Madrigal Pharmaceuticals Inc (MDGL) 2013 Q4 法說會逐字稿

Good day and welcome to the Synta Pharmaceuticals fourth-quarter and year-end 2013 earnings conference call. Today's conference call is being recorded and webcast. At this time, for opening remarks, I will turn the call over to Steven Bernitz, Senior Vice President of Corporate Development at Synta Pharmaceuticals. Please go ahead, sir.

Hello, and thank you all for taking the time to join us today. With me are Keith Gollust, Chairman of the Board of Directors and Executive Committee; Vojo Vukovic, Chief Medical Officer; Iman El-Hariry, Vice President Clinical Research; and Keith Ehrlich, Chief Financial Officer. This morning we issued a press release that reported results for the fourth-quarter and year-end 2013. 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, which are subject to certain risks and uncertainties. Additional detail can be found in related SEC filings also available through our website. I will now turn the call over to Keith Gollust.

Thank you Steve, and thank you all for joining us today. I want to begin this call by addressing the news that was announced last week. By way of context, several months ago, the Board of Directors made a decision to strengthen the Company's decision-making capabilities. We began at the Board level and retained the services of an Executive search firm.

Our goal was to add directors with executive experience in drug development, regulatory interactions, and commercialization. As you know, from last week's news, this process has already resulted in the addition to our board of Dr. Paul A. Friedman, the recently retired CEO of Incyte Corporation. Dr. Friedman has already begun to contribute to Synta and will continue to do so through his active participation as a member of the Executive Committee, which was formed to oversee Company affairs while we conduct a careful search for a new CEO.

At some point in the Board's process of self-examination, we came to the conclusion that in order to best serve our many constituencies, we needed to make an Executive change. This in turn led to the news of Safi Bahcall's departure. This was a difficult decision which was carefully considered over an extended period of evaluation. It was also an emotional decision since we on the Board have worked closely with Safi and consider him a friend. I want to take this opportunity to express my gratitude and the gratitude of the Board to Safi for the personal commitment he made to the Company over many years.

I also want to emphasize that the decision was not based on any lack of confidence in the current status of our development programs. On the contrary, it is the increasing scope and complexity of our programs that contributed to the Board's belief that recruiting an Executive with experience in the areas critical to the successful execution of a complex development program was essential.

This morning's announcement that ganetespib was selected for inclusion in the I-SPY 2 trial, brings to five the number of randomized investigator-sponsored trials that have been announced this year, which collectively are targeted to enroll over 1,000 patients and have the potential to validate the clinical benefit of ganetespib in multiple indications. Importantly, these trials are sponsored by and paid for by cooperative groups and government bodies, which required independent objective determinations that the clinical data and safety profile that has been compiled to date justifies the significant commitments being made.

Since this Board of Directors believe that the ganetespib development program provides compelling evidence of clinical activity, the challenge is to conduct a successful Phase 3 trial that leads to regulatory approval and commercial operations. That challenge can best be met with a properly designed and well-executed clinical trial. The GALAXY-2 protocol amendment that was announced earlier this morning addresses that challenge and represents a renewed and expanded commitment by Synta's Board.

It is well-known that over 35% of the outstanding shares are owned by the members of the Board; that makes us highly motivated to commit resources carefully. The dilution caused by partnering or by issuing equity is felt by all of us proportionately. We are well aware that the GALAXY-2 trial will take longer and cost more than originally anticipated, but the modifications we have made are consistent with the goal of maximizing our probability of success. This leads to the final point I'd like to make before Vojo provides greater detail in the clinical programs.

Together with strengthening the Executive function, the Board is making a commitment to provide investors with an increased level of candor and to build conservatism into the guidance we provide. I personally have been an investment professional for over 40 years and I understand the importance of the word credibility. We have set a goal of establishing credibility and earning your trust by the actions we take and the guidance we provide. With that, I'll turn the call over to Dr. Vojo Vukovic.

Thank you, Keith. As we announced this morning, based on an evolving standard of care and regulatory feedback, we remain in the protocol of our pivotal Phase 3 GALAXY-2 trial. As you may know, GALAXY-2 is a randomized multinational study of ganetespib and docetaxel versus docetaxel alone with a second line achievement of patients with non-small cell lung adenocarcinoma.

