Curis Inc (CRIS) 2013 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the First Quarter 2013 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. As a reminder, this conference call is being recorded for replay purposes.

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

Okay, thanks, Kate. Good morning and as always thanks for joining us. During today's call, we'll provide you with an update on corporate plans and developments and also discuss our first-quarter 2013 financial results.

Before we begin, I'd like to advise you that this conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation statements relating to our and our collaborator, Genentech's expectations concerning the commercialization of 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-907 and CUDC-427 in the clinic; and the potential therapeutic benefits of these development candidates; and our and our collaborator, Debiopharm's expectations regarding the advancement of Debio 0932 in presently ongoing clinical trials as well as 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 Annual Report Form 10-K for the year ended December 31, 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 are 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'd like to now introduce Dan Passeri, Curis' CEO, who will provide brief introductory remarks. Following Dan's remarks, Ali Fattaey, our President and Chief Operating Officer and Dan will update our pipeline. I'll then return to review our financial results for the first quarter of 2013 and we'll open the call for questions at that time.

During the Q&A period, as a courtesy to those others on the line, we'd ask the participants please limit themselves to one or two questions. All right, Dan?

Yeah, thanks, Mike. Good morning everyone and thank you for joining us today. So far 2013 has been a highly productive period for Curis, marked by several key achievements and continued progress with our proprietary targeted cancer drug candidates. These include the initiation of Phase I clinical testing of our dual PI3 kinase and HDAC inhibitor, designated CUDC-907 and progress towards Phase II testing of our antagonist of IAP proteins, designated CUDC-427, expected to begin later this year. And as Mike stated, we will give you further details on those two programs momentarily.

The end of the first-quarter 2013 also marked one year of Erivedge sales in the US. Our collaborator, Genentech/Roche have accomplished steady and continued growth each quarter, including approximately 20% quarterly growth in sequential net sales in the first-quarter 2013 as compared to the fourth-quarter 2012, which is the second straight quarter of approximately 20% sequential growth.

In addition, Genentech and Roche have demonstrated their commitment to make Erivedge available for basal cell carcinoma patients globally, having recently secured marketing approvals in Israel, Mexico and South Korea and receiving a positive opinion from the Committee for Medicinal Products for Human Use or CHMP. For a conditional approval of Erivedge in Europe, we expect Erivedge marketing approval decisions in Europe and Australia in the coming months and Genentech/Roche are actively pursuing approvals in many other territories globally.

Strategically, we're focusing on the clinical development of CUDC-907 and CUDC-427 and believe that our capital position as of March 31, 2013 with approximately $54 million in cash, provides us with ample runway to fund our operating plans into mid-2015. On top of that, we expect that our financial position will be further bolstered by potential milestones in 2013 and 2014, including those for the potential Erivedge approvals in Europe and Australia in the coming months, as well as the initiation of Phase II clinical trials with Debio 0932 are estimated to occur next year.

I'm going to now turn the call over to Ali Fattaey, who joined Curis earlier this year as our President and Chief Operating Officer, to provide more details on the internal drug candidates. And then, I'll come back and give you an overview of our partnered programs. Ali?

Thank you, Dan, and good morning everyone. I'd like to begin by providing an update on our proprietary drug candidates CUDC-907.

By nature, CUDC-907 has a number of different properties and we believe these are very advantageous properties for the drug. Let me begin by reviewing briefly how we expect these properties to translate into activity in patients in the clinic. CUDC-907 is designed as a targeted agent with potent PI3 kinase and HDAC inhibitory activities, both of which have been shown to be effective at killing cancer cells.

As a PI3 kinase targeted agent, CUDC-907 potently inhibits PI3 kinase alpha and delta isoforms and to a lesser extent PI3 kinase beta and spares PI3 kinase gamma inhibition. This is an attractive target profile since PI3 kinase delta inhibitors have recently shown good clinical activity against lymphomas and PI3 kinase alpha has recently been shown to also play an important role in several hematologic cancers.

We believe that targeting both the delta and alpha isoforms of PI3 kinase should result in improved clinical benefit. For example, as recently reported in mantle cell lymphoma patient samples and especially after the first relapse, PI3 kinase alpha expression and signaling may provide a resistance mechanism to PI3 kinase delta inhibition. Therefore by inhibiting both PI3 kinase alpha and delta isoforms, treatment with CUDC-907 may overcome this type of potential resistant mechanism.

Beyond that inhibition of PI3 kinase alpha and delta may extend the activity of CUDC-907 to other cancer types such as multiple myeloma, where both PI3 kinase delta and alpha isoforms are shown to be important for the survival of multiple myeloma cells. Our current Phase I clinical trial ongoing is enrolling both lymphoma and multiple myeloma patients and we look forward to the results of these -- the drug in these patient population.

