Dare Bioscience Inc (DARE) 2016 Q3 法說會逐字稿

Welcome to Cerulean's Third Quarter 2016 Conference Call. This call is being recorded. My name is Brian, and I will be your operator today. With us from the Company are Chris Guiffre, CEO; Gregg Beloff, CFO; Scott Eliasof, CSO; Adrian Senderowicz, CMO; and Alejandra Carvajal, GC.

Mr. Guiffre, please proceed.

Good afternoon, everybody, and thank you for joining us. Let's start with a comment from Alejandra on forward-looking statements that may be made during the call.

Certain remarks that we make during this call about the Company's future expectations, plans, and prospects constitute forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors including those discussed in the Risk Factors section of our most recent quarterly report on Form Q, which is on file with the SEC and can be accessed on our website.

In addition, any forward-looking statements represent our views only as of today, and should not be relied upon as representing our views as of any subsequent date. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our views change. Therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to today, November 3, 2016.

Thanks, Alejandra. Cerulean experienced a setback in August, when our randomized RCC trial failed to meet its endpoint. We ran the study to determine whether CRLX101's activity against HIF could improve outcomes in that refractory setting. Unfortunately, the answer was no. And as a result, we discontinued clinical development focused on HIF inhibition and sharpened our focus on 101's topoisomerase 1 inhibition.

There is a significant need for an improved topo 1 inhibitor that enables combinations not possible with marketed products in this class. We have three topo-focused combination trials ongoing, and we look forward to reporting on their progress in the quarters ahead.

Cerulean's NDC technology has created two clinical candidates to date. Our belief in our technology is now shared with a new partner, Novartis. As we announced in October, we entered into a five-target collaboration with the Novartis Institutes for Biomedical Research. Novartis is a world leader in the research and development of oncology therapies, and we believe this collaboration validates the potential of our platform.

In October, we also announced a $20 million at-the-market financing facility with Aspire. In connection with this agreement, Aspire made a $1 million initial investment. Today Adrian will explain our focus on topo 1 sensitive tumors. Then Scott will talk about the Novartis collaboration. Finally, Gregg will comment on the Aspire ATM during his financial update. Adrian, please take it away.

Thank you, Chris. 101 is an NDC with a camptothecin payload. Camptothecin is the most potent topo 1 inhibitor. But it was discontinued in clinical development because it was too toxic. 101 concentrates camptothecin inside tumor cells and spares healthy tissue, as demonstrated in the PNAS paper published early this year.

Therefore we believe 101 will be more active and better tolerated than the marketed topo 1 inhibitors, irinotecan and topotecan. As we showed at ESMO last month in our Phase 1b dose intensive trial, we have seen monotherapy responses in multiple topo 1 sensitive tumor types, including colorectal and pancreatic tumors that were refractory to oxaliplatin or irinotecan.

One example is fourth-line pancreatic patient who progressed through a gemcitabine Abraxane combination, then FOLFOX and (inaudible).

This patient was on opiates due to severe pain. The patient had a 29% tumor shrinkage, and was able to discontinue opiates for six months. This is a remarkable clinical benefit for a fourth-line pancreatic cancer patient. An example like this one illustrates why we have the opportunity to replace irinotecan and topotecan, and to treat tumors where these drugs were never approved.

With strong monotherapy activity and unprecedented tolerability for a topo 1 inhibitor, we have the opportunity to create combinations that are difficult or impossible with irinotecan and topotecan.

Let me give you three examples of 101 combinations that are difficult or impossible with other topo 1 inhibitors. First, we are studying 101 in combination with weekly paclitaxel (inaudible) in platinum-resistant ovarian cancer. The combination is active and well-tolerated.

Second, we are studying 101 in combination with LYNPARZA, the first and only approved PARP inhibitor. Dose escalation is ongoing, and we have not seen any dose-limiting toxicities yet.