This trial is being amended to strengthen the provision for testing patients for ALK translocations and EGFR mutations from strongly encouraged to mandatory. Only those patients who have demonstrated progressive disease following one prior platinum-based combination therapy for advanced non-small cell lung adenocarcinoma, a diagnosis of advanced disease created in six months prior to study and treat known as chemo-sensitive, and host tumors test negative for both ALK and EGFR status will be enrolled.

We believe this amendment is necessary to reflect real world clinical practice, particularly in the US, where ALK and EGFR patients are not commonly treated with inhibitors specific to these targets. To ensure that there are at least 700 patients with ALK, EGFR double-negative status, the trial size has been increased to 850 patients. At this study size, the GALAXY-2 trial has an 87% power to detect a hazard ratio of 0.75 at the time of the final overall survival analysis.

Based on these study amendments and current projections, Synta expects the two interim efficacy analysis of GALAXY-2 to be conducted by the independent Data Monitoring Committee in the second half of 2015, and the final analysis to be conducted in the first half of 2016.

As Keith also mentioned, ganetespib is now a part of five other large randomized studies. These include the I-SPY 2 trial, a standing Phase 2 randomized controlled, multi-center trial for women with newly-diagnosed, locally advanced breast cancer. The study is designed to test whether adding investigational drugs to standard chemotherapy is better than standard chemotherapy alone in the neo-adjuvant setting.

This is a highly regarded study which has already yielded promising new findings, such as those announced for investigational agents veliparib and neratinib. Enrollment in the ganetespib arm of I-SPY 2 is expected to begin in 2014. It will initially be available to patients with HER2 negative disease with the intent to expand its eligibility to all breast cancer subtypes, including HER2 positive, after safety testing with trastuzumab is completed.

The I-SPY 2 trial employs a unique adaptive trial design to match experimental therapies with patients and predict regimens likely to succeed in Phase 3. Genetic or biological markers from individual patients' tumors are used to screen promising new treatments, identifying which treatments are most effective in specific patient subgroups. The study allows the identification of the right drug for the right patient in the most expeditious fashion.

I-SPY 2 adds to the AML-LI-1, AML-18, and AML-19 trials in acute myeloid leukemia and high-risk myelodysplastic syndrome, which we announced in January. These multi-center randomized trials supported by the Leukemia and Lymphoma Research Fund and Cancer Research UK will evaluate ganetespib in combination with chemotherapy in the first-line treatment of these diseases.

Among them the AML-LI-1 trial is currently ongoing. This study looks at the combination of ganetespib and low-dose cytarabine versus low-dose cytarabine alone in patients who are not eligible for intensive chemotherapy and are traditionally not included in most trials. Up to 50 patients are being enrolled in the ganetespib arm, after which an interim analysis will be conducted to evaluate whether to proceed into a Phase 2 trial. This interim analysis is expected to be conducted in mid-2014.

We also announced in January the selection of ganetespib for the GANNET53 trial in ovarian cancer. GANNET53 is a Seventh Framework Programme, or FP7 Research project, funded by the European Commission. This pan-European randomized trial is designed to evaluate the combination of ganetespib and paclitaxel versus paclitaxel alone in over 200 patients with metastatic p53 mutant, platinum-resistant ovarian cancer.

The study's consortium consists of national clinical trial groups in gynecological oncology and high-volume university centers, as well as noted p53 scientists. The safety lead-in Phase 1 portion of GANNET53 is expected to begin enrollment in mid-2014.

All of these programs are part of the over 2,000 clinical trials sponsored by investigators, cooperative groups, or patient foundations that are ongoing or planned for 2014. These programs are supported by a significant number of research studies conducted at leading institutions. To that end, we look forward to seeing results presented at the ACR annual meeting in April looking at in-vitro, in-vivo, or clinical results with ganetespib in lung, pancreatic, ovarian, colorectal, glioma, renal, and breast cancers, exploring combinations with radiation, chemotherapy, and targeted agents.

