Madrigal Pharmaceuticals Inc (MDGL) 2008 Q2 法說會逐字稿

Good day and welcome to the Synta Pharmaceuticals Second Quarter 2008 Financial Results Conference call. Today's conference call is being recorded and webcast.

At this time, for opening remarks, I would like to turn the call over to Rob Kloppenburg, Vice President of Investor Relations and Corporate Communications at Synta Pharmaceuticals. Please go ahead, sir.

Hello and thank you all for taking the time to join us today. With me are Dr. Safi Bahcall, President and Chief Executive Officer of Synta Pharmaceuticals, Keith Erlich, our Vice President and Chief Financial Officer, Dr. Eric Jacobson, Synta's Senior Vice President and Chief Medical Officer, and Dr. Jim Barsoum, the Senior Vice President of Research.

This morning we issued a press release that reported results for the second quarter ended June 30, 2008. This release can be found on our website at www.Syntapharma.com.

Before we go any further, I'd like to remind everyone that we will be making forward-looking statements during this teleconference call. Such statements, including statements relating to the timing and progress of clinical trials and financial guidance for 2008, reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such forward-looking statements.

Risks and uncertainties include the risk that the results of completed clinical trials may not necessarily be predictive of results in larger, later-stage clinical trials, and the other risks and uncertainties described under "Risk Factors" in our Form 10-K for the year ended December 31, 2007, as filed with the Securities and Exchange Commission. Synta undertakes no obligation to publicly update forward-looking statements, whether because of new information, future events, or otherwise, except as required by law.

I will now turn the call over to Dr. Bahcall, after which we will open the floor to questions. Safi?

Thanks Rob and thank you all for joining us this morning. We've had a very busy and productive second quarter. I will highlight some of the most significant developments, then turn it over to Keith for a financial update and then open up the call for questions.

First of all, we have been making good progress with our registration program for Elesclomol, our lead cancer drug. Over the past several months we've seen a substantial increase in enrollment in our Phase 3 SYMMETRY trial to a monthly rate that is among the highest we are aware for a large melanoma trial. We believe this is due to the growing acceptance of the strength of our Phase 2b data, the growing scientific data package behind the mechanism and its potential in melanoma, as well as a decrease in the number of competing trials.

If this trend continues, we would expect to complete enrollment of the SYMMETRY trial by the end of the year or first quarter, which would be an impressive achievement for a trial of this size and reflection of the hard work and abilities of everyone associated with the trial, particularly our clinical and operational teams and the investigators in sites participating in the study.

To date, there have been two independent Data Monitoring Committee safety reviews. On both occasions the recommendation has been to continue this SYMMETRY trial as planned. Coming up in the fourth quarter, we expect the interim, safety, and non-futility analysis of the PFS data to take place by the Data Monitoring Committee. The process for the review will follow the pre-specified charter agreed to with the FDA as part of our SPA.

As a reminder, the Company is quarantined from this analysis. At no time do we see the results. At no time do we have access to any unblinded data. The DMC will meet, review the data and let us know their recommendation. The charter specifies rules for recommending either to stop the study for futility or to continue the trial. There is no early stopping rule for efficacy. Once we have received the DMC recommendation, we would expect to issue a brief release.

Following the DMC review, assuming the recommendation is to continue, we estimate completing our target enrollment of 630 patients by the end of year or first quarter and meeting our goal of conducting the primary PFS endpoint analysis in early 2009. PFS is the primary endpoint of this trial. Therefore, once these final results are available, we would expect to review the results with the DMC and the FDA. Should those results be positive, our intention is to proceed with filing an NDA with the FDA as soon as possible.

Beyond our main registration program for Elesclomol, which is our highest priority, we, together with our partner, have been actively developing clinical plans for new indications. While melanoma presents a tremendous unmet medical need and a wide open market opportunity, we are equally excited by the potential for Elesclomol in other high oxidative stress cancers. Our preclinical data very clearly support usage in additional indications. These indications represent a very substantial growth opportunity, something that both we, and our partner, clearly recognize.

Our plan, as we have previously stated, has been to initiate new trials once the new formulation of Elesclomol was ready. The second-generation sodium salt formulation is water-soluble and does not require combining with a paclitaxel/Cremophor solution. We have made good progress with this new formulation and are on track to initiate a new trial with a sodium salt in a new indication in the fourth quarter. We will have more to say about the choices, indication and trial design details as we get closer to initiation.

In 2009, we expect to initiate a broad range of clinical trials with this new formulation and we will have a lot more to say about those choices later.

Finally, we are making good progress on many other aspects of Elesclomol, on our other programs and in growing our organization. For Elesclomol, we are continuing to build scientific and medical awareness. The presentation at ASCO on the benefits seen in first-line patients was well received, as was our global investigator meeting. Two-year overall survival data will be presented at ESMO in Stockholm in September. Our paper on the mechanism of action has been accepted in a peer-reviewed journal and will be published later this month. We expect publication of the Phase 2b trial results later this year.