Next as an HDAC targeted agent, CUDC-907 potently inhibits the HDAC enzymes designated HDAC1, 2, 3, 6 and 10. Currently, HDAC inhibitors are approved for the treatment of specifically T-cell lymphomas and next-generation inhibitors of HDAC are in clinical development for the treatment of multiple myeloma.

We believe that the combined inhibition of PI3 kinase alpha and delta, concurrent with HDAC inhibition, provides additional cell killing potential and should extend the effective use of CUDC-907 in additional hematologic cancer patient population, such as multiple myeloma.

Now, as Dan indicated earlier, we began the Phase I clinical testing of CUDC-907 in advanced lymphoma and multiple myeloma patients in January of this year. This Phase I clinical trial is designed as a standard dose escalation study, where CUDC-907 is orally administered in patients on once-daily dosing schedule on a continuous basis.

The trial is currently recruiting patients at the Sarah Cannon Cancer Center and at the Memorial Sloan-Kettering Cancer Center with MD Anderson Cancer Center expected to begin patient recruitment in May of this year. Now, enrollment in the 30-milligram dose initial cohort is now complete with three patients. Two multiple myeloma patients and one lymphoma patients was enrolled in the first cohort and all three patients received two cycles of treatment and continued to cycle three assessment of their disease.

Patients are continuing in this current cohort with treatment of CUDC-907. We are tracking CUDC-907's exposure and pharmacokinetic properties in our Phase I trial as well. And we are pleased to see a similar pattern as what we observed in preclinical animal model observation emerging from analysis of patient five in the sample in that these dual PI3 kinase and HDAC active CUDC-907 drug is metabolized to a form that retains PI3 kinase activity. We had characterized this metabolized form as CUDC-907 and it appears to have a similar PI3 kinase isoform selectivity and potency and a similar potency as the parent CUDC-907 drug.

This metabolite also appears to be relatively long-lived in animals and in patient plasma samples and we view this as an attractive profile for the drug, since sustained suppression of PI3 kinases seem to be important for activity, while HDAC inhibitory activity can be administered with short-term exposure. And based upon the analysis of the currently available clinical data, we are encouraged by the initial PK results observed.

Also, we note that the adverse event observed in this first cohort of patients are consistent with the expected target-related side effects in the patients. Although still anecdotal and very early, these observations may represent encouraging evidence of target engagement activity by the drug in patients.

I would just like to caution here that these clinical results are from the first cohort of three patients only and although similar in that three patients, they require much further analysis and we look forward to disclosing and describing those for you in the coming months.

CUDC-907 is being developed in collaboration with the Leukemia & Lymphoma Society or LLS, under which LLS will support our ongoing clinical development of CUDC-907. Under the agreement, LLS will fund approximately 50% of our direct clinical costs of the development of CUDC-907 through Phase Ib or Phase IIa clinical testing stage 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 two IND filing and beginning the Phase I clinical trial. This represents important capital to support our continued development of this molecule and we thank the Leukemia & Lymphoma Society for its commitment to this drug candidate.

Finally, we're planning for a trial in which we will examine the use of CUDC-907 in solid tumor patients. We expect to initiate this trial in the second half of this year and we look forward to providing updates on the current Phase I trial and plan for further testing of CUDC-907 in patients in the coming months.

I'll now like to turn to our fully-owned IAP inhibitor, CUDC-427 designation, which targets mechanisms of evasion from apoptosis. CUDC-427 does this by antagonizing inhibitors of apoptosis for IAP proteins, which function to regulate intracellular signals for apoptosis induction.

In addition, some of the IAP proteins are also components of extracellular pathway signaling of the tumor necrosis factor or TNF family of receptors. CUDC-427 in effect switches prosurvival TNF signaling into a potent pro-apoptotic pathway. In this respect, CUDC-427 is an attractive drug candidate, particularly in combination with other anti-cancer agents that have been shown to stimulate TNF expression such as capecitabine and taxane drugs. As a reminder, in 2012, Genentech completed a Phase I clinical trial in which 42 patients received daily dose -- daily oral doses of CUDC-427 as a single agent for the first two weeks of the 21-day cycle. The results of this Phase I study will be presented next month at ASCO that overall CUDC-427 was well tolerated and single agent clinical benefit was observed for some patients in this study.