We also look forward to presenting in-vivo clinical results from our HDC program. As a reminder, HDCs are conjugate molecules that link ganetespib or other Hsp90 inhibitors with small molecule cancer drugs, using the accumulation of Hsp90 inhibitors in tumors to improve the delivery of those drugs to tumors. The most advanced of these HDCs are our HDC SN-38 and HDC docetaxel conjugates. We look forward to presenting additional data surrounding this platform at upcoming scientific conferences. I will now turn the call over to Keith Ehrlich for financials.

Thank you Vojo, and good morning everyone. There were no revenues recognized in the fourth quarter of 2013 or 2012.

In the fourth quarter of 2013, our research and development expenses were $20 million, as compared to $14.4 million for the same period of 2012. Our fourth-quarter general and administrative expenses were $3.5 million, as compared to $3.4 million for the comparable period in 2012. Our net loss in the fourth quarter of 2013 was $24.2 million or $0.31 per basic and diluted share, as compared to a net loss of $18.1 million or $0.29 per basic and diluted share in the same period of 2012.

As of December 31, 2013, we had approximately $91.5 million of cash resources on hand. Based on our current operating levels, we expect our cash resources will be sufficient to fund operations at least through the end of 2014. Certain new or expanded activities contemplated for 2014 will be conducted subject to the availability of sufficient financial resources. I will now turn it back over to Steve.

Thank you, Keith. This concludes our prepared remarks. Operator, we will now open the call to questions.

(Operator Instructions)

Thomas Wei, Jefferies.

Hello guys. This is Shaunak filling in for Thomas. I just had a couple questions for you. First I wanted to know on the decision to modify the GALAXY-2 trial -- how much of this was driven by FDA feedback versus an internal Company decision?

Hello, Shaunak The GALAXY-2 modification, the amendment that was announced this morning, was driven by really two key factors. One is as you pointed out, the regulatory feedback, and the other is really the changes in the non-small cell lung cancer landscape.

We are in ongoing discussions and have been in ongoing discussions with both major regulatory agencies since before the trial was started, and we continue those discussions today. So we are carefully listening to the regulatory feedback, and as appropriate incorporating in design, and that's really the part that you saw today. And then the definition of the patient population to ALK and EGFR negative.

Okay. And then just on the ENCHANT-1 trial, just curious how many more patients do you expect to present at ASCO, and what would you see as a positive or favorable look at the data at that point?

Hi Thomas. This is Iman here. We actually are not planning for any scientific presentations. However, we are having an update on ENCHANT [design and fluid design] at the European breast cancer conference.

Okay. And then, just on the I-SPY 2 trial, I was curious -- about how long do you think this safety testing with Herceptin will take? And in terms of actually succeeding and achieving this high phasing predictive probability, what is actually the threshold for success there?

Okay. In terms of the combination with trastuzumab, this is a Phase I combination which is done not under hospitals of the I-SPY consortium, but it's done on a different study. So this study would be initiated soon.

In terms of the probability of success, the ongoing protocol in the I-SPY has a predictive modeling which looks at least 85% ENCHANT to succeed in Phase III. So it's the next jump based on activity in a certain subgroup or biomarker out of the 10 biomarkers in this setting.

Okay. And just one last thing -- I was just curious -- about how long would it take to fully enroll the minimum 60 patients or maximum 120 patients? And when would you expect to see some data from this trial?

We are expecting the study to start in the second half of the year. However, as I mentioned earlier, the study has adaptive design based into it, which means then it would look at enrolling the 60 or up to 120 patients, it depends on the adaptive design on how soon that level of activity is demonstrated, and that is difficult to actually give any estimate at this point.

Great. Thanks for taking my questions.

Brian Klein, Stifel.

Hello. Thanks for taking my questions. Good morning. First, for Vojo, regarding the GALAXY-2 amendment, I guess I still don't understand the rationale because in the past you've seen activity with ganetespib in both of those mutant populations, ALK and EGFR, so I don't understand why you are now excluding those patients.

Can you give a little bit more of an explanation? I understand that in the US at least there is a change in the underlying treatment paradigm, but certainly in the rest of the world those patients should still be eligible.

Yes. Hi Brian. It's a very good question. The rationale is really entirely driven by regulatory reasons. As you know GALAXY-2 is a global program, and when executing this program, we are aiming at global registration strategy. So we need to make sure that the trial will be acceptable for approval of ganetespib globally. For that reason we will consult with all major and also national regulatory authorities as appropriate.

