Gyre Therapeutics Inc (GYRE) 2011 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth-quarter 2011 Targacept, Incorporated earnings conference call. My name is Jeff, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Alan Musso, Chief Financial Officer. And you have the floor, sir.

Thank you, Jeff, and good afternoon, everyone. Don deBethizy, Targacept's President and Chief Executive Officer and Dr. David Hosford, Targacept's Vice President of Clinical Development, are also here with me today. Before we get started, I would like to remind you that our comments today may include forward-looking statements made under the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to future events, plans, expectations, objectives, or financial results or condition, including for any of our product candidates, the design, scope, or other details of clinical trials, the timing for initiation or completion of, or for reporting of results from clinical trials, or for submission or approval of regulatory filings, target indications or commercial opportunities, as well as any payments we may receive from AstraZeneca, AstraZeneca's development plans for product candidates licensed from us, our cash runway, revenues or expenses, plans, expectations, or any other matter that is not a historical fact.

Actual results may differ materially from those expressed or implied by any forward-looking statement as a result of many factors, including those described under the heading Forward-looking Statements in our press release from earlier today or under the heading Risk Factors in our most recent Form 10-K or in later filings with the SEC. We caution you not to place undue reliance on any forward-looking statement. Also, any forward-looking statement that we make speaks only as of today and should not be relied upon as representing our views as of any future date. We disclaim any obligation to update any forward-looking statement, except as required by applicable law.

And now I'll take a few minutes to review our financial results for the fourth quarter and full year of 2011, which were released earlier today, and then I'll turn the call over to Don for some remarks. For the fourth quarter of 2011, we had a net loss of $9.8 million, compared to a net loss of $2.2 million for the fourth quarter of 2010. The change is due principally to higher research and development expenses and a decrease in the recognition of deferred revenues from previously received payments. For the year ended December 31, 2011, we reported net loss of $8.5 million, compared to net income of $10.9 million for 2010 with the change due primarily to increased R&D expenses and partially offset by an increase in the recognition of deferred revenues from previously received payments. We ended the year with over $249 million in cash and investments in marketable securities.

Moving to our financial guidance, based on our current operating plans, we expect for the year ending December 31, 2012, our net operating revenues to be in the range of $50 million to $60 million, and our operating expenses to be in the range of $75 million to $85 million. We also expect our cash, cash equivalents, and investments balance at the end of 2012 to be at least $165 million. We continue to expect that our current cash resources will be sufficient to meet our operating requirement through at least the end of 2014. And now let me turn the call over to Don.

Thanks, Alan, and good afternoon, everyone. Let me start with where we are with the RENAISSANCE program for TC-5214 as an adjunct to antidepressant treatment for patients with major depressive disorder who do not respond adequately to initial therapy. The program includes five Phase 3 clinical trials, two flexible dose studies, two fixed dose studies, and a placebo-controlled long-term study that is focused primarily on safety, but also includes efficacy end points. As I'm sure you are aware, in the fourth quarter of last year, we and AstraZeneca reported disappointing results from the two flexible dose studies. The other RENAISSANCE studies are nearing completion, and we continue to expect to report top-line results in the first half of this year. If successful, 5214 has the potential to become the first novel mechanism for treating depression in decades, which would be a welcome development for millions of patients for whom existing treatments are inadequate.

The dearth of innovation in delivering new therapies to treat depression underscores the challenges for drug development in a therapeutic area where clinical outcomes have often been confounding. While the results to date from the RENAISSANCE program have clearly impacted us, our Company profile provides us with a solid foundation for success. First, while many eyes externally have been focused only on 5214 and the RENAISSANCE studies, we have a deep clinical pipeline of five mid- to late-stage product candidates that represent multiple different innovative NNR pharmacologies and target important therapeutic application. Second, we have an experienced management team with a proven track record of capital-efficient therapeutic discovery and development. Third, we have a history of attracting partnering interest for our programs, allowing us to leverage the expertise and global reach of major companies in the industry, while at the same time, diversifying risk and maintaining breadth in our pipeline. And, finally, as Alan noted, we are well capitalized with a cash position that we expect to fund our operations well beyond the projected timing for outcomes from all of our ongoing clinical trials.

