Madrigal Pharmaceuticals Inc (MDGL) 2013 Q2 法說會逐字稿

Good day and welcome to Synta Pharmaceuticals' second-quarter 2013 earnings conference call. Today's conference is being recorded and webcast. At this time for opening remarks, I would turn the call over to George Farmer, Vice President of Corporate Development at Synta. Please go ahead, sir.

Hello and thank you all for taking the time to join us today.

With me are Safi Bahcall, our Chief Executive Officer; Vojo Vukovic, our Chief Medical Officer; Iman El-Hariry, our Vice President of Clinical Research; and Keith Ehrlich, our Chief Financial Officer.

This morning, we issued a press release that reported results for the second quarter of 2013. This release can be found on our website at SyntaPharma.com.

Before we begin, I would like to point out that we will be making forward-looking statements based on our current intents, beliefs, and expectations, which are subject to certain risks and uncertainties. Additional details can be found in related SEC filings also available through our website.

I will now turn the call over to Dr. Bahcall. Safi?

Thanks, George, and thank you all for joining us this morning.

I'll start with a few high-level comments about our development program, turn it over to Vojo for some additional details, after which Keith will discuss our financials and we'll open the call for questions.

Let me start with lung cancer. The track record of our industry in Phase III development, particularly in lung cancer, has not been very good. There have been over 40 failed Phase III trials in lung cancer in the past 10 years, involving over 20,000 patients, and only three new drugs approved that have shown a survival advantage.

In our GALAXY program, we're taking a different approach in order to improve these odds. First, we are heading into a global randomized Phase III trial having already treated nearly 400 patients in a global randomized lead-in trial of exactly the same design. To our knowledge, there's never been a drug entering its first pivotal trial in oncology with this much data in the same setting, essentially doing the same trial twice.

The purpose of having such a large lead-in trial, the dress rehearsal GALAXY-1 study, as the lead-in to our pivotal GALAXY-2 study is to overcome the problems of historical Phase III failures. These include two main things. Insufficient power in the typical 50- to 100-patient small Phase IIb study to make well-informed decisions on patient selection. Second, the risks in heterogeneity that come from transitioning from a small, generally local study to a large global operation.

The ability to analyze this size database of clinical experience before Phase III -- over 1,000 patients across 15 countries -- has created an unprecedented opportunity to optimize both patient selection and trial conduct for Phase III.

The second thing we're doing somewhat differently is in choice of patient population. It has become popular to focus on single genetic markers for patient selection. This is particularly useful for single pathway drugs -- for example, Herceptin and the HER2 biomarker, Tarceva and the EGFR biomarker.

The great advantage of an Hsp90 inhibitor, however, is its ability to silence multiple cancer-signaling pathways simultaneously, like cutting all the lines in the electrical grid, rather than just one. It also means that a single genetic marker is less likely to be useful in predicting ganetespib activity, as compared with a single pathway drug such as Herceptin or Tarceva.

In the GALAXY-1 trial, what we've seen convincingly and consistently is that one prospectively defined clinical marker stood out for identifying patients who derived the greatest benefit from ganetespib, and that is, is the patient's cancer sensitive to chemotherapy or is it refractory?

Preclinical results show that when chemotherapy is working a little bit, ganetespib is making it more effective, and when chemotherapy is not working at all, ganetespib probably doesn't help. And that's what the clinical results from GALAXY-1 show as well.

Clearly, there is some important underlying biology driving these findings. We and a number of our collaborators have recently identified some mutations in apoptosis pathways that contribute to resistance both to taxane and to ganetespib. We are continuing to explore both the basic and translational research around these findings.

I'd like to make a comment about using a clinical marker rather than a genetic marker. While focusing the Phase III trial on the 70% of patients who are chemo-sensitive and excluding the 30% that are chemo-refractory is new for non-small cell lung cancer, it is common in many other tumors -- for example, breast cancer, ovarian, and many hematologic cancers.

