Madrigal Pharmaceuticals Inc (MDGL) 2010 Q2 法說會逐字稿

Good day and welcome to the Synta Pharmaceuticals second quarter 2010 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 Dr. Safi Bahcall, our Chief Executive Officer, Keith Ehrlich, our Chief Financial Officer, and Dr. Vojo Vukovic, Synta's Chief Medical Officer. This afternoon, we issued a press release that reported results for the second quarter of 2010. 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 open the floor to questions. Safi?

Thanks, Rob, and thank you all for joining us this afternoon. Let me begin with a brief overview of the progress we've made with STA-9090 and elesclomol, and then Keith will take you through the financial update. We are today in a attractive strategic position with 9090.

A key concern for first generation Hsp90 inhibitors has been dose limiting liver toxicities, and more recently, for second generation compounds, dose limiting ocular toxicities. We have experience with 9090 in over 200 patients and we're not seeing those toxicities. Moreover, we have achieved dose levels at which we have seen clinical responses and clear signs of single agent activity. That safety and activity profile is unique. The breadth of our program is also unique. This quarter, we initiated three new trials with top tier investigators, bringing the total up to 11 trials, of which seven are company sponsored and four are investigator sponsored. The safety results, encouraging signs of activity and the breadth of our program positions 9090 as a lead program in this field.

Enrollment in our phase-two trials is proceeding well and there's no change in our guidance of expecting to be able to present some interim phase-two data by the end of the year and target one or more phase-three trials next year. We will update you more on meeting timing and data as we get closer and know more. In addition, we remain on-track to meet our goal of 15 total-trials initiated by year end. I will now turn the call over to Vojo to briefly discuss elesclomol.

Before doing so, I would like to note that while we have seen some recent new interest in elesclomol, and have been very encouraged by the new findings and understanding, which Vojo will discuss, we remain focused right now in terms of the vast majority of our financial commitment to 9090. For the immediate future, any new trials with elesclomol would only be in the context of third party sponsorship. Vojo?

Thank you, Safi. There have been three key recent developments with elesclomol. First, in reviewing the results of the phase-three symmetry trial, as well as earlier results from phase-two-B trial of elesclomol in metastatic melanoma and our phase-two-B trial in lung cancer, we see a consistent trend. All three trials, each of which was double-blind, randomized, and controlled showed that elesclomol had clinical activity in patients with low to normal levels of LDH.

Second, numerous preclinical experiments have now confirmed both the underlying mechanism of elesclomol, which is to disrupt mitochondrial energy production and the fact that elesclomol activity requires oxygen to work. Under low oxygen conditions, which is reflected in elevated LDH, elesclomol loses activity. These preclinical results are consistent with the pattern that has been seen in the three randomized trials.

Third, the dependence of activity on LDH is not unique to elesclomol. Two recent studies, one for Avastin and one for Torisel, both of which are drugs that also activate metabolic pathways, have shown a similar correlation of activity with the level of LDH. In the case of these drugs, which target pathways that more active under hypoxic conditions, they showed greater activity for high LDH.

The combination of the consistency of the preclinical and clinical data for elesclomol, the patterns seen across three randomized trials, and the growing evidence of the importance of LDH as a predictive biomarker, have been encouraging for us and for investigators we're talking to about elesclomol. I'm excited that we have a compound with a first-in-class mechanism that has strong scientific rationale, has shown encouraging results in three randomized trials, and is generating positive interest from investigators- who are really looking for fresh, new anti-cancer approaches with broad application, which is what elesclomol offers.

I am very much looking forward to the new trials. As we mentioned in our release today, we continue to expect the previously announced AML trial to initiate by year end. We've also made good progress in starting one other solid tumor trial and are in discussions about several others. We'll have more to say about each of these as they get closer to starting. I will now turn the call over to Keith Ehrlich.

Thank you, Vojo, and good afternoon everyone. Total collaboration revenue in the second quarter of 2010 was $3.4 million, as compared to $4.7 million in the same period of 2009. In the second quarter of 2010, our research and development expenses were $9.7 million as compared to $10.1 million for the same period in 2009. In the second quarter of 2010, our general administrative expenses were $2.7 million as compared to $3 million for the comparable period in 2009.

In the second quarter of 2010, our net loss was $9.1 million or $0.22 per basic and diluted share as compared to $8.5 million or $0.25 per basic and diluted share. As of June 30, 2010, we had $48.7 million of cash resources on hand. Based on our current operating levels, we continue to estimate our 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.

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

Thank you, Dr. Bahcall. We will now be conducting a question-and-answer session. (Operator Instructions)

Thank you. Our first question is from Ryan Martins with Barclays Capital. Please proceed with your question.

Thanks for taking the questions. First off, maybe starting with a little more broader question. You're going to have two assets now, with 9090 and elesclomol that are going to have -- that have shown activity in AML. Just wondering how you think about this from a strategic perspective? Is there a plan in the future to have combination trials?