We are currently working on a Phase II clinical study designed to administer CUDC-427 in combination with Xeloda in metastatic cancer patients. Pre-clinical studies have shown that low dose of CUDC-427 synergize well with standard doses as Xeloda and 5-FU in breast cancer xenograft preclinical model. In the projected clinical trials, we look to determine the optimal and safe dose of CUDC-427 to administer with Xeloda in this patient population as well as to determine the level of clinical benefit that CUDC-427 can provide beyond Xeloda in this breast cancer population.

We're also planning to initiate at least one additional trial in the second cancer indication later this year. Now, in addition to these combination studies, we are actively exploring treatment as distinct patient population whose tumors may have genetic alteration that rendered them responsive to single agent CUDC-427 and we expect to make a determination on a single-agent development path in the coming months for this drug as well.

All of our trials with CUDC-427 will incorporate plans to evaluate each patient that is enrolled in the study to help us identify sub-population that may be particularly sensitive to CUDC-427 effects. We look forward to providing updates to our study, design and trial start date close to the time that the results of the Genentech-sponsored Phase I studies will be disclosed at ASCO.

Lastly, regarding our EGFR, HER2 and HDAC inhibitor program CUDC-101, we have determined that IV administration of the drug is impractical and have therefore discontinued enrolling patients in the Phase I IV trials in head and neck cancer patients. We are directing our resources to the pre-clinical testing of oral formulation of CUDC-101 and importantly to further development of our proprietary drug candidate CUDC-907 and CUDC-427.

I'd like now to turn the call back to Dan to provide an update on our partnered programs. Dan?

Thanks, Ali. I'd like to turn next to our partnered programs beginning with discussing Erivedge, which as everyone is aware is an approved drug from our Hedgehog pathway collaboration with Genentech, which is a commercial stage product for the treatment of advanced basal cell carcinoma.

Erivedge is first-in-class Hedgehog pathway inhibitor, which received FDA approval during the first quarter of 2012 for the treatment of adults with advanced BCC. Under our collaboration agreement with Genentech and Roche, they're commercializing Erivedge worldwide and are also working on as continued clinical development. As reflected by the continued monthly and quarterly growth in sales of Erivedge since the US launch in February of 2012, the uptake of Erivedge by physicians has been very positive.

Roche recorded net sales of approximately CHF28.8 million or approximately US$30.6 million during 2012. During the first quarter of 2013, Erivedge net sales were approximately $14 million, representing a quarter-over-quarter increase of approximately 20% of net sales. Based on the early market launch metrics and Roche estimates of a potential target population of approximately 28,000 patients in the US with an additional 12,000 patient potential in the top five EU countries, we continue to expect that the advanced BCC market represents significant value for our shareholders and anticipate Erivedge's continued growth in 2013.

Genentech and Roche are also working to secure approval of Erivedge in many other territories, including Europe and Australia, among others. And last week, the Committee for Medicinal Products for Human Use of European Medicines Agency issued a positive recommendation for the conditional European marketing authorization of Erivedge for the treatment of advanced basal carcinoma.

We're obviously very pleased with the CHMP recommendation and we hope this important medicine will soon be commercially available to patients in Europe. The European Commission, which has the authority to approved medicines for use in the European Union, generally delivers its final decision within three months of the CHMP recommendation and the decision will be applicable to all 27 EU member states.

Approvals in the EU and Australia would result in [our] receiving additional milestone payments as well as royalty revenues from Genentech and Roche. Roche has also secured approvals of Erivedge in Israel, Mexico and South Korea over the past several months and has begun a global process seeking regulatory approvals for submitting filings for approval of Erivedge in a large number of other territories, including the Americas beyond the US, Asia and other European countries.

We expect several additional filings in the future and believe that this continues to demonstrate both Roche's strength as a global partner and it's serious commitments to the commercialization of Erivedge. 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 than advanced BCC. 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 category represents approximately an additional 2% of the total BCC patient population or approximately an additional 40,000 patients annually in the US alone. As such, we believe that this ongoing study represents a very significant market expansion potential for Erivedge and we look forward to providing you updates on this study when they become available.

I'm now going to turn to Debio 0932, which is our orally available small molecule Hsp90 inhibitor, which is partnered with Debiopharm, is being developed for the treatment of non-small cell lung cancer. Debiopharm completed the dose escalation portion of a Phase I clinical trial of Debio 0932 in late 2011 and presented data from the study at the ASCO Annual Meeting last year.

Debio 0932 is tested in 50 patients in the Phase I study, including 22 patients who received 0932 every other day and 28 patients who received daily dosing of 0932. Debio 0932 was generally well tolerated in the study with the most adverse events classified as Grade 1 or 2, which is designated mild or moderate, with no apparent dose or scheduled relationship.