The decision to restrict the patient population I think is a regulatory component because of the availability of the appropriate pilot of treatments for these two patient populations, and the evolving landscape, and we have to project this obviously over not just today but we have to project it over the anticipated timeline to approval.

And finally from a medical perspective, it makes a lot of sense to strive towards having a more homogeneous patient population; that makes the evaluation of the drug much easier. And as you know, patients with ALK and EGFR may carry different prognosis compared to other patients.

Right. Thank you. Can you give us a sense of where you are in patient enrollment now and how that patient population would be impacted by these changes? In terms of the final analysis and I guess the MITT population you are looking at now?

Yes. So as you know, traditionally we have not provided operational updates in terms of rates of patient enrollment. What we have provided instead is our guidance towards the data readouts; just to reiterate we are currently planning for two interim analyses to be conducted by independent Data Monitoring Committee in the second half of 2015. And the final analysis is currently scheduled for first half of 2016.

Okay. Are you still committed to enrolling the majority of the patients in the US and Western Europe?

We have implemented operational changes to enable the amendment to be successfully implemented. The trial is a global trial and will have a very significant component of patients from the West including Western Europe and North America.

Okay. All right. Thank you for taking my question.

Graig Suvannavejh, MLV.

Great. Good morning and thank you for taking my questions. I had several on multiple fronts. But first if I could just go back to the original topic of the conversation which was the change in leadership.

I was just wondering, what sounded like you are looking for someone that had in particular commercial and/or regulatory expertise, and I was curious if that necessarily meant that you needed to have someone who already has been a CEO or someone who might not have been a CEO, but has been very senior in companies. So I wanted to get your thoughts on maybe the profile of the person that you are looking for.

Well, Graig, this is Keith Gollust. You described well what an ideal Chief Executive for a Company like ours, what the qualifications would be. We know from work we've done that there are some well -- there are many well-qualified people available generally at any given point in time that meet that criteria we've established, and we're optimistic that we are going to be able to meet several of them and make trade-offs as necessary.

It isn't the case that we know what we can find somebody who gets a 10 in every one of the categories we'd like to focus on. But one thing I can tell you is that we're not in a hurry. We're going to take our time. We're going to meet with multiple candidates, and in the end the Board will determine the individual who we think can best assist in achieving our goals.

Great. Thank you so much for that. Just having -- being relatively new to the story, it seems as if this is the second major kind of amendment to the GALAXY-2 trial, and I was just wondering just off the top of my head, is there any reason to believe that there might not be yet another change, or as far as you are concerned this is the final change to the trial size and the protocol?

This change, the amendment two reflects our current thinking. Obviously it's very difficult to predict what may happen in the future, but this current amendment reflects our aggregate thinking and the aggregate regulatory feedback we've received so far.

We believe the program will be very well positioned for the rest of the development timeline, but again this is something that is difficult to predict. If necessary, we'll do more changes, but the changes we'll do today positions the drug to go all the way to the finish line.

Okay. And then a follow-up to that is how often do you get regulatory feedback that would make you internally at least think about making any potential changes?

As we've said before, we started regulatory consultations before we opened the Phase II trial. We've been in communication with global, major, international and national regulatory authorities in a continuous fashion, and we continue to do so as necessary.

Great. Maybe I'll ask one more question just about the HDC program. I think as of your -- the Company's last call, there was a statement that an IND might have been within 12 to 14 months of filing. I was wondering if now that we're three months past that, is it fair to assume that an IND for any of your HDCs might be 9 to 11 months away, or is there any guidance around timing of INDs?

We believe and continue to believe that our HDC platform is a very exciting scientific concept. I think the discussions externally we've had thus far seem to confirm that. Many people share the enthusiasm we feel about this platform. And it is because of that that we want to make the best efforts to put the best possible molecule or molecules into the clinic.

And I think the Board continues to support this strategy. So at this point in time, we do not I think want to provide a very specific down to one-month plus or minus type of guidance. We anticipate being entering into the clinic next year.

Okay. Thank you for taking my questions.

George Zavoico, HC Wainwright.