Third and finally, we're studying 101 in combination with FOLFOX a drug combination that includes leucovorin, fluorouracil, and oxaliplatin. FOLFOX is sometimes combined with irinotecan to create the combination called FOLFIRINOX, a very active combination for GI tumors that few patients can tolerate.

We aim to create a varied version of FOLFIRINOX by replacing irinotecan with 101. Dose escalation is ongoing. And we have not seen any dose limiting toxicities yet.

I want to wrap up my comments by sharing an interesting case that the NCI investigator reported last week. One ovarian cancer patient being treated with LYNPARZA and 101 was in hospice, and now is back to full-time work in less than 6 weeks of therapy. This patient had previously failed a LYNPARZA PD-L1 combination, and now is being treated at 150 milligram of LYNPARZA twice a day, plus 101 at 12 milligram per meter squared. She's having no problems tolerating the PARP-topo 1 combination.

I understand this is just one anecdote. But imagine what you could do with a tolerable PARP-topo combo for many, many patients. The PARP companies can move beyond BRCA mutants and HIV positive patients to much larger patient populations with topo 1 inhibitors DNA damage can potentiate the PARP inhibitor's ability to prevent DNA damage repair.

People are starting to learn about the profound importance of PARP inhibitors based on strong clinical data from AstraZeneca, Tesaro, Clovis, Medivation, and Pfizer. The more people learn about PARP inhibitors, the more they will recognize the potential of PARP-topo combinations. The homerun for PARP inhibitors is combining with a topo 1 inhibitor, and we have the only topo 1 inhibitor that could be combined and work with PARP inhibitors.

With that, I'll turn the call over to Scott.

Thanks, Adrian. Our platform was designed to selectively attack tumor cells, reduce toxicity by sparing the body's normal cells, and enable therapeutic combinations. Like many nanoparticle companies, we have preclinical data showing targeting. But unlike most nanomedicines, we also have clinical data that clearly shows CRLX101 concentrated in the tumor cells and not in the adjacent healthy tissue. These data were published in PNAS in March of this year, and that paper is a significant milestone for our technology. We believe it contributed to our ability to attract a world-class partner like Novartis.

NDCs are differentiated from most other nanoparticle approaches, because we conjugate the payload to the nanoparticle backbone. That's very different than typical entrapment approaches involving liposomes. Therefore, NDCs are the next generation of nanoparticle technology. Importantly, they offer strong market exclusivity, because when you conjugate you can create new chemical entities that are eligible for data exclusivity in the US and EU, and for composition of matter patents around the world. That is simply not possible with entrapment approaches.

Our technology platform has delivered two NDCs into clinical development so far, and now we are going to work with one of the world's leaders in oncology to create five more NDCs. Novartis and Cerulean have started working together on NDCs directed at five mutually agreed targets proposed by Novartis. Novartis provides the payloads and we make the NDCs.

If Novartis takes any of the NDCs into the clinic, then they will handle clinical development, regulatory activities and commercialization for these NDCs. Our collaboration with Novartis provides $5 million in up front, and $3.5 million worth of FTE funding. It allows us to earn up to $233 million per target in milestones for each of the five targets, including $1.5 million per target in preclinical milestones, and $7 million per targeted in option exercise fees to take an NDC into the clinic. And as you'd expect, we are entitled to royalties on NDCs that make it to market.

With five different targets to work on, this deal gives us a chance to prove how robust and versatile our technology is, while creating significant value for our shareholders.

I can't disclose the targets, of course, but if there are any other questions about the collaboration, I'll be happy to answer them in the Q&A portion of the call. Now, I'll turn the call over to Gregg.

Thank you, Scott. I'll highlight our financial results for the third quarter of 2016, which are included in the Form 10-Q that was filed after market close today. For the third quarter, we had a net loss of $10 million, compared to a net loss of $10.6 million for the third quarter of 2015.

We ended the third quarter with cash and cash equivalents of approximately $38.1 million. We believe that our cash and cash equivalents, together with the $1 million in proceeds from the initial sale of common stock to Aspire, and the $5 million upfront payment from Novartis are sufficient to fund our planned operations for at least the next 12 months.