The bottom line, we have an intensively data-driven approach to maximizing the likeliness of success in Phase III. The size of the clinical database and the operational experience before Phase III; the choice of using an easily evaluated clinical marker, rather than a tumor marker from biopsies; and the strength of the data supporting this choice give us high confidence in the Phase III.

And now, let me turn it over to Vojo to add some detail.

Thank you, Safi. I'd like to touch on a number of topics that Safi mentioned and provide some feedback from the field from our GALAXY-2 program.

First, it's clear that Hsp90 inhibition is making a comeback, based both on our GALAXY results in the randomized setting and the single-agent activity seeing both with our drug and the Novartis AUY drug. Hsp90 inhibition of lung cancer was the only featured workshop devoted to a single therapeutic class at the recent Huntington Beach lung cancer meeting, with presentations from a number of the most well-known lung investigators.

And we are receiving almost weekly now new proposals for funded studies from investigators and corporate groups. Most recently, the Southwest Oncology Group, one of the two largest oncology networks in the US, has indicated plans for a randomized trial evaluating Tarceva and ganetespib in the second- and third-line lung cancer setting.

Another large cancer network submitted a fully funded proposal for trial evaluating the combination of ganetespib with a well-known antiangiogenic agent. And we have trials in ovarian cancer, pancreatic cancer, bladder cancer, prostate cancer, and other cancers either in active initiation or planned for the coming year.

Secondly, I've been very pleased with the progress and enthusiasm for GALAXY-2. We have over 70 sites now activated. The input of recent results and advisory boards has been very positive. In addition to the obvious advantages of entering Phase III with strong clinical results in hand, including positive survival data, one of the things that has most resonated with our investigators is the impact of ganetespib on reducing the spread of tumors, which was seen both in preclinical data, but most strikingly in the clinical results from GALAXY-1, because it's the spread of the disease that kills cancer patients, not as much the primary tumor.

Safi?

Thank you, Vojo.

To briefly discuss our strategy in breast cancer and how the recently announced results might impact that strategy.

Over the past year, we've indicated that our top three priorities following second-line lung cancer were, number one, expansion in lung cancer, including first line and additional combinations; number two, metastatic breast cancer; and number three, neoadjuvant breast cancer.

Our interest in breast cancer comes from the known role of Hsp90 in fueling breast cancer growth. Patients with reduced Hsp90 expression live longer. Those results are the most compelling validation for Hsp90 as a target in any tumor type that we are aware of.

Breast cancer treatment today can be divided broadly into three categories. For HER2 positive disease, HER2-targeting agents are backbone therapy. Patients are treated with a HER2-targeting agent, such as Herceptin, in all stages of disease -- neoadjuvant, adjuvant, metastatic -- and they cycle through different therapies -- chemotherapies added in combination on top of that backbone.

For ER- or PR-positive disease, hormonal therapies are backbone therapy. For triple negative disease, however, there's been no standard of care, no backbone therapy.

What does a drug need to become backbone therapy? Three things. Number one, single-agent activity. Herceptin, for example, has some modest but not overwhelming single-agent activity in HER2-positive disease. Number two, favorable safety. Particularly in breast cancer and particularly for early-stage treatment, quality of life is very important to patients. And number three, ability to combine. Herceptin, for example, is very rarely used as a single agent. Nonoverlapping toxicities, synergistic or additive activity, and favorable safety are all critical to becoming backbone therapy.

Results with ganetespib to date support all three of these criteria. Many of our investigators came to us over a year ago encouraging us to develop ganetespib as backbone therapy for triple negative disease -- neoadjuvant, adjuvant, and metastatic setting. And that is our goal.

Together with lead investigators, we've developed protocols for two registrational trials, one in the metastatic setting, the ENCHANT-2 trial, and one in the neoadjuvant setting, the ENCHANT-3 trial. We're hopeful that these trials will begin next year. As we have said previously, we will wait to complete certain ongoing partnership discussions, some of which relate to plans in breast cancer, before launching these trials.