In addition, no ocular or cardiac toxicities were observed and no consistent changes in hematology or biochemistry parameters were seen. The most common adverse events included asthenia, constipation, decreased appetite, diarrhea, nausea and vomiting. Anti-tumor activity was assessed in 45 of the 50 patients enrolled in this study, including a -- which included a partial response observed in a patient with Kras-mutant lung cancer and in one patient with breast cancers. Stable disease was observed in 12 patients and disease progression was observed in the remaining 31 patients valuable for efficacy evaluation. And I remind everyone this was a single agent survey.

In August 2012, Debiopharm initiated a Phase I/II clinical trial of Debio 0932 in combination with chemotherapy regimens in patients with advanced non-small cell lung cancer, referred to as the HALO. This trial is treating stage IIIB or IV non-small cell lung cancer patients with diseases characterized as wild-type EGFR. Debio 0932 is administered in this study in combination with cisplatin/pemetrexed or cisplatin/gemcitabine in treatment-naive patients and with docetaxel in previously treated patients.

Once the recommended Phase II dose of 0932 in combination with each of these three chemotherapy regimens has been identified. The randomized, double-blind, placebo-controlled Phase II portion of this study is expected to then be initiated. In that portion of the trial, approximately 140 eligible patients will be randomized to receive chemotherapy with either placebo or Debio 0932. The primary objective of this study will be to determine the efficacy of Debio 0932 in combination with chemotherapy. To just remind everyone, we are eligible for our next milestone payment under our license agreement with Debiopharm, when Debiopharm treats the fifth patient in this Phase II clinical trial, which we expect will commence in 2014.

In addition to this study, Debiopharm has completed a Phase Ib study of Debio 0932 in 30 patients, including patients with non-small cell lung cancer and we'll present this data at a medical conference in the second half of 2013. Finally, Debiopharm is expanding its development efforts around this molecule by planning to initiate a Phase I study and patients with renal cell carcinoma in the second half of 2013 and we're obviously pleased with this development and continued development of the drug.

So to conclude, we believe Curis represents a highly attractive investment opportunity providing investors with significant upside potential from our fully-owned highly promising clinical stage cancer drug candidate CUDC-907 and CUDC-427, while benefiting from the growing value prospects in Erivedge as well as from the continued progress of Debio 0932 partnered with Debiopharm. We view our ability to extract the full potential of CUDC-907 and CUDC-427 and the clinic as an important driver to significantly increase the value of Curis and we believe we're now very well situated to focus upon the realization of that value.

I'd like to now turn the call over to Mike for a discussion of our financial results and then we'll come back for Q&A session.

Okay, thanks, Dan. Briefly here, we reported a net loss of $5 million or $0.06 per share on both the basic and fully diluted basis for the first quarter of 2013 as compared to net income of $2.2 million or $0.03 per share on both the basic and fully diluted basis for the first quarter of 2012.

Revenues in the first quarter of 2013 were $900,000 as compared to $10.4 million for the same period in 2012. This decrease in revenues is primarily the result of $10 million in license fee revenue that we recognized upon Genentech's FDA approval of Erivedge in the first quarter last year. Net sales of Erivedge during the first quarter of 2013 were $13.3 million, which resulted in royalty revenues to us of $664,000.

Costs of royalty revenues, which again our comprised of amounts due to third-party university licensors in connection with Genentech and Roche's Erivedge net sales, were $33,000 and $114,000 during the first quarters of 2013 and 2012 respectively. The first quarter of 2012 included a one-time charge of $100,000 on the first commercial sale of Erivedge last year.

Operating expenses for the first quarter of 2013 were $5.2 million as compared to $8.2 million for the same period in 2012. Research and development expenses were $2.6 million for the first quarter of 2013 as compared to $5.2 million for the same period of 2012. The decrease in R&D expense was primarily due to $1.5 million in expenses that we incurred in the first quarter of 2012 related to amounts due to various university licensors in connection with the FDA approval of Erivedge.

In the first quarter of 2013, we also shifted our development program spending mix by decreasing spending on CUDC-101 as well as discovery research to $700,000 from $2.4 million in Q1 2012 and increasing our spending on CUDC-427 and CUDC-907 by $800,000, most of that increase, $700,000 related to expense related to CUDC-427.

G&A expenses were $2.6 million for the first quarter of 2013 as compared to $2.8 million for the first quarter of 2012. Other expense was $600,000 for the first quarter of 2013, an increase compared to other income of $30,000 for the same period of 2012, primarily due to $900,000 in interest expense related to our $30 million royalty-secured debt transaction that we completed last December, partially offset by $300,000 in other income recorded during the first quarter of 2013.