The Aspire firm commitment ATM is important to us. Because it provided us $1 million in capital to strengthen our balance sheet. And because it gives us access to up $19 million of additional capital that is if and when we decide to sell shares to Aspire. We have no obligation to sell shares to Aspire, but we have the right to sell shares to Aspire, using one of two mechanisms, based on prevailing market prices.

I want to point out that Aspire is a long-time shareholder, and we are grateful for their continued support.

Let's wrap with guidance. In 2017, we expect to report the following milestones. First, report further results from the ongoing Phase 1b/2 clinical trial of 101 in combination with weekly paclitaxel in patients with platinum-resistant ovarian cancer. Second, report initial results from the ongoing Phase 1/2 clinical trial of 101 in combination with LYNPARZA in patients with advanced solid tumors. And finally, we will report initial results from the weekly dosing dose escalation for 301.

With that, let's open up the call so that Chris, Adrian, Scott and I can take your questions. Brian, please prepare the queue.

(Operator Instructions) John Newman, Canaccord

Hi, guys. Thanks for taking the question. A question for, I guess, Chris and Adrian. Could you just review why the combination of CRLX101 with a PARP makes sense, and just how it's different from some of the other topo 1s?

And then I was just curious if you could talk a little bit more about the study in solid tumors. Is it specific to any one solid tumor type, or is it just open to a number of solid tumor types? Thanks.

Okay. Let's take your questions in reverse order. The second question is easy to knock off. Currently it's all solid tumors in the dose escalation phase. Once we have declared a recommended Phase 2 dose, there was a contemplated expansion into small cell lung cancer, which is an obvious choice for this combination. There's also been plenty of discussion about other expansion cohorts and one you might imagine that's also obvious is ovarian cancer. That's where you see a lot of the PARP companies focusing.

But there are a variety of tumor types that you could take a PARP-topo combo into, over time. Right now what we are focused on is as quickly as possible demonstrating that our topo 1 inhibitor is combinable with a PARP inhibitor. And that's very important. Because no one else has really been able to do that. Other people have tried, of course. Because the logic is very clear and sound.

Topo 1 inhibitors damage DNA. PARP inhibitors prevent DNA damage repair. So it is obvious that you want to be able to combine the two if at all possible. The challenge that people have experienced is that any time those two drugs interact, you get synergistic cell killing. That's synergistic cell killing in the tumor is something you very much want, and it's why the combination is so active, synergistically active.

But unfortunately you get that synergistic cell killing in the bone marrow as well. And that creates unacceptable levels of bone marrow toxicity, which has plagued other attempts. I think what I'd like to do is maybe ask Scott to talk you through a little bit about what we and AstraZeneca learned about how our topo 1 inhibitor does not create the bone marrow toxicity problems with PARP inhibitors that have plagued other combinations.

Scott, would you take that for me?

Yes, absolutely. So let me first start by pointing out that at the maximum tolerated dose of CRLX101 monotherapy in patients, there's very, very little hematological toxicities. And that's actually quite surprising. Because both topotecan and irinotecan have quite considerable hem-tox, and so do PARP inhibitors. And so when people try to combine those two, as Chris said, they had to lower the dose about basically into sub-therapeutic levels.

And we knew since our clinical data said that there was going to be low hem-tox, that's why we approached AstraZeneca about this idea of combining olaparib with CRLX101. And they immediately jumped on the idea. And what we've shown in preclinical studies is that when you look in the tumor, and actually we have both clinical and preclinical data showing when you look in a tumor, you see sustained DNA damage that last for many days. In ovarian cancer patients we've seen DNA damage out as far as 6 days, which is as far as we've looked. And that's quite remarkable, and it's a function of the type of nanoparticle that we create here, which releases the camptothecin slowly inside the tumor over a long period of time.