The recently announced results from ENCHANT-1 don't really change our thinking in any way; they simply confirm earlier signals of single-agent activity. I've asked Dr. Iman El-Hariry to join us for the Q&A session. He's a breast cancer oncologist who's been in the industry developing breast cancer drugs for over 10 years before joining us at Synta several years ago. He has led our breast cancer program for ganetespib since inception. But first to Keith.

Thank you, Safi, and good morning, everyone.

There were no revenues in the second quarter of 2013 or 2012. In the second quarter of 2013, our research and development expenses were $17.9 million, as compared to $11.3 million for the same period of 2012. Our second-quarter general and administrative expenses were $4.2 million, as compared to $2.9 million for the comparable period in 2012.

Our net loss in the second quarter of 2013 was $22.8 million, or $0.33 per basic and diluted share, as compared to a net loss of $14.6 million, or $0.25 per basic and diluted share, in the same period of 2012.

As of June 30, 2013, we had approximately $70.2 million of cash resources on hand. Based on our current operating levels, we expect our cash resources will be sufficient to fund operations into the second quarter of 2014. Certain new activities contemplated for 2013 and 2014 will be conducted subject to the availability of sufficient financial resources.

I will now turn the call back over to Safi for concluding remarks. Safi?

Thanks, Keith. This concludes our prepared remarks. Operator, we'll now open the call to questions.

Thank you, Dr. Bahcall. (Operator Instructions). Thomas Wei, Jefferies.

Thanks. I had a couple of questions. First, just on ENCHANT. I was curious if you could give us any additional details on whether positive responses that you saw in breast cancer were confirmed with a second scan. Maybe any details on the depth of response that was seen or durability?

I'll turn that over to Dr. Iman El-Hariry to answer.

Yes, sure. In fact, all PRs were confirmed week 12 scans. So the first initial scan was done at week six.

For the complete response patient, the first scan at week six was a little ambiguous, given the extensive necrotic -- evidence of necrotic disease seen on the scan, and the final scan at week 12 is currently being confirmed by an independent [oncologist]. But it's important to know that these patients had been received and went into surgery with total mastectomy and currently receiving definitive treatments.

In terms of the durability of the response, both patients have gone through a [case] of fourth or the fifth cycle, and it's -- at this moment, it's hard to see the patients are still ongoing on the treatments. And this was really exciting our treating investigators, given the short durability of response as seen with chemotherapy in triple negative breast cancer.

And just to clarify, there were comments made at ASCO about a near-complete response in triple negative breast. Is that a different patient from the one that was described in the press release as going on -- having a clinical complete response and going on to surgery, or are basically the two responses in triple negative breast complete or near-complete responses?

It is indeed a different patient. So the first patient that we alluded to at ASCO was a different patient from one of the sites. This patient had achieved nearly a complete response and that response was confirmed actually twice. So the second patient with the complete response, this is the one that we have just announced last week in our press release.

And with that set of data in this ENCHANT-2 and ENCHANT-3 design that you have, are you planning on focusing just on triple negative breast or is it going to be a broader subset or very broadly just metastatic breast cancer?

Thomas, it's Safi. It's a great question. We have been in pretty extensive discussion with breast cancer investigators, as well as looking at our data.

The scientific rationale is very strong in HER2-negative disease broadly. And there's been quite a lot of interest in treating hormone refractory. Once patients in hormone-positive disease have exhausted endocrine therapy into hormonal therapy, they switch to chemo and treatment looks very similar. It's the same agents, not from the same paradigm in hormone positive, hormone refractory disease as it is in triple negative.

Given the high unmet medical need, though, in triple negative, we're currently thinking about focusing on triple negative with both the metastatic and neoadjuvant settings. I think even as far back as a year ago, many of the investigators in the program came to us with the view that given the ganetespib safety profile, compared to the more cytotoxic regimens, the regimens with more problematic toxicities, they really wanted to see as their first priority neoadjuvant in triple negative.

But I think collectively, triple negative, both neoadjuvant and metastatic, would be our highest priorities, and then expanding into the hormone-positive group, either with a taxane or in combination with other agents, is the next priority.

Brian Klein.

