Madrigal Pharmaceuticals Inc (MDGL) 2009 Q3 法說會逐字稿

Good day, and welcome to the Synta Pharmaceuticals third quarter 2009 financial results conference call. Today's call is being recorded in 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, our Chief Executive Officer; Keith Ehrlich, our Chief Financial Officer; and Dr. Vojo Vukovic, Synta's Chief Medical Officer.

This morning we issued a press release that reported results for the third quarter of 2009. This release can be found on our Web site at www.syntapharma.com.

Before we begin, I would like to point out that we will be making forward-looking statements based on our current intent, belief, and expectations. They are subject to certain risks and uncertainties, and I encourage everyone to look at the SEC filings for additional detail.

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.

I would like to start by summarizing our strategy and priorities for the coming year.

Our top-two priorities are, first, to advance our Hsp90 inhibitor, STA-9090, to clinical proof of concept. Our goal is to be in a position to initiate registration-enabling studies as early as next year should the data be supportive. And, second, to secure one or more partnerships that will extend our cash runway until at least 2012 and potentially beyond.

On the first goal, advancing 9090, our strategy is driven by the preclinical and clinical results we have seen to date and is to create what we believe will be the most comprehensive and scientifically robust program for an Hsp90 inhibitor in the industry. We are targeting being in 12 or more trials for 9090 by mid next year.

We have been helped over the past several months in our progress toward this goal by the broad support we have received from investigators around the country and their interest in sponsoring trials with this compound. Many of these investigators have worked with other Hsp90 inhibitors, and their support for 9090 is encouraging for us and for the program. A majority of the new trials will be investigator-sponsored, meaning they will cost us much less than the typical company-sponsored trial.

On the second goal, generating one or more partnerships to extend our cash runway, we are now in discussions with multiple companies on multiple programs -- 9090, Elesclomol, VDA, and Apilimod -- with a variety of possible deal structures. It is in the company's best interest to be flexible, to engage in multiple parallel discussions, generate competitive bids, and weigh the difference choices against each other. The best option may be a smaller set of deals leading to a larger deal down the road, or it may be a larger deal more immediately.

Based on the pace of discussions and level of interest, I can say we are optimistic we will be able to generate one or more partnerships in the first half of next year. We are fortunate to have multiple unpartnered programs, a strong discovery engine, and a good cash position, all of which gives us flexibility, and we intend to use that flexibility as an advantage to get the best choices on the table.

Those are our top-two priorities, 9090 and partnerships.

We have also been encouraged by the emerging data from Elesclomol, both the emerging clinical results, which show activity in the low and normal LDH population in melanoma, and the recent progress on the underlying science, which will be presented at meetings in November and December. These results emphasize the unique mechanism of action of Elesclomol and point towards why we are seeing a difference in activity in melanoma between the high and low LDH patient groups.

I want to reiterate two points regarding the future of this program. First, we will not be making substantial investments in the program until we have made strong progress on our first two priorities, 9090 and partnerships. Should we restart Elesclomol in the clinic, we do not anticipate any major effort or expenses until later in 2010.

Second, I want to emphasize that, while it is encouraging to have seen clinical activity in such a tough cancer as melanoma, this does not mean that we would immediately go back into melanoma should we restart. Investigators in other tumor types have expressed interest in exploratory trials based on the mechanism and the collected preclinical and clinical data so we may choose to begin with indications other than melanoma.

Finally, we are pleased with the progress on our CRACM program, which is partnered with Roche. Our scientists have made excellent progress in identifying some compounds with very promising potential as potent oral cytokine inhibitors and are looking forward to seeing the program advancing to the clinic. As a reminder, all costs for this program are paid by Roche.

I will now turn the call over to Vojo, who will discuss the 9090 program further.

Thank you, Safi, and good morning, everyone.

Let me begin by saying that we're seeing a great deal of excitement in the oncology community about Hsp90 inhibition in general and 9090 in particular. The high level of interest in 9090 began with the preclinical results generated both in our labs and in external labs which showed that 9090 is up to 100 times more potent than first-generation Hsp90 inhibitors, such as 17-AAG,and, very importantly, that 9090 does not appear to have many of the [off-target] toxicities, which have been a concern for the first-generation Hsp90 inhibitors.

This interest has grown as we have advanced program in the clinic and seen safety data consistent with what has been seen preclinically. 9090 has been very well tolerated to date with a manageable, reversible (inaudible) profile and, importantly, without the serious (inaudible) toxicity issues that our concern for the 17-AAG family.

