Madrigal Pharmaceuticals Inc (MDGL) 2014 Q2 法說會逐字稿

Good day and welcome to the Synta Pharmaceuticals second quarter 2014 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 Daniel Cole of 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, Vojo Vukovic, Chief Medical Officer, and Keith Ehrlich, Chief Financial Officer. This morning we issued a press release that reported results for second quarter 2014. This release can be found on our website at SyntaPharma.com. Before we begin I would like to point out that we would 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, Dan and thank you all for joining us today. Obviously today's big news is the announcement that Synta has completed its search for a new CEO, and has named Ann Whitaker to that position effective September 2. Although we completed the search in the time frame we originally estimated, the process was more demanding and time-consuming than I expected when we began in March. Also, while we set the bar high, I didn't expect that we would attract the talent of a senior leader from a major international pharmaceutical company with responsibility for a commercial organization producing over $10 billion of annual revenue.

As you know from this morning's press release, Ann is leaving her position as President, North America Pharmaceuticals at Sanofi to join Synta. During the process, we reviewed the qualifications of dozens of candidates, many of whom were well qualified, but none of whom were more well qualified than Ann. Those of us who have gotten to know her during this process feel very fortunate to have found a leader with experience in the areas critical to success, and that will enable Synta to realize the exciting potential of ganetespib in HDC. I look forward to introducing many of you to Ann in the coming months. I would now like to turn the call over to our Chief Medical Officer, Vojo Vukovic, who will provide an update on our clinical programs.

Thank you, Keith. Since the beginning of this year, ganetespib has reached several important clinical milestones across studies and cancer types including encouraging results from the GALAXY-1 and ENCHANT Phase 2 studies in lung and breast cancer, and graduation to the Phase 3 expansion in the AML LI-1 trial. With the launch of GANNETT53 in ovarian cancer which we announced in today's release, ganetespib is now being studied in three large randomized studies in three separate cancer types, non-small cell lung adenocarcinoma, AML, and ovarian cancer. Of note, both the AML LI-1 and GANNET53 are investigative sponsor studies. This is not only more cost-efficient for the Company, it also reflects the strong and growing investigative enthusiasm for ganetespib as a novel potent small molecule Hsp90 inhibitor. Before year end we expect to have three additional large, randomized investigative sponsor studies initiated. These include AML-18 and AML-19, both in acute myeloid leukemia, and iSPY-2, the well-known and well regarded breast cancer study.

As we reviewed in our last call, we reported encouraging results from the final analysis for GALAXY-1 study. From a clinical development perspective the GALAXY program is the Company's central focus, with other indications being addressed to cooperative group studies. GALAXY-1 is the foundation on which the pivotal GALAXY-2 trial has been built, and is a large global, randomized, multi-center Phase 2b study of docetaxel with and without ganetespib, in second line non-small cell lung adenocarcinoma. The final results from this trial, in particular the encouraging overall survival results and tolerability profile in chemo-sensitive patients, validate the selection of the chemo-sensitive population for the pivotal Phase 3 GALAXY-2 trial. Enrollment and progress in the GALAXY-2 trial remains on track. With a target enrollment of approximately 850 patients and based on current projections and statistical assumptions, we continue to expect the [true] interim efficacy analysis of GALAXY-2 to be conducted by an independent data monitoring committee in the second half of 2015, and a final analysis to be conducted in the first half of 2016.