Of course, the most important part of our business is the opportunities for potential new medicines and the creation of significant value represented by our clinical pipeline. Beyond the RENAISSANCE program, our clinical outcomes will come from Phase 2 trials of TC-5619 and TC-6987. These wholly owned NCEs are highly selective for Alpha7, a distinct NNR mechanism that is supported by a substantial body of science for therapeutic application in a wide array of diseases and disorders. Last quarter, we initiated a Phase 2b study of 5619 as a treatment for the negative symptoms and cognitive dysfunction in schizophrenia. You may recall that 5619 showed encouraging findings on negative symptoms and on aspects of cognitive dysfunction in schizophrenia in our previous Phase 2 trial. These needs are largely unmet by currently available medications. In our ongoing study, we plan to enroll approximately 450 patients with stable schizophrenia, targeting at least 25% in the US, and the rest in Eastern Europe. We have also designed the study to enroll approximately 80% tobacco users, consistent with the estimated actual patient population. We expect results from this study to be available in mid-2013.

We also recently initiated a separate Phase 2 study of 5619 in adults with inattentive predominant ADHD. According to FDA, studies suggest that as many as 4% of adults suffer from ADHD, and it is well known that ADHD manifests itself in adults more by inattention than hyperactivity. In addition, the market research firm, Decision Resources, has estimated that around 60% of pediatric ADHD cases are inattentive predominant. In our prior 5619 adult ADHD study, we saw encouraging efficacy signals in the inattentive predominant patient sub-population on both clinician-rated and subject-rated measures, indicating that both the patients and the investigators were perceiving a benefit from 5619. For our ongoing study, we're now planning to enroll approximately 150 adults at sites in the US. We expect to complete this study and report top-line results in the second half of 2012.

I'll turn now to our other wholly owned and internally developed alpha7 modulator, TC-6987. We are currently conducting two separate trials of 6987 in inflammatory disorders, one in asthma and one in type 2 diabetes. These are early Phase 2 studies, designed to guide the selection of indications for later stage development. We expect to complete both studies and report top-line data in the first half of this year.

Moving on, last year we initiated a Phase 2b study of AZD3480, an alpha4beta2 NNR modulator in mild to moderate Alzheimer's disease. 3480 remains licensed to AstraZeneca under our cognitive disorders collaboration agreement, although we are conducting this study with much of the cost offset by payments that we have received from AstraZeneca in connection with the study. We are conducting this study at sites in Eastern Europe and the US, with 3480 being evaluated over a 12-month period head-to-head against Donepezil, the most commonly prescribed Alzheimer's medication. As we mentioned previously, we successfully utilized the FDA special protocol assessment process to confirm with the agency that this Phase 2b study has the potential to serve as a pivotal trial.

Our efforts in Alzheimer's disease also include AZD1446, another alpha4beta2 NNR modulator licensed to AstraZeneca. We recently announced that AZ has informed us of its plans to progress 1446 as a treatment for Alzheimer's disease. AZ is responsible for funding the development of 1446, and the next clinical trial is expected to be a Phase 2 study as an adjunct treatment to Donepezil in patients with mild to moderate Alzheimer's disease. The anticipated adjunct approach for 1446 is complementary to our ongoing 3480 monotherapy trial. And we view AstraZeneca's intent to progress 1446 as reflecting well on the promise of NNR therapeutics for treating a growing epidemic. With estimates that by 2050, the number of people in the US age 65 and older with Alzheimer's disease may grow from over 5 million to a projected 11 to 16 million, barring the emergence of medical breakthroughs to prevent or more effectively treat the disease.

