Madrigal Pharmaceuticals Inc (MDGL) 2011 Q2 法說會逐字稿

Good day, and welcome to the Synta Pharmaceuticals second quarter 3022 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 Communication at Synta Pharmaceuticals. Please go ahead, sir.

Good morning, and thank you for taking the time to join us today. With me are Dr. Safi Bahcall, our Chief Executive Officer, and Keith Ehrlich, our Chief Financial Officer. This morning we issued a press release that reported results for the second quarter of 2011. 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 our 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 good morning, everyone. I'll begin with a quick review of our second quarter and where we are with ganetespib, our Hsp90 inhibitor, and then turn it over to Keith for a financial update. I'll leave an update on the other pipeline programs to the Q&A.

Over the past eight weeks we presented phase II results for ganetespib at ASCO in Chicago and at the World Lung Conference in Amsterdam, which generated a great deal of interest among investigators in the future of ganetespib specifically, and Hsp90 inhibition in general. As several investigators noted, these results mark a turning point in the Hsp90 field and position our compound in lead contention to be first to market.

In our phase II lung cancer trial, the high overall disease control rate of 54% compares favorably with published clinical trial results in similar patient populations, which showed results in the 30% to 55% range for approved and experimental agents, and much less than that for supportive care or placebo. This outcome was particularly encouraging given the advanced stage, heavily pretreated and progressive disease nature of the patients enrolled in our trial.

Of very high interest, as measured by the feedback and inquiries we have received since then, was the evidence of correlation of ganetespib clinical activity with tumor genetic profile. The high response rate or tumor shrinkage rate seen in the [alkre arrangement] or KRAS mutated patient populations, combined with the evidence of favorable safety, have led to many inquiries from individual investigators and investigator groups for additional trials in lung cancer and in other tumor types. We expect these discussions to lead to several new trials that will begin in 2012.

The identification of specific patient populations with high response rates to ganetespib is an important element of our strategy. We are currently incorporating the recent clinical findings into our development plans, and expect to announce trials, which will create additional paths to registration, beyond our pivotal GALAXY trial within the next several months.

I would like to emphasize four key factors that have been important to us and to our investigators in thinking through our clinical plans. First, the definitive evidence of clinical activity, including the durable, objective responses that have been seen with several patients having shown responses or tumor shrinkage lasting over a year. Second, the favorable safety profile established in over 400 patients treated to date.

Third, the very sizeable and, we think, occasionally underestimated opportunity presented by the recent identification of the ALK patient population in lung cancer. We believe this opportunity is likely to develop the way of HIV, first-line combination therapy with individually active agents, of which ganetespib is one and crizotinib from Pfizer is another. That combination has the potential to become standard of care, like the cocktail combination therapy approach now used to treat HIV.

And finally, a fourth key factor in our clinical plans is the unique leading position of ganetespib. This leading position is based on the safety and clinical activity, the pivotal program now underway, and the number of top tier investigators and institutions supporting the program in the US, increasingly in Europe, and soon in Asia. We are very excited by the ganetespib opportunity and we'll be working very hard over the coming months to realize the potential of this very promising compound to treat cancer patients in multiple tumor types.

Some final comments on the GALAXY trial, which is our pivotal phase IIb/3 trial in second-line lung cancer in combination with docetaxel. This trial is progressing very well, and we expect that all of the approximately 50 sites in North America and Europe will be up and running by the end of the third quarter.

Based on our enrollment projections, we believe that we will have interim data early in 2012. The exact timing and nature of an interim presentation will be determined by discussion with our steering committee and by when and where an abstract would be accepted, most likely in the March or April 2012 timeframe.

On partnerships, we are in advanced stage discussions with multiple partners for several of our programs. As always, at this stage in the process we can't comment any more beyond what we have said before. We are focused on Asia partnerships for our Hsp90 program, and either regional or global partnerships for our elesclomol and [CRAC] programs. There are no changes to our guidance. We expect to achieve our goal of closing one or more partnerships by the end of this year. I'll now turn the call over to Keith Ehrlich. Keith?

Thank you, Safi, and good morning, everyone. Together with $34.8 million of net proceeds raised in our issuer directed registered direct offering of common stock in April 2011, we ended the second quarter of 2011 with approximately $63 million of cash resources. Based on our current operating levels, we estimate that our cash resources will be sufficient to fund the Company's operations into the second half of 2012.