Hello everyone. Good morning. Thank you for the update, Keith and everyone.

First question, is in regard to the UK and the Cardiff trial. You presented in the press release today that the LI-1 trial was a new trial, but in fact it's been going on since November 2012. And it also includes other drugs like Cyclacel's sapacitbine and Sunesis' vosaroxin, which did not make the cut. And the LI-1 is a fluid trial, in other words -- Dr. Burnett can choose to add various other drugs in the trial if he sees fit.

But so far the track record for that hasn't been very successful. It seems that low dose Ara-C seems to be the winner. I know vosaroxin hasn't worked. Can you tell me how many patients are actually in LI-1 right now with ganetespib, and what you're outlook for that whole patient population, the elderly very difficult to treat population is for ganetespib?

Sure. Hi George.

Hello, Vojo.

So the AML-LI-1 trial has been ongoing for a while as you correctly stated since the end of 2012, and Dr. Alan Burnett, the scientific and medical lead of this program, and his colleagues have, as you correctly stated, put several drugs into this multi-drug protocol, and some of the other drugs did not make the cut.

The challenge that you also correctly then cite is really this patient population is to create the combination that will be both safe and effective, because these are elderly patients who cannot tolerate intense chemotherapy. And so far we are encouraged with the way how ganetespib did in the study because it went on and enrolled approximately 50 patients. We are approaching the enrollment of the 50th patient in the LI-1trial, the 50th patient on the ganetespib arm, which means that we are approaching the time of the first interim analysis, which will be a go/no-go decision point for Phase III. This interim analysis will be conducted by the independent Data Monitoring Committee and that time for midpoint of this year so around mid-2014.

I think another point to mention is, as we have announced, the same group, Dr. Burnett and his colleagues, have decided to put ganetespib into the other trials under their stewardship, such as the AML-18 and AML-19 trials, which combine ganetespib with more intensive chemo regimens in different patient populations in the first line, of this trial for the first line, which I think is another nod to ganetespib and its potential and promise in this indication.

Thanks for that Vojo, and that speaks to my next question which is the safety aspect of ganetespib. I mean, from what -- following ganetespib for a while now one of the things that stands out is its safety, and that's probably why Burnett is adding it with daunorubicin, and I am not sure if it's been combined with daunorubicin before, and the same thing goes with I-SPY and for the GANNET.

Are there any safety lead-in trials that need to be done for these before it goes into sort of the full enrollment period? Or are these folks that are putting ganetespib into their sponsored trials overall satisfied with the safety?

Yes. So to answer your question directly for both AML trials, the AML-18 and 19, the new trials, there is a safety lead-in component, which was actually successfully completed for AML-18, and on the basis of this data and we assume also performance in the AML-LI-1 trial, the consortium is moving the drug forward into the randomized stage.

Great. So that's good news. That's good news. And in that regard, I mean you are dropping the -- getting back to GALAXY-2 you are dropping the crizotinib and the erlotinib portion of patients that are on those drugs, but that doesn't -- as Brian said, you are seeing activity in those patient populations. So this doesn't preclude adding ganetespib to crizotinib and erlotinib in those populations in another trial perhaps. Are you thinking about what the next step might be in that regard?

Absolutely. And as I mentioned before, the intention of modifying the patient population, making it more narrow in GALAXY-2 is not driven by the lack of activity in these two patient populations. It is just our desire, and also the regulatory view that our GALAXY-2 patient population should be as homogeneous as possible to ensure optimal analysis of the data and increase the probability of success. And we and others share the opinion and the view that ganetespib could be a very effective drug in EGFR and ALK-positive patient population, but that is a separate question that can and will be explored in separate trials.

Great. And then finally last question regarding partnering and capital raising, you have less than -- or about $100 million, slightly less, and you guided to having cash through the end of 2014.

We've heard multiple times on these calls that partnership is coming. We expected it within a year. That sort of thing. Can you sort of give an overview of whatever you can say obviously not to show your hand, what your philosophy is going forward to make sure that you can take this trial to the end in 2016 when GALAXY-2 is going to play out?

Sure. Well, we have a cash budget for 2014, which calls for approximately the same level of expenditure that we saw in 2013. And it's likely to expect that a similar number will apply in 2015. And we're taking into consideration our cash requirements right through final analysis of GALAXY-2.

