Madrigal Pharmaceuticals Inc (MDGL) 2009 Q4 法說會逐字稿

Good day, and welcome to the Synta Pharmaceuticals fourth quarter and year-end 2009 financial results conference call. Today's conference is being recorded and webcast.

At this time for opening remarks, I'd 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 fourth quarter and year-end of 2009. This release can be found on our website, 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. On this call, I'll briefly summarize our priorities for 2010, Vojo will provide a clinical update and Keith will provide the financial update. As many of you know, Hsp90 is a target that has generated a great deal of scientific interest. It regulates many clinically validated targets that drive cancer growth and proliferation. It's a target that has great potential. That potential has not been met by the first generation of compounds to inhibit Hsp90, which had been too weak and too toxic. Our emerging results have shown that STA-9090, our lead cancer drug, is more potent and better tolerated than other Hsp90 inhibitors. We believe that 9090 is the first drug -- in the words of one of our investigators -- that can unlock the true potential of Hsp90 target.

In 2010, our primary focus is on advancing 9090. We intend to analyze and report data from our initial trial, initiate six to ten new trials, and identify a rapid path to registration for 9090. Our goal is to end the year with a Phase 3 ready drug. I'll briefly discuss two additional priorities and then turn the call over to Vojo. Last week, we announced that clinical development of Elesclomol will resume later this year. While our prior trial was in melanoma, we have no near-term plans to resume development in melanoma; while Elesclomol did achieve the primary end points in the majority sub-population of our Phase 3 trial, which is a positive result in over 400 patients in a double-blind randomized setting and that is encouraging. Our near term focus for Elesclomol, however, is on proof of concept trials that will provide a fast path to clinical validation. We believe this approach is best for patients and for the drug.

Finally, a word on partnerships. Because of our strengthened financial position as a result of the follow-on financing we concluded in January, we now have additional flexibility regarding the timing and nature of potential partnerships. We believe that the additional data from our ongoing and planned Phase 2 studies of 9090 could increase the shareholder value from a partnership, and therefore we do not want to limit the timing of an agreement to the first half of this year. We continue to have active discussions regarding our foreign partnered assets, with a goal of concluding one or more agreements by the end of 2010. Vojo?

Thank you, Safi. We have now taken success of 100 patients for 9090. We have been pleased by how well tolerated the compound has been, especially relative to other Hsp90 inhibitors. The most common adverse events in these trials have been manageable and reversible diarrhea and fatigue. We have not seen the liver toxicities, (inaudible) toxicities, or certain other toxicities that have been problematic for other Hsp90 inhibitors. We have identified the MTD and the recommended Phase 2 dose in our once-weekly solid tumor study and have initiated two Phase 2 trials for which we expect will have initial results later this year.

Importantly, we have seen encouraging signs of single agent activity at dose levels that are well-tolerated. These signs of clinical activity included patients with confirmed tumor responses, as well as patients with prolonged stabilization of disease and tumor shrinkage. In the hematology trials we have seen patients with clear objective signs of hematological improvement following treatment with 9090. As expected from the Hsp90 inhibition mechanism, these signs of activity have occurred in the broad range of solid tumor and hematological cancer types, including lung cancer, renal cancer, GIST, melanoma, colorectal cancer, CML, and AML. What has made these results particularly encouraging to us and to our investigators is that all these patients were heavily pre-treated. They had progressed on or failed to respond to treatment with numerous prior therapies including chemotherapies (inaudible) agents such as Gleevec, Avastin, Sutent and Tarceva.

The strong results to date have generated a high level of interest from leading investigators and have lead to receiving many proposals for investigator sponsored trials. As a result, we expect to initiate an additional six to ten new trials by year-end. One of these will be a Company-sponsored combination trial, the remainder will be primarily investigator sponsored. As Safi said, our goal is to identify a rapid path to registration. To do that, we are looking closely at certain biomarkers and are adapting our trial designs to focus on patient populations for both the underlying signs and the clinical data supported with 9090.

I would now like to briefly turn to our plans for Elesclomol. Working closely with our (inaudible) collaborators, we have made important progress in understanding the science behind how Elesclomol works. Elesclomol disrupts cancer cell mitochondrial metabolism. We have seen essentially that Elesclomol requires normal oxygen levels in cells. In a low oxygen environment, the (inaudible), energy degeneration shifts away from the mitochondria and Elesclomol loses anti-cancer activity. Those preclinical findings are consistent with the results observed in our Phase 3 melanoma trial, where benefit was seen only in normal LDH patients. The findings support running future trials which will exclude patients with high LDH levels. We're now in active discussions with investigators regarding initiating one or more trials for Elesclomol in the second half this year. We'll have more to say about the choice of indication and trial design as we get closer to trial initiation. I will now turn the call over to Keith, who will provide a financial update.