Total collaboration revenues in the second quarter of 2011 were $1.1 million as compared to $3.4 million in the second period -- same period of 2010. In the second quarter of 2011 our research and development expenses were $10.4 million as compared to $9.7 million for the same period of 2010. In the second quarter of 2011 our general and administrative expenses were $2.9 million as compared to $2.7 million for the comparable period in 2010. In the second quarter of 2011, our net loss was $12.5 million, or $0.30 per basic and diluted share, as compared to $9.1 million, or $0.22 per basic and diluted share, in the same period of 2010. I will now turn the call back to Safi.

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

Thank you.

(Operator Instructions)

Thank you. Our first question is from Jason Kantor with RBC Capital Markets. Please proceed with your question.

Hi, Safi. Congratulations on all the progress. I was -- so, I'm interested in the interim analysis of the phase II trial, I guess. Is there some protocol based analysis after a certain number of patients or after a certain part of the trial? Would this be just response rate data? I mean, what are the options in terms of data that we could expect?

Sure. What you can expect, what we're targeting is to have somewhere between a third and half of the patients. If you remember, this is a pretty large trial, 240 patients, so even a third of this trial is comparable to a more typical phase IIb, somewhere between a third and a half of the patients.

And the type of endpoint that's becoming generally accepted for this kind of trial in this kind of context is more of a landmark analysis rather than a time to event analysis. In other words, something like a [DCR] or a [CTS] at cycle 2. When you have a phase III OS primary endpoint, then you'll typically use a PFS interim. When you have a PFS primary endpoint, you more typically will use a landmark [RESIST] endpoint, typically around the cycle 2.

So we could have, for example, cycle 2 disease control rate in an un-blinded fashion for the two arms?

That would be -- I think that's, for example, what the [BATTLE] trial uses and that's what's sort of increasingly common for interims for these types of phase II/3 designs. What we'll do is --

But what is the purpose of the interim? I mean, will you be adjusting the trial in any way, or this is just for information flow? Is there a regulatory purpose?

The purpose is to help set up the phase III portion. So, in order to make an operationally seamless design where you can move quickly from the phase IIb portion to the phase III portion, you want to get started with some of the phase III design elements or regulatory discussions, the operational issues, patient populations, before the end of the trial. Otherwise you have a long waiting period where sites are open but you're on hold. You're not recruiting patients. So the purpose is to get a head start on the phase III design and planning.

And would we -- would this include any subgroups in terms of molecular markers or other things, or this is -- this would just be top line --

What we decided to do is not -- it probably is too early right now to get overly specific about exactly what dataset would be presented in which meeting and where. On the next call I think we'll be able to get a little more specific. As you know and we've talked about before, a big purpose of this portion of the trial and one of the reasons we powered it so strongly with 240 patients is so that we can look at the biomarkers in subgroups that are of interest. So we will --

And then --

So we'll be looking very carefully at that.

One last question. You had in your press release the plans to present phase I data at this conference in September. That seems particularly important given the GALAXY study. What type of information will we have? How many patients? And I assume we'll have response rate data for all those patients?

That is the docetaxel/ganetespib combination data that will be presented at ESMO, which was the original plan. We'll certainly have the safety data. We may well have some of the clinical activity data. I don't know off the top of my head.

Thank you.

Our next question comes from Joel Sendek with Lazard Capital Markets. Please proceed with your question.

Hi, Safi. Just a couple of follow-ups from the last questions. I guess more specifically on the GALAXY interim. Do you have multiple planned interims? Is this the only one? And is there [alpha spend] that will impact the phase III statistical plan once you convert or move to a phase III?

Yes, let me just make sure it's very clear. The phase III is a different patient population. This is not one of those phase II/3 trials where you try to use all the phase II patients together with the phase III patients in one lump pool. It's effectively two pools of patients, two trials that are conducted in an operationally seamless way. So there's no alpha spend between the phase IIb and the phase III at all.

Got it. Okay. Sorry about that.

And the interim -- yes, no problem. The interim is an administrative look, not a futility go, no-go analysis. So there's no alpha spend in the interim in the phase IIb.

Okay, understood. Great. And then back to this data at ESMO, so, I'm very curious about the efficacy of the drug in combination with docetaxel. Correct me if I'm wrong, we haven't seen any of that yet. So, seems to me that since you don't know off the top of your head whether there will be any efficacy data or not, when will we see the first data of the combination of docetaxel and ganetespib?