We continue to advance our other pipeline programs, including STA-9090, our Hsp90 inhibitor, and two ongoing solid tumor Phase 1 studies are enrolling well and continue to dose escalate. The drug has been well tolerated to data and we're encouraged by what we are seeing in these studies. We are on track to initiate a Phase 1/2 trial of STA-9090 in hematologic cancers in the fourth quarter.

Finally, I was very pleased to announce this quarter the hiring of Michael Bailey, who led commercial operations at Imclone. At Imclone he built an organization that drove a blockbuster oncology product launch. We are thrilled to have him join us at Synta, where we look forward to Michael achieving similar success with Elesclomol.

I will now turn the call over to Keith Ehrlich, our Chief Financial Officer.

Thank you, Safi, and good morning everyone. Our major focus today as a Company is the development of our lead drug candidate, Elesclomol. The Elesclomol development costs formed the majority of our total R&D expenses.

As you know, this program is partnered with GSK and under our partnership agreement, we share responsibility for total worldwide development costs. Under the terms of our agreement Elesclomol development costs, including the melanoma Phase 3 program, are split according to an agreed targeted percentage. We pay what has been described in our filings as "a modest share of total costs". The remainder, which represents the substantial majority, is paid by GSK.

The agreement with GSK also specifies an initial period during which we are responsible for all melanoma development costs, up to a pre-specified limit. During this period, GSK is responsible for operational milestone payments to us totaling up to $50 million. These payments essentially cover their share of the melanoma costs.

Following the initial period, additional costs incurred for the program will no longer be our sole responsibly. They will be shared with GSK on an ongoing basis according to the agreed targeted percentage. We estimate that this transition will occur in the second quarter of 2009.

From an accounting standpoint, payments by GSK to Synta are recorded as cost-sharing revenue and costs incurred by GSK in support of the Elesclomol program are recorded by Synta as a reduction in cost-sharing revenue.

In the second quarter of 2008, we recognized $1.3 million of license and milestone revenue in connection with our partnership agreement with GSK that we entered into in 2007. This was offset by $1.9 million of net cost-sharing reimbursement to GSK under the agreement, resulting in net collaboration revenue of negative-$631,000. Please note that this cost-sharing reimbursement to GSK is not payable by Synta until final completion of the SYMMETRY trial and therefore does not affect current Synta cash flow.

For the quarter ended June 30, 2008, we reported a net loss to common shareholders of $22.7 million, or $0.67 per basic and diluted share, compared to a net loss to common shareholders of $16.7 million, or $0.50 per basic and diluted share for the same quarter during 2007.

R&D costs increased from $13.6 million in the second quarter of 2007 to $18.3 million in the second quarter of 2008. This increase was principally due to costs related to our clinical program, including the SYMMETRY trial, the development of the sodium salt formulation of Elesclomol, as well as our two Phase 1 trials of STA-9090.

G&A expenses increased from $3.9 million in the second quarter of 2007, to $40 million -- excuse me, $4.0 million in the second quarter of 2008. The Company ended the second quarter of 2008 with $79.4 million in cash, compared to $115.6 million at the end of 2007.

Based upon our current operating plans, we have maintained our financial guidance. We expect to end 2008 with between 60 and $75 million in cash. This includes 40 to $50 million in anticipated operational progress milestone payments from GSK, as we previously guided and assumes no further income from other partnerships or financing events.

Under the terms of our agreement with GSK, Synta will be eligible for a milestone payment of $25 million upon achieving the primary endpoint for the SYMMETRY trial or upon determination by Synta and GSK to file for regulatory approval. Based upon our current estimates, we expect to conduct this primary endpoint analysis in early 2009.

Finally, as noted in our press release, we filed an S-3 shelf registration with the SEC this morning. This universal shelf registration allows us to sell up to $150 million of various types of securities over a three-year period.

As we have said in the past, we have no immediate plans for a financing, given current general market conditions and because we have sufficient financial resources available for our current needs. However, we feel that filing a shelf registration at this time provides us with financing option going forward, should circumstance change or opportunities develop. The terms of any sale would be announced in a filing with the SEC at the time of any such sale.

I will now turn the call back to Safi.

Thanks, Keith. I will now open the call to questions and discussion. Operator?

(OPERATOR INSTRUCTIONS) Mike King, Rodman & Renshaw

Hey, good morning. Can you hear me okay?

Yes we can hear you, Mike.

Okay, quick question. Safi. Let's assume that the trial runs to a successful conclusion in early 2009 and you get your PSF endpoints. Tell us then what happens. I assume all patients on the placebo arm will, then, be offered to be crossed over to Elesclomol. And what kind of statistical problems will that create, in terms of ultimately seeing a survival benefit?