Among the compelling results from our investigative sponsor studies, ganetespib recently graduated to the Phase 3 extension of AML LI-1 studies. AML LI-1 is a multi-center, randomized, Phase 2/3 clinical study, evaluating several novel treatment regimens including the combination of ganetespib, with low dose cytarabine in newly diagnosed elderly patients with acute myeloid leukemia, or high risk myelodysplastic syndrome, who are not eligible for intensive chemotherapy. Advancement into the Phase 3 extension came after an interim analysis of complete response rate in 50 patients who received the ganetespib-cytarabine combination in the Phase 2 portion of the trial. We will provide additional details of the expected time lines of the Phase 3 portion of the study as they become formalized. We expect the other two AML studies supported by the Leukemia & Lymphoma Research Fund and Cancer Research UK, AML-18 and AML-19, to initiate before the end of 2014. 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 second quarter of 2014 and 2013. Research and development expenses were $18.8 million for the second quarter of 2014, compared to $17.9 million for the same period in 2013. General and administrative expenses were $2.9 million for the second quarter of 2014 compared to $4.2 million for the same period in 2013. The Company reported a net loss of $22.3 million, or $0.24 per basic and diluted share in the second quarter of 2014, compared to a net loss of $22.8 million or $0.33 for basic and diluted share for the same period in 2013. In the second quarter of 2014, the Company raised an aggregate of approximately $56.6 million in net proceeds from the sale of its common stock under its at-the-market issuance sales agreements with MLV & Co., also known as an ATM, and to an affiliate of one of the Company's directors who is also a major shareholder.

As of June 30th, 2014, the Company had $112.1 million in cash, cash equivalents and marketable securities compared to $91.5 million in cash, cash equivalents and marketable securities as of December 31, 2013. Subsequent to June 30th, 2014, the Company has raised approximately an additional $12.2 million of net proceeds under its ATM. Based on its current operating levels, the Company expects its cash resources of approximately $112.1 million at June 30th, 2014, plus the $12.2 million in net proceeds from common stock sales subsequent to June 30th, 2014, will be sufficient to fund operations at least into the fourth quarter of 2015. This estimate assumes no additional funding from new partnership agreements, equity financing events, or further sales under its ATM, and that the timing and nature of certain activities contemplated for the remainder of 2014 and 2015 will be conducted subject to the availability of sufficient financial resources. I will now turn the call back over to Keith Gollust for concluding remarks. Keith?

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

Thank you, Mr. Gollust (Operator Instructions) Our first question is coming from the line of Joe Pantginis with Roth Capital Partners. Please proceed with your question.

Hi guys, good morning. Congratulations on the progress and congratulations for completing the CEO search. Obviously sounds very, very qualified for the position. Keith, maybe can you discuss a little bit, and I know we discussed some of this before, but can you share again some of the qualities you were looking for here? And I know we're going to hear a lot from Ann when she joins, but regarding sort of the direction you want to take Synta in with regard to the broad platform that ganetespib has here based on the clinical platforms that are already in place.

Sure, Joe. We -- I think I mentioned this back in the first conference call we had when I took over as interim Chief. I think obviously as is the case with any CEO the number one thing that you're looking for is leadership capabilities. One of the things that impressed us most about Ann during this process was her emphasis on team building as her preferred method of leadership. I think that's essential for a company like ours. So her leadership qualities were very high. And then, of course, because of the fact that GALAXY-2 is well underway, we recognized that there was little opportunity for the new Chief Executive to ultimately influence the outcome of that trial. Instead, what is most important are -- are the factors that come after we get successful data in GALAXY-2. And that involves building a commercial team, because it is our expectation that we will become a commercial company. So if you take a look at Ann's background, you can see that her over 20 years of experience is heavily concentrated in the commercial area, and that's exactly what we were looking for.

That's perfect. And I guess would you sort of portray an old, sort of use a political phrase, the first hundred days or so you guys sort of have your marching orders in agreement with each other? Is she going to come in, take a look at things and see if anything requires changing from a business development strategy standpoint, or is everyone pretty much in sync right now?

Well, Joe, everything is on the table, but I can assure you that in terms of the discussions that I have had with Ann over the last couple of weeks, the -- what we're calling the 90-day plan or the first three months is well underway.

Great. And then maybe just a quick question for Vojo. Vojo, can you remind us what the hurdles were for the LI-1 study to move from Phase 2 to Phase 3? And what the potential timelines are for the Phase 3 portion?

