Curis Inc (CRIS) 2013 Q4 法說會逐字稿

Good morning ladies and gentlemen, and welcome to the fourth quarter and full year 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. As reminder this conference call is being recorded for replay purposes. I will now turn the call over to Mani Mohindru, Vice President of Investor Relations and Corporate Strategy. Please proceed.

Thank you, Bridget. Good morning ladies and gentlemen, and welcome to Curis conference call to discuss the Company's fourth quarter and full year 2013 financial results and corporate update. Good morning, and thank you for joining us. During today's call we will provide you with an update on corporate plans and developments, and also discuss our fourth quarter and full year 2013 financial results.

Before we begin, I would like to advise you that this conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation statements relating to the status and plans for the development of the CUDC-427, our plans and expectations for advancing the clinical development of CUDC-907, potential [health] benefits of our development candidates, our and our collaborators Genentech and Roche's expectations, concerning the commercialization of and market opportunity for Erivedge in various territories, expected growth of Erivedge and sales of 2014 and beyond, Genentech's plans for ongoing trials of Erivedge, and the presentation of data related to those trials, our and our collaborator Debiopharm's expectations regarding the clinical development of Debio 0932.

Actual results may differ materially from those indicated by forward-looking statements in this conference call, as a result of various important factors including those Risk Factors described in our Quarterly Report on Form 10-Q for the quarter ended September 30th, 2013. And in other filings that we periodically make with the SEC, and we encourage you to review these Risk Factors carefully. We caution that we are making these forward-looking statements only as of today, and that we may not update any of these statements even if the events and developments subsequent to the date of this call cause these estimates and expectations to change.

I would now like to introduce Ali Fattaey, our President and Chief Operating Officer, who will provide an update on our proprietary program CUDC-907 and CUDC-427. Following Ali's remarks Dan Passeri, our Chief Executive Officer, will provide and update on our partnered programs, and then Mike Gray, our Chief Financial and Business Officer, will review our financial results for the fourth quarter and year-end 2013, following which we will open the call for Q&A. During the Q&A period as a courtesy to those individuals seeking to ask questions, we ask that participants limit themselves to one or two questions. Ali.

Thank you, Mani. Focusing on our proprietary pipeline, I would like to start with CUDC-907, our orally available small molecule drug candidate, that is designed to inhibit select class sub-HDAC enzymes and PI3K kinase isoforms alpha, delta, and beta. CUDC-907 is being tested in an ongoing Phase I dose escalation trial in patients with relapse or refractory lymphoma or multiple myeloma.

In December of last year we presented interim data at the ASH Conference on 13 safety evaluable patients, of which 11 were evaluable for response assessment. Ten of these patients received continuous daily doses of CUDC-907, and three patients received dosing twice weekly. We reported a possible signal of anti-tumor activity in this presentation, including one patient who had a partial response, and that was a patient with mixed follicular lymphoma diffuse large B cell lymphoma, that was treated with a daily administration schedule. Seven other response evaluable patients achieved stable disease, and among the patients with stable disease, one patient with multiple myeloma was then in cycle 13 of their daily CUDC-907 treatment. Both of these patients currently continue their treatment on this study.

At the ASH Conference, we also reported that based on the potential for drug accumulation and the frequency of Grade 304 adverse events of thrombocytopenia, diarrhea, or neutropenia, with a daily administration schedule, this regimen had been determined to have reached the maximum tolerated dose. Since the ASH presentation intermittent dosing of CUDC-907 using twice or three times per week administration schedules, continues to enroll patients in escalating dose cohorts at all three study sites. We anticipate that the dose-escalation portion of this study will be completed mid-year.

We expect to initiate enrollment in the expansion phase of this study during the second half of this year, where we plan to test CUDC-907 in patients with select hematologic malignancies, potentially in patients with diffused large B cell lymphoma and multiple myeloma. In addition to the ongoing dose escalation trial in hematologic indications, we are also exploring treatment of patients with select solid cancers in a Phase I study. We expect to provide additional details regarding this trial as we get closer to the time of its initiation. I should point out that we are developing CUDC-907 in collaboration with the Leukemia and Lymphoma Society, or the LLS, and we would like to thank LLS for their important guidance and support in the development of this drug candidate, CUDC-907 as we continue to advance it in the clinic.

