Oncternal Therapeutics Inc (ONCT) 2009 Q4 法說會逐字稿

Good day, ladies and gentlemen. And welcome to the GTx 2009 corporate results conference call. My name is Francine and I'm the operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions). I would now like to turn the presentation over to your host for today's call, Mr. McDavid Stilwell, Director of Corporate Communications. Please proceed, sir.

Thank you and good morning. On behalf of GTx, I'd like to welcome you to our fourth quarter and year end 2009 corporate results conference call. We released our results earlier this morning through the news wires. If you do not have a copy of the release, you will find it on our website at GTxInc.com. We'll have a replay of this call available on our website until March 29th, 2010.

With me today are Dr. Mitchell Steiner, Vice Chairman and Chief Executive Officer, Marc Hanover, President and Chief Operating Officer, and Mark Mosteller, Chief Financial Officer. Before we begin, I'll remind you that information discussed on this call may include forward-looking statements, and such statements are subject to the risks and uncertainties we discuss in detail in our reports filed with the Securities and Exchange Commission, including in our quarterly report on Form 10-Q filed November 9th, 2009. We expressly disclaim any obligation to release publicly any update to forward-looking statements made during this call. Now I'll turn the call over to Dr. Steiner.

Thank you, McDavid. And thank you all for joining us today. The Company announced in early November 2009 the receipt of a complete response letter from the FDA for the toremifene 80-milligram New Drug Application.

In December, GTx and Ipsen met with the FDA to better understand the two issues cited in the complete response letter. Based on this end of review FDA meeting, GTx and Ipsen have concluded that there is a path forward to obtain approval for toremifene 80-milligrams to reduce fractures in men with prostate cancer on ADT. While this means there will be a commercial delay, we believe both issues in the complete response letter can be addressed in a single second well-controlled Phase III clinical trial. We are now working with the FDA on the specifics of the study design for the second clinical trial and timing. We feel confident that this next study will be designed to confirm the results of our first Phase III ADT clinical trial.

Why do we plan to continue the development of toremifene 80 milligrams to reduce fractures in men with prostate cancer on ADT? There are several reasons. From our December meeting, it is clear that the FDA continues to view the prevention of fractures in men with prostate cancer on ADT as an indication separate from the broader male osteoporosis indication, and there are no FDA approved treatments for this indication. Only one additional clinical trial is required. GTx will need to conduct a second well-controlled Phase III clinical trial which will include cancer safety end points. As long as there are no new safety issues, this should be sufficient to support approval.

We also confirmed that toremifene 80-milligram can be further differentiated in the marketplace by providing prespecified clinical data to support benefits for hot flashes and gynecomastia in addition to fractures, all of which are estrogen deficiency side effects of ADT. We are designing our second clinical study to achieve these objectives. We have strong patent protection that extends to 2023. It's a large opportunity for our Company. There are 700,000 men with prostate cancer on ADT in the US alone. We have conducted market research with more than 2,000 physicians, and with payers, and we have determined that this is a $200 million to $400 million opportunity for GTx and if we're able to add the treatment of hot flashes to an approved label for toremifene-80 milligrams, our market research forecasts that peak sales for this product double.

We may also be able to expand into a new indication. Once we have demonstrated fracture efficacy for toremifene 80-milligrams in men with prostate cancer in these two Phase III clinical trials, then bone mineral density alone may be used as the primary end point to bridge to the indication of cancer treatment induced bone loss in breast cancer patients. We will provide the details of the toremifene 80-milligram second Phase III clinical trial after we have agreement with the FDA on protocol design and timing.

As for the toremifene 20-milligram clinical program to prevent prostate cancer in men with high grade PIN, who are at high risk for prostate cancer, the last patient completed the trial in late February. We're conducting the necessary operational steps to properly close the study, and we expect to receive data from this study this summer. If the results are positive, we will then file the toremifene 20-milligram New Drug Application by year end.

In regard to our SARM program, our lead SARM, Ostarine, has been evaluated and performed well in seven Phase I, Phase II, and Phase IIb clinical studies with 582 subjects. Ostarine is an oral agent that has demonstrated a promising efficacy and safety drug profile. SARM's an exciting new class of drugs with a potential to treat a variety of musculoskeletal wasting diseases. This morning we announced that we have reacquired rights to Ostarine and our entire SARM program from Merck. It was a difficult decision to dissolve our SARM collaboration with Merck, but GTx and Merck developed divergent priorities for the SARM program.

