Oncternal Therapeutics Inc (ONCT) 2004 Q4 法說會逐字稿

Good day, ladies and gentleman, and welcome to the Q4 2004 GTx, Incorporated Earnings conference call. My name is Emma, and will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question and answer session towards the end of this conference. If at any time during the call you require assistance, please press star followed by zero and a coordinator will be happy to assist you. As a reminder, this call is being recorded for replay purposes.

I would now like to turn this presentation over to your host for today's call. Ms. Carney Duntsch from Investor and Media Relations. Please proceed.

Thank you, Emma. Thank you and good morning, everyone. On behalf of GTx, I would like to welcome you to our Fourth Quarter 2004 Year-End Financial Results conference call. By now, you should have already received a copy of the Company's press release; however, if you do not have a copy and wish to review it, you may access the release on our website at gtxinc.com. You can also access a replay of this conference call on our website until March 2, 2005. With me today on the call are Dr. Mitch Steiner, vice chairman and chief executive officer, Mark Hanover, president and chief operating officer, and Mark Mosteller, chief financial officer. Following this introduction, Dr. Steiner will highlight the Company's recent clinical and corporate achievements. Then Mr. Hanover will review the Company's financial performance for the quarter and year-ended December 31, 2004, and provide financial guidance for 2005. Dr. Steiner will then discuss the Company's anticipated 2005 milestones and corporate programs in greater detail. Once the speakers have finished their prepared remarks, we will open the call for questions.

Before we begin, I would like to remind you that the following discussion will contain certain statements that are forward-looking including answers to questions at the end of the formal remarks. These statements are only predictions and are based upon our current expectations. Forward-looking statements involve risks and uncertainties. Actual results and the timing of events can differ materially from those anticipated in our forward-looking statements as a result of these risks and uncertainties. These and other risk factors are discussed under additional factors that might affect future results in our annual report on form 10-K filed with the SEC on March 26, 2004. We expressly disclaim any obligation or undertaking to release publicly any update or revisions to any forward-looking statement contained herein to reflect any change or expectation with regard thereto or any change in events, conditions or circumstances on which our statements are based. Now I'd like to turn the call over to Dr. Mitch Steiner.

Thank you, Carney. Good morning, and thank you for joining us on our fourth quarter 2004 year-end conference call. Two thousand and four was a year of significant achievements for GTx. In February, GTx completed its initial public offering raising $70 million. IPO allowed GTx to further advance its Phase III clinical programs for ACAPODENE and to fund the research necessary to progress our second SARM compound, ostarine, into clinical trials, this solidifying GTx as a multi-product, late-stage company.

In March, GTx entered into a worldwide joint collaboration and license agreement with Ortho Biotech, a subsidiary of Johnson & Johnson, for the development of GTx's first clinical SARM, andarine. This deal with Johnson & Johnson not only validates GTx as the lead SARM company, but also allows GTx to retain rights to the rest of its SARM product pipeline.

In June we announced positive results from the Phase II-B clinical trial of our lead product ACAPODENE for the prevention of prostate cancer in high risk men. The promising data from the trial moves GTx closer to providing a prevention option for men who are at high risk for prostate cancer. Currently there are no treatment options available.

In December we signed an agreement with Orion Corporation to acquire all of the remaining rights to toremifene, the active ingredient in ACAPODENE, making GTx the sole licensee for toremifene in the United States and giving us the rights to all indications except breast cancer in all other countries. Toremifene 60 mg dose is approved by the FDA for the treatment of metastatic breast cancer and is marketed under the name Fareston. This acquisition allows GTx the ability to control all toremifene-based products in the United States and to further enhance the value of the entire ACAPODENE assets. Also during 2004, GTx entered into collaboration agreements with three diagnostic companies, Hybritech, diaDexus, and Tessera, to develop a commercial blood or urine diagnostic test for high-grade PIN. We believe the opportunity for such a diagnostic test to check high-grade PIN will significantly expand the already growing market for our ACAPODENE. There are approximately 1.1 million men in the United States who have been diagnosed with high-grade PIN and it is estimated that there are 9.4 million men in the United States who unknowingly harbor high-grade PIN. A noninvasive blood or urine tests, to detect high-grade PIN would significantly enhance the value of ACAPODENE asset. Now I'd like to turn the call over to Mark Hanover.