I will now provide an update on CUDC-427, our oral small molecule [smagnometic] drug, that is designed to promote cancer cell death by antagonizing IAP proteins. I remind you that we licensed the exclusive worldwide rights for CUDE-427 from Genentech in November 2012. We initiated a Phase I trial of CUDC-427 monotherapy last year to expand on the findings from the Genentech Phase I trial that was conducted in 42 patients with refractory solid tumors or lymphomas, the results of which were presented during an oral session at ASCO last year.

The intent of our sponsored Phase I CUDC-427 trial was to further refine the safety, tolerability and maximum tolerated dose of single agent CUDC-427 using a more intensive dosing schedule than that was used by Genentech in their Phase I trial. And also to refine the potential clinical benefit in select patient populations, including ovarian and fallopian tube cancer patients.

During the course of treatment on our study, one patient with Stage 4 breast cancer experienced grade 3 elevation in AST and ALT liver transaminase enzyme levels. Unlike prior clinical experience with CUDC-427, this patient's transaminase and later her bilirubin level continued to rise, despite discontinuation of CUDC-427 treatment, and the patient died of deliver failure one month later. In response to our reporting of this event we received written notification from the FDA on November 5th last year, that the trial had been placed on a partial clinical hold, and that no new patients may be enrolled in this study until the partial clinical hold is lifted by the FDA, based on our response to their request for additional information.

We compiled the FDA requested information regarding the patient's case, as well as a thorough analysis of safety for all 51 patients treated with CUDC-427. This information along with an amended protocol designed to mitigate the risk of liver injury for patients has been submitted as part of our response to the FDA. We will work closely with the Agency to resolve the partial clinical hold, in order to reinitiate enrollment and treatment of patients with CUDC-427. Our plan is to continue treatment of patients with single agent CUDC-427 using this modified protocol that was submitted to the FDA.

Provided that the partial clinical hold is lifted we also expect to initiate a separate study treating HER-2 negative advanced breast cancer patients with CUDC-427 in combination with capecitabine or Xeloda. This proposed study will have a Phase I/IIb design, and we expect to provide additional details closer to the start date. Examination of CUDC-427 in other indications and combinations is also planned.

I will now turn to Dan to briefly discuss our two partnered programs, Erivedge and Debio 0932. Dan.

Thanks Ali. Good morning everyone. I will first begin with Erivedge, which is being developed and commercialized globally by Genentech and Roche under our existing collaboration. During 2013 Roche successfully secured Erivedge marketing approvals in key territories worldwide, including the European Union, Australia, Canada, and Switzerland, among others, resulting in $10 million in milestone payments to Curis. Roche continues to work diligently towards commercialization of Erivedge, the various EU member states, as well as other territories outside of the US where Erivedge has received approval.

Just as reminder Curis is entitled to royalty payments on worldwide net sales of Erivedge, outside of the basal cell carcinoma indication we are also entitled to certain development and regulatory milestones if they are achieved. We believe that Erivedge availability and use by advanced basal cell carcinoma patients continues to be encouraging, as is reflected by the sustained growth in quarterly sales since its US launch in February 2012. During the fourth quarter of 2013, Roche reported net sales for Erivedge of over $28 million, representing an approximately 30% quarter-over-quarter increase in net sales. We continue to expect that Erivedge has the potential to represent significant value for our shareholders.

We anticipate that Genentech and Roche's net sales of Erivedge and consequently our royal revenue should continue to grow throughout 2014, assuming successful reimbursement and commercialization of Erivedge in territories worldwide. Genentech has also completed a Phase II trial of Erivedge in patients with new non-recurrent operable nodular BCC, which is a less severe form of the disease. Genentech and Roche will present full results of this study at the American Association of Dermatology Conference to be held in Denver, Colorado from March 21st through 25th.