Ryan, this is Safi. Actually, a number of people have suggested the potential for combining 9090 and elesclomol for a couple of reasons, and we've actually looked at that in the lab and seen some interesting pre-clinical synergy data. And that's because elesclomol is active under the -- a low LDH conditions, and 9090 has some effects that might help in the high LDH conditions. And so, when you combine the two, there is some underlying -- attractive underlying science rationale why that might make a good idea.

But, the first thing we would do is certainly start with the proof of concept studies for each of them separately. And once we've established that in the clinic, move on to potentially considering combination studies.

Okay, thanks. And looking back a little bit at the data that was presented for the once weekly trial with 9090 and ASCO. There was some -- in some few patients there was a decrease in heart rate and a slight increase in QT. Just wondering, when you said you're going to make modifications for future studies and with the new studies that you all have initiated, have you had any changes in inclusion, exclusion criteria, or is this just something that's an on-going monitoring?

Hey, Ryan. This is Vojo Vukovic. Thanks for the questions. We have reviewed all cardiovascular data, EKGs, and the heart rate and PR interval data, and we keep reviewing this data with the external cardiologist. We don't have any concerns, neither has the cardiologist any concerns about the ongoing trials. And we're not required to do any changes to the monitoring or there's no treatment implications, or anything like that. So, we continue to see the signal, but it's not something that's worrisome at this point in time.

Okay. Thanks for clarifying that, Vojo. And maybe -- obviously, we saw at ASCO Novartis and Astex compounds as you indicated in the press release had ocular toxs associated with them. Do you guys have any idea what the future plans for those compounds -- future development plans with those compounds?

Ryan-- we couldn't' -- you'd probably have to ask what Novartis or Astex what their plans are. We don't know.

Okay. And finally, just on partnering, if you guys have any kinds of updates other than a timeline for the end of 2010 in terms of discussions?

We're having some interesting discussions. There's no change to our goals or guidelines or plans. So, not on this call.

Okay, thanks.

(Operator Instructions) Our next question is from Joel Sendek with Lazard Capital Markets. Please proceed with your question.

Hello, thanks a lot. So, you guys have so many trials ongoing for 9090. Eleven clinical trials, maybe 15 by year-end. I guess, obviously, that's a good thing with regard to the potential applicability of the drug. My question is, how long do these trials have to run before you have confidence that you're going in to the right indication for the phase-threes' that you want to start next year? And the further implication for that is, in order to get the most lucrative partnership, you possibly can you presumably want to get the best data and have these trials run a certain amount of time. So, does that impact when and how you would negotiate a partnership? Thanks.

Sure. Two parts to your question. How much data do you need and what do you need to see to go into phase-three and then, kind of a similar question on the BD or the partnering side. In both of those, it tends to be in the case of partnering when we're in discussions with pharma companies, it becomes fairly clear what convincing data is and what it isn't. It ends up depending on the tumor type, on the indication, on the collective data, what -- how many patients have you seen? How compelling is the result? And it's hard to give a blanket answer because it's different for different cancers. A heme cancer is very different than a lung cancer, is different than a gastric cancer, which is different than a pancreatic cancer.

You're going to need more than a few dozen patients to have something compelling for a partner. And it's about the same answer for the phase-three, because what drives partnership interest is also what drives both internal and external interest in a phase-three. So, in both of those cases, you need to see something, whether it's disease control rate or PSS rate or a number of patients with real tumor shrinkage that's fairly well above historical in that patient population, to be convinced either for phase-three or four getting good deal terms on a partnership.

I guess -- and then -- I guess that makes sense. I guess my question is at what point -- I guess it's hard to answer. But, at what point do you think you're going to have enough in order to do either of those two things? And because we are forced to kind of model this out, and you have so many trials on-going, some of which are luckily paid for by third parties. But, I guess the downside is you have less control over the timing of it.

Are you going to wait until you see one good signal and put the plan in place to go forward with the phase-three? Are you going to wait until you -- enough time is passed, give each indication the possibility of having a robust response before you make a decision to commit capital?

I see. I think it's a little tough to give a very broad general answer to that question because it depends what you're seeing. Let's say you're working in non-small cell lung cancer, second or third line and you're seeing very compelling data and it's a pretty big patient population, and there's a high unmet need and you have a pretty clearly defined path to phase-three. Whereas your other trials, because many of them are open label, we're getting real-time on-going looks at the data. So, you reach a position certainly by the early part of next year, where you're getting directionally a pretty good sense of how the drug is doing in different patient populations. And that's probably good enough to help you -- by the first half of next year, pretty well flesh-out what your next set of steps are for the drug.

Okay.

To answer your question, bottom line is you don't need to wait until the last patient with the last measurement for every trial to make a decision.