For GTx, our most pressing goal is to generate revenue from our product candidates so that we can become a profitable Company. The development of Ostarine for cancer cachexia is a real near term commercial opportunity. Ostarine will provide important cancer supportive care that could treat the muscle wasting related to cancer and cancer treatments, for which there are no approved products today. In the United States, there are approximately 2.9 million cancer patients who have or are at risk for cancer cachexia. Greater lean body mass increases strength and performance, which improves quality of life, response and tolerance to chemotherapy, and ultimately, survival.

In October of 2008, GTx reported the results of a Phase IIb clinical trial evaluating Ostarine in 159 patients with cancer cachexia who had lung cancer, colon cancer, breast cancer, non Hodgkin's lymphoma or CLL. Ostarine demonstrated the ability to build lean body mass and increase performance following four months of treatment. With Ostarine now back in our control, GTx will move quickly to have an end of Phase II meeting with the FDA, and following that meeting, we will update investors about our plans for Ostarine Phase III cancer cachexia clinical development program and expected time lines.

In late February, we initiated a Phase II clinical trial evaluating GTx 758, our newest drug candidate, for the first line treatment of advanced prostate cancer. Like our SARM program, GTx 758 was discovered in our laboratories, and it's the fourth product candidate that we have taken from discovery and preclinical research into clinical development. GTx 758 is an oral LH inhibitor, with a potential to reduce serum testosterone to castrate levels, without causing hot flashes or bone loss, two serious side effects of current first line androgen deprivation therapy. The regulatory pathway is well-defined, with testosterone well-accepted as a surrogate endpoint, and the market is large, $3 billion worldwide, for androgen deprivation therapies.

Current ADT therapies are all LHRH analogs, either their agonists or their antagonists. While these agents achieve medical castration, they're similar in formulation, efficacy and side effects. GTx 758, if successful, will be the first truly differentiated approach to first line deprivation therapy in many years. We expect to receive results from our ongoing Phase II clinical trial in late summer 2010.

I will now turn the call over to Marc Hanover for a brief review of the financial results. Marc?

Thank you. The net loss for the quarter and year ended December 31, 2009 was $10.9 million, and $46.3 million respectively, compared to $13.9 million and $51.8 million for the same periods in the prior year. Revenue for the quarter and year ended December 31, 2009 was $3.7 million and $14.7 million respectively, compared to $3 million and $13.5 million for the same periods in 2008. Revenue for the fourth quarter of 2009 included collaboration income of $2.8 million related to our collaborations with Merck and Ipsen respectively. And, $862,000 of net sales of Fareston 60-milligram, marketed for the treatment of metastatic breast cancer in post-menopausal women.

Revenue for the year ended December 31, 2009 included collaboration income of $11.4 million from Merck and Ipsen and $3.3 million of net sales of Fareston. Research and development expenses for the quarter and year ended December 31, 2009 were $8.2 million and $32.3 million respectively, compared to $10.6 million and $44.3 million for the same periods in 2008. General and administrative expenses for the quarter and year ended December 31, 2009 were $6.3 million and $27.7 million respectively, compared to $6.3 million and $23.1 million for the same periods in 2008. At December 31, 2009, GTx had cash, cash equivalents, and short-term investments of $49 million. GTx has the potential to further strengthen our balance sheet with milestone payments from its partner, Ipsen, as well as payments from potential partnerships for our SARM and/or GTx 758 assets.

Now I will turn the call back to Mitch.

Thanks, Marc. Operator, we're ready for our first question.

(Operator Instructions). Our first question comes from the line of Joel Sendek from Lazard Capital Markets.

Good morning. Thanks for taking the question. So could you give more details on the breakup of the Merck arrangement? You previously said that when the partnership was going well, that you could choose the Merck compound or your compound to move forward. I'm wondering what's happening to the Merck compounds, and then what are the financial arrangements under the breakup?

Thank you, Joel. So the question is, when we originally did this deal it was -- we were allowed to pool our compounds together and whether the GTx compound or the Merck compound succeeded, then GTx would get the same economics basically for any of these. So we kind of hedged our bets by basically in-licensing in addition to our own program, another SARM program. During the past I guess two years to three years of this relationship, Ostarine became the clear winner, and Ostarine was and is the lead compound and so as in regard to any of the Merck compounds, they don't have the same profile as Ostarine.