Additionally during the second half of 2013 Roche initiated a Phase Ib/2 trial using Erivedge in patients with relapsed refractory acute myeloid leukemia, and high risk myelodysplastic syndrome. We are encouraged that Roche continues to invest in exploring Erivedge in diseases outside of BCC, and we look forward to providing updates on Erivedge's ongoing studies, as well as on its continued commercialization in various territories as they become available.

Turning now to Debio 0932, we continue to be enthusiastic regarding our partner Debiopharm's approach to investigating Debio 0932, which as a reminder is a second generation oral HSP90 inhibitor in cancers with strong scientific rationale in supporting preclinical data. Debiopharm is currently completing the Phase I portion of the ongoing Phase I/II HALO trial of 0932, in non-small cell lung cancer patients, and anticipates advancing 0932 into the phase 2 portion of this lung study during 2014. We are entitled to the next milestone payment after the fifth patient is enrolled in the HALO Phase II study. In October 2013, Debiopharm also began treating patients in a Phase I trial of Debio 0932 in combination with the mTOR inhibitor everolimus in patients with advanced or metastatic renal cell carcinoma. We would also be entitled to a milestone payment should this treatment strategy enter Phase II testing.

We believe both our internally developed as well as our partnered programs hold significant promise to be important novel therapies for cancer patients, and we look forward to providing updates on all of these programs throughout 2014. I would like to now turn the call over to Mike for a discussion of our financial results. Mike.

Alright. Thanks Dan. For the year ended December 31st, 2013, we reported a net loss of $12.3 million, or $0.15 per basic and fully diluted share, as compared to a net loss of $16.4 million, or $0.21 per basic and fully diluted share in the full year of 2012.

For the fourth quarter of 2013 we reported a net loss of $4.2 million, or $0.05 per basic and fully diluted share, as compared to a net loss of $12.4 million, or $0.15 per basic and fully diluted share for the same period in 2012. The fourth quarter and full year 2012 net loss included a one-time in-process research and development expense of $9.5 million, pursuant to our November 2012 CUDC-427 license agreement with Genentech.

Revenues for the full year 2013 were $15 million as compared to $17 million in 2012, the decrease in revenues was primarily due to a decrease of $4 million in license revenues offset in part by an increase in royalty received from Genentech Roche's net sales of Erivedge during 2013. Revenues for the fourth quarter of 2013 were $1.5 million, which primarily consisted of Erivedge royalty revenues of $1.4 million. Revenues for the prior year period were $1.7 million, including $1 million in milestones under our agreement with LLS, and $560,000 in Erivedge-related royalty revenues.

Research and development expenses were $12.9 million for the full year 2013, as compared to $15.5 million in 2012. During the full year 2013 we decreased spending related to our CUDC-101 and discovery research programs by $6.2 million, and focused internal resources instead on the development efforts around CUDC-907 and 427, resulting in increased spending of $5.4 million on these programs year-over-year.

During the full year 2013 we incurred $500,000 in sublicense expenses related to our obligations to university licensers, as compared to $2.1 million for the same period in 2012. R&D expenses were $3 million for the fourth quarter of 2013, as compared to $2.7 million for the same period in 2012. Again, in process Research & Development expenses as I mentioned earlier was $9.5 million in the fourth quarter and full year 2012 periods, related to our license agreement around 427 with Genentech.

General and Administrative expenses were $11.3 million and $10.4 million respectively for the full years 2013 and 2012. G&A expenses were $3 million for the fourth quarter of 2013, as compared to $2.9 million for the same period in 2012. As of December 31st, 2013 our cash, cash equivalents, marketable securities and investments totalled $68.9 million, and there were approximately 85.9 million shares of our common stock outstanding. We expect that our existing capital resources are adequate to fund our current and planned operations, at least well into the first half of 2016.

With that I will turn it back to Bridget to open up Q&A.

Thanks.

Thank you. (Operator Instructions). Just a moment while we wait for questions. And our first question is from Simos Simeonidis with Cowen and Company. Your line is open.