Thank you, Mitch. I would like to review our financial performance for the fourth quarter and for the full year of 2004. For the fourth quarter ended December 31, 2004, GTx reported a net loss of $6.9 million, compared to the net loss of $4.5 million for the same period for the previous year. For the year ended December 31, 2004, the Company had a net loss of $22.3 million, compared to a net loss of $14.2 million in 2003. Revenues for the fourth quarter and year ended December 31, 2004, were $344,000 and $1.9 million, respectively, and resulted from our collaboration and license agreement with Ortho Biotech, a subsidiary of Johnson & Johnson, for our lead SARM compound andarine. Research and development expenses for the fourth quarter and year-ended December 31, 2004 were $5.3 million and $18 million, respectively, compared to the $3.4 million and $10.8 million incurred during the same period in 2003. The increase in research and development expenses for both the fourth quarter and full year were primarily the result of the growing investment in our Phase III clinical program of ACAPODENE for the treatment of serious side effects of androgen deprivation therapy for advanced prostate cancer. The increase in research and development expenditures also resulted on the pre-clinical development of ostarine, our second clinical SARM compound, which is being solely developed by GTx for andropause and other chronic conditions related to aging.

Our general and administrative expenses for the quarter and year-ended December 31, 2004, were $2.2 million and $7.2 million, respectively, compared to $1.2 million and $3.6 million for the same period in 2003. The increase primarily resulted from the addition of key personnel, increased insurance costs, and higher professional fees to support the Company's growth and reporting obligations as a public company.

We began 2005 with four ongoing clinical programs including two pivotal Phase III clinical trials for two different large indications. As a result of these programs, we anticipate a net loss for the year ended December 31, 2005 of approximately $35 to $45 million. At December 31, 2004, the Company had cash and cash equivalent of $64.5 million. Now I will turn the call back over to Dr. Steiner.

Thank you, Mark. I would like to take a few moments to give you a brief overview of our achievements year-to-date, and expected milestone advance for the remainder of 2005. Our positive momentum of 2004 continues into 2005. We announced in January that we have initiated a pivotal Phase III clinical trial for ACAPODENE for the prevention of prostate cancer in high-risk men. We have had good discussions with the FDA on the PIN SPA, and based on those discussions and having received the official comments last week, we anticipate refiling our SPA soon. Just two weeks ago we announced the initiation of a Phase I clinical trial for our second SARM compound, ostarine. Ostarine is solely owned by GTx and is being developed for andropause and other conditions associated with aging, such as sarcopenia. Sarcopenia is the loss of muscle mass associated with aging and affects approximately 17 million Americans for which there are no approved treatments. We expect to complete the Phase I clinical trial for ostarine by midyear, and plan to initiate a Phase II clinical trial in 2005. In the second half of 2005, we expect to release our interim analysis of bone mineral density for the first 200 patients enrolled in our pivotal Phase III clinical trial using ACAPODENE 80 mg to treat the side effects of androgen deprivation therapy in advanced prostate cancer patients. Also during the second half of this year we plan to initiate a Phase II clinical trial for andirine for the treatment of cancer cachexia with our partner, Johnson & Johnson. During the course of the year we plan and we will be presenting at several key scientific conferences. In fact, the first opportunity will take place this Thursday at ASCO's Prostate Cancer Symposium in Orlando, where GTx will be presenting two separate posters of our Phase IIB clinical data using toremifene to prevent prostate cancer in high-risk men.

As you can see, GTx is off to a strong start in 2005, and we look forward to yet another successful year. I want to thank all of the employees of GTx for their valuable contributions. We have a dedicated group of intelligent, hard-working and creative employees whose achievements continue to distinguish GTx as a leader in the biotech sector. Now I'd like to turn the call back over to the operator for questions.

Thank you, sir. (OPERATOR INSTRUCTIONS) Our first question comes from the line of Joel Sendek from Lazard. Please proceed.

Thanks. The first question on the SPA. Am I to assume that everything was okay and they and you agreed with the changes that you posed before, and now it's just a formality to get the official SPA in?

