Madrigal Pharmaceuticals Inc (MDGL) 2008 Q4 法說會逐字稿

Good day and welcome to the Synta Pharmaceuticals' fourth-quarter and year-end 2008 financial results conference call. Today's conference 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 Safi Bahcall, President and Chief Executive Officer of Synta Pharmaceuticals; Keith Ehrlich, our Vice President and Chief Financial Officer; Eric Jacobson, Synta's Senior Vice President and Chief Medical Officer; Jim Barsoum, the Senior Vice President of Research; and Michael Bailey, our Senior Vice President and Chief Commercial Officer. This morning, we issued a press release that reported results for the fourth quarter and year ended December 31, 2008. This release can be found on our website at www.syntapharma.com.

Before we go any further, I would 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 2009, reflect our current views with respect to future events and our 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, the expected timing and amounts of milestone payments under our agreements with GSK and Roche, financial guidance for 2009 and the other risks and uncertainties described under Risk Factors in our Form 10-K for the year ended December 31, 2008 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. At the conclusion of formal remarks, we will open the floor to questions. Safi?

Thanks, Rob and thank you, all, for joining us this morning. Today, I would like to start by asking Eric Jacobson, our Chief Medical Officer, to update you on our ongoing analysis of the results of our Phase III trial of Elesclomol in metastatic melanoma, which I know many of you have questions about. I will then review our progress on other programs and plans for 2009. Finally, Keith Ehrlich, our Chief Financial Officer, will provide an update of our financials and then we will open the call to questions. Eric?

Thanks, Safi and good morning, everyone. As you know, in February 2009, we suspended our global Phase III clinical trial of Elesclomol plus paclitaxel in metastatic melanoma called the SYMMETRY trial following a meeting of the independent data monitoring committee or DMC.

The DMC noted that while the primary endpoint of progression-free survival showed a trend that favored the Elesclomol arm of this study, early analysis of the secondary endpoint of overall survival favored the control arm.

The DMC report stated that because the causes of death are not known, they could not be sure whether this was an adverse treatment effect, an effective differing post-progression off-study treatment or a chance effect not relating to the study drugs at all and that this was a quote, paradoxical outcome, unquote, not foreseen prior to study initiation.

The DMC also noted in its report that the overall survival for the Elesclomol arm is in the range of what one would expect for survival rates in large, multi-national trials in metastatic melanoma while the overall survival for the control arm was somewhat longer than would be expected.

Based on these observations, the DMC recommended that unblinded data be released to us and that we provide appropriate notification to investigators and patients. While it is still early days in our analysis of the SYMMETRY Phase III results, so far, we have found no specific target organ toxicities or adverse events that can explain the imbalance in overall survival observed.

This is an important finding because it may remove one barrier to potentially getting the program back into clinical development. At this point, there is no new information on why the imbalance of overall survival between the treatment arms was observed. It is possible that the overall survival results from this trial may change with time because the survival data are not yet mature with a relatively small fraction of the prespecified number of survival events having occurred. We expect the survival data to mature, meaning be robust enough to draw conclusions, by the end of 2009.

We and our partner for the Elesclomol program, GSK, are currently investigating a number of aspects related to the SYMMETRY trial results. This information will help to inform our choices for the future direction of this program, including whether or not to restart the program. I know that many of you would like to know more details about the analysis. However, it is still early and it would not be appropriate to comment further until we and GSK have finished analyzing the data. It is difficult to provide an update on how long this process will take; however, I can say it is a top priority for both Synta and our partner and we will provide updates as soon as we can. I will now turn the call back to Safi Bahcall.

Thanks, Eric. While we're obviously disappointed with the results of the SYMMETRY trial, we have always managed our business so that we can be in a solid financial position to continue to advance the rest of our pipeline should any one program suffer a setback. As a result, today, we have at least two years cash and the resources to advance our other programs and we are fortunate that these programs have been generating a high degree of investigator interest.