That's -- I kind of wanted to rule that out. That's good. Thanks a lot.

Our next question comes from George Zavoico with McNicoll, Lewis, and Vlak. Please proceed with your question.

Hi, everyone. Congratulations on a good quarter. A couple of questions. Of all those trials that you're planning, the 15 by the end of the year and phase-three next year, can you reassure us that you have enough supply of drug to -- for all those trials?

Yes, George, we do. We've fortunately been doing this long enough. With the elesclomol, we've got the phase-three commercial ready. So, we have a pretty established CMC group internally, that's been through this kind of thing quite a few times. We've reached the point where, as they said a few weeks ago, not that it's become routine, but that it's well under control in terms of running manufacturing phase-two, phase-three manufacturing batches.

You're doing that yourself? Or do you have a CMO?

We have a contract manufacturer.

Okay. One or two? Just in case.

We have a CMO for API, we have a CMO for drug product. And we've used a number of manufacturers. I don't remember off the top of my head how many we have.

So, clearly you've covered all your bases in that regard. And then, of any of the trials coming up of the 15, are any of them pediatric cancers?

No.

Okay. Great. Thank you very much.

Our next question comes from Joe Aguilera with BioRevolution Capital. Please proceed with your question.

Congratulations, Safi, on a very good quarter and good movement on 9090. The first question is what's the fastest route to approval you think as a single agent for which indication, Safi, if you had to guess going forward?

That's a subject of much discussion internally, as we get the data and evaluate different paths. I think that's something we'll probably talk about a little bit later when we have more data presented in medical meetings. And then we can point to our -- the rationale for some of the thinking of the trials. And there might be some news coming up fairly soon, which will be relevant to that. I don't think on this call we can comment on the phase-three path right now.

And would that influence the partner how they want to strategically move that indication? Obviously, will that weigh heavily?

Yes, I think they're related. To the extent that we see compelling phase-three generating data in a particular tumor type, that would be probably of the highest interest to a partner -- the indication that would be of the highest interest to a partner.

Okay, thank you, Safi.

Our next question comes from David Harmon with UBS. Please proceed with your question.

Hello, Safi. Congratulations on your quarter. Can you hear me, by the way?

We can hear you great.

Oliver sends his best. He's on his way to Australia right now. A year ago, the investor group that I work with and I were asking some of the same questions that Joe just asked. And the comment was that the fastest route was through the heme indications, and you probably would have, because of that rate of success that you anticipated having, you're going to have something on that this year. The comments this morning on the net and again this afternoon, and I think the comments as I remember in the annual meeting were that the heme was, in fact, coming along very well. And yet, they weren't mentioned by the analysts on the net this morning, and basically, not mentioned much in this conference call. Could you clarify the comments that have been made before that the heme was the disease -- under the most likely to show the best results earliest?

When one works in hematology cancers, one has an objective marker, which is looking at white blood cell count which is -- it can be an advantage in speed relative to working with solid tumor cancers where you're looking at scans, that are more difficult. Depending on the type of hematologic cancer, there's certainly the possibility of going quickly. But, as we've spent more time and treated more patients in solid tumor cancers, and also in the last couple of years as the genetic profiling has gotten more and more sophisticated in solid tumor cancers, for example the ALK translocation mutation in lung cancer, similar things in melanoma, breast cancer, it becomes clear that one can move quite quickly in solid tumor cancers if you really understand the science of your drug and the patient sub-populations where your drug is working.

We'll have more to say about past the phase-three in time and phase-three, as we get a little farther and present results at meetings. Right now, I don't think we've said much in the last year or so about whether we're leaning toward heme or solid tumors, other than the press release we issued in the spring, saying that we've met in lung cancer, the interim activity criteria in one of the cohorts.

Do I remember correctly, that you feel that the lung cancer market is bigger than the heme market.

There are more deaths in lung cancers than deaths in the next several leading cancers combined. It is an opportunity -- a patient population and a mortality which is extremely high, it's the highest. But the market opportunity and how the economics play out depend on the specifics of what population you're targeting or what sub-population you're targeting, and how long people use your drug. In general, lung cancer has the largest number of deaths of any particular cancer type. But, the exact economics of how that plays out depends more specifically on the data in which patients your drug is targeting.

Do you care to comment on the implications of having successful lung cancer trials here in the United States and what the effect could be on markets in China and Japan?

I'll take that question. This is Vojo Vukovic. As you can see from our press releases, and from the information published on our website, we are targeting a relatively broad range of solid tumors. And some of the recent initiated trials, specifically the investor-sponsored trials, such as gastric cancer or hepatocellular cancer have global significance. And are particular importance for the market in Asia because of the high prevalence of these diseases.

Appreciate it. Thank you.

There are no further questions at this time. That concludes the question-and answer session. I will now turn the conference back over to Dr. Bahcall for closing comments.

Thank you everybody for your time and attention today.

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