Joel, thank you for the question. The question basically is, what can you tell us about the SPA, and let me just sort of set the stage. As you know, we filed the SPA in October. We have had discussions with the FDA about the SPA and received comments last week from the FDA. I will you our discussions with the FDA have been direct -- in other words, we directly spoke with the FDA at a very professional level. As you know, our conversations with the FDA are kind of private as we walk through what we can and cannot say, sort of a tightrope. But what I can tell you is -- what I can say is that we believe that based on our discussions and based on the written comments that we've just seen this past week, that from the ultimate trial design and the regulatory pathway that we had previously outlined, we don't expect it to be appreciably different. But, of course, until we have the finalized SPA, and at that point I'll go into the details -- I just don't want to -- I want to be sure that the discussions that we have continue and, as I said in the call, where we are right now is essentially looking at the comments, revising the SPA. As you know, we've already started the trial. We had the investigators' meeting in late January, and so all that is on track. So kind of giving you that as a basis, the summary is that we've had good discussions with the FDA literally composing the revised SPA and [inaudible], and we do not believe that the ultimate trial design pathway will be appreciably different from what we have already shared with you.

Okay. And there is no change in the enrollment of the patients or anything like that?

You mean like patient numbers?

Well, no. Just with regard to the fact that you started the trial already --

Oh, I see.

Stop it or anything like that --

Right, right. As far as starting the trial, I mean literally the third week of January we kicked off the trial, and so we're on track and started enrolling as we go through the SPA process so that it's done -- it parallels as opposed to sequentially.

Okay. Could you -- I have a financial question. One on FARESTON. Are you giving any financial guidance on sales of the drug for '05?

Joel, no. As you know, we took the product over January 1 of this year, and we are finalizing -- we're in the process of finalizing government contracts, etc., to get the distribution and everything in place. So just to kind of step back a minute on that, as you know, 2002 there were $6 million in revenues for FARESTON; in 2005 there were -- excuse me, in 2003 there were 5 million, and 2004 there was approximately 4 million, all based on IMF data that we have. So that sort of -- we are not giving specific line item guidance on the product sales.

Okay. So it's not likely that you'll -- it's not likely that trend will continue -- I guess you -- can you put anything in the top line?

Sure. Let me say this. On the FARESTON sales, obviously our goal is to maintain the level where we are and do the best we can to try to increase that, but, clearly, the goal is to maintain, and given that and having said that, obviously the trends are going down and declining, but we believe we're trying to maintain that same level. That's more or less what our goal is internal.

Okay. And then if I could just bother you for one more question, which is the cash balance. If we could get that versus the net loss of the fourth quarter. It looks like the cash is decreasing at a faster rate than the reported expenses would suggest, and I'm wondering what the -- if there's a cash flow item or a balance sheet item, CapEx or something like that to explain the difference.

Joel, to that point, the only thing -- remember, we spent -- at the end of the year we acquired the FARESTON asset, which is roughly -- the sales price was about $5.2 million, but, again, the focus here on the expenses really was on the ADT trial expenses and ostarine expenses, a gradual increase.

Okay. Thank you.

Thank you, Joel.

Our next question comes from the line of Eric Schmidt of SG Cowen. Please proceed.

Good morning. Sort of a followup question for Mitch on the SPA discussions. I think you almost answered my question and tried to answer a different question of Joel's, and that is, have there been any changes to the targeted enrollment of around 1200 men, and is this a study powered, or 80 percent power to detect 30 to 35 percent difference in progression in either 12 or 18 month end-point; any of those parameters change, Mitch?

What I can tell you is that the patient numbers that we have mentioned before are pretty much the same numbers. In terms of the difference -- the relative difference in reduction and all those kinds of questions, it is best that we report that back to you when we have the approved SPA, but I will tell you again that our philosophy is pretty close to the trial design that we have already shared with you. It is pretty close to the -- you know, we hope to what the ultimate trial design will be, so we're not trying to make any "big changes."

Okay. And do we know whether it's 12- or 18-month end-point?

Again, whether there are end-points or whether they're into analyses, I can't really at this point address that. But I will tell you again is that the real question is when do you expect to see data, and we believe that we're going to be seeing data pretty much in the same timeline that we've already said. But without coming out and saying much more than that -- and I appreciate your position. I know you appreciate our position, but as soon as we know --

Fair enough.

We're not talking like, you know, oh, my gosh, they came back and said they wanted a 5-year or 10-year trial, do you know what I'm saying?