Let me begin with a review of our oncology programs outside of Elesclomol, starting with our novel synthetic Hsp90 inhibitor, STA-9090. Our two ongoing solid tumor dose-escalating trials of SDA-9090 have shown encouraging results to date, including signs of biological and clinical activity. We have seen a clear dose response relationship with the Hsp70 biomarker. We have also seen two confirmed responses and a number of prolonged stable diseases in what is a highly refractory patient population and we have not yet reached maximum dosing in either study, which is quite encouraging. We hope to present preliminary data from these trials in the second half of this year.

The mechanism of action of this compound and the strong data we have seen preclinically have suggested hematologic cancers are promising opportunities. We recently initiated a Phase I/II trial in hem cancers with a twice-a-week schedule and expect to begin a Phase II trial with a once-a-week schedule later this year as well.

The collected data to date on this program, including the data generated by us, the data generated by our academic collaborators and the Phase I data, have led to a high level of enthusiasm from clinical investigators with whom we have reviewed the program. We have received a very sizable number of proposals for initiating trials across a fairly broad range of cancers types. These proposals are based on the understanding of molecular pathways involved in those cancers types and the overlap with targets strongly inhibited by STA-9090.

We expect to collaborate with a number of these investigators and initiate several clinical trials in solid tumor cancers in the second half of this year. As we and our collaborators make our final choices about new indications and trial designs, we will communicate these more specific plans.

Of note is that the interest we are seeing includes interest from investigators who have worked with all the Hsp90 inhibitors in the industry, as well as Gleevec, Sutent and/or Tarceva and are excited by the superior in vitro and in vivo profile demonstrated by STA-9090. A number of these results will be presented at scientific meetings and in peer-reviewed publications later this year.

We believe this program has very substantial value and we have made progress in both second-generation and third-generation compounds. We have a second-generation injectable Hsp90 inhibitor with some enhanced properties in preclinical development. In addition, we are working on a new series of Hsp90 inhibitor compounds that may be orally administered.

Moving on to our inflammatory disease programs. Apilimod, our oral IL-12/23 inhibitor, continues to enroll patients in a Phase II rheumatoid arthritis clinical trial. The RA study completed initial enrollment of 22 patients and the preliminary results show encouraging biomarker and clinical [signals], suggesting activity in this indication. Based on these results, we elected to enroll an additional cohort in this trial for a higher dose and expect to have results from this cohort in the second half of 2009.

I was very pleased in December of 2008 that we could announce a significant new partnership, R&D partnership, with Roche for our CRACM inhibitor program. This program represents a very exciting new potential category of oral disease-modifying agents for treating autoimmune and inflammatory diseases such as rheumatoid arthritis by targeting the ion channel and immune cells, which is critical to their function.

This agreement provided Synta with $16 million in an upfront payment, reimburses us for all costs for this program, including all discovery, preclinical and clinical costs, and provides for very substantial milestone payments and royalties on any approved products.

With our lead product, we have seen very potent anti-inflammatory activity in preclinical studies both in vitro and in vivo. I am pleased to announce today that we recently initiated preclinical development of this lead compound and are targeting a Phase I start in 2010.

In addition to the lead drug candidate, we are actively at work on next-generation compounds. Because there are a number of CRACM ion channel targets on immune cells, next-generation compounds could potentially apply to different immune system diseases. For example, one compound for RA, one compound for allergy asthma, one compound for transplant rejection. This makes this quite an exciting program with broad potential for expanding into a number of therapeutic areas.

Our plans for 2009 include first advancing each of these programs to the next inflection point as we have outlined above and second, creating one or more new partnership opportunities. We have shown in the past two years that Synta has the ability to enter into major alliances with leading pharmaceutical companies. Because we are in a solid financial position and have a variety of programs underway with unique advantages and because we have the flexibility that comes with having a number of options, we believe we are in a good position to enter into collaborations on favorable terms. I will now hand the call over to Keith Ehrlich who will provide an update on Synta's financial operations.

Thank you, Safi and good morning, everyone. We ended the year with $89.6 million in cash, cash equivalents, marketable securities and collaboration payments receivable, which includes a $16 million nonrefundable upfront payment that was paid in January 2009 under our agreement with Roche. This compares to $115.6 million in cash, cash equivalents and marketable securities as of December 31, 2007.