All right. So the hurdle for the LI-1 study which is set in elderly patients that are unfit for intense induction chemotherapy. Historically in this patient population low dose Ara-C which is the comparator, achieves complete response rates of up to 15%. And in this disease, complete response rates closely correlate with survival. So it's seen as a good surrogate for survival. The minimum activity needed to advance it to Phase 3 per protocol was 17.5% complete response rate. Your second question regarding time lines, we really don't have precise time lines at this point in time because this study, as you know, is under corporate group sponsorship and conduct. So it's really difficult for us to talk about the specific time lines. We do expect that the enrollment should go forward very quickly, but then because it's a survival input into Phase 3, it may take some time before we have the final data in hand.

Great. Thanks a lot for that. Thanks a lot, guys.

Thank you. Our next question is coming from the line of Brian Klein with Stifel. Please proceed with your question.

Hi, guys, thank you for taking my questions. So first for Vojo on ganetespib in LI-1, can you give us a sense of when we might see data from that Phase 2 portion?

Yes, that's a good question. The design of the study, the LI-1 study is designed as a Phase 2/Phase 3 study. And one of the provisions there is that the Phase 2 data set becomes part of the Phase 3 data set. And so far, the only people who have looked at the data in unblinded fashion is the data monitoring committee. And that's -- has to -- that integrity and blinding of the data has to be -- has to remain in place until the very end of the study. That is the condition in order to be able to use that data set for the Phase 3 analysis. And we want to respect the intention of the investigators to protect the integrity of the trial and also by adhering to that process, we are also qualifying this study, you know, to potentially serve as a registration study in this indication.

So I guess, you know, this is my interpretation and you tell me if this is correct. We won't get the Phase 2 data. At this point we don't have time lines for Phase 3 in terms of enrollment or when we might see final data from Phase 3 completion, and I guess my understanding is that because it's an investigator sponsored study it may not be sufficient for a US filing; are those correct?

Well, on the first two points I would agree that the correct -- the data will not be presented until the end of the study. The time lines are being worked out, so as we get more detail, we'll certainly share what we can share. And we hope to be able to do that in the future. And when it comes to the last point whether the data will support a filing in the U.S., we are in discussions with investigators around this and other details. It is our intention to explore the use of this study as a potential registration [enabled] study which would, of course, require that the study meets technical quality standards that are needed for a pivotal trial. So we are in discussions with investigators around that point, and we hope to be able to provide an update on the status of that in the future.

Okay. Great. Just turning quickly to the pipeline, any update on the filings in IND for the HDC program?

Brian, no. We -- we're not providing any update on that. I think as I reported in the past, we've taken a very careful look at HDC. We don't want to create expectations at this point by providing time lines. I can tell you that we're pleased with the progress we've made since the last call, and we continue to be optimistic that HDC will provide some interesting reports in the future.

Okay. Great. Maybe a question for Keith. How much is left in the ATM?

Let's see. I think there's about a little over $40 million left. Between $40 million and $45 million remaining in the current.

Okay. So based on press release today and your guidance, it looks like you guys only have sufficient cash resources to get you through maybe the second interim analysis, but it doesn't seem like you have enough to get to the final GALAXY-2 data. So just wondering what the strategy here is in terms of funding the Company through that what looks like to be the key pivotal data that you'll need to get ganetespib commercialized.

Sure, Brian. Obviously we're well aware that we need to maintain adequate cash reserves. Not only to take us to final data, but beyond that. We feel now as we have in the past that we have multiple sources of financing, and it's -- you know the board is very actively considering our financial alternatives and we make decisions on a real time basis. You're correct in your analysis, our current cash reserves take us well into the fourth quarter of 2015, but you can anticipate that there will be some additional financing to give us the cash reserves we need well into 2016.

Great. Thank you for taking my questions.

Thank you. The next question is coming from the line of George Zavoico with MLV & Co. Please proceed with your questions.

Hi and good morning everyone. Again, congratulations on finding what appears to be a very qualified CEO. Look forward to meeting her when she comes on board in September. I have a couple questions mainly for Vojo, I guess. With regard to the GANNET53 trial, a couple questions -- couple questions there. First of all how does the recent approval of Avastin for ovarian cancer in platinum-resistant patients in the EU affect GANNET53, that's part one. Number two, there seems to be a focus on p53 mutations. Is it going to be a bio marker driven trial there? So first for those two questions. Thanks, Vojo.