As of March 31, 2013, our cash, cash equivalents, marketable securities and investments totaled $54.1 million and there were approximately 80 million shares of our common stock outstanding.

That concludes all the prepared remarks and now I'd like to open the call for questions. Operator?

(Operator Instructions) Simos Simeonidis, Cowen & Company.

Good morning. Thank you for taking the question. So, my question is on Erivedge. First of all, if you can remind us the timing of the additional data on BCNS or Gorlin syndrome. And secondly if you can talk about the European opportunity with the approval expected in a couple of months? I know the treatment paradigm is slightly different and the Roche sales force has continued to make progress in the US quarter-over-quarter. Can you tell us how these patients are treated differently and thus how are they going to be targeted in different positions in Europe?

Yeah, thanks, Simos. So, first question, a couple of questions and that the first one has to do with strategy around Gorlins patients. Our belief is that, that subset of patients is an ongoing survey with a number of principal investigators such as [Erv Epstein] at Stanford and that category is likely to be covered by the existing label. So, I don't think we have a separate study or survey under that, but I think we'll probably be seeing Gorlins patients coming into the market realization of the drug over time based on publications. So, I think those patients are already being treated under the existing label, it will continue to be so.

Yeah, I was just going to add -- this is Mike, this radiation is contraindicated in that patient population, so they fall on label.

Yeah.

Okay.

Okay. And then regarding the EU opportunity, Simos, I don't believe that they are treated therapeutically any differently than they are here in the States. So, we believe that is just a continual market expansion, an opportunity that was there about -- estimated to be 12,000 additional patients in the EU, which is the top five countries. So, we think that approval will basically just be a continuation of the current strategy.

The one add that I would have is that Roche has recently commented that the difference, maybe this is (inaudible) alluding to Simos is that the target -- the physician target is one group called dermato-oncologists. So, Roche has made some statements that the patients may be more concentrated within this physician group, whereas in the US, they're targeting surgeons, dermatologists and in some very severe cases oncologists as well. So, it could help the European rollout, but (inaudible).

That was my point that there are no others -- it's a much more -- it's kind of a smaller physician group in Europe that treats that BCC patients?

Yes.

All right. Thank you.

Thank you.

Ted Tenthoff, Piper Jaffray.

Great, thank you very much and congrats on the progress. My question has to do with 907 and the Phase I , I appreciate the update there. With respect to enrolling from here, we're going into the third cycle, what will be the next dose cohort and how quickly do you think you can enroll those patients? And is there anything from the pre-clinical data that gives you a sense of where we should start to see activity, maybe where we should just start to see toxicity?

Go ahead, Ali.

Yes, thank you, Ted, for (inaudible) question.

Hi, Ali.

Hello, Ted. So I think the updates that we had with respect to 907 was that the first three patients obviously have gone on to beyond cycle two, which is very initial assessment of disease and gone into cycle three of treatment. With respect to the next cohort -- and say, this first cohort was initial 30 milligram dose. The next cohort that is open now and patients are in screening for is the 60 milligram dose. So we have doubled the dose from the initial cohort going into this.

In terms of dose escalation and planning for the numbers of cohorts that we would enroll, we would expect that we can double the dose until we see some adverse events and then would have to potentially increase at a slower pace going forward. From -- based on what we see currently in the clinical setting and trying to extrapolate or interpolate from the pre-clinical data, our assumptions are that by the approximately fourth escalation cohort is when we would be at similar doses to where we were seeing efficacy in animal models, good efficacy in animal models.

In terms of side effects, we know what the potential expected side effects of these drugs are based on the mechanism and we're keeping close eye on the side effect profile and the adverse event profile. I couldn't comment on when we would expect to see adverse event that may be limiting to kick in, but at least with respect to efficacy, we would expect those [might be] fourth cohort or so in terms of the dose escalation.

Excellent. That's very helpful. And would you submit data for hematology in December?

We were expecting to have sufficient data and sufficient patients enrolled for us to be able to discuss and present at the ASH Conference later into the year as well, yes.

Excellent, thanks so much for the help.

Thank you, Ted.

Thanks, Ted.

Jim Birchenough, BMO Capital.

Good morning, it's Nick standing in for Jim this morning. Thanks for the update. Just pointing out from Ted's question, I just want to clarify, I think you said you would double the dose, then you might need to proceed a little more slowly. So that suggests you need to get to 180 milligrams before you think you would expect to see efficacy?