Good morning. Thank you for taking the questions. My two questions are, the first one is on Erivedge. When we saw the announcement yesterday from Novartis on their hedgehog inhibitor LD-225, and there isn't a lot of data out there, the only data I could compare kind of across the trials, is that Erivedge has about a 20% higher ORR, around 60% versus 40% for the Novartis drug in the Phase I trial in BCC patients. But my question is, do you see the Novartis drug as a major risk to Erivedge's revenues, or other than the first mover advantage, that two or three year advantage that Roche would have, is there reason to think that this is not going to be risk to the Erivedge revenue?

Yes. Thanks Simos. This is Dan. I think just taking this from sort of an overall perspective, we've been aware of this development for the past couple of years, and we've been monitoring it along with Genentech. I think it's premature to make any forecast on how much of an impacts it may or may not have. We need to see more data. It certainly is a risk, so I don't want to make light of it. I mean we have been watching it and monitoring it, but the extent of which we just simply can't calculate at this point, so I apologize. We just can't provide further color, but we are monitoring it, continuing to have dialogue with Genentech about it, and once we get clarity on the particulars and the performance of the drug regarding toxicity profile, response, et cetera, we will be able to provide more clarity.

Okay. And then the second one I'm going to ask about 427. Ali mentioned that in your press release you mentioned the two trials that you are going to do, or initiate them on therapy and start the Phase Ib/II assuming the hold is lifted. Should we assume that you are going to do them concurrently, or are you going to wait to see patients stable on the monotherapy study before you would start the combo trial with Xeloda?

Thank you, Simos. Yes. We do have plans for initiating both studies, both the continuation of the monotherapy treatment of patients with CUDC-427, as well as the combination with capecitabine, the way that we have planned it and proposed it, it would be independent studies and that's our plan. Obviously we have submitted that and articulated our intent to the FDA. We will wait to see whether there's any comments from them, but from our side our plan is to really look at them as different studies, one would be looking at monotherapy, and the appropriate way of conducting that study versus the combination with capecitabine and the appropriate way of administering the drug in combination.

So this will be a combination study, then I assume you would use the modified protocol to mitigate risk for liver injury?

That's correct. There are a number of factors that we included as part of the risk mitigation strategy, and all or the majority if not all of those will be included in the capecitabine study as well. I think we had discussed before, previously the reason for the capecitabine study, the continued plan for that had always been a Phase Ib/II, the Phase Ib portion would be determining the appropriate dose of our drug with a set dose of capecitabine that would be tested, so I think that's part of the reason that really is an independent assessment of that drug. But all of risk mitigation strategy will apply to any use of CUDC-427 going forward.

Great thank you very much.

Thank you.

Thank you. Our next question is from Adnan Butt of RBC Capital Markets. Your line is now open.

Morning everyone, and thank you for Simos for sticking to two questions. I will follow that tradition and stick to two myself, first on 907, how many patient have been dosed with [apliacin] three times weekly, and what dose levels? And then one for Mike. In terms of R&D in 2014, do you expect it to be lumpy maybe more in the second half than the first half? Any color there would be helpful. Thanks.

Thank you Adnan, and thanks for your questions. This is Ali. Regarding CUDC-907, I think we won't be making updates in terms of, wait for a scientific presentation in order to demonstrate the enrollments, number of patients at the different dose levels, and any additional information regarding the performance of the drug and its safety in those. We had indicated at the ASH that at that time using the twice weekly administration, even at the slightly higher doses than the one daily dose of it, that we had not seen a similar side effect profile. So that's really the extent of the information that we would be updating at this point. I want to point out that at all three centers the two schedules of twice weekly, as well as three times weekly are enrolling patients and in escalating doses. That's about the extent of the update at this point.

On the R&D question, Adnan, I think it's fair that we should expect that second half of the year our spend will increase, I mean for both programs but obviously particularly for 427, in the hope that it comes off the partial clinical hold. We would actually generally would give financial guidance on this call, I think we're going to hold off on giving specific financial guidance until the hold is lifted or during the next call. I think as a general statement, I would not expect our burn to drastically increase over last year, and I think that comes through in our statement that our cash will get us, at least well in the first half of 2016, so we're sitting on at least two years of capital, which assumes a pretty speedy re-entry into the clinic for 427, no milestones, and so it's a very conservative forecast scenario.

Okay. Thanks.

Thanks, Adnan.