We are now treating patients at what we believe is the therapeutic range and have identified a primary dosing schedule we plan to take forward into Phase 2 programs. We will have a more full discussion of the safety profile and dosing considerations at future medical meetings.

Even more encouraging is that we are seeing preliminary evidence that 9090 is a clinically active compound. Activity profile suggests 9090 may have broad application across multiple tumor types. To date, we have seen two confirmed responses as the (inaudible) this criteria and a number of instances of tumor shrinkage in durable disease civilization.

In many cases, these responses have been seen in patients whose disease has progressed on or after treatment with several approved standard-of-care therapies. Today I will describe two cases which we and our investigators believe are particularly strong in encouraging signals of clinical activity. Both these patients are on our Phase 1 once-weekly-dosing solid-tumor trial.

The first case is a patient with metastatic nonsmall cell lung cancer who has a medical history typical of advanced lung cancer. This is very important point to consider as, in Phase 1 clinical studies, we often see patients who may not fully represent the typical patient population. This patient was treated with a total of six prior regimens, four of which are standard-of-care treatments, and two of which are investigational agents.

The best response achieved during those prior treatments was progressive disease. In other words, the patient did not experience any benefits from any of the prior treatments. With 9090, this patient experienced an approximately 25% reduction of tumor burden, not quite meeting RECIST criteria for partial response but, most importantly, he has achieved prolonged disease control not seen with any of the prior therapies. He's currently on his tenth month of treatment and remains on study.

The second case is a patient with advanced metastatic renal cell cancer. This patient also exhausted all standard-of-care treatment options for his disease. He presented with a metastases in multiple organs, including hip and shoulder, and was unable to walk without pain. Practically, he was confined to his home and visits to the hospital.

After two cycles of treatment, all of his target lesions shrunk, and he was able to walk without pain. We have recently been informed that he hikes regularly for up to two miles, spends a lot of time at the golf course, and has made vacation plans for a trip to Hawaii. His total tumor burden has shrunk by about 10% to 15%. He has been on study for six months and continues on treatments.

These two examples are particularly encouraging because the patients have typical, real-world, complex, advanced-stage disease. They have failed to respond or had progress on multiple prior therapies, and they showed a clear benefit from treatment with 9090. Several additional patients in other tumor types have shown similar degree of tumor shrinkage and a durable disease control.

These collected safety and efficacy data have been very encouraging to us and to our many collaborators. These clinical results combined with strong preclinical data and scientific rationale have helped us make strong progress toward the ambitious goals Safi mentioned.

I will now turn the call over to Keith, who will provide a financial update. Keith?

Thank you, Vojo, and good morning, everyone.

The most striking aspect of our financial results is that Synta showed a profit in the third quarter. This is a result of the determination of our Elesclomol partnership, triggering an acceleration of when the $130 million we received from GSK gets recognized. Instead of being recognized over the remainder of the estimated 15 years of the agreement, the portion of payments not previously recognized as revenue was recognized in the third quarter. This amounted to approximately $114.6 million, resulting in our profitability. This is a one-time event, and we do not accept -- expect to see any further financial impact from the termination of the GSK agreement in future earning statements. Payments under the Roche agreement are obviously not affected, and we will continue to recognize these payments over the estimated performance period of the agreement.

Research and development expenses were $9.1 million for the third quarter of 2009, compared to $24.1 million for the same period in 2008. This decrease is due primarily to reduction in resources related to the Elesclomol program.

General and administrative expenses were $3.1 million for the third quarter of 2009, compared to $3.7 million for the same period in 2008.

Net income was $118.1 million, or $3.49 per basic share and $3.48 per diluted share for the third quarter of 2009, compared to a net loss of $26.3 million, of $0.78 per basic and diluted share for the same period in 2008.

As of September 30, 2009, the company had $51.7 million in cash, cash equivalents, and marketable securities, compared to $73.6 million as of December 31, 2008.

As a result of the implementation of cost-saving measures and based upon our current operating plans, we expect to end 2009 with approximately $40 million of cash resources. This estimate assumes no additional funds from new partnership agreements or equity financing events.

I will now turn the call back to Safi.

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

Thank you, Dr. Bahcall.

(Operator instructions.) Our first question is from Joel Sendek of Lazard Capital Markets. Please go ahead, sir.