What I mean, I don't know off the top of my head exactly what endpoints and how many patients will be presented in September. And I don't know that that's finalized yet. But there will be a report that's presented by the investigator, and that will certainly include both the safety and whatever activity data up to that point is mature, which is -- will be some fairly large fraction of the accumulated patients since that trial is enrolled pretty well.

Okay, great. And then I guess my last is a question and a comment, I guess. When you describe the future treatment of non-small cell lung cancer, you used the HIV analogy. And I would agree with that, maybe do a cocktail and things like that. It certainly seems to be the way things are heading. But what I would disagree with, I guess, is the fact that HIV patients live many years and lung cancer patients die, right?

And so I guess isn't that a big differentiation because you only have so much time in order to get your cocktail on board and choose the right one. And, I guess, what's your commentary on that? Because it's going to become challenging in order to get all the patients the drugs that they need in the sequence that's best for them in a relatively short amount of time.

Well, HIV patients died, too, until good drugs came along. And I think that's the thing that may not be widely appreciated outside of the lung cancer community, that the identification of this ALK patient population as being highly oncogene addicted, meaning they are -- their tumors are enormously driven by the ALK oncogene. And if you can get that ALK oncogene, crizotinib does it, ganetespib does it, you can have a major impact on the disease.

So, I agree with you, the combination therapy has been used in lung cancer. We combine a platinum with an antimitotic agent, like a tubulin or an -- a tubulin inhibitor and an Alimta. But that's combining old sort of chemotherapy mechanisms. What we're talking about with ALK is a specific subgroup that, like HIV, you know what's driving it.

In HIV the virus is driving it. And you have a couple of different agents, nucleoside inhibitors and non-nucleoside RT inhibitors, proteasome inhibitors, and those are three different ways at getting at the virus. And you put them all right up front. You hit it hard, you hit it early, and you make an enormous difference in survival for HIV patients.

I think that's the way it's going to play out with ALK patients. And again, the difference there is when you're looking at every single lung cancer patient and you're doing blanket carpet bombing with chemotherapy, it's going to be much less impact on survival, as you say.

But if you go -- if you identify the subgroup of patients like you have with HIV, where you know what's causing it, you know the virus, in the ALK subpopulation you know what's causing it, it's the ALK oncogene. Once you know that, once you identify the patients and that subpopulation, then it's the same concept as HIV, hit them hard and hit them early with the drugs that are active against that underlying cause.

And crizotinib binds to one site on the oncogene, and Hsp90 inhibits another portion of the ALK fusion. It inhibits the glue that sticks the ALK with the EML4 together. So you're hitting the underlying driver two different ways, just like the nucleoside and non-nucleoside RT inhibitors hit the HIV virus in two different ways. And they're used right up front. You hit them hard, you hit them early, with the two very active drugs. So that's why I think the ALK subpopulation is going to have a close analog with the HIV world. And I think it'll end up making a huge difference in survival for that group.

Got it. Understand. Okay, thanks, Safi.

Our next question comes from Shiv Kapoor with Morgan Joseph. Please proceed with your question.

Thanks for taking my question. Safi, congratulations. I wanted to ask you a different question perhaps. Most of the questions on ganetespib have been satisfactorily answered. Can you tell us what, in your mind, is the biggest risks for the Company at this stage? And can you talk about what you are working on, Safi, what do you spend most of your time on these days?

Well, thanks for that question, Shiv. I can always count on you for some interesting questions on these calls. What I'm spending most of my time on right now is, I would say, number one, partnership discussions. We're in, I would say, over half a dozen very interested parties. So we want to make sure.

We think there are many variables there, many options there. You have global deals, you have regional deals, you have the one program, you have the second program, you have the third program. So there are a lot of variables to -- that come into the mix. And so I'm spending some fair amount of time in making sure we think through those very carefully. So that's one.

The second is operationally. We've always set very high levels of excellence internally on our ability to execute effectively. That means on time, on budget, on spec. And so we're -- I'm making sure and staying closely engaged on getting all the sites up, getting the quality metrics in place, making sure we have good relationships with the sites, making sure the sites understand how to administer the drug for the GALAXY trial. So that's the second thing I'm focused on, which is operational.

And the third is thinking through beyond our GALAXY pivotal program, the new potential paths to registration. So we've gotten a flood of inquiries since ASCO and the World Lung meeting in June and July, with people, really top tier investigators, very interested in the drug. There's clearly a shift in the field in Hsp90. As you guys know, there's been baggage in the field from prior programs and mistakes and problems. And this drug has really emerged as clean, with a good safety profile, a lot of patients, and now clearly clinically active.