Right.

So that's not in the cards, but we're trying to be cautious only because it is still open and we just got our comments, we're sending it back. If somebody from the FDA is listening, I want them to know that we're behaving, you know?

Okay. So if the timelines are still generally on track, does that apply to the study would complete enrollment around year end '05; is that sort of the target here?

In terms of enrollment, we're still looking -- remember, enrollment started literally this quarter, because we kicked off the meeting, the SGA kind of pushed things off, and it wasn't recognized after our discussion because the trial design was pretty much on track and we said let's go for it and let's start the trial. And the FDA knows, we know, everybody knows the trial has started. So with that enrollment, we told everybody it would take about 12 months. We use the numbers -- we start in the first quarter of '05 and we will have enrollment completed in the first quarter of '06.

Great. Thanks a lot.

Thank you, Eric.

Our next question comes from the line of Meg Malloy from Goldman Sachs. Please proceed.

Thanks. I guess you said just about what you can say on the SPA, so I guess I'll switch gears a little bit. Could you give us an idea -- we will see interim analysis from the androgen-deprivation study later this year -- about what your expectations are -- just to remind us of your expectations on the overall rate of decline in BMD? And then separately, could you just remind us in terms of number of people required to maintain commercial sales of FARESTON?

Sure. I'll answer the first question, and I'll ask Mark to answer the second question. The first question, to take a step back, it's androgen-deprivation therapy trial, 1200 patient trial, it's 100 [inaudible]. It is part of the trial which is a two-year treatment trial. We're looking at a secondary end-point, which is bone mineral density in the first 200 patients that completed the first here, which means there will be basically 100 patients per arm that will have bone mineral density to compare from their baseline bone mineral density DEXA scan to their one-year DEXA scan .

As you know, the literature says that patients on placebo, on androgen-deprivation therapy for prostate cancer will lose approximately 2 percent of bone that first year, some more if they just started androgen-deprivation therapy. We're looking to see a loss in bone mineral density with the placebo group. For the treatment group, if there is no loss. i.e., they're the same as their baseline, that's a 2 percent difference from the placebo, and that's still very positive considering that you look at the postmenopausal women studies after three years showing an increase in bone mineral density of 2 percent, for example, with raloxifene, that translated to a 50 percent reduction of bone fractures. So the key point years at SERMs -- the way that SERMs work, they may not have the same magnitude of bone mineral density changes, but the quality of bone is better. So with that said, we're looking to see about 2 percent loss in bone mineral density after one year in the placebo group, and we're looking for anything from baseline and higher for the treatment group.

Thanks.

Do you want to answer the second question?

Sure. Meg, good morning. On FARESTON, again, based on the IMF data of 2004 is approximately 4 million in revenues, and our team internally that is working on this, as we mentioned in the past, is commensurate with that level of sales. Having said that, we've also mentioned that we have approximately 7 STBs that are working on FARESTON, of which frankly some of those were already budgeted for us in '05 because of the pre-launch activities that we were planning for the ACAPODENE assets. So hopefully that will give you an idea of the team that is working on it.

Thanks.

Our next question comes from the line of Buddy Lyons from Stanford Group. Please proceed.

Hi, Mitch. Can you give us a sense of how it's going with the three diagnostic companies, and if you've learned anything about the feasibility of creating such a test for PIN, and just any information on that end?