So Ostarine's really the compound that's on the table. Consequently, when we last year were working on starting a COPD study in Phase II and also Phase IIb study in chronic sarcopenia, the Phase II for COPD was supposed to start in fourth quarter and the Phase IIb for sarcopenia was supposed to start this year. But after the Merck and Schering merger, it became clear that some of these delays were starting to take place and as you know for GTx, these delays mean potentially a delay in some large milestones. We got nervous.

We continued to have discussions with Merck, trying to understand how this merger and how the SARM program was going to play out. And we began to enter into some discussions with Merck about sort of some of the next steps, and one of the concerns was that now the Schering-Plough merger, they had their own compounds which GTx would have access to and it became clear that one of the things we could do is go ahead and meet with the additional folks at Schering and now Merck and GTx and then we would move forward and kind of delay the program and figure out what the next steps were going to be.

Ostarine has continued to perform well in seven clinical trials and our feeling was that still the most expeditious way to the market was cancer cachexia. Merck was not interested in going into cancer cachexia. But that also meant that chronic sarcopenia and COPD were going to be delayed, GTx was in a tough position of trying to decide whether to keep the relationship the same without any clear understanding of where we were going, or do we find a way to move forward with Ostarine or do we do a clean break, and moving forward with Ostarine could have been Ostarine with still keeping the Merck relationship. And after we -- let me also remind you there was a lot of interest in Ostarine in the past and continues to be interest in Ostarine, and there are companies out there where cancer supportive care is a good fit.

We were in a tough position. In fact, for the record, we were surprised to see a statement in the Merck 10-K, that statement in the Merck 10K, quite frankly I learned it from Eric Schmidt's note. Then I went back and read the 10-K myself. So we were surprised. So over the last 10 days or so, just like the 10-K says, we were discussing with Merck sort of the next steps and based on what we think is the best way to go forward, after much deliberation, we decided the best alternative was to terminate our of collaboration with Merck and it was a difficult decision but we believe that this course of action gives us the best way to maximize the value of the SARM program. And since Ostarine was the lead compound anyway, why not keep the lead compound, which was moving beautifully, going forward and basically get back what was ours to begin with, and use that to move forward in what we think is a near term opportunity.

And then what are the financial terms of the breakup and do you intend to repartner?

So the financial -- just in generalities, the financial terms are we get everything back free and clear and so we're able to partner without having -- sometimes in some of these breakups, the other Company gets a royalty of some sort on the compound. There's none of that. So Ostarine is still free and clear and that's pretty much it. We get everything back and we get all the data and we move forward.

Okay. Thank you.

Thank you, Joel.

(Operator Instructions). We have a question coming in from the line of Eric Schmidt.

Thanks for taking the question. Mitch, on the high grade PIN study, you mentioned the last patient completed the study in February. Just kind of wondering why it might take three or four months here I guess until the summer to clean up that database and report the results?

Yes. So thank you for the question, Eric. The answer is that the last patient came out in February and our partner, Ipsen, is working very closely with GTx and what they're doing is two things. One, they're going through all the queries that naturally take place, usually take place when you have a clinical trial to clean that up. The 1600 patients, so it's a big study, and it's international, so that adds another level of complexity. More importantly, they're really doing a good job going through and troubleshooting all of the tables and listings and figures that we're going to get and it just takes time and there's nobody more anxious than myself with this big study, with 150 sites, to get it all put to bed. If we get it back sooner, Eric, I will report it sooner. It's just, we just need the time to gather the information in this big study.

Okay. And could we talk a little bit about your financial situation? I don't know if you're able to give any spending guidance for 2010. I don't know for example whether Ipsen might pay, might be on the hook for milestones that allow you to pay for the future ADT trial? And I guess I don't know how you prioritize your own development spending between future spending on toremifene and ADT and Ostarine and cachexia. Could you weave all that together for us?

Sure, Eric. It's Marc. I'll address that for a minute. First of all, in regard to guidance. Let me first address that for a minute, because it is a good question and something we constantly think about, every minute of the day.

Where we're not giving guidance right this second, simply because we need to have clarification on several fronts. Obviously, we need to have clarification on our PIN results, and then we need to get specifics on the final protocol design for the Phase III ADT study, and then we need to get specific trial design from the FDA meeting on our SARM program, and then, lastly, we need to see the outcome of our Phase II 758 study, which again, it should come out, as Mitch mentioned a little while ago, that data should come out in June or late in the summertime. So basically, the thought is that obviously, we've taken significant actions to date.