And that has meant not only that lung cancer docs come up with wanting to use the drug in different -- all sorts of different settings and combinations, but we've seen from colon cancer, breast cancer, prostate, pancreatic, a lot of folks come to us, melanoma, with different proposals. And so some fair amount of time and thinking needs to go into prioritizing those and making sure if and when we create new paths to registration those are really well thought out in advance so we position ourselves well. So those are the three things, partnerships, operations, and new paths to registration.

You didn't answer the question about what do you think the biggest risk for the Company is. Should we assume those are the three big areas that you worry about as well?

Those are what I'm focused on. And I tend to focus on both the opportunities and the risks. So I want to make sure partnerships proceed on track. I want to make sure operationally we meet our timelines. And then I want to make sure that the trial designs are right up front so that we don't have to go back and fix things later. So those are the areas that I'm spending most of my time on.

Okay, great. Thanks.

Our next question is from George Zavoico with MLV. Please proceed with your question.

Thank you. Hi, Safi, Keith and Rob. Thanks for taking the questions, and a good quarter. I'm intrigued by your cocktail analogy, which I agree is very, very interesting. And I've always been an advocate of looking for and parsing out patient populations that might be particularly sensitive to targeted drugs. And in this case the ALK patient population has certainly presented a tremendous opportunity for you.

On the other hand, crizotinib is not an approved drug. It is still in clinical trials. And the FDA really has no path for putting two drugs such as ganetespib and crizotinib together in a trial, which seems to be what the lung cancer population, especially the small 4% or 5% of those patients that have this mutation, would be absolutely screaming for at this point, just like the HIV patients were screaming for cocktails a couple of years ago -- or several years ago -- actually more like a couple of decades ago now. But so can you speak a little bit to your strategy for going in this direction with an unapproved -- another unapproved drug?

Sure. I should start by saying -- I mean, we are very -- in very close contact with many of the folks in the lung community who are leading the crizotinib effort and leading the ALK patient effort. And we have a pretty regular and frequent interaction with them. So without getting into things nonpublic, I think it's fair to say that wide expectations are that crizotinib will get approved imminently in the US and follow pretty quickly in Europe and Asia next year. So I think crizotinib being unapproved is something that is just relevant this month and is going to change very rapidly.

Okay.

So then we're going to be talking about an approved agent, which will take some time. There's obviously time lag to reimbursement, there's time lag for a couple of other things in different countries, for example. But certainly if you go out into the field and you talk to folks that are active, the widespread expectation is that there's going to be pretty wide adoption of crizotinib pretty quickly and approval pretty quickly.

-- got to agree with that for sure.

So we will be talking about-- within the next 12 months an approved agent is certainly the expectation. And then there are a number of ways to demonstrate activity around that, in combination or after that or in other settings. We are right now in the middle of those plans. And what I think it's fair to say is that you can expect some announcements on our plans and strategy there within the next several months.

Okay. I think within the lung cancer community this approach seems to be the most rapid path to market. Would you agree with that?

The GALAXY trial is a trial that is very well designed, very straightforward trial, and we think could get quite rapid enrollment. As you know, it's a very large patient population. We're going in combination with docetaxel because of the way the landscape is changing in lung cancer, with pemetrexed moving up first-line. You're seeing increasing usage and adoption of docetaxel second-line, and that's right where we're fitting in. It's a sweet spot for the trial. So, there's a lot of patients there. We're going to be in quite a few countries, with a lot of sites. So the GALAXY trial can move very quickly as well.

Yes, I'll agree with that, too. I'm just thinking that with the kind of response rates that you're seeing with crizotinib, upwards of 80%, 85%, and if you potentially add ganetespib to that and even bump that up even further, that the path will be lubricated for that indication, albeit a fairly small indication. But, yes, basically I guess we have to just wait and see how both paths pan out.

The next question, you're talking about you're expecting a partnership within -- before yearend, I think you said. You've been -- in various calls you've been saying that partnerships are coming up close, coming imminent within certain deadlines. And it seems to be pushed back every -- almost every quarter. Now, granted the sort of the landscape is changing because as you acquire more data and get more comfortable with ganetespib's safety and efficacy, I suppose the hurdle for partnership really increases. You're a moving target. Is that a fair assessment of why partnerships haven't been forthcoming more rapidly?