Sure. First of all, thank you for the question. The question basically is, can I give you an update of what we know based on our collaborations with the three companies, Hybritech, the company that brought the first PSA test to market, diaDexus, a genomics company, and Tessera, which has a market [inaudible] early prostate cancer antigen and whether or not I can give you an update. I will tell you that what GTx brings to each of these collaborations is the fact that we just did a large Phase IIB 514 patient trial in which we treated three-quarters of patients with toremifene and one-quarter, approximately 130 patients were treated with placebo. Blood and urine were obtained of these patients at 0, 3, 6, 9 and 12 months. What that means is you have an incredibly valuable cohort of patients that we can begin studying going forth. Having said that, that's what we bring to the collaboration. We would not have done collaborations with any of these three companies if we didn't see some preliminary data that gave us excitement that we had potentially a PIN marker. Now having said that, one thing I can say from a preliminary standpoint, it does appear that the urine is a better place to look for a PIN marker than the blood. And the reason I can say that is, you know PIN is carcinoma in situ, meaning that it's in the lining of the ducts, but it hasn't invaded the membranes, and those prostate cells are trying to secrete PSA into the serum. If it's not secreting PSA to the serum, it's probably not going to be secreting any "PIN proteins" into the serum, either. But the only place that PIN cells can slough off and go is through the prostate ducts, which is connected to the urethra and then into the urine. So our best bet, if this is what the collaborations look like and are revealing, is that urine can be the best place to look for a PIN marker because the cells haven't invaded yet. So that's new information that we're working through, and it kind of makes logical sense that the cells are sloughing off and they don't [inaudible] the blood stream. The only place to look for it is in the urine, and that's kind of what we're seeing. We hope that over the next year we'll be able to at least have some abstracts that are presented at major readings, which will clarify more of the kind of markers and the sensitivity and specificity of those markers. So we're feeling pretty good about the PIN mark.

Is there any timeline, or general timeline for the development of a test? I mean, would it be on the market by the time ACAPODENE is approved for the PIN indication for the prevention of prostate cancer?

Buddy, in an ideal world, what we'd love to see happen is about a year before we are complete and sitting in front of the FDA, we would love to see a commercial PIN test available for physicians to begin to understand its use. A lot of times what happens with diagnostics like this is, they are driven by the therapeutics and visa-versa, now called theragnostics. But having said that, in an ideal world, we'd love to see the commercial test available ahead of time of the actual therapeutic test. And at this point now, all I can tell you is, I know it takes about 18 months to 24 months to go from laboratory proof of concept to a commercial test, and we're kind of in that [inaudible].

Okay, thank you.

And our next question comes from the line of Jim Petracelli (ph) from [inaudible]. Please proceed.

Morning, guys. My question -- the first question is on ACAPODENE. Given the sequence of events over the last kind of six or seven months, are you seeing any interest from potential partners for PIN?

Thank you for the question, Jim. The question basically is, are we seeing interest in our lead late stage program, and the answer is absolutely. We're seeing -- we've generated a lot of interest, especially in light of two things -- one, the fact that we have such positive Phase IIB data that gives us an opportunity to take 514 patients worth of data and share that. The other thing that is creating an interest for our lead asset is the fact that we did close the distribution channel and have acquired all rights to the drug in the United States, so now the "channel" issue has gone away. The third reason is that the area of androgen deprivation therapy, other large pharmaceutical players have gotten into the field of their own clinical trials which sort of validates the space being a large market and people have now seen that and we're getting a lot of interest. You know, GTx's position, Jim, is that we'd love to do a distribution agreement with the right partner at the right time, mainly because our focus has always been in the area of urology and medical oncology, but both androgen depravation therapy and the potential for treating PINs, will encompass doctors outside of urology and medical oncology. And outside the United States, we clearly -- our specialty sales force is in the U.S. only, so we have opportunities to partner not only globally but also [inaudible] with Japan, Europe, and other major markets, in addition to the areas of the United States that we cannot cover. So this is an attractive opportunity for GTx to look for additional funding for potential offset of [inaudible]. I mean, this could happen, but, again, it has to be the right partner at the right time. It actually is late enough now that we hope to get the right price.

Thanks, Mitch. My second question is around ostarine, and you may have mentioned this before and I missed it. But did you talk about timelines for that drug this year?

Yes, I did, Jim, and basically what I said was that we started the Phase II trial -- excuse me, correction -- We started the Phase I trial this past month, and we announced that like two weeks ago. The Phase I trial should be completed the first half of this year, and we're shooting to be in a Phase II trial second half of this year. Depending on how quickly that goes, I hope it will have data. But the main thing is that we'll be in a Phase II with our own SARM that's solely owned by GTx the second half of this year.

So the Phase I data should be presented sometime in the second half of the year or mid-year?

It's very possible that the Phase I data will be -- that's right, mid-year, summer.

Okay. And then kind of your development plans from an internal versus a partnering kind of thought.

For ostarine?

Correct.