Given the level of cash that we need to maintain, it suggests we'll have to do -- find sources of cash in the future, including this year, approximately to what it has been in the past. And we'll be considering a normal combination of proceeds from partnerships and financings, either equity or debt in order to meet those needs.

In response to your observation that we've made statements in the past about partnerships that might be or are likely to be completed, I would say that we have an active partnering program that's led by our Senior Vice President, Steve Bernitz, at any point in time we are in discussions that are at various stages of development. And all I want to say is that in the future, if we complete a partnering transaction, we will announce it at the time of completion. I don't think you can expect to hear from us statements about what we think might happen in the future.

That's terrific. I'm glad you made that clear. Thank you very much.

Nick Abbott, BMO Capital Markets.

Good morning. Thanks for taking my question. My question's have really been framed by the previous question, and it's really a strategic question at the highest level almost, which is -- you have this GALAXY-2 trial ongoing. The size has increased fairly dramatically, presumably the spend has increased. I think scientifically many of us have questioned the scientific basis of the trial in this era of biomarker led trials, and yet you have a compound that appears to exclude a fully active in certain biomarker populations, so was there ever a Board-level discussion of is it really the best use of capital GALAXY-2, or should we really take a long hard look at the data we've accumulated and see if there is a faster market strategy in a biomarker led population? Thank you.

That's a good question. The most direct answer to your question is that, yes, of course, the Board, in consultation with the Senior Management of the Company, is continually evaluating strategic options. As you would expect, there are always trade-offs, pros and cons, but ultimately we take responsibility for the strategic direction of the Company.

I just want to refer back to a statement I made in my opening comments, which is that the -- in addition to being Directors of the Company, the Directors are major shareholders of the Company, and we have every motivation to allocate our scarce resources as carefully as possible. We rely very heavily on the Senior Management of the Company and their evaluation of our programs, but that's something we consider on a continuous basis. And when strategic trade-offs are required, we focus and we make those decisions.

And maybe as a follow-up then. In terms of the other data that is out there, you have had a number of trials, the CHIARA trial, which started a long time ago albeit in a front line ALK-positive population, but there have been a number of investigator sponsored studies in patients with advanced disease who have failed targeted therapies. Can you give us a quick summary of what the latest observations are from some of these other studies that you haven't talked about recently?

All right. I will try to do that briefly and concisely. Yes. We have certainly have expanded the ganetespib program very early on several years ago into a number of indications to evaluate its safety and efficacy profile, both as monotherapy and in combination with other drugs, including targeted drugs or with radiation.

As Keith mentioned, in answer to your previous question, we are continuously evaluating the results, we're continuously evaluating our environments and trying to see what is the best strategy for ganetespib to move forward. Obviously there's multiple choices which is a good thing because the drug is active in multiple [myocally] profiled patient populations in oncogene driven diseases.

But we think a number of factors including competition, treatment landscape, and also the drug profile to make best choices but also to evaluate and reevaluate the choices that we make. And I think the GALAXY strategy, we remain very confident it's the right strategy because of the multitude of mechanisms that are affected by ganetespib, which facilitate the [extremity] of chemotherapy and improve on its ability to prolong life.

In lung cancer, we think that this is a very interesting concept that can be evaluated in other indications as well, and I think that it is something that has been reaffirmed and confirmed by the commitments that outside institutions and investigators make particularly in the domain of those large randomized trials which require significant resources that we announced today.

Okay. Thank you. And do you have any specific comments on the CHIARA trial?

The CHIARA trial, just to remind everybody is a monotherapy trial in patients with ALK-positive non-small cell lung cancer. This trial has actually terminated enrollment. And the reason for that is the changes to strategic priorities; this was part of the process that I tried to briefly describe, that we continuously look, evaluate, and reevaluate our strategic priorities and try to make the best choices for the program and for the Company.

Okay. Thank you.

Thank you. That concludes the question and answer session. I will now turn the conference back over to Mr. Gollust for closing remarks.

I want to thank you all for your time today. I want you to know that if you have any follow-up questions, I along with the team here are available to take your calls. I look forward to speaking with many of you in the future. Thank you.

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