I'm not sure I would agree with that, George. But, actually, I just want to comment about one thing you mentioned right up front. The crizotinib response rate was 50% in one trial, around 51%, and 60% in a different trial more recently, not 80% or 90%.

Oh, okay.

And you're absolutely right, there is a big need there because the median time to progression is ten months. So you get a good response, but still every -- there's -- you have a median progression of ten months. So within a year, that's not a homerun. You absolutely want to extend that time to progression --

Right.

-- patients on drug. So I think there's a huge opportunity there. And I think it's sort of easy to dismiss it as, oh, 5% or 10% of patients sounds like a small number. But you have to remember that's bigger than 100% of melanoma. And it's also bigger than the entire patient population for Gleevec, and that's a very large market. So I think it's -- one has to be a little cautious about dismissing this as a small market. I think it's a very interesting opportunity, obviously medically, but also commercially as well. So that's the first one.

On the partnership, we've been consistent in saying this whole year that we expect a partnership by end of year. And so that hasn't changed. And in terms of what we're expecting, we're pleased by what we're hearing and what we're seeing this year. I mean right now. But as you know, at this stage of the process we just can't comment on the discussions beyond what we've already said and consistently said all year, that our goal and our target is to complete a partnership by the end of the year.

Okay. No, I'm not dismissing the size of the market. It is a smaller patient population, but the size of the market is definitely -- it is considerable. I'm not disagreeing with you on that at all. And I think it's a great strategy, as I said before. Going in the direction of finding groups of patients that are particularly sensitive and respond well and durably to a drug, even if it a small percentage of the total indication, I think is a great strategy to follow.

All right, well, thanks very much. Appreciate that.

Our next question comes from Robin Davison with Edison Investment Research. Please proceed with your question.

Thank you. Hi, Safi. I wonder if I can explore a little bit more on the plans for the lung cancer, particularly in these specific populations. Are you expecting to initiate studies in both the ALK and KRAS areas, or are you just using that as an example in the statement?

I mentioned ALK and KRAS as the signals that a number of people have come to us about, quite excited. ALK because you saw just very definitive clinical activity there and there's an enormous effort by Pfizer that's been invested in identifying this patient population and defining the assays. And we are in a very lucky position to be in some ways drafting off the very significant work and investment that Pfizer has done in identifying that group. So that's of high interest to us.

KRAS, many people have approached us just because you don't see something like that very often, with close to two-thirds of the patients showing clear tumor shrinkage. That's just not that common, especially in the KRAS group, where many known drugs just don't work. So that's of high interest to people, not only in lung cancer, because it's a big population in lung cancer, but in several other tumors where KRAS is very significant, in pancreatic and in colon. So we've had people outside of lung cancer come to us and talk to us about their interest in KRAS outside of lung cancer as well.

Okay. I mean, if we look at the ALK, do you think that you'd be able to explore both crizotinib [failures] and combination with crizotinib at the same time, or is that not -- you haven't decided upon that strategy yet?

Well, you wouldn't do that in the same trial. You'd probably -- those are different objectives and different trial designs. Both of those have been proposed to us by quite a few investigators and investigator groups. We've had a lot of people come and say -- many people in sites come to us and say they want to do a crizotinib combination trial. And so that's something we are evaluating and following up on.

And then we've had quite a few people come to us and saying they're interested in what happens after crizotinib, when patients progress on crizotinib in either single agent or combination trials there. And those are two very different trial designs. And we're having active discussions on both of those types of trials. And as I mentioned, probably a little too early to announce plans right now, but in the next several months you could expect to hear more from us definitively about those plans.

Okay. Finally, I just wondered if you could comment a little bit about elesclomol. The phase II lung cancer study is looking like it's going to start a little later than I think we had thought earlier in the year. And I'm wondering whether -- if there's any reason behind that. Are you directing more attention towards ganetespib and these potential new opportunities, or are you hoping to close a deal on that one first before you get that study underway, for example?

Yes, two things there. One is we have some quite interesting findings on biomarkers there and we want to take some time to make -- to really flesh that out so we can design the lung cancer trial to focus most effectively on the best potential biomarker.

And two, as you mentioned, a bandwidth and a resource. We're really focusing. This is a very unique and fortunate time for ganetespib, for the program, with a number of opportunities that have been identified. And so we are -- some of that is bandwidth, just focusing the resources and attention on ganetespib.

Right. Sure. Great. Thanks very much for those answers.

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

Thank you, everyone, for your time and attention today. That will conclude this call.

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