Thanks. It appears to me that the biggest risk to the company is that you might not get the value that 9090 deserves to get, and I'm wondering what your plan is to maximize the value of the drug, especially given the responses that we've seen. And, I guess, related to that is are you doing anything to, maybe, reduce expenses further until you have one or more of these partnerships in place?

Joel, this is Safi. Yes, so we're doing both of those things. One is we've gone through a companywide cost-saving initiative, where we're really focusing essentially all of our resources on 9090. We're also active with the CRAC program, but that's fully reimbursed by Roche. So essentially all of our -- all substantial R&D resources of the company are focused on advancing 9090. Just based on the level of excitement we've seen around that program, that makes a lot of sense for us.

The first part of your question, what are we doing to retain as much value from that program for shareholders, that's something that's absolutely on all of our minds, and what we're doing is we have -- as I mentioned, we have put ourselves in the fortunate position of having four unpartnered assets -- that's just the legacy of the company that we've had generated a number of these drugs -- and we've seen interest from partners around all four of those programs. So, as I mentioned, we may -- it is possible we'll do a large deal around 9090 sooner rather than later, but an alternative option, which I think is what you're getting at, is we could do some smaller deals sooner, and that buys some time to create more value in the 9090 program, advance it further into clinic, and then potentially do a larger deal down the road.

So what we're doing is putting all the assets of the -- unpartnered assets of the company in play in discussion with different partners and creating a number of options that could potentially buy us some time with 9090 to advance it further in the clinic.

And are you giving yourselves a -- you kind of mentioned mid-2010. Is that a hard deadline, or is that just kind of the general goal as to when you might -- when we might see a deal or two?

It's a reasonable estimate based on where we are in discussions. Having -- we've done -- we've been in partnering -- different types of partnering discussions for different programs for years now, and so lots of stuff can happen, and at this stage, it's probably too early to say. But I would say that that is reasonable guidance given the pace of discussions and the number of partners that have come to the table or on a number of different programs and kind of some of the positive signals that we're seeing.

Okay. Thanks a lot.

Our next question is from Ryan Martins of Barclays Capital. Please go ahead, sir.

Hi. Thanks for taking my questions. It's great to hear the case studies of the patients on 9090 in trials. I was wondering, you guys have mentioned that [had two CR's] confirmed by these (inaudible). Is that something you could provide more information on in terms of the duration of the response or what kind of prior therapies these patients were on, or is that something you would like to keep for the medical meeting?

Hi, Ryan. Good morning. This is Vojo Vukovic. Thanks very much for the question. I think your question was about some more detail about the patients with partial responses as per RECIST; is that correct?

Yes, partial, and I guess complete responses also.

No. We mentioned partial --

Partial responses. Okay.

Yes, I think these are patients -- we'll certainly provide all of the details at upcoming medical conferences in first half of 2010. What you can say right now is really the patients are also heavily pretreated patients who have failed, in one case, I think, seven lines of prior treatments, and in the other case it was two lines of treatment. So I think they present the typical patients with advanced disease, and we have seen these partial responses in the therapeutic range that we're targeting.

Okay. Thanks. And with 9090, clearly, you all have shown preclinical data that's shown to be superior to the first-generation 17-AAG and analogs. But how do you see yourselves positioned versus other, earlier-stage synthetic compounds, like in the Pfizer SNX-5422 or the Astec's compound or the Novartis compounds?

Yes, I think that's a great question. I mean, let me begin by answering the question that we've synthesized in our labs nearly all of the (inaudible) inhibitors that we're aware of for which the structures and the (inaudible) were able to do extensive testing in our labs. And by our experiments, as well as the experiments results of our collaborators, we see that 9090 is far superior to 17-AAG family of inhibitors that a number of companies are developing.

Now, specifically, within the second-generation class we think that the 9090 is at least as potent as any compound we have tested, and we see a lot of characteristics of the drug -- pharmacological properties that we feel are unique and create important advances for the compound and the clinic.

Okay. And just one final question. Along the CRACM program with Roche, when do you all expect to file an IND for this program, and is there a specific milestone associated with the IND filing on the program?

Ryan, this is Safi. We've been targeting an IND next year in 2010 -- towards the end of 2010, and per our contract, we can't disclose details of milestone payments.

Okay. Thanks. Thanks for taking the questions.

Our next question is from Andrew Vaino of Roth Capital Partners. Please go ahead, sir.

Hey, thanks for taking my question. Just a quick question on the 9090. You mentioned you'd start registrational studies next year. Do you have a guess as to how many that would be and what the indications would be? I assume lung cancer and RCC?