In contrast, in the preclinical studies, we've looked at bone marrow to look at DNA damage in bone marrow. And what you see is a tiny little bit of DNA damage in the bone marrow from CRLX101, probably caused by the camptothecin that's released in the plasma getting into the bone marrow, not the nanoparticles. And that's very small and very, very transient. So it's there and gone in about a day or two.

And so what we reasoned is if we dose CRLX101, wait a couple of days for the bone marrow to clear, and now dose olaparib continuously over the next week or two, then you get the synergistic efficacy in the tumor, because you have plenty of DNA damage from CRLX101, and then you're inhibiting DNA repair, as Chris mentioned, in the tumor with the olaparib. But in the bone marrow there is no DNA damage, and so you don't get the synergistic toxicity in the bone marrow.

And so that is the concept. It is a very sound concept. There's a lot of literature suggesting that topo inhibitors are the most synergistic drug combination for PARP inhibitors. So we're very, very excited to test this combination in the clinic.

Thank you, Scott. And with that, I'm going ask Adrian maybe to talk to John just briefly about the clinical opportunity for a PARP-topo combo.

Let me-- John, hi. Let me give you the example of when someone tried to-- the people from Canada tried to combine irinotecan and olaparib, what happened with this combination. So basically the dose for olaparib is 400 milligrams PO BID as monotherapy. And the dose for irinotecan is around 350 milligrams per meter squares every three weeks. That's the dosage that you expect to give to patients.

The dose that was tolerated in patients when they combined was 50 milligrams BID for the olaparib, and 125 milligrams per meter squared for irinotecan. So basically it's a sixth and a third of the dose that you give to patients.

Let's put in contrast what we are doing right now in our patients. And again, we are in cohort number two. We have seen no dosing toxicities. So we're already giving patients 150 milligrams PO BID. So three times more than the irinotecan combination was able to tolerate. And 12 milligrams per meter squared of 101. That is 80% of the maximum dose we can give.

So already in cohort two we are-- and this is the dose that this patient that I mentioned that was in hospice, and within 6 weeks, the patient is working full time. So already we are doing significantly higher doses and actually very close to what the doses you expect to have as the tumor activity in the trial. So we are already very, very happy with the clinical results so far.

Does that help, John?

Yes. That's excellent. Really interesting how this combination should be able to work out. So very good. And then I just also wanted to ask. I know that the trial is just starting. But I'm just wondering if you know if these data might surface in the first half next year or in the second half, in the middle, or if at this point it's just a 2017 event?

Yes. We-- I'd love to be more specific. And when I have a better handle on it for you, we'll try and tighten our guidance. But for now, we're being at this point in October of 2016, just a little bit cautious about exactly what we provide for specific guidance. So all I can say for you now is that we will provide that data to you in 2017.

Okay. Great. Thank you.

Michael Schmidt, Leerink Partners

Hi. This is Varun Kumar on behalf of Michael Schmidt. I'm just following up on the 101 combo with LYNPARZA. If you decide to move ahead, let's say in ovarian cancer, can you talk a little more on potential patient subgroup that you will initially target to enroll based on platinum-sensitive status and BRCA status type? Thank you.

Yes, sure. I'm going to turn that one over to Adrian to let him talk a little bit about that.

So, sure. There are multiple opportunities in ovarian cancer. So as you've heard, we have (inaudible) activity as monotherapy in platinum resistant patients, in platinum sensitive, in combination with Avastin, in combination with paclitaxel. And it looks like we commenced with olaparib.

But we need to be very focused, and we need to get into the market the sooner the better. So we are going to have focus in a particular tumor types that are highly un-met medical needs in order to go to the market sooner. So you can imagine that platinum-resistant ovarian cancer is of particular (inaudible) of us, and is the most significant unmet medical need. And obviously patients who fail PARP inhibitors will be the quickest way to the market.

But again, this is going to (inaudible). And as soon as we have approvals in these indications, we're going to move up for approval.