Thank you.

Thank you, and our next question is from Brian Skorney with Robert W. Baird. Your line is open.

Hi, guys. Good morning. Thanks for taking my question. I just had a quick question on the protocol amendment. Is there any way you could provide any sort of color around what you are doing differently, and how you think those changes will avoid any further issues? Thanks.

Hi Brian. This is Ali. I will give you a little bit of that. I think a couple of things that we have assessed and are addressing, not to try to go into the specifics of the protocol. Obviously awaiting for the FDA response, and their assessment of the risk mitigation strategy included in there. Things that we have looked at, or at least parameters that we have looked at and are included in there, refer to dose and schedule of the drug, eligibility criteria and the monitoring strategies for the patient. These are all included within the protocol itself. We will see additional information for that following the FDA review.

Okay. Great. Thanks.

Sure.

Next question is from Brian Klein with Stifel. Your line is now open.

Thanks for taking my questions. Just two here. First on Erivedge, on the upcoming approval of nodular BBC data in March, can you help set expectations here as to what you would view as good data from this data set?

Hi Brian. This is Ali. Regarding the operable, the context for it is a study that's being done in a less severe form, or a Phase II trial that was completed in less severe form of the disease. Patients that are considered to be operable but sub-optimal. The data for that will be present the at the American Dermatology Conference in March in Denver. Difficult to set expectations for it , simply because we allow Genentech and Roche to present the data at this point. Again, the intent of the study has been for education of the treating physicians and dermatologists, and in terms of conclusions based on the presentation we will await for Genentech to give us better guidance on how they intend to use the data for education purposes.

Okay. Thanks. Then just a quick question for Mike. In terms of your cash balance and your expectations or runway through 2016, or through the first part of 2016, does that cash guidance include your expectation for milestone payments from Debiopharm for this year?

No. No.

Great. Thank you.

Our next question is from Chris Marai with Wedbush Securities. Your line is now open.

Good morning guys. Thanks for taking my questions, I've got two actually. One is on 427. So with respect to changes to your protocol changes to dosing, I was wondering if you could maybe remind us as to why in your Phase I trial you guys had made some change with respect to dosing versus the initial Roche trial where we didn't see any side effects? And then secondly with respect to Erivedge, I was wondering if Roche has indicated at all that they're interested in expediting some of the new exploratory studies and new education, given the Novartis data? Thanks.

Sure. Thank you, Chris. This is Ali. Regarding CUDC-427, just to give context for the other listeners as well, the Genentech study that they had conducted their Phase I treating 42 patients, used a dose range of starting from 5-milligrams all of the way to 600-milligrams on a 14 days on treatment, 7 days holiday schedule. The purpose of that schedule was really predicated on the initial plans for combining the drug with capecitabine as a development strategy, obviously a strategy that we intend to continue for development of CUDC-427 as well.

The adverse events that were seen on the Genentech study included a couple of cases of grade 3 ALT increases that we have described, and were presented at the ASCO meeting last year. The only DLT that was observed in the Genentech study was a grade 3 fatigue associated with one patient, and formally maximum tolerated dose of the drug was not achieved in that study. The intend for our study as we indicated was to further refine this dose and the schedule. First part of it was increasing dose beyond what Genentech had taken that is part of the reason we treated the patients with a daily dose of 400, 600, and 800-milligram dose, so slightly over what Genentech will done in our three cohorts. And secondly, there was not really a safety or other rationale for the drug holiday of seven days other than to combine it with capecitabine, and use a similar regimen or schedule of capecitabine, therefore we wanted to test the daily dosing schedule for the drug.

This obviously all goes into the analysis that we have done with regards to the safety of the drug, and any other parameters that is part of the submissions as part of the response to the FDA. So the short answer, I guess the reason that we took it to a different schedule was that MTD was not formally established, therefore we wanted to determine the upper limit of the dose for the drug, and regarding the schedule, a drug holiday was not merited based on the performance of the drug or the side effects, and it was really mainly determined that way for combination purposes. I hope that answers your question.

Yes. No. That's very helpful. Thanks. So it had nothing to do with essentially, sub-par efficacies, or disappointment in the drawing's performance in early Phase I trials?