Andrew, yes, this is Safi. Let me address this. First, we are going to talk about future indications as we initiate those trials so we haven't committed to any -- or at least committed publicly to any specific question.

And, secondly, the point about registrational studies, it's an aspirational goal that's really connected to the fact that we're doing -- that we're integrating biomarker and molecular profiling data very closely into each of the programs that we are either conducting now or planning over the next several months, and that puts us in a position to identify and target certain subpopulations that could be particularly responsive for 9090.

And so what I said is should we be able to generate data that is sufficiently supportive, the goal is to put us in a position where we could initiate registration-enabling studies in these subpopulations -- the targeted subpopulations, which, as you know, can proceed very quickly.

Okay. And you mentioned biomarkers for the 9090. Are there any specific ones you're looking at?

There's a number of standard biomarkers, and then there's a number of ones that are proprietary that we've been developing in our labs that we think are actually superior to some of the traditional biomarkers for the Hsp90 class. But we regard that right now as a competitive advantage for the program so we're not going to be publicly disclosing it.

Okay. Just a quick question on the Elesclomol. Have you folks actually identified a discrete molecular receptor that it interacts with?

Actually, the question was have we identified the binding site of Elesclomol?

Yes.

What it binds to?

Yes.

The answer is yes, we have identified what Elesclomol binds to, and we'll be presenting that at the -- the mechanism results will be presented at the November [Triple] meeting.

Okay. And then, finally, I note that, unfortunately, you guys had some cost cutting earlier. How many employees do you currently have, and what percentage are in research and what percentage in development?

I think we have between -- somewhere between 125 and 130, and certainly the majority are R&D.

Okay. Great. Thank you.

(Operator instructions.) Our next question is from Joe Aguilera of BioRevolution Capital. Please go ahead, sir.

Hi, Safi. This one's for you and for Vojo. On your VDA program, when do we expect to file an IND there? What's the intent?

Joe, this is Safi. We're -- we haven't made any final decisions about the timing of the IND. As I mentioned in one of the earlier questions, we're really focusing our resources right now on the 9090 program based on how close that is to generating very compelling proof of content. So that has fallen to a somewhat lower priority behind that effort.

That's good. And being that Antisoma is obviously leaving that arena, being that they're going to go on a combination basis, do we have -- do we intend to go on a stand-alone basis in the beginning, or you can't comment on that -- VDA?

For that type of compound, your initial study would typically be a single agent.

And on the Hsp90, in terms of all these patients will -- I'm assuming will fail Gleevec and Tarceva. Is that where we'll get a lot of the patients from, Safi?

Well, I can start and then Vojo can -- it's more -- it depends on the indication. If you're in indications where Gleevec is approved or Sutent is approved or Tarceva is approved, you may well go after them because that's what the preclinical data has shown, that that's very strong and that's also what we're seeing -- where we're seeing responses in our Phase 1 trial. However, we won't necessarily just be in the indications where Gleevec, Sutent, or Tarceva are approved. We're looking at several other indications.

Maybe, Vojo, you'd like to comment a little more?

Sure. As Safi has mentioned before, we have a pretty ambitious plan to cover a number of indications. We'll be launching the wave of Phase 2 proof-of-concept studies, and the vast majority of that -- primarily the studies will be single-agent studies because we have seen single-agent activity in number of different tumor types. And in that situation, you obviously go into refractory patients that have exhausted all standard-of-care treatments.

And, Vojo, what's the mechanism of action being a lot of the Kosans, the Biogen, the Biotica, the Astec, the Infinity drugs have failed on some of the Hsp90? What's the differentiation in the mechanism of action of Hsp90 you feel has the advantage over the other existing developmental Hsp90's out there?

The mechanism of action -- the underlying mechanism of action is always the same, inhibition of the Hsp chaperone complex. But different drugs do that differently. They bind to the different domains of the protein, and we have -- in protein structural work we have determined that we clearly differentiate from other compounds in that respect, and that could potentially explain some of the differences in activity and potency.

And the other thing which is important in the clinic, we have seen very good safety profile, which I think further differentiates our compound from other compounds, and that it enables us to have a very effective therapeutic range and have an optimal risk-benefit ratio for the patients.

Good. Thanks, Safi and Vojo.

That concludes the question-and-answer session. I will now turn the conference over back to Dr. Bahcall for closing remarks.

Thank you all for your time today, and that ends our call.

Ladies and gentlemen, this concludes today's call. You may now disconnect your line.