention to?

I think looking at the profile of this drug clearly as a monomer antagonist of IAP, it's a very competitive drug, and it's also an oral drug candidate that's been given daily for patients. The other oral monotherapy drug that's in clinical development at the moment in a similar stage of development would be the Novartis compound. Again, I think we're very competitive in that arena.

Great. My last question is for Dan. You mentioned that the Genentech is going to be looking at Gorlin. Are they going to try do a different dose? How are they going to conduct the study when we had such a strong response in a prior trial, it just seems like difficult to have blind patients to do the treatments?

Boris, I apologize if I suggested that they would do a separate Gorlin's trial for a separate label. We believe the Gorlin's category would also be covered by the present label and the second qualifier, which is that BCCs recur, because these patients have continually reoccurring BCCs.

There is very positive Gorlin's data already present out of Stanford. Erv Epstein did a trial, I think it was placebo-controlled, with Gorlin's patients. And the challenge there is where these patients have an ongoing chronic situation is using the drug in a manner that you can ameliorate and manage the AEs. I think with the operable study, the third cohort is very important for addressing that issue.

So the third cohort in the ongoing Phase II right now is designed to treat patients for an eight-week period providing them with a four-week drug holiday, then putting them back on drug for an eight-week period. That data would support and buttress the premise that physicians can alter the drug schedule in a manner to reduce and manage the AEs more effectively, and I think that will be an important requisite for expanding into that category.

Great, thank you very much for taking my questions.

Okay. Thank you.

Thank you. Our next question comes from the line of Bryan Klein of Stifel Nicolaus. Your line is open. Please go ahead.

Great, thanks for taking my questions. So on 427, could you just remind us again what the safety profile is as a monotherapy and what you've seen in combination with both the taxanes and the pyrimidines? Thanks.

I don't think for CUDC-427, the data has not been disclosed this is some of the work that has been done by the Genentech team, so we have not really disclosed the safety profile of the compound. The combination assessment is also being done preclinically, and the combinations I indicated are ones that Genentech has tested as well.

There's going to be a release of a Phase I data by Genentech and the PIs at an upcoming conference midyear, so that data will be released there, but the drug appears to be very well-tolerated. From what we've seen, no DLT has been reached to date, and the MDTX has not been determined yet, so the drug appears to be very well tolerated. But the particulars of the AEs observed haven't been publicly released yet.

Okay, thanks. And then maybe just lastly -- could you explain mechanistically whether there is an impact of prior chemotherapy on the up-regulation of the IAP targets or if there's any impact on disease stage? Thanks.

Not in particular with this drug. Obviously, in the field we do see IAP, as I indicated before, a very important mechanism for overcoming resistance to other agents such as chemotherapy. With this agent in particular, it has not been disclosed or studied extensively at this point. But that's clearly an area that we will be looking at. As I indicated, we'll be evaluating each one of the patients that we enroll in our trials for both potential selection markers, as well as biomarkers of activity to pursue exactly what you're describing as well.

Great, thanks for taking my questions.

Thank you. Our next question comes from the line of Gene Mack from Brean Capital. Your line is open. Please go ahead.

Thanks for taking my questions. Two quick ones. You touched briefly on the IAP landscape, mentioning the large compound and I guess I there's one from Ascenta. I'm wondering both seem to be in Phase I. The Ascenta trial seems to have been going on for quite a bit. Are you anticipating potentially seeing any data from that? If you have any updates on where either compound might be in terms of starting Phase II? Do you expect that we'll maybe see data from either the Novartis compound or the Ascenta compound at ASCO along with what you have from Genentech?

Then just on 907, I'm wondering what DLT what is giving the dual mechanism? What DLTs do you think you might be expecting to run into once you get to the maximum tolerated dose? Thanks.

Starting with the questions on IAP -- the Ascenta compound has been partnered with Debiopharm, so Debiopharm is controlling clinical development. You're right, it has been in Phase I for quite some time. We don't have guidance that's publicly available as to when they expect to be focusing on a Phase II. There have been some publications on various indications with IAPs. Novartis had a presentation recently on a breast cancer study. Was there another indication there as well, or was it just --?

Breast cancer and potentially brain cancer patients. It was the San Antonio breast cancer meeting.

Okay. Using IAP in patients that had been refractory to taxoteres and then using it in combination with the drug that they had become refractory to, and they saw some very interesting results, promising. In terms of indications going forward, there have been some reports of Lymphoma being one of the indications with IAP in combination with the Ascenta compound. I'm sorry, that's the tetra compound. That's a heterodimer. And that's right now as far as I can give you details on that.

Regarding 907, anticipated DLTs, we don't know what range. Are you asking the dosing range or the DLTs we expect?

I'm wondering what you think you run into once you get to a point where the drug has got to its maximum tolerated dose, not necessarily the milligram dose.

Just based on the mechanism, we're looking at the types of AEs that one would expect, GI and hematological AEs. We don't have enough guidance right now on where we would expect to see the DLTs emerging, primarily because we don't know the oral absorption bioavailability we're going to be having in humans. I don't know if you want to add anything to that, Ali.

I think clearly, a little bit early, and remember the drug 907 has two different modes of activity, PI3-kinase targeting activity, as well as HDAC. Patients have just been completed enrollment, so we'll wait to see what those look like. We have run formal toxicology studies in preclinical models as part of the IND package, but it is very difficult at this point to indicate what are the DLTs we would expect in the clinic.

Great, thanks, very helpful.

Thank you. Our next question is a follow-up question from the line of Edward Tenthoff of Piper Jaffray. Your line is open, please go ahead.

Thank you. Can you guys hear me okay?

Yes.

Excellent. I'm kind of trying to get a sense, and I know that this is sort of more Roche driving the bus here, but trying to get a sense in terms of where they are in terms of duration of therapy. I know that in the publication, we actually saw longer term duration out to maybe 12 months, if I'm not mistaken. But I'm trying to get a sense of where, what they're telling you in real-world duration, what you're hearing from Roche in terms of how long docs are actually treating in metastatic conditions with Erivedge.

What I'm going to conveying is antidotal based on conversation, also based on knowledge of one patient in particular that we're aware of, who happens to have a personal friendship with a board member, who had metastatic BCC.

It's quite a bell curve. I think in the system it was an average time on drug of 13 months, or median, the duration was 13 months. The patients come off for a number of reasons with the AEs. Once they're off-drug, I believe they are staying off-drug, based on the protocol. I think there have been patients that have gone well beyond a year. And I don't know if there's any patient still on-drug from the pivotal trial. We have not been made aware of the details of that, Ted.

Unfortunately, I can't provide you with clarity. It's a question that we ourselves are waiting for that clarity, and that will come out when the data is released.

Okay. Yes, I think that would be really helpful to get a sense from real-world. We'll see what we can do to get that, too.

I think the overall use of the drug, I think that's why this third cohort in the operable in really important, to show that you can put the patient on a drug holiday, the AEs attenuate or resolve, and put the patient back on drug. And I think that's an important component to providing physicians with flexibility on managing the AEs.

Got you. Helpful.

Thank you. I am showing no further questions in queue and would like to turn the conference back over to Management for any closing remarks.

Okay. Well, we really appreciate your attention and interest, and I think we are very well primed for 2013, particularly with our proprietary programs and continued Erivedge revenues coming in, and we look forward to providing you with additional updates as they become available.

Again, thank you very much for your attention. Have a good day.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program, and you may all disconnect. Have a great rest of the day.