I'll close by saying that this will be an important year for us, as we expect to deliver results from the remaining RENAISSANCE studies of 5214 and from Phase 2 trials of 5619 in inattentive predominant ADHD and 6987 in inflammatory disorders. We are especially focused on the efficient use of capital and prudent portfolio prioritization, and we are continuing to assess all aspects of our business to ensure that post-RENAISSANCE program, we are well positioned to leverage our clinical programs, innovative science, strong cash position, and talented employees, to improve patients' lives by restoring their independence. And with, that we'll open the call up to any questions.

(Operator Instructions) Our first question comes from the line of Robyn Karnauskas with Deutsche Bank. Please proceed.

Hi, this is [Leesia] for Robyn. And I have a question about 6987, with that readout in the first half of the year. What do you intend to learn from the asthma trial to better inform the development of your inflammatory disorder franchise?

I think I'll turn that over to David. The top line, of course, out of this is we'll establish safety in patients. That will be an important outcome from the trial. We have FEV-1 as the primary end point in that trial. And -- but what we're hoping to do is to be able to see cytokine patterns moved to be able to see things that are being moved by a four-week treatment period. And with that, I'll turn it over to David to elaborate a little bit more.

Sure. In our pre-clinical results, we saw very good evidence for decrease in airway resistance, which as you know, is one of the passing pneumonic hallmarks of asthma. And so we developed this particular trial in order to use doses that would be estimated to be equivalent to those that were effective in this pre-clinical model. So we are measuring FEV-1, as Don said, as one our measures and other accepted regulatory measures, even though this is an early learning trial, such as methacholine-induced bronchospasm. We will learn from the cytokine profiles that we are gathering in that trial, as well as from a variety of other secondary end points.

In diabetes, we're doing the same thing. We're using a regulatory end point, the fasting plasma glucose, but we're gathering a lot of other information about estimates of insulin-receptor sensitivity, estimates of beta cell function, and inflammatory cytokine profiles in that trial as well. So I think at the end of it, we'll come out with a package of information that will allow us to evaluate whether to continue and how to continue, in these two inflammatory disorders.

Okay. Great. And so just basically you'll learn more from the secondary end points in conjunction with the primary end points.

That's a very good way of putting it much more succinctly than I did.

Our next question comes from the line of Alan Carr with Needham & Company. Please proceed.

Hi, this is Mark on the line for Alan. I was just wondering if you could talk a little bit about the OpEx burn for 2012. We notice it is down pretty significantly. I was wondering if you could elaborate which programs are associated most with the burn, and how your assumptions relate to the success or failure of 5214?

Sure, this is Alan. Most significant change in terms of our operating expenses in this year versus 2011 is the 5214 co-development cost share. Last year that program was up and running very actively throughout the full calendar year, where in this year, we're expecting the results from the RENAISSANCE program to read out here in the first half, and then the monotherapy trial has an expected readout in the second half. So that will be a significantly lower cost spend for us, and that's the main driver for the reduced expenses this year.

Our next question comes from the line of Bret Holley with Oppenheimer. Please proceed.

Yes, thanks for taking the questions. I'm wondering on 6987, I guess what do you need to see in the early Phase-2 data to progress? And how are you thinking about, at this point, partnering the programs? And how do you think of the leverage, too, because obviously, you guys are very focused on CNS, and I think everyone knows that. And so I would be very surprised if partners you were negotiating with -- I put your feet to the fire as far as what you could or could not do as far as additional development.

Well, this is -- this area of the nicotinic receptor mechanism and inflammatory disorders goes back several years. And Kevin Tracey at the Feinstein Institute published a seminal paper in nature linking the Alpha7 neuronal nicotinic receptor to modulating and inhibiting cytokinic suppression. That has gone on. He has recently published a paper in science. There was a company created in the meantime called Critical Therapeutics that took a run at this. We acquired all of their IP&S through Cornerstone last year -- I think it was last year, right Alan, or maybe the year before. And we -- so this is an area that's been brewing. We have been, as you said, Bret, been focused on CNS, with the two low-hanging fruit that emanated from all of the tobacco research and the nicotine effort was around cognition and mood stabilization or depression.