Hey, Mike. I'm going to turn this over to Eric in a second. But just to clarify, the decision or recommendation to cross over would be up to Data Monitoring Committee, which would certainly be reviewing the results at that point. Just as a reminder, the analysis that we would do for PFS in the first quarter, or an early part of '09 is a final analysis for PFS, but it is not the final analysis for OS. So, in that sense, its interim for OS and we would be (inaudible - multiple speakers) --.

Right, understood.

(Inaudible - multiple speakers) DMC about (inaudible - multiple speakers).

Right, right, okay.

Do you have anything to add, Eric?

Well, this is Eric Jacobson. Mike, I think that, number one, this data goes to the DMC and we get an independent recommendation. Number two, we would plan, and this is already in our pre-specified charter, to discuss the results with the FDA before making any changes to the conduct of the trial. So we would have not only the recommendation of the DMC, but discussion with the FDA before any change.

Right, but that's going to take time and I would imagine that people would want to, if the trial is successful, they'd want to -- why would to remain on placebo?

Yes, well I can understand that point. However, I want to remind that at the time of the analysis the trial will be fully enrolled and there will be some time between the data analysis and discussions. So, at that point, it's unclear whether there would be any need to cross over patients.

Okay and then just a quick question about scanning. Can you remind us of the frequency of the scans and how they may be similar or different than the frequency of scanning in Phase 2?

The scanning per the protocol is done every other cycle. The scanning is based on the date of randomization for the patients.

So every cycle means every eight weeks?

Every eight weeks.

Was that the same as Phase 2?

It was the same as Phase 2, yes.

Okay. Okay, thanks very much.

Jason Kantor, RBC Capital Markets

Hi there. I'm interested -- you said that your rate of enrollment is accelerated and that you would describe it as about the highest that you are aware for any large melanoma study, which begs the question why isn't this enrolling ahead of schedule. Presumably you wouldn't have, in your previous guidance, assume that you would achieve such a high level of enrollment and it seems that, in the language here, you're opening the possibility that enrollment actually won't complete by year-end '08. Is that your expectation?

Yes, this is Safi. When we set the target goal, and before we started the study, of December, we, I think a few quarters ago, announced that we had a delayed start in initiating the study. So, based on that, we've said consistently that December would be an ambitious goal.

Based on what we've seen, we've been very encouraged lately with the enrollment rates, which are among the highest that we're aware of for any large melanoma trial, but we wanted to give ourselves some flexibility, because you just never what happens over holidays or in a summer slowdown.

So we're confident that we'll meet the enrollment goal, if the trend that we're seeing continues, either by the end of the year or slipping into first quarter next year. In either case, that puts us in the position to meet our original objective of conducting the primary endpoint analysis in the early part of '09.

And just to be clear, do you mean Q1 when you say early part of '09?

It's a little hard to get more specific until we have fully understood the enrollment rate and the event rate and understand exactly when we push the button, but it could be Q1. I think that's likely. It might spill over into Q2. It's just hard to get more specific right now.

Okay and the costs that you're -- the non-cash costs that you're incurring and you say you're not going to actually have to pay those the Glaxo until the completion of the study. Do you mean completion of enrollment, the primary PFS data, or the overall survival data? What's -- when is the end of the study defined?

That term means the final end, so it's final case study report. So that's well after enrollment, well after PFS data, well after OS data, so that's far off.

Okay. And then, finally, the 40 to $50 million milestones and the 60 to $75 million cash, is that dependent at all in the completion of enrollment? Is that a critical milestone for you? So, that is, if the completion of enrollment is in Q1 does that change it or put you at the low end of those numbers?

We're confident about the 40 to $50 million. I don't think the exact details of enrollment timing are going to impact those milestones in any significant way.

Okay. Thank you.

Joel Sendek, Lazard Capital Markets

Hi, thanks. I had a question about the DMC review in the fourth quarter. Can you tell us more precisely when that might take place, based on what you know now?

It's hard to get much more specific. I'd say more likely it'd be toward the end of the fourth quarter.

Okay and that's similar to the two reviews you had before?

No, the two DMC reviews we've had up to now are entirely safety reviews.

Okay.

The one that's coming up is the only interim PFS analysis.

I see. I see. Okay, great. And then I guess following up on the last question about the 40 to $50 million from GSK, presumably that's what you're saying its this year, that might not be an -- if that's not associated with enrollment, might it be associated with this DMC review?

No, not that DMC meeting.

Okay. Just wondering what else it could be. Any hints?

We're contractually not able to get into the specifics.

Okay. All right. Thanks anyway. And then on the other indications, can you give us some idea what the range of other cancer indications would be for the new formulation?