(Technical difficulty). (Multiple speakers). Okay, great, sorry about that. So thanks for taking my questions. First, on ganetespib in breast cancer, it seems, based on your prior development, that you had been moving away from monotherapy with ganetespib. In your planned registrational studies for breast cancer, triple negative, are you again moving back towards combination with that agent or you're going to pursue a monotherapy program?

You know, I think this is really a great question. And let me just tell you about breast cancer. There is -- what we need to -- in terms of moving into an indication, we have to demonstrate first a single-agent activity, and if you look at all the drugs that have been approved in various cancers in any subtype, there is no single drug that has been approved without demonstration of such single-agent activity.

So it's very important for us to see that ganetespib has a clinical activity in breast cancer in the [sub-parts] that we are interested as, and the investigators are also interested as, and that will enable us to move into the combination treatment.

And if you look for an instance at drugs like, and I'll give just some examples, let's just say [plusutamab] or pertuzumab or other (inaudible) agents, they have all been tested as single agents. And what's really exciting, particularly to us, is the level of activity that you are seeing, it's far exceeding the single-agent activity that has been seen with these agents before they moved into a combination therapy.

Also, given that you are continuing to expand enrollment in ENCHANT-1, do you anticipate that you will present that data before you initiate the registrational programs that you discussed?

It's hard to say since we haven't made any final decision on when the larger ENCHANT-2 or ENCHANT-3 trials will start. I think what we have said in the past is that we're hopeful we'll be presenting ENCHANT at San Antonio this year.

Okay, thanks. Briefly on non-small cell lung cancer, we are now a little bit over 2.5 months into the enrollment of GALAXY-2. Can you give us a bit of an update there?

We don't consistently give guidance for enrollment for ongoing studies, but what we have really said is that we will have some data from GALAXY-2 in the first half of next year, the first interim analysis. And the second interim analysis, as well as final data, is targeted currently for second-half next year.

Great, and then one last question, Safi, in your prepared remarks you mentioned two problems that have occurred in the past with drug development in non-small cell lung cancer. In particular, regarding the first one, which was insufficient power, just wondering that since we haven't seen the final data from GALAXY-1, what gives you the confidence that you have an appropriate power assumption for GALAXY-2? Thanks.

Sure. I think we have -- I mean, there are two parts to that question. One is the choice of patient population and then the other is the choice of overall power.

And I think the choice of patient population, focusing on the key most sensitive group and not the chemo-refractory group, was achieved to a very high statistical significance using the standard statistical interaction test. It passes all the biological rationale and plausibility, and it's consistent with patterns in prior trials. So it's an extremely strong case that we've achieved the main objective of the GALAXY-1 trial, which is to identify the right patient population.

I think based on the totality of the data, obviously we have access to a lot of data and have analyzed it internally, and independent groups that have come in and analyzed it with us, and external groups in industry that have analyzed the data. We feel very comfortable with where we are. If anything, if we get any further data, we can always revisit, but we're comfortable with the assumptions where we are today.

Great. Thanks for taking my questions.

Gene Mack, Brean Capital.

Thanks for taking the question. Wondering if, Safi, maybe you can talk about, is there any --- first, do you have enough data actually even yet or is it just too early to tell if there's any potential to enrich for better responders in the breast cancer populations that you're going to be looking at for ganetespib?

Yes, Gene, that's a great question. In fact, I can tell you some of the feedback that we've gotten in the investment community, as we shared, especially -- sorry, in the investigator community, as Iman and Vojo shared this data, I would say unanimously everyone wants to understand what is the genetic profile of these dramatic single-agent responses that we are seeing.

I mean, a week six response with a well-tolerated agent, but especially a complete clinical response of the type that's been seen. Is there a biomarker? Is there something like the ALK or the EGFR mutation, but a new one, which -- in triple negative, and that is -- very fortunately, we have biopsies from these patients, so we are looking into it.

What I think that means for our strategy is, as Iman said, we have an enormous amount of experience with a taxane program coming from the lung cancer and we've seen very clearly that our drug is sensitizing tumors to chemo and especially to taxanes. That means we have the standard plan that we've had all along, which is to simply take what we've done in lung cancer and the taxane combination, and all the operational experience and all the insights, and port it over into breast cancer.