Thank you, Vojo and good morning, everyone. We entered 2009 with $44.2 million in cash and cash equivalents, which together with a $26.7 million of net proceeds raised in our follow-on offering of common stock in January 2010 provide approximately $71 million of cash resources as we begin 2010. Total collaboration revenues in the fourth quarter of 2009 were $4.7 million as compared to $0.6 million in the same period of 2008. In March 2009, we restructured our operations in response to the clinical outcome of the Phase 3 Elesclomol trial and substantially reduced our expense run rate.

In the fourth quarter of 2009, our research and development expenses were $9.2 million as compared to $23.0 million for the same period of 2008. In the fourth quarter of 2009, our general and administrative expenses were $2.4 million as compared to $3.5 million for the same period in 2008. In the fourth quarter of 2009, our net loss was $7 million or $0.21 per basic and diluted share as compared to $26 million or $0.77 per basic and diluted share in the same period of 2008. Based on our current operating plans, we estimate our $71 million of cash resources, together with expected research and development reimbursements and milestone payments anticipated under the Roche agreement will be sufficient to fund the Company's operations into 2012. I'll now turn the call back to Safi.

Thank you, Keith. We'll now open the call to questions and discussion. Operator?

Thank you, Dr. Bahcall. (Operator Instructions). Our first question is coming from Joel Sendek of Lazard Capital Markets.

Hi, thanks. A couple of questions. On 9090, I think that last time you mentioned six new trials and now you're saying six to ten. I'm wondering who might -- what the change is there? Is one of them the Company-sponsored trial?

We're giving a full year guidance now.

Okay. And is the Company sponsoring a new one?

We had not mentioned that before. We are mentioning that now. We do intend to do one Company sponsored trial which will be a combination study.

And then as I look at just doing my model for the next couple years, you have around 70 in cash, you said that can get you into 2012. So I'm wondering if we should project a burn equal to around half that, around 30 to 35 million each of the next two years and whether there's any partnering assumptions built into that runway?

I think that's not an unreasonable estimate for a net-net burn; and no, right now, we are setting up our operations to stay within that cash burn, and it doesn't assume an equity offering or a further partnership.

Okay, and then when you say your goal is to end the year with 9090 Phase 3 ready, how soon -- is that an aggressive goal? Is that achievable? Would you wait to get clarity on the partnership before you start a Phase 3 or could you potentially move the drug into Phase 3 as you have your negotiations ongoing with the potential partners?

Joel, a couple questions in there. Obviously that's a data driven question. We're encouraged by the activity that we've seen -- these are very refractory patients that usually don't respond to anything, and so that certainly gives us and the investigators ideas about the path to registration and the kind of pivotal trial and refractory population that you might go into. Over the course of this year, we hope to get additional data, confirm those kind of responses and then flesh out the path to registration. If that ends up being relatively small pivotal study in highly refractory patients, that is something we could certainly consider going alone or going alone in the US with an ex-US partner.

Okay, great. Thanks a lot.

Thank you. Our next question is coming from Ryan Martins of Barclays Capital.

Hi, guys. Thanks for taking my questions. Firstly, what kind of initial data should we expect from the three Phase 1 trials? Is it going to include durability data?

Hi, this is Vojo Vukovic. That's a little bit too early to say at this moment in time, the Phase 2 data. We'll talk about that later in the year.

Okay, and I know you said you've identified the MTD. Would it be possible for you guys to provide any color on the dose limiting toxicities that you may have seen with the drug?

Yes, sure. We're very encouraged by the safety profile that we're seeing so far in the Phase 1. The dose limiting toxicities are fatigue and diarrhea. Both of them are reversible and manageable and they are typically mild to moderate so they don't impact treatment of patients. We haven't seen any of the severe organ toxicities such as liver toxicity or other toxicities that earlier generation of Hsp90 inhibitors have seen.

Okay. And then on Elesclomol, I know on the previous call you had said the trial initiation would be contingent on a partnership in the middle of 2010. Clearly, you said that the partnership doesn't need to happen by the middle of 2010; so should we assume that Elesclomol trial initiation is no longer contingent and could start prior to any partnership?

Yes, I think what we've said in discussions or publicly is that we wouldn't resume a large scale clinical program for Elesclomol which would consume a lot of resources and bandwidth and capacity at the Company until we have additional capital and most likely from a partnership. But the kind of trials that we're talking about for Elesclomol are relatively low cost, low patient number, done in close collaboration with the investigators so that it could provide a fairly quick path to clinical validation.