I mean, in December, as painful as it was, we had to reduce workforce here at GTx, and reduce certain cost structures throughout the Company, in order to eliminate costs and expenses, et cetera. So year end 2009 showed a $46 million net loss. It will be significantly less than that in 2010. Now, having said that, I would like to offer you more clarity on that specifically, but until we have the details of all these pieces, I don't think it would be wise for us to outline that at this point.

Suffice it to say, though, that several things that may help, certainly helps us, help you, yes, we have a partnership with Ipsen that can yield some milestone payments, based on our current existing agreement. Which is significant money there. The other thing to bear in mind is that the Company, as you know, Eric, the shareholders, the insiders own approximately 50% of the Company. We don't take selling equity lightly. So our goal and objective is that we want to figure out ways to maximize value of our assets. I think, quite frankly, we can do that with SARMs and I think we can do that with GTx 758.

The question is the timing, when and how, and I think there is a real possibility for that, and on top of that, I think there's a way to possibly create additional value out of our ADT program. ADT, there's -- it's been derisked significantly and I think there's a tremendous opportunity there to find ways to leverage that asset further. So at this point, I think we have a lot of positive things to look forward to, and that's the reason why there's no guidance now. But we will give guidance, as soon as possible.

Thanks for that, Marc. Maybe a couple follow-ups, are you going to be recognizing the deferred revenue, the remaining deferred revenue from Merck in Q1, and how much might that be from a modeling standpoint.

We're going to recognize the total Merck collaboration income in the first quarter of 2010, and it's approximately $55 million.

Remaining?

$55 million, yes.

Okay. Assuming you don't start any of these new studies, cachexia, or the next ADT trial, could you give us some kind of a ballpark figure of what your total spend might be over the next quarter or two?

Yes, so, again, I'm not going to give specific guidance, Eric, but I will say that we're very comfortable in terms of where we are with our current cash. It does get us beyond, as we mentioned in the past, it will get us beyond 2010, and I really do believe that with our cost reductions, we will have a significantly less burn than we had in 2010, and I will give you more guidance to that as soon as I can. But I'm comfortable with that statement.

One last question then on Ipsen. Is there any clarity on what they might be doing in terms of the European filing?

Yes. So I was going to finish answering a little bit on the --

Go ahead.

And then I'll answer that question. I was just going to make the point that for the ADT study and for the cancer cachexia studies, one of the things that GTx will do is before we move forward on any of those studies, after we meet with the FDA and understand exactly where we're going, if we start those studies because we found ways to fund those studies and as Marc is saying, is that we don't want to fund them necessarily with eke equity. With that said, we do think because the ADT program is derisked and the SARM program is now free and clear, a late-stage asset, that these will be attractive opportunities.

In regard to your next question, Ipsen can file with the trial that we've already done, but our feeling with our partner, Ipsen, is let's understand what the outcome of the FDA meetings are going to be ultimately, and what they're going to agree to, because that does have implications in terms of what they do in Europe. And so they have been working with us very, very closely to understand. In fact, they've come with us to the FDA meetings. We've had debriefings with them. Ipsen has been a wonderful partner in this regard, and we are very sensitive to what their needs are in Europe, and they've been very sensitive to coordinating what we're doing in the US. So I hope it will happen after we get clarity with the next go-round with the FDA, is we will also give you clarity in what's going to happen in Europe.

Sounds like, Mitch, it's possible they could file -- they're not going to do anything until you get clarity with the FDA, but they could potentially file with the data you have on hand.

They could potentially file with the data on hand and that's always been the case. But now with the complete response letter and trying to understand what the issues are, which we've now done, and trying to understand what the next trial is going to look like, and what aspects of that trial are going to either support or strengthen the current trial, the current data set, they want to get it in, they want to get it -- they want to be successful, and one of the things that they don't have to deal with that we have to deal with in the US, is in the US our patent clock has started. Our patent life will go to 2023.

In Europe, Ipsen has already filed with the -- or requested from the central EMEA, would this program qualify for innovation, and the reason that's important is because if it does then the toremifene 80-milligram gets 10 years of market protection, eight years of data exclusivity, or the opposite, eight years of data protection and 10 years of market exclusivity. And so whenever they file and get it approved, that's when the clock starts for them. So there's no, quote, rush, until we do it right, and I think the right next step is to understand what the requirements are going to be in the US and how that will affect Europe.

Thanks a lot.

Thank you, Eric.

(Operator Instructions).

If there's no further questions, then we would like to thank you all for your interest in GTx and we look forward to providing you with updates on our future progress. Thank you again for joining us on today's call.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a great day.