And there, in breast cancer because of treatment in adjuvant and neoadjuvant, you kind of automatically have the same sort of thing that we are seeing in lung. There has always been in breast cancer essentially a chemo-sensitive versus chemo-refractory in that in most breast cancer trials in the metastatic setting, you have a provision for time off of chemotherapy, six months or 12 months. Pertuzumab was approved with 12 months off of chemotherapy, sort of equivalent to the chemo sensitive.

So to answer your question, in breast cancer, there is already a certain type of selection for more chemo-sensitive patients, which is essentially what we've found in the GALAXY program, that says these are the patients where the sensitizing effects of ganetespib will help improve the chemo.

But then, the second part comes back to, is there a biomarker? And that's something we're going to look into and be analyzing over the course of this year, and if we identify that there is a certain gene mutation -- for example, in triple negative -- which drives extremely high sensitivity, that's the thing that would cause us to revisit maybe there is a parallel path as a monotherapy within some genetic biomarker. Does that answer your question?

Yes, thanks so much. And then, just one other thing, I wonder if you'd just give us any update you might be able to provide on partnering talks. There's been a couple of allusions to it in the press release, and then I think you may have mentioned something on the call. But I was just wondering if you can elaborate on what the effort is there and maybe if you have any sense of timelines?

We have an ongoing partnership process. We've been very pleased by the level of interest. We've found that it doesn't help negotiations if we publicly announce timelines, so we don't plan to publicly announce timelines.

And is the data from the breast cancer trial, has that been part of the discussions now or is that still too early?

That's an active part of the discussions. I think there's some companies who are as interested or as excited in the breast opportunity as they are in the lung opportunity.

I think the lung opportunity is the most immediate, and obviously there's a very large data set to answer, but breast cancer is an enormous patient number and has the opportunity for very extensive and very well-developed paradigm for neoadjuvant and adjuvant treatment. And I think people recognize that the safety profile of ganetespib is key. And it is a big competitive advantage for neoadjuvant and adjuvant usage.

And I think, equally important, what you are trying to achieve in breast cancer in the neoadjuvant or adjuvant setting is prevent metastases. And that is what people are seeing and that's how people are thinking about this drug in the field as it's preventing metastases. And therefore, breast cancer is a particularly interesting place to go because of the extensive adjuvant and neoadjuvant usage.

Great. Thanks so much for taking my questions.

Joe Pantginis, ROTH Capital Partners.

Thanks for taking the question and congratulations on the ENCHANT data. I did want to focus on the one patient who achieved the CR and was able to get restaged to being operable. I was just curious, if I read it correctly, what were the factors why this woman did not see prior chemotherapy?

Thank you for the question. The patient -- actually when I came on the trial, she was inoperable and the underinvestigator did not actually see much of a hope for her to get into chemotherapy, and he said that maybe her choices should be a form of clinical trial. So he wanted to give this a chance.

With patient [idads], the protocol is set up as only the [four change] or just give to start with a finite period of time and then assess subsequently. I think to his extreme surprise, and to my also extreme surprise as a breast cancer oncologist to see that patient after three cycles of treatment completely restaged. As the investigators said word for word, this is --- I could not see anything at all when I examined her. For him, that was a very, very surprising result for him.

So that's what really made the disease restaged end from being completely inoperable with a G4 stage to an operable stage. At this point, she had her surgery only last week. So, really the patient, the reason she did not get chemotherapy or surgery in the beginning is because, again, of her extensive local [advantages]. This was a very large tumor mass in her breast, as well as extensive spread to lymph nodes.

Okay, thanks very much.

Robin Davison, Edison Group.

Just a few quick ones. First of all, actually I wondered with regard to the GALAXY-1 study whether you had any more further analysis done that might be informative from the 15th of May date or whether that was complete at the time of ASCO?