All right, and then finally, maybe a question for you, Keith. How should we think about the R&D line in 2010? Is it going to be pretty similar to what we see in Q4 2009?

Oh, I'd say that's a reasonable assumption. That's certainly our goal.

Okay, thanks.

Thank you. Our next question is coming from Andrew Vaino of Roth Capital Partners.

Hi, thank you for taking my question. I just had a quick question on the mode of action of Elesclomol with respect to the LDH levels. Have you guys looked in vitro at the relationship between oxidative generation in the presence of Elesclomol with or without LDH, and if there's a concentration dependent effect there?

Yes, sure. We've conducted a number of in vitro in preclinical studies with Elesclomol. We see a clear relationship within oxygen levels, LDH, and the activity of Elesclomol.

But is there any idea of where the interaction comes from between -- is the interaction just with the overall oxidative levels themselves or with the Elesclomol and the LDH?

The bottom line is you can think of Elesclomol as acting by choking off the oxygen and mitochondria and really inhibiting breathing and respiration. At very low oxygen levels in hypoxic conditions in cancers you have the Warburg effect,when energy generation shifts away from the mitochondria and towards glycolysis, so what happens at very low oxygen levels or hypoxic conditions is the mitochondria is less important. And so the Elesclomol anti-cancer effect is much less active because the mitochondria is much less important. Does that answer your question?

Well, I'll look more into it, thanks.

Thank you. Our next question is coming from Robin Davison of Edison Investment Research.

Yes, hello there. I just wanted to check a couple of things. First of all, the clinical trial read outs this year, I'm already thinking that there's just the one study in leukemia for 9090 first of all.

We're going to read out the three Phase 1 ongoing trials, of which two are solids and one is in hematological cancers. Those will read out hopefully the first half of the year; and then three of the Phase 2 studies, of which again two are solid and one is hematologic, will read out in the second half of the year, and the read out in those final ones will be an initial read out, not the final completed study.

I see, right, okay. Can you confirm whether there's any plans to publish any more data from the SYMMETRY trial, for example, in the obviously the low or normal LDH patients.

Yes. We are hopeful that we'll have additional results from the SYMMETRY trial presented, including the 12 month follow-up later this year.

Right, good. Just finally, I mean, is it relatively easy to identify those patients with the sort of normal LDH levels?

Absolutely. The determination of LDH levels is a standard test can be conducted in any Medical Center.

Right, okay, good. Thanks for your answers.

Thank you. Our next question is coming from Mike King of Merriman Capital.

Good morning, guys, can you hear me?

Yes.

Thanks for taking the question. Safi, can you discuss the sort of allocation of capital decision you're making with respect to Elesclomol and moving it forward into your sort of broad single seeking trials in a variety of tumors as opposed to turning around and doing a registration study in low LDH patient population?

Sure. Our resources and capital is almost entirely focused on 9090. We have a fairly minimal expense allocated to Elesclomol this year. The program will start in the second half; and as we get closer, we'll kind of explain the clinical trial choice and the clinical trial design, which I think you guys will find interesting and hopefully as compelling as we and the investigators find. But I think the right strategy for the drug and for patients is to, in a fairly quick low cost way, achieve fairly clear clinical validation with the program and then come back and revisit melanoma potentially later next year.

Okay, great. Thanks.

Thank you. Our next question is coming from George Zavacoy of McNoll, Lewis and Black.

Hi, Safi, hi, everyone. Thank you for taking the questions. A quick question about the 9090 investigator sponsored trials. Is that the larger cooperative groups that you're going to be doing it with? Or are there individual investigators, and pretty much all of the funding of those investigator sponsored trials going to come from the groups of the investigators?

It's both individual investigators and certain groups that we're talking to. And as you know, the cost to fund those trials is a fairly small fraction of the cost to fund a Company sponsored trial.

Yes, yes, okay, good. But so you did mention you're doing at least one Company sponsored/investigator sponsor, so that's like a combined funding responsibility?

Sorry, it was one Company-sponsored trial for a combination agent protocol, meaning 9090 combined with another agent.

Oh, okay, so that's not a -- okay. I understand now, thanks. With regard to LDH, if one puts a patient on a respirator with O2, how volatile, or how flexible, or how variable are the LDH levels in cancer patients and is the variability enough to exclude or include patients if they're oxygenated?

Well, LDH levels are very fairly established in a number of solid tumors. They typically indicate very aggressive tumor disease and there's a clear link between cancer cell hypoxis -- means low oxygen level -- because that's what's driving the production of LDH. While this is an interesting question that you ask about the respirator, could affect the overall oxygenation of the patient, but it is quite unlikely it would affect the oxygenation of the tumor.