Hi, George. So regarding your recent -- your first question, how is the recent approval of Avastin in second line ovarian cancer going to affect the prospects of GANNET53? So in GANNET53, we generally -- will generally enroll patients that are refractory or resistant to platinum. And as you know platinum can be used in first line, second line, and sometimes even third line in ovarian cancer. So the concept is really, once patients fail initial treatment, whatever that treatment might be, and as the standard evolves and now includes Avastin in addition to platinum in first and second line, we'll just basically continue enrolling patients that fail that line of treatment.

So we do not expect that the time lines or the prospects for ganetespib in this indication will be greatly affected by Avastin. Regarding the bio marker question, we are enrolling all patients that are resistant or refractory, we're not selecting them upfront with a bio marker. The reason is two-fold. One, there's going to be a post hoc analysis of the bio marker so we'll identify patients who are and who are not p53 mutated. And then secondly, it's a practical question. Most of the patients, historically 95% or sometimes even higher, are expected to have this p53 mutation. So one can say for practical reasons virtually all patients will have that mutation.

Okay. And a follow on, in your press release, you write -- it's written that the study's consortium consists of national clinical trial groups in gynecological oncology, but it also says that there are three innovative small and medium sized companies involved. What exactly does that mean? The SMEs as you point out in the press release?

That means that that consortium is a consortium that's not only evaluating our drug, ganetespib, but it's also evaluating other drugs. I think some of these smaller companies are also -- that includes also diagnostic companies. Because the program is not just a [onco] program it has a very strong gestational research component, and the research efforts underway to identify not only mechanisms but potential bio markers and tests that could be used for patient selection.

You said other drugs. Is this like LI-1 in that it's looking at different drugs in platinum resistant ovarian cancer as well as ganetespib?

This specific protocol Gannett 53 is not. It's focused on ganetespib only. But my understanding is that this group is also interested in exploring and evaluating potentially other drugs.

Okay. I see. And final question, can you describe a little bit how AML-18 and AML-19 will differ from the ongoing AML study? Please?

Yes, sure. So essentially the three studies, AML LI-1, AML-18, and AML-19, are essentially very similar comparable studies, and they're addressing all front line patients with AML high risk MDS, and the only difference really between them is the subset of the population they're addressing. So the LI-1 is addressing elderly unfit for induction chemo. 18 is addressing elderly that are fit for induction chemo, so they can be treated upfront with induction chemo, and then AML-19 is addressing younger patients who will receive induction chemo. So fundamentally there's two different combinations, the combination in LI-1 is combination Ara-C, and the combination in 18 and 19 involves combination with induction chemotherapy and then is followed by maintenance treatment.

And they're all front line?

They're all front line.

Okay. Great. Thank you very much, everyone.

Thank you.

Thank you. The next question is coming from the line of Nicholas Abbott with BMO Capital Markets. Please proceed with your question.

Good morning, thanks for taking my questions and congratulations on what looks to be a great hire for a CEO. Vojo, you've provided very valuable information already, so some of my questions have been answered, but are you aware of any ASH abstracts that have been submitted for ganetespib in hematological malignancy, and specifically with 18, 19 trials, do they have the same design constraints as LI-1 with respect to data?

Yes, the intention of this property group is to have the same constraints in place for the Phase 2 and Phase 3 portion. I should mention that before we ran -- before the corporate group ran the LI-1 study they ran a pilot to evaluate the safety and feasibility in a small number of patients, and they did the same thing for -- as a precursor a pilot for AML-18. I'm pretty sure that at some point in time the corporate group will publish that data. Whether it's going to be ASH or not we have not been notified. By contract we get notified 30 days before submission, and we haven't received a submission. The submission deadline for ASH is mid-August, so based on that I'm not expecting a submission to ASH.