And Varun, I think it's an excellent question. But I also want to point out that we-- in the PARP-topo combo, we don't have complete control over where we go, right? This is a collaboration between us and our friends at AstraZeneca. So to some extent, it's going to be dependent on where they see the best opportunity to continue to expand the label for LYNPARZA, or whether we combine with other PARP inhibitors and help them to expand their label.

And to just put that in context, I'm sure that you've become in the last year, quite familiar with what we call the PARP wars, and how there are six companies basically vying for one market opportunity right now. If you think about it, the market opportunity that they're all going for right now is not enormous. They're all basically focusing on platinum-sensitive ovarian cancer. And then there's the BRCA mutants, which narrows it further, which we've seen with Tesaro, maybe the HIV positive folks.

But the fact of the matter is, I think you should think about the current six leading contenders in the PARP wars are all going after a relatively small pie today. But I think all of them understand that the money that they're investing in this space would not bring an adequate return if they didn't go after bigger pies and bigger share of the pie over time.

So what I believe we can do is help expand that pie significantly. And I think as Adrian mentioned in his prepared remarks, the PARP companies don't just need to think about BRCA mutant platinum-sensitive ovarian cancer patients. You can start to think of a broad swath of unmet medical needs where you have that interesting combination of DNA damage from the topo 1 inhibitor and prevention of DNA damage repair from the PARP inhibitor. It's all about expanding the pie, so that you don't have to say which small niche are you going after, which I think was more or less your question. It's which broad patient populations do you want to go after.

That's very helpful. Thanks for taking my question. Thank you.

Debjit Chattopadhyay, Janney

Hey. Good afternoon, gentlemen. So just a question-- hey, Chis. How are you?

Good, thanks.

The ongoing LYNPA-- olaparib combo study. In terms of the doses being used, how does that compare with the 800 milligram dose of-- the approved dose of olaparib versus what's being tested in the ongoing clinical program?

Good question. I'm going to need a little help from Adrian on that. Can you walk him through?

So that seems to be (inaudible). How are you doing? So there is an interesting thing that some people may not be aware. The drug approve-- the olaparib approved at FDA was capsules, 400 milligram per BID capsule. So that's 800. They switched to tablets. And the equivalent tablet amount is 600. So 300 BID.

So we, in the trial that we're doing at the NCI, we're working with tablets. And we are already at 150 PO BID. So we're at half the [MPV] for tablets. And we're going to go as much as we can. And I can tell you again. We are in the second cohort. We have two patients, three actually-- probably a third, with no bone marrow toxicity. That's the major issue that these combinations have. And as I mentioned to you before, for the irinotecan, they were able to give 50 PO BID capsules. That's equivalent to maybe 30 milligram PO tablets. Because it's a higher pharmacokinetic. So we are well ahead of irinotecan combination.

I hope it helps.

Yes. That's very helpful. And then one more follow up on that. So at what level does this become clinically really interesting if you can get to 200 milligram tablet BID or the 250 milligram or anything above the 150 milligram BID would be especially in combo with CRLX101, would make it therapeutically really relevant?

So I'm going to answer it in twofold. One, it's already clinically interesting this patient who failed olaparib and failed PD-L1 and had these within a few weeks from hospice to full-time working. This has not happened spontaneously.

The second answer is also interesting. If you go to Johann de Bono's original Phase 1 trial, you can see responses in BRCA deficient patients, as low as-- less than 100 milligrams PO BID capsules. So we are already at 150 PO BID tablets. That's equivalent to 200 milligram capsules. So we are at doses that are active in the clinics, significantly active with partial responses.

Moreover, from the 101 dose, we are at 12 milligram per meter squared. This is already a dose that we've seen significant activity in the human tumor. So we could be expecting the in the right population relevant doses right now, relevant therapeutic levels right now.

Great. If I may have one more question then. This is still a dose escalation study, which is not enriched for any BRCA mutant ovarian cancer patients. So if it's an all-comer study, do you-- even if you go to the 200 milligram BID or higher olaparib dose, would you then see consistent response rates, or it doesn't matter because your primary focus really is to see if you could combine CLRX101 plus olaparib at the higher doses?