But we have been keeping our eye and actually generating data on our Alpha7 compounds in this area for some time, and have recognized a long time ago that with the picomolar IC50s that are associated with these Alpha7 compounds, and the role of the Alpha 7sub-type and activated macrophages, as well as the peripheral nervous system, we can't forget this is also a nervous system response. We're working in close to our knitting in the sense that we're working on a peripheral nervous system activity, but then gets mediated at the activated macrophage. It gives you a flavor as we interact with partners, especially partners interested in new, exciting mechanism in these chronic inflammation disorders. And where we found ourselves with 6987 was a situation where we had four-week toxicology data. We have always had a bias to learn in patients as much as we can. And the pre-clinical package on asthma and type 2 diabetes were just outstanding. So that is how we ended up in those indications.

It was a practical approach to getting patient data as soon as possible, and then coupled with additional pre-clinical data that we have in other areas and the epidemiology around ulcerative colitis and nicotine conducted by the Mayo Clinic, I think partners are quite interested in the new mechanism. And they're all eager, of course, to see the outcome from these two trials, as we are. So we're looking forward to these trials contributing some additional learning. And then hopefully, we're interested in finding a partner, obviously, because inflammation is an area that we have not expanded our head count to address. And we have focused on the basic mechanisms related to NNRs.

Great. And then on 5619, as far as the 80% smokers in the trial, one, how are you practically controlling that as far as tobacco use? And is that a hard target? Are you going to essentially cap enrollment if there is imbalance in smokers versus non-smokers?

David, why don't you address that.

Sure, we're monitoring on an ongoing basis, the enrollment of different subjects into the trial. We measure their tobacco use by looking at their urinary cotinine, and we have certain defined algorithms for what is allowed for a tobacco user, what is not allowed for a tobacco user, what is allowed for non-user. And we actually disqualify people who meet one definition when they're actually supposed to be in the other camp. We're not going to maintain a hard-and-fast 80/20, but we're going to shoot for 80/20, plus or minus a few percent. It is not exactly a stratification, but it will try to capture the real-world prevalenceof tobacco use, which is around 80% in western countries.

Okay. And I guess the question is there, obviously with the differential efficacy you saw in the earlier Phase-2 trial, is the powering of the study adequate, assuming that maybe the 20% non-tobacco users perhaps may not respond as (inaudible).

We'll still be able to see a signal in the tobacco users, and we'll be able to gauge efficacy even if it is not statistically significant in the non-users. We can look at magnitude of effect and estimate whether that magnitude of effect would have been significant had the sample size been larger. So it will give us a good look at both camps.

And, Bret, I think it is important to add and just remind everyone that when we looked at our data from the previous Phase-2 trial, it wasn't that we didn't have any activity in the non-tobacco users. And what we found is that the non-tobacco users who were on drug for 12 weeks and at the highest dose, which was 25 milligrams, we're starting to show activity. So we have, as you know, we've anchored the trial at a 5-milligram dose, which is in the middle of where we saw the effect. And then we went to 50 milligrams because the pharmacokinetic, pharmacodynamic analysis really argued for increasing the dose. We have a very wide therapeutic index on this very drugable compound. So that is easy for us to do. And then the other part of it is, is we've gone now from the 12-week, three-month trial to a six-month trial. And part of that reasoning was around regulatory advice that we got from the FDA, and their interest in having six-month trials. But I think it also is an advantage to us to treat our patients longer based on the first Phase-2 trial.

(Operator Instructions) All right, that will conclude the question-and-answer portion. I would now like to turn the presentation back over to Dr. Don deBethizy for closing remarks.

Thank you, Jeff. Well I want to thank everybody for being attentive and being on the call today. We look forward to an exciting 2012 as we move our pipeline of five clinical stage candidates to completion and over the next two years. So thank you very much. Take care.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a wonderful day.