Again these was interpolation from preclinical based on the amount of exposure we get in preclinical and the profile of the drugs there. So far we're pleased that we see a similar pattern in the first three patients again, mind you that we've seen a similar pattern. Our expectations are that by the fourth cohort, we should be at similar levels of exposure for patients and what we're used to seeing preclinical activity of the drug in animal models. I don't think the expectation here is that we have to get there before we see activity, which is an interpolation from animal data. By the fourth cohort or so, as you indicated, we would be expecting to see approximately similar levels and similar activities.

My follow-up really relates to, you described some what sounds like some fairly (inaudible) dissection of the PI3 activity in the metabolite. In terms of the HDAC activity, can you characterize that to what is known about HDAC metabolism in approved indications?

I can describe. So for our drug, I think what I describe is the fact that we're identifying the same metabolite as what we've seen with animal experiments and we're pleased with that. What we do find is that the dual active drug, which has both the PI3 kinase and HDAC activity is metabolized and we identify them metabolized that has full PI3 kinase activity and no longer HDAC activity. So that's what we see. I think a similar type of assessment has been done for other HDAC drug, where the way those drugs are metabolized is likely similar to what we find for our drug.

Joe Pantginis, Roth Capital Partners.

Hi, guys, good morning. Thanks for taking the question. I was wondering if you could dive a little more into the market opportunity. Obviously, you put out some numbers for Erivedge, about 28,000 patients in the US and the 12,000 in the top five EU. Just curious now with Roche having boots on the ground, how those numbers might have been tweaked as of late or how they might be tweaked in the future based on patient identification now that they're actually detailing physicians?

So, I think this market has always been a little bit uncertain. Basal cell unlike other cancer cells have a patient registry. So the market size is an estimate from Roche. I think the market size at 28,000 and 12,000 is conservative. And we can't say on the US side it's -- that Roche has been pretty aggressive in increasing our marketing efforts. They've increased the sales force recently late last year. It's a very Erivedge specific sales force. So, I think right now, our comments really can be limited to we're optimistic that the drug is going to continue growing. An interesting observation that we've had is that getting that first prescription is the key sales goal for Genentech sales teams. So once they get the first prescription, you see a second prescription and the third and there's (inaudible). I think we're kind of seeing this in the weekly prescription trends as well. Early in the year, last year, we were at a certain level or Genentech was at a certain level mid-year plus at another level, Q4 a different level and now we are at a higher level still. So, overall, absolute sales are still reasonably modest. The sales growth [of] 25% last quarter, about 20% this quarter continues to be positive and we expect that to continue.

That's helpful. Thank you. And maybe just a quick follow-up if you don't mind. Ali, you made a comment regarding 427, obviously the main crux or the main premise of this drug is in combination with other therapies, but you did talk about the potential of monotherapy based on certain mutations, are you in a position to discuss these types of mutations and these things that would have a diagnostic available or you would need to develop a diagnostic from the start?

Thank you, Joe. It's a good question. I think, in this -- if we look (inaudible) there are certain patients that have translocations or operations genetically components of IAPs, in particular the cIAP and we're looking very closely to see if we can potentially do a clinical study enrolling those patients and it would be with a potential genetic alterations that we can identify diagnostically.

Thanks a lot, guys.

Thank you.

Thank you.

Brian Klein, Stifel.

Great, thanks for taking my questions and congrats on the EU recommendation. Just briefly on the operable modular indication, can you give us an update on timing for that data?

Yeah, our estimate now is going to be late Q2 into Q3, that's the best of our guesstimate this point from communications (multiple speakers)

Yeah, Q3.

Yeah, Q3. (inaudible)

Great. And just on the financial side, do you guys anticipate booking a milestone payment for EU formal approval in the second quarter or third quarter?

It's in guidance that we've been given in past experiences and if there's two to three months time to approval, so it could startle either way. It's going to be right around the end of the second quarter, early third, that's the best they can offer.

Great. Thanks a lot, guys.

Thanks, Brian.

Boris Peaker, Oppenheimer.

Good morning. Congratulations on the [quarter]. I just wanted to probe a little on the Erivedge numbers that the target patient populations that you guys mentioned specifically 28,000 in US and 12,000 in the top five EU. Could you tell us why such a discrepancy? I mean the top five EU countries probably have roughly 80% of the US population, but it seems like there advanced BCC patient numbers are certainly less than half?

I mean the published incidence rate, which I apologize I don't have off top of my head, [it's lower] and I think it's really just a math problem. And, I mean these are again estimates that there is no real registry for these patients. So the actual population I think will sort of emerge as the drugs commercialize, but really it's a relative incidence rate.