So let me address this. So this is indeed an all-comer solid Phase 1 dose escalation. And we are treating-- so basically the primary end point is to see safety. However, because of this activity that we're seeing and not toxicity, I'm discussing with some investigators at the NCI to try to start enriching patients with BRCA deficient tumors in order to start seeing activity right now. Because we believe that that will be the best way forward.

But again, the primary endpoint is safety. And we're going to obviously do expansion, and determine two more types of interest in the very near future.

Okay, so just last question, I promise. So given where your stock is right now, and this is a more philosophical question, here. Wouldn't it be more prudent to have patients in the dose escalation phase where you could actually see a response as opposed to just looking at safety here? Clearly because if you just report out, hey these two drugs can be combined, but we haven't really seen responses because maybe the right tumor types are not in the study, would the market have patients for that, or would it be more sensible to have some of these patients who are likely to respond? And thank you so much.

Debjit, it's a very fair question. And I guess I'd start off by saying, yeah, I don't really fully understand what's going on in the market, or what's going on with our stock. It is what it is. And we tend to focus on what we can control and not what we can't control.

But you say given where our stock price is, wouldn't it be great if we were doing something different on the protocol? That may or may not be true. I'm actually not sure. But I can tell you when we wrote this protocol with the NCI and AstraZeneca almost a year ago, we didn't design the protocol around what our stock price was doing. We designed it around the best way to develop this drug. And I think we felt and our friends at AstraZeneca felt, and certainly our friends at NCI felt the right thing to do was to try and get to a recommended Phase 2 dose as quickly as possible. Because if we did that, we would have accomplished something that no other PARP-topo combo had been able to do for all the reasons we've discussed earlier in the call.

So we're as curious as you are about the activity. And we like it when we get these anecdotes of activity from NCI. But I think our first priority and our main mission has to be to figure out what the right dose levels are for these two drugs. And as Adrian mentioned, we're already excited that we're at therapeutic dose levels of both drugs, and we're not seeing any signs of the toxicities that have plagued other PARP-topo combos. But we still have dose levels to go. We're only treating at 12 with 101, and you know we can go up to 15.

We're only treated at 150 with LYNPARZA, and we're moving to the third dose level cohort at 200. I myself would be delighted if we were able to treat at 200. And if we get to 250 or 300, that would almost be like icing on the cake. That would be incredible.

But I think the job of the NCI, AstraZeneca and Cerulean is to find that recommended Phase 2 dose, and then start expanding into the various tumor types that we've all discussed. Right? I'm not sure if that addresses your question, but I hope it helps. At least it's our thinking on the topic.

I appreciate the feedback. Thank you so much, and good luck.

(Operator Instructions) [John Robbins], private investor.

Hi. Thanks for allowing me to ask a question. Just question, given the current stock price, any possibility of a reverse split to stay above the dollar threshold to avoid a possible delisting?

John, thank you for the question. It's certainly an astute question. You're aware of the NASDAQ listing rules, as are we. We understand that our stock is trading below a dollar. As I said earlier, we don't fully understand why. But it is what it is. And we are-- I guess the way I'd answer your question is we are fully prepared to take the measures necessary to maintain our listing as a public company. And rather than walking through sort of the details on how that works, I think I would just like to affirm that I understand your question, and we're well aware of the situation and know how to deal with it.

Okay, great. Thank you.

Thank you. There are no further questions in the queue. So at this time, I would now like to hand the call back over to Mr. Chris Guiffre, Chief Executive Officer, for closing comments and remarks. Sir?

Thank you, Brian. And thank you, everyone, for joining us today. We look forward to reporting on our continued progress in March. Have a good night.

Ladies and gentlemen, thank you for your participation on today's conference. This does conclude the program and you may all disconnect. Everybody have a wonderful day.