In addition, we earned and received a $10 million milestone payment from GSK in the first quarter of 2009. On March 12, we committed to a restructuring that consisted principally of a workforce reduction of approximately 90 positions to a total of approximately 130 positions to better align our workforce to our revised operating plans following the suspension of our SYMMETRY clinical trial. We estimate our costs in connection with the workforce reduction will range from $1.4 million to $1.5 million.

In addition, we are in active negotiations for the termination of certain SYMMETRY-related contracts and are reviewing our need for certain facilities and related assets and accordingly, expect to incur additional restructuring charges. However, we are unable to estimate the amount of those charges at this time.

We expect our ongoing research and development costs and our general and administrative expenses in 2009 to be significantly reduced from 2008 levels as a result of our suspension of the SYMMETRY trial and related restructuring.

Based upon our current operating plans, we anticipate that nearly $100 million of cash resources available to us in the beginning of 2009, together with expected reimbursements and milestones from our Roche agreement to be sufficient to fund our planned operations for at least two years. I will now turn the call back over to Safi.

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

(Operator Instructions). Joel Sendek, Lazard Capital Markets.

Hi, good morning. A couple questions. First of all, can you give us some feel for the amount of milestones that you are estimating in order to get you to your two-year financial estimate?

Yes, as we pointed out, Joel, in the 10-K that we would expect in that estimate to earn and receive about $5 million in milestones under the Roche agreement.

$5 million? Okay. Because it seems to me -- I mean you did a substantial headcount reduction, but it seems to me you need to cut your burn about 50%. Can you get there without further headcount reductions? Or is my 50% too high?

So one of the things that, again, that we understand here is that substantially all of the costs of the Roche program for CRACM inhibitors is 100% covered by reimbursements from Roche. That has a significant impact on our cash requirements. So once you have taken that into consideration, in fact, we are probably at about half.

Okay, that helps. And then back on Elesclomol, you talked in the press release about the potential for -- the investigators are still interested in moving forward and testing it in other cancers. And I am just wondering at what level is that enthusiasm now given the failed study here?

This is Safi, Joel. I guess I will let Jim -- Jim is interacting with research folks who are looking at it in ovarian and breast and lung and other cancers and I will let him talk about that. And Eric is interacting with the medical folks in prostate and breast and ovarian. So I will let each of them talk to that.

Hi, Joel. This is Jim. Yes, we have seen actually continuously growing interest among academic collaborators. We have continued to expand our network of academic collaborators and we are getting a lot of exciting findings both in terms of the mechanism of action, what are the factors that lead from the induction of oxidative stress to the killing of tumor cells, a lot of exciting data in tumors like breast cancer, for instance, and subsets of tumor types. For instance, increased sensitivity in platinum-resistant cancers. And a lot of the academic work has sort of lead us to maybe potentially identify some patient populations that might be more sensitive to Elesclomol treatment and might help direct future clinical development, might identify future target populations for clinical trials. So we are actually seeing -- pre-clinically, we are seeing continued interest in the mechanism in the potential of the drug and application to certain cancer types. So we will continue to support that work.

And this growth in interest is in the face of the SYMMETRY trial -- or it continues to grow in the --?

Well, as I think the issue was that, as we started the SYMMETRY, we started to get more interest by clinicians and that has actually grown as we have advanced the drug and there hasn't been a loss of that enthusiasm and in fact, I think what people have cited is the fact that no drug works in melanoma in terms of improving overall survival. We shouldn't be deterred by a negative result in survival in melanoma and that there are cancer types that may be more sensitive and more appropriate for clinical development.

Okay. I understand.

Joel, this is Eric. We had two other trials that were ongoing at the time of the SYMMETRY result being announced. One was in prostate cancer and one was a single dose, monotherapy dose-escalation trial and both groups of investigators in those trials are disappointed that we suspended them in prostate. For two patients, we are already seeing some encouraging results. So I think that as we complete our analysis, if there is a path forward, these investigators would have already expressed interest on restarting those clinical trials.