I see. And on the 40,000 in the operable BCC that you mentioned in US, could you comment in terms of specific criteria that you use to kind of define these target patients?

Well, this comes from a Roche estimate, where they have a presentation and they convey that there was a subgroup of patients that although designated operable, so fall outside of the current advanced label. It's clearly a group that's suboptimal and they estimated that this group is approximately 2% of the total. That's as simple as the math calculation it comes from, estimating an additional 2% of patients that are deemed operable, but if physicians have an alternative to treat them, potentially for instance with the neoadjuvant prior to surgery to improve outcome, then they use it.

I see. And my last question on just Erivedge epidemiology, with the Australian approval probably not that far off, I'm curious that Roche commented on the market opportunity there. I mean even though the overall population is much slower in Australia compared to European countries and US, the incidence of skin cancer is substantially higher. So I'm just curious how significant is that market for BCC?

Yes, it's a difficult one to ascertain, Boris, simply because in Australia, as you stated, the incidence is much higher and as a result of that, first of all, the majority of the population is along the coastal regions. So more concentrated and they have a much greater awareness, they have a very significant education campaign in the school systems doing continual checks. So the percentage of the population that is categorized as advanced are operable sub-optimal. I don't think it's going to be as significant as the incidence rate, just because of our practice protocols okay.

Well, thank you very much for taking my questions.

Thanks, Boris.

Appreciate it.

Adnan Butt, RBC Capital Markets.

Thanks for taking my question. Again, on 907, as far as the [straw] that's ongoing, is it a planned balance between lymphoma and myeloma and why the myeloma indication? And secondly, can you estimate how many patients worth of data the Company might have for ASH? Thanks.

It's not a balance between multiple myeloma and lymphoma. It is open for enrollment of the patient populations and (inaudible) it depends on the patient that's available and we'd go into it. So, it's not balance. In terms of patient data, obviously with having two sites now enrolling and a third site coming on shortly, we believe we'll have ample numbers of patients enrolled by the time ASH abstracts are going to be due for us to submit it. And so we should have a very good idea about, both from a good number of patients in terms of the benefit in the PK and PD profile of the drug in that regard.

I think you asked the question, the middle question was why multiple myeloma? This is based on the target profile of our drug, targeting both PI3 kinase delta and alpha, as well as the HDAC inhibition and some of our preclinical work in model showing that we have very good activity in multiple myeloma preclinical models and that was the reason for enrollment for those patients in addition to the lymphoma patients.

Thank you.

Gene Mack, Brean Capital.

Thanks for taking the question. Can you just clarify earlier, I think you mentioned that in the 907 trial, there was a disease assessment, I know that it was only after I guess two cycles, but can you just give us an idea if there was any stopping criteria for patients at that point -- the point if there was a certain amount of these progression at that point or if there's still a lot to get dose escalation in [foreign service]. there was no toxicity? And then, I just have a quick follow-up?

Sure. In the first cohort, we did not observe dose-limiting toxicity as defined in the protocol and also for our protocol investigators do the assessments and make the determination if the patient had seen sufficient benefit and at the same time lack of progression of their disease to marry continuing on the treatment into cycle three. It's based on physicians' discretion and assessment of the disease at the end of cycle two and we did not see dose-limiting toxicity in the first cohort.

Is it safe to assume though that like one of the patients had blown through, but did not see (inaudible) blowing through the treatment that they would have probably been moved on to something else?

Correct.

Okay, great. And then, I think you guys have mentioned in past, there was a inflammatory pathway defined for 907, is there any more clarity on that and I'm sorry if you already mentioned it, I got on the call late?

Yes. So, Gene, that was actually quite a while where we were talking about the prospects of it being an immune-modulatory and that was all hypothetical just based on the role of PI3s. We have not investigated any further to-date, because obviously the primary focus is oncology and we want to see its performance from a PK/PD standpoint, defined the safety profile. That's something we will revisit downstream if the data continues to warrant, but right now our focus is solely in the oncology space.

Great and that's all.

Thanks.

Thanks, Gene.

Ed Arce, MLV & Company.

Hi, good morning. Thanks for taking my questions. I just have a couple, actually one was already asked, but just wanted to get a sense for your expectations for our data releases at ASCO in particular with 427?

Yes, so the investigators, the primary principal investigator of the CUDC-427 Phase I trial will be presenting at ASCO. Obviously, the goal of that study was to determine the safety, tolerability and PK/PD parameters as well as any benefits from this study, while we can't tell you that the safety profile, tolerability and clinical benefit that's observed in the Phase I will be presented at ASCO.

Great. Thank you.