Okay. And in terms of the -- you already discussed the quality aspects in terms of these trials serving to hopefully expand the ganetespib label. While these trials are designed by world experts, experts often run ahead of regulators. So did the (inaudible) colleagues discuss the trial design with regulators or have you had the opportunity to review the trial design at a high level with regulators to see if they agree that the design per se is suitable for a registration trial?

It is our intention at the later point to review the design with regulators and discuss. What we are also discussing with the investigators with the corporate group are data quality requirements that are typically required for registration quality studies. Right now the corporate group trials they collect valid information, but some of the methodologies of data collection, verification, storage, and so on need to meet internationally accepted standards in order to be seen as suitable for registration. And it is our intention to discuss this and other aspects of the trial execution with the investigators and subsequently with the regulators.

Okay. And just two very quick ones. You know there are a whole variety of small IITs ongoing with ganetespib in a broad range of tumors. Do you have a sense, Vojo, of what, you know, timetable is for signals from some of those trials? And then last one for Keith, you indicated in terms of an HDC platform, obviously no commitment at this stage for an IND or timing for an IND. What about partnership, Keith? That's a very interesting platform. Can you perhaps make any comments in terms of ongoing partnership discussions? Thank you.

So there are two questions. One is the time lines for IST readouts and the other is the HDC partnership status. If that's okay I'll address the IST time lines. In terms of meaningful signal detection trials it is our expectation based on performance and based on generally our experience with ISTs that we should get one or more data read outs from a meaningful signal detection IST study next year, in 2015. As a reminder, we have a breast cancer study that is a random -- small randomized trial, where we combine ganetespib with fulvestrant in the setting of hormone therapy refractory breast cancer patients. And we are hoping that this trial may be able to produce data read outs sometime next year. I think that's probably the most important part of -- several other trials that evaluate combinations have graduated beyond the Phase 1 evaluation so they're now in the process of recruiting patients for the efficacy evaluation. So it is possible that next year we may get several of such read outs from the ongoing ISTs.

Okay. Nick, in terms of your question about HDC partnerships, again I want to emphasize we don't want to create specific expectations or describe any specific discussions. I will say that the progress that we have made on the -- in the research we've been doing over the last few months, I feel will be supportive of partnership discussions. We continue to get expressions of interest from people who see a great potential in this platform, and I am hopeful that these discussions will eventually lead to the types of partnerships which we feel will be essential to the full development of the platform.

Okay. Thank you.

Thank you. Our next question is coming from the line of Robin Davidson with Edison Group. Please proceed with your question.

Yes, hello there. It's a quick one, really. I presume that having spent almost six months recruiting a new CEO and putting out a search and so on, you had an opportunity to sort of consider the strategy that the board would like to pursue for Synta for the -- really the most important question to me is whether you consider it preferable to partner ganetespib ahead of the read out of the GALAXY-2 study or afterwards? Is there any comment you can make on that point? Would you take an earlier partnership? Do you bring somebody in that you hope to deliver that, or are you still looking to financing and take GALAXY-2 to its conclusion before seeking a partner?

That's a good question, Robin. I think it's pretty clear that positive data and eventual approval by the FDA will make us interested in a long-term partnership with a larger company, with the resources to fully develop ganetespib beyond its initial indication, and also to commercialize the product on a worldwide basis. So long term, we are hopeful and we do expect to have an important partnership. Whether or not we do that before we get the data is up in the air at the moment. Our business strategy and our financial strategy is to have the resources to complete the trial without a partnership. Obviously it depends on factors that we can't predict at this time, but we certainly don't need to get a partnership done. If something develops over the course of the next 12 months that encourages us, it is a possibility, but it is an essential part -- it is not an essential part of our business strategy.

Right. Okay. I just -- a quick one again. Obviously there's been a fair amount of use of the ATM post the quarter, and I just wanted to know if you could give me an up to date share count currently.

Share count?

It hasn't changed dramatically from what was there at the -- as reported in the 10-Q.

105, I think. 104. 104.

Okay. Excellent. Thank you.

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

I want to thank you all for your time today. Obviously if you have any follow up questions, we're all here and we're available to take your calls. Thank you.

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