Yes.

Dose changing?

Yes. It really had nothing to do with it. That was not the purpose of it. I also want it remind the listeners and the groups that in the Genentech study, patient benefit was definitely seen with two unconfirmed complete responses, and up to eight people, or eight patients that experienced stable disease for which were beyond three months of disease stabilization, so it was not predicated on the performance of the drug. I also point out that in the study, in the Genentech study biomarkers were fully engaged and the drug was being administered at a therapeutic dose, as far as the biomarkers were concerned, so it was really a better refinement and better understanding of the dose and schedule of the drug.

Great. Thank you. And then with respect to Erivedge?

Yes. If you don't mind repeating your question.

Oh, yes. No. I'm sorry. So has Roche indicated to you any of their future plans with Erivedge, any new indications that have been investigated, and given the Novartis data, have you had any contact that suggest that they want to speed up this given you guys have a first mover advantage? Thanks.

I think Genentech and Roche have a had a methodical plan for both the development and commercialization of Erivedge. Obviously, the commercialization and the approval of the drug, you have seen very good results of that where it's now approved in nearly 50 different countries. With regards to the clinical trials there was a number of studies that were previously sponsored by Genentech and Roche in the past. Some of which in solid cancers unfortunately outside of the basal cell carcinoma and potentially Medulloblastoma, our results did not meet what the expectations were. However, the most recent study that Genentech and Roche have again invested in and initiated is in the hematologic cancer setting, including the AML and MDS that's really predicated on additional information and the field being available for the potential utility of hedgehog antagonists in the hematologic cancer space. I think about the level of the discussion and information that we have at the moment, in terms of the development strategy for Erivedge in other indications.

Great. Thanks. Congratulations on the quarter, thank you.

Thank you.

Our next question is from Boris Peaker with Oppenheimer. Your line is open.

Hi. Good morning. Just have one question, a lot of my questions have been answered already. Could you just summarize the upcoming presentations at medical meetings for 2014, at least that you already are aware of?

Hi. This is Mani. So 907 as you know is enrolling, so data from that study is probably the one that is going to be most significant for this year. As we have stated in the past, we don't think the data would be right by ASCO to present there. We are considering other meetings close to ASCO that we may be able to get some kind of an abstract in, and certainly we feel that we will be ready by ASH to have data presented there. But the plan is to start the expansion phase in the second half of this year, so that would give you some indication around the middle of this year with our dose-escalation and recommended phase, recommended dose of the next studies to be there.

We also have addition abstracts that have been submitted for the AACR Conference early in April. Those are more preclinical studies that have been conducted with the CUDC-427 drug candidates, and upon acceptance those presentations would also be made. Those are the two at the moment that are definitely slated for presentation.

Great, thank you very much.

Sure.

Thanks, Boris.

(Operator Instructions). Our next question is from Daniel Brims with Brean Capital. Your line is open.

Hi. Thank you for taking my questions. Can you give us for the timeline for the FDA review of the data? Is that a standard 30 day review, or how long do you expect it to take the FDA to get a decision to you?

That's correct. Our understanding is as well that this is a standard 30 day period that the FDA has for review and communication back to us. Our expectation is that would occur within the March timeframe.

Okay. Thanks. And for the Erivedge revenue, you said it was in excess of $28 million. How much of that is US, and how much came from ex-US?

The majority is still US. On the year about 90% of the revenue of $79-plus million dollars was US-based. Roche hasn't carved out the ex-US versus US, I will say in Q4 we are starting to see increasing growth in ex-US, but most of the pricing reimbursement discussions are ongoing, and will be finalized in 2014. So expect to see that number continue to grow.

Thank you.

Thank you. I am not showing any further questions at this time. Please proceed with any ending comments.

Okay. Well, first I want to thank everyone for listening in. I would like it thank our employees, particularly with the diligent effort that has gone into building the clinical group, and responding with the FDA partial hold. I want to thank our Directors, and investors and partners for their continued support. And we look forward to providing you all with further updates on the progress over the coming months, as more data and information becomes available. Thank you again. Have a good day.

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.