Okay. Thank you.

Simos Simeonidis, Rodman & Renshaw.

Yes, it seems to me that you are emphasizing quite a bit the potential of the STA-9090 compound and you are planning to have it in two or three potentially Phase III trials this year. Is this a compound that you are thinking about partnering potentially once you have proof-of-concept data?

Simos, this is Safi. Let me start and then I will hand it over to Jim maybe a little bit some more. First, just to correct, we didn't say Phase III trials. We may be in half a dozen trials by the end of the year or more, but they are all -- none of them would be more advanced than Phase II. As you know, some of these are highly refractory populations and you could rapidly advance to pivotal studies, but they would certainly be starting as Phase II studies, proof-of-concept studies.

I know, so that is what I thought I said. Yes, Phase I/Phase II, yes, so, but you would be amenable to -- once you have data, partnering it?

Yes, it is something we are considering. I mean there is a number of --one of the nice positions is that -- one of the nice things about where we are is that we have a pretty broad range of programs that are diversified, different mechanisms, different chemical families, chemical structures, different therapeutic areas of interest to different folks. So we have a lot of flexibility. The Hsp90 program is something that we are considering partnering once we get some additional data. Our inflam programs, including Apilimod and some earlier stage assets, is something that we have seen some interest in from partners and our other oncology programs, our VDA and some other assets that we have internally have also generated some interest. So in terms of partnering, we have a certain degree of flexibility and we will be having opportunistic discussions around all of them.

In terms of the -- why people are so excited about STA-9090 in terms of both their academic research collaborators, as well as the medical investigators, maybe I'll turn it over to Jim who does a lot of those meetings.

Sure, we continue to believe Hsp90 is one of the most exciting oncology targets. Hsp90 is a chaperone that is critical for the maturation activity of many different kinases, which drive uncontrolled proliferation of cancer cells. And many of these kinases are some of the highly validated targets such as HER2, EGFR, BCR-ABL, c-KIT, which are the targets of approved cancer drugs.

Our excitement about 9090 is the fact that we have seen in our preclinical studies, and now we have extended that to our preclinical work in our academic collaborators labs, that 9090 is anywhere from 10 to 100 fold more potent in both the inhibition of these kinases, as well as the killing of tumor cells than the first generation of Hsp90 inhibitors like 17-AAG.

So we are seeing increased effectiveness and safety of 9090 relative to the first wave of inhibitors that affected this target. And as we work with various preclinical and clinical investigators, they are sharing our enthusiasm. So we believe this drug has potential in a wide variety of cancers, particularly in treating cancers that have become refractory to targeted therapies like Gleevec, Sutent, Tarceva and others. So we are going to invest heavily into multiple trials, proof-of-concept trials in 2009.

So would it be safe to assume, and that is what I was leading at with my previous question, would it be safe to assume that the plan going forward is to invest the cash you have on hand in the existing compounds, mainly 9090, potentially Elesclomol, as opposed to let's say considering strategical (inaudible) like a reverse merger or a merger that would allow you to invest that cash at a later-stage asset?

Simos, this is Safi. We are really getting quite close to near-term inflection points and running these Phase II trials at relatively low cost. So right now, we are very focused on initiating and getting -- continuing the current 9090 trials and initiating a couple new ones. So that is our primary focus. We are not actively conducting searches for other compounds to in-license at this stage.

So you mentioned near-term inflection points just right now and in the press release. Could you walk us through what you think are the most important ones?

Well, I think when we are talking about 9090, we are in -- we will shortly be in four trials and by the end of the year, be in potentially half a dozen or more trials. And these are in patient populations that are highly refractory. In certain cases, especially the hematological cancers, they have objective markers where you can see early data that is very compelling quite soon. So within the next 12 months, we could have very interesting data from these programs.

Thank you.

(Operator Instructions). That concludes the question-and-answer session. I would now turn the conference back over to Dr. Bahcall for closing remarks.

Thank you all for your time. That concludes our session today.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.