Okay, so as long as the tumor is still spilling out LDH, it doesn't really matter how oxygenated the rest of the body is, just looking to see the enzyme in the test. Is that a correct interpretation then?

Yes, yes. I think you said it just right.

Okay, great, and I'm fairly new to getting back to covering you guys or looking at you guys again. You haven't mentioned Apilimod or STA-9584. Can you tell me a little bit about what's going on with those? I guess, is the trial still ongoing -- at least for Apilimod?

The Apilimod trial we've gathered some data. We're still analyzing it, and what we've said is consistent with what we've said in the past, which was that we guided expectations low to the program and now we're confirming that, that we have no plans to continue development of Apilimod in this particular oral formulation. We like the target. It is a target that has been clinically validated by antibodies against that target but showed some very good data. What we've said is that the pharmaceutical properties of this first generation compound are not optimal for getting the drug to the target tissue, and so what we are interested is second generation or follow on compounds that have improved follow-on properties and can still hit that target. So we do think it's an exciting therapeutic approach. In terms of 9584, which is our VDA, that's really more of a resource question. We are focused almost entirely on 9090 now based on the really very encouraging signs that we're seeing in patients and the very high demand for investigators to get access to the drug. As we get further in the year, we may take a look at potentially resuming or advancing 9584 a little more aggressively.

Okay, thank you, all.

Thank you. Our next question is coming from Dave Harmon of UBS.

Good morning from beautiful Boston here, UBS. Two questions. My notes are from last Summer and early Fall that you were going to have, you hoped, six tests going in 9090 by the end of last year. Are my notes wrong or are you behind schedule? And if you're behind schedule from last year, are you catching up now because of the fact you're now forecasting ten tests for 9090 in 2010? That's the first question.

I think we will probably want to separate ongoing trials from new trials. We do have six ongoing trials for 9090 and we did announce some new guidance that we do intend to initiate six to ten new trials that's above and beyond the ongoing trials.

Thank you. Last year in February, you had 90 new employees for Elesclomol. If I remember correctly from my notes, [Glaxo] was starting to go into production and you anticipated a fantastic year, from many indications from Company communications. And this year, you're side stepping Elesclomol to -- you've relegated it to virtually zero activity until you get a new partner. That indicates either a huge scaledown in the potential of Elesclomol or a huge scale up of the potential of 9090, which is why you are -- as you say you're putting all your assets into that for the time being. Which is it?

Well, to start with, I think there's been a -- we've seen some very encouraging data from 9090 over the last six months, as Vojo said, both the safety -- which is very important to many of the investigators we talked with that are excited about the mechanism that we believe that approach will work but the previous drugs are just too toxic. So the safety data we've gotten recently which shows an attractive safety profile was very important. And then the responses in patients who have failed many other therapies and had essentially no hope in limited choices showing very interesting responses to the drug. So that has very much encouraged us in the investigators on 9090.

With the Elesclomol result, there's a lot of ongoing work both on understanding the science, which Vojo talked about today that has really improved our understanding of the mechanism; getting -- finishing the results from the SYMMETRY melanoma trial; and then the new results that we got in our collaboration with the investigators in Toronto on the potential in AML, acute myeloid leukemia. And based on all of the data that we have on Elesclomol today that we did that we brought in a scientific advisory board, I think we all pretty much unanimously converged on a path for Elesclomol which is the path that we're on, which is starting a very interesting proof of concept trial in the second half of the year which we're hopeful will show some interesting results fairly quickly.

At this point last year, you had -- I think the figure in the press release is 651 people on the Elesclomol trial. A lot of them were still alive and I haven't seen any figures on what the life span was of the people that were still alive when they were taken off the drug last year. Are there still 600 alive or are no people alive and what's the curve on the rate of deaths? Because obviously, if 600 or so are alive, something happened that Elesclomol seems to have had an effect, and if there were 300 alive three months or four months after the tests were ceased, then it still looks like a promising drug. Will you be publishing at all what the curve is on the rate of deaths? Even though the FDA may not assume, anything but certainly the people that are still alive can assume something and have reason to give thanks.

We will be presenting updated survival data with the kind of analysis you mentioned later this year; and some of those other questions are interesting questions that probably are better handled offline so maybe we can schedule a call and kind of walk through melanoma and some of those kind of questions later today or tomorrow with you.

Lastly, the term you've used, quick trial -- "a quick path" is relative in the cancer research field. Is that three years, or three months, or can you say anything else about the definition of "quick path"?

When we use the word sort of proof of concept trials, those would be trials that could read out anywhere from six to 12 months.

Thank you.

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

Thank you all for your time and attention today. That concludes the call.

Ladies and gentlemen, this concludes today's teleconference. You may now disconnect your lines.