Yes. Our feeling is that we'd love to -- again, this is the best case scenario -- we have been known because we've been able to take SARMs from the laboratory and put them into the clinic -- either our own or [inaudible] chemistry created them, other pharmaceutical companies have created SARMS, they have not gone in to manage it. We have been basically the lead company in this area. We did a deal with our partner, Johnson & Johnson for andarine and we're very happy with that deal. We're happy with that relationship, but we've also been able to retain ostarine, and we are moving forward with ostarine. Having said that, what we'd like to see happen is that GTx is in the driver's seat in terms of completing Phase I clinical trials, having proof of concept data for the Phase II trials, because we believe ultimately that our shareholders' best value will be when the data is in hand and we can then, based on data, look for the right partner. To the question why would we get a partner, I'll tell you why. The reason for it is that if we go after andropause and other conditions of aging, such as sarcopenia, my conservative estimates, this is a 5 to $12 billion opportunity worldwide, and with an aging population, it's going to get -- it's a big market. GTx is still only focused in medical oncology, serology, and clearly outside of that space in the United States, we're going to need help, and outside the United States it's part of our business plan we're going to need help. So timing of when to deal with finding additional partners outside the United States or a global partner, I can't answer right now, but it clearly makes that sense that the market is so large that you need to have a large sales force and marketing arm to get into it. So there are plans sometime in the future to partner ostarine for this large opportunity, but what we'd like to do is be able to develop the drug to a point that we maximize shareholder value and maximize the value of the asset, and that's the reason why, you know, when we did our IPO, part of it was to develop our SARM program, and that's the course that we've been on.

Great. Thanks.

Thank you, Jim.

(OPERATOR INSTRUCTIONS) We have a question from the line of Joel Lipton from Lipton Capital Management. Please proceed.

Can you hear me?

Yes, Joe, you're on.

Very good, sorry. Just one question about the stock movement. I know that that's not your end of the business, but back in November there was a release made that you expected the fourth quarter to look a little bit better -- so less of a loss than had previously been anticipated. Upon making that release, the stock made a pretty substantial move from around $11 to somewhere around $15, and then throughout this quarter, worked its way back down again. As the release came out today, the number was in fact less than you had anticipated. Do you think that -- do you expect to see this sort of volatility that could move the underlying movement of your stock in the future? And also, will there be any other immediate need for any other additional financing that would cause any dilution in the stock?

Joel, thank you for the question. First, let me just begin by saying the following, and that is that our company is -- when we went public in February of last year, 2004, we went out at a price of $14.50. Since that time, as you can hear from this call, we're a different kind of company. We have hit every milestone and exceeded even additional ones that we did not have in our initial plan, but we were able to do that and be successful. We're a different company, and the fundamentals from November to the fundamentals today have not changed -- if anything, stronger, because now we've kicked off a Phase III program, and we've also kicked off an additional SARM. So the market doesn't really, in my opinion, reflect the true fundamentals of our company. And so it certainly baffles me that we've done so much more over the past year and this is what the market is doing as a sector as a whole. So I don't -- the good news is that GTx really kind of focuses on our business, execution of our business, and our goal is to continue to build shareholder value, and this location in the market will hopefully correct itself at some point.

Your second question was pretty much what's going to happen from a financing standpoint, and let me just say the following, and that is we do -- at the beginning of this year we had about $65 million in cash. For the biotechs that went out last year, we have done very well. Our guidance, 35 to 45 million. For this year, we are very fortunate -- you heard from the call that we're really -- we're a different kind of company. We're positioned to take advantage of that. We have late stage clinical programs that could [inaudible] partners. We have another asset, ostarine, which is now in Phase I of the clinical program. We do have a partnership with a large pharmaceutical company with an opportunity for milestones. And so we have many options to raise cash. For example, we could do license deals with these various assets that I just mentioned. The license deal does more than just bring cash in. It can reduce [inaudible], for example, which could change our guidance even this year going forward. On the target, pin it down. We can achieve our milestones under our current deal. So really it's -- there are many ways that GTx can deal with the need for additional resources going forward, but I think we've done a great job with the money that we have. We'll get into 2006 and it gives us some time to execute our business plan.

Very good. Thank you.

And this concludes our question and answer session. I will now turn it back to Dr. Steiner for closing remarks.

Thank you, Operator. We'd like to thank you all for your continued interest in GTx. We look forward to providing you with updates on our future progress. Thank you all again for joining us on today's call.