Yes, we've had a number of independent data review meetings, committees, and one of the things that has been of high interest is, essentially, is there anything else that could explain the survival advantage? You know, was there somehow post-study therapy or was there any kind of imbalances with healthier patients on the ganetespib arm versus the control arm?

And so, there has been some further requests by some independent groups that we've been working with. And they found the same thing that was found in the May analysis, which is post-study therapy was well balanced, it's extremely unlikely that anything in post-study therapy, particularly in lung cancer and particularly because nothing really works in third or fourth lung.

And it's also extremely unlikely that imbalances could explain the therapy advantage because consistently, essentially, every analysis -- [gawx] analysis looking -- including any known prognostic variable, has always found in the opposite direction that if there were any imbalances in this trial, they favored the control arm.

So those have been repeated and those have been done quite extensively. Those give us a lot of confidence that essentially no matter how you kick the tires, you have a very robust survival advantage.

Right, very good. Just secondly, as well, I'm just slightly still a little confused. I think you may not have made the decision yet, but the planned ENCHANT-3 study in the neoadjuvant setting, is that as a monotherapy for ganetespib or will it be in combination with chemotherapy?

The trial in the neoadjuvant setting will be an [a to a b] in combination with chemotherapy. Chemotherapy has shown great activity in inducing excellent responses in that setting, and so that will be the path to go.

Right, I see. Okay. Thanks very much.

Ryan Martins, Lazard Capital Markets.

Hi, thanks for taking the question. On ENCHANT-1, I just wanted to confirm, is 15 the total number of patients that you've enrolled so far or is that the number of patients that you have reported on? Also, you've, I think, added a second arm in combination with paclitaxel or the others here. Have you been enrolling patients into that arm?

We have completed the enrollment in the stage one for the ganetespib cohort. The HER2 cohort is still enrolling in stage one.

Sorry, we missed the second part of the question. Could you repeat that?

Yes, I was just asking, you added on a second arm in combination with paclitaxel earlier this year into ENCHANT-1. Are you enrolling patients into that arm?

Yes. The way that's going to work is after patients complete standard --- complete the monotherapy lead-in, patients and investigators have the option to elect into -- continue with the combination to adding standard care.

And so far, there have been just 15 patients enrolled in HER2-positive or triple negative?

No, we completed the stage one enrollment in the triple negative group and are now in stage two enrollment. And the HER2-positive group, we are still in the stage one enrollment. Stage one is 15 evaluable and state two will be up to 18 evaluable.

Okay, thanks. And then, in terms of the dosing in breast cancer, or the schedule, is that different in breast cancer versus lung?

When we go in the combination studies, it will be the same in this proof-of-concept study. In the monotherapy, it's twice weekly, three weeks on, one week off, of a four-week cycle.

Okay, and do you have any data that's been generated so far in combination with paclitaxel in breast cancer?

This would be the [plan in inches] one. So patients will have the option to move to standard of care in combination with paclitaxel (inaudible).

Okay, thank you.

Thomas Wei, Jefferies.

Thanks. I just wanted to clarify in ENCHANT-1, the patient with the clinical complete response who went on to get surgery, was that an objective complete response or a clinical assessment of a complete response?

We have the clinical complete response and we're still waiting to get the final surgery report. We do not know yet.

And for GALAXY-1, I'm curious what your latest thinking is on timing of the final overall survival analysis and what your expectations -- or how we should frame our expectations when you look at the data. Should we expect it to look pretty much the same as what had been presented at ASCO?

Sure. The timing of the final analysis is, as we guided, fourth quarter of this year. So we are on track on that. Our projections are on track for that. With respect to guiding how the data looks like, I'm not sure we can do that, right?

If your question is what would be presented at the meeting, it would be probably pretty similar to all standard medical meeting presentations.

I guess it was more the question of would you expect the data to look better with more maturity?

I don't think we could speculate on what future clinical data might look like at this time.

That's fair. Thanks very much.

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

Thank you all for joining us today and thank you for your time and attention. This ends the call.

Ladies and gentlemen, this concludes today's call. You may disconnect at this time. Thank you and have a great day.