Yes. We have always been excited about the high oxidative stress cancers based on the science that we've seen in the lab and what we've seen in the clinic, and as we've mentioned in the past, those include prostate, ovarian, breast cancer, as well as pancreatic and hematologic. And so you'll definitely hear more about that very soon.

Okay. Thanks a lot.

Derek Jellinek, SIG

Great. Thanks for taking my question, guys. Just quickly following on the enrollment rates, I was just wondering if you've seen any delays enrolling ex-U.S. sites? And actually, could you comment, Safi, on how many sites are currently up and enrolling and are you comfortable with the number of sites?

Eric, you want to --?

We'll, first of all, I think we've mentioned earlier that there were some regulatory delays in Europe at the beginning of the trial, but now all the European countries are up and running. As far as the total number of sites, we now have approximately 150 sites initiated, which was our initial target, so we've achieved our target as far as total number of sites.

But do you see those sites being added to at all?

Well, we do a continuous assessment about performance of sites. We also have had tremendous interest from investigators worldwide in participating in the trial. So we are doing further assessments of potential sites and could add additional sites, based on the high degree of interest.

Okay, great. And just -- I'm looking at the -- thinking about the salt formulation of Elesclomol. Have you guys completed the bridging study to compare the PK between the salt and free acid form and if so, what kind of results would you, did you see from that?

We had a previous salt formulation that was tested in the clinic. We did do a formal bridging study between those two formulations and showed bioequivalence. For other reasons that formulation did not go forward and now the new sodium salt formulation will go into the clinic at the end of this -- in fourth quarter of this year.

Okay. And just quickly, if I may, on 9090. I was wondering if you can update us when we're going to see data from the Phase 1 study, the two Phase 1 studies? And any kind of color on hematological cancer you're looking to target in Q4? I'm assuming maybe CML, given BCR-ABL as a client protein, or AML, given FLT3. Any kind of color on that?

We haven't determined when we would be announcing data on our first two studies, but when we decide on what scientific venue we'll make that announcement. And as far as the hematological study, the protocol is written for a host of hematological malignancies and certainly we're interested in some of the ones you've mentioned, based on mechanism.

Okay and then quickly, if I may? Safi, you said ESMO may be when you're going to report survival data from the Phase 2, any other upcoming data releases and scientific meetings? Thanks.

Well, at ESMO we are presenting two-year survival data. We also have data on safety analysis for the compound across all our studies. And then we have our publication on mechanism of action that will be coming up and beyond that we have some other potential venues, but we haven't formally announced other venues to date.

Okay, great. Thanks for taking the questions.

Andrew Vaino, Roth Capital Partners

Hey, thanks for taking my call. I just had a quick query on if we'll get anymore information on the apilimod at any point soon.

Well, as you know, we are initiating an additional cohort in our rheumatoid arthritis study. That study is open for enrollment and we won't be making any announcements about that until we are further along with that cohort.

Okay. So, by open for enrollment can I assume then that means that you've not enrolled any patients yet or not dosed any patients yet?

We have patients in screening and we anticipate we'll be dosing shortly.

Okay, great. Thank you.

Robyn Karnauskas, Deutsche Bank

Hi guys, congrats on the progress and thanks for taking my question. So I just wanted to know whether you've announced yet whether the number, the minimum number events for the progression-free survival endpoint has been reached?

No. We haven't announced that and part of our standard operating plan is that we don't discuss -- we don't have access to the -- we're quarantined from any ongoing operational aspects such as event rates and we certainly wouldn't expect to announce that.

Okay. So, I guess, you may not be able to answer this question either. But if the number of events already occurred, then going into the futility analysis, how does that impact the potential outcome from that analysis, the minimum number of events for the final analysis has already occurred and they'll have all those at the meeting?

Yes. Since we don't have any access to the data, it's pretty hard for us to speculate what they may or may not do. I mean, they'll have some number of events. They'll take a look at data. There is only in the charter, there's only a specified stopping rule for futility. So, if they feel that, based on what they're seeing, there's an extremely low likelihood that the study will succeed, then they can recommend stopping the study. Otherwise, in the charter, all they can really recommend is to -- the intent is really to just recommend continuing the study unchanged.

Okay.

Beyond that, I really -- we don't have access to the data. We couldn't really guess what they might or might not do when they see the actual results.

Okay and then the last question is on the futility analysis in that final meeting in the fourth quarter. What triggers that meeting?

It's a combination of making, through the statistical group that's overseeing the trial, making sure that they have enough events for it to be a worthwhile meeting, as well as this is about the right time in the study. That it's sufficiently in for the final data analysis but there are enough events. So it's kind of a combination of factors, but this was about the right time.

Okay, great. Thanks.

There are no further questions in the queue. I'd like to hand the floor back over to Dr. Safi Bahcall for closing comments.

Thanks, everybody, for your time today and we look forward to updating you on our next call.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, 9