Thank you, Ed.

Thanks.

Reni Benjamin, Burrill & Company.

Hi, good morning, guys. Thanks for taking the questions and congratulations on the progress. Just going back to 907 and the activity that you're seeing in the earliest cohort, can you just help us or provide a little bit of color regarding the patient history or the characteristics of the patients? How many treatments have they -- had beforehand have they -- how well did they respond to their previous therapies? And when you talk about they're starting their third cycle, does that mean they've been at least stable for three months?

Hello, Ren, thank you for the question as well. I mean I think, in terms of the patients that are getting enrolled, these are Phase I centers and therefore classic Phase I patients have had other rounds of treatment, especially being lymphoma and multiple myeloma patients. And they would have been having good progress on those treatment prior to coming on to our Phase I trial. In terms of prior therapies, I don't think -- on top of my head, I wouldn't know it, but they've had multiple rounds of treatment before coming into this study. With regard to -- I apologize, I forgot the second part of your question.

Just, when we say that they're starting their third cycle is that, it'd gone for three months?

Thank you. So, cycle of treatment is 21 days for this treatment. So they would have had at least 42 days of treatment and evaluation and then gone on to the cycle three, which would have been another 21 days of treatment. And then from there, every second cycle that patients get assessed and the investigator makes the decision to continue enrollment. I can tell you that at least one patient has gone on to complete four cycles of treatment and being assessed by physicians as well.

Perfect. Okay and just one last question, probably for Mike. The countries on territories that Genentech is exploring, can you help just maybe give a little bit more color of what sort of a bear hug Genentech is putting on the world, if you will, to try to get Erivedge to a lot of different countries. I think Dan mentioned the Americas, is it just Brazil, is it -- by the end of this year, how many countries do you think an application have been filed?

It's specific number, can't really comment and what I can say is there are approximately a dozen or so including the US, where there has been regulatory submissions. Of those, Mexico, Israel, South Korea and the US have been approved. Obviously a positive recommendation from CHMP in Europe and we're expecting an approval decision still in Q2 in Australia. So I think we'll have additional territories including some that are fairly significant for basal cell, Brazil, Russia, are examples. They could come on this year, early next. In addition, I think over the next year or two, we'll really come to appreciate global strength there. They are really (inaudible) details really aggressively pursuing a global registration strategy for this discount offer Erivedge.

Great, thanks guys.

Thanks, Reni.

Jim Birchenough, BMO Capital.

Oh, thanks for taking the follow-up. Just a quick one really and it relates to combination therapy for 907, specifically for multiple myeloma. Do the pre-clinical data indicate the ability or the role of the PI3 kinase in certain subsets of patients of certain therapies is conferring resistance and so when would you expect to start some combination therapy trials, even if we’re just with deck?

Sure, that's a good question. I think the goal of our Phase I trial in this setting with lymphoma and multiple myeloma is really to try and identify a population that we would potentially focus on both for the development of the drug. I mean I think you specifically identified potentially multiple myeloma index or other. I don't think we've gone that far to say multiple myeloma is certainly the next or the population that we would go after. I think we would wait for the Phase I trial to look at either lifts our populations of lymphoma or the multiple myeloma to determine which one we would follow up with further trials. At the same time though, we are testing some of this pre-clinically in animal models to ascertain the ability of the drug to combine with the agents that you mentioned and other agents that are commonly used to treat lymphoma and multiple myeloma patients.

Okay, thank you. And then, then just one last follow-up and that's on Erivedge, obviously. Genentech and the National Cancer Institute have surveyed a wide variety of in a wide variety of setting. I don't think any of those have really been positive unfortunately, but has anything come out of this survey that gives you hint on where you might be able to use Erivedge outside of basal cell and PAX medulloblastoma?

Yes, we were watching that data carefully as well and to-date, nothing has come out that definitive pointing a path forward. So we're just watching the data as it emerges and we still remain hopeful.

Okay. Thank you.

I'm not showing any further questions at this time, I'd like to turn the call back over to Dan Passeri for closing remarks.

Yeah. Thank you and thanks to everyone for joining us on our call today. Overall as we've conveyed, we've had a very productive quarter by advancing 907 and Phase I trial and we've made significant progress with the development plans for CUDC-427. Advancing these two programs is our primary priorities for the remainder of 2013 and believe that we're very well positioned to realize a number of important value-creating development milestones across these programs as well as our partnered programs.

At this point, I'd like to thank our employees, directors, investors and partners for continued support and we look forward to providing you with further updates on an ongoing basis. And again, thank you for your time and interest. And have a good day, everyone, thank you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a great day.