Oncternal Therapeutics Inc (ONCT) 2010 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the second quarter 2010 GTx, Incorporated, earnings conference call. My name is Michelle, and I will be your operator for today. At this time, all participants are in a listen-only mode. We will be conducting a question and answer session later in today's conference. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today, Mr. McDavid Stilwell, Director of Corporate Communications. Please proceed, sir.

Thank you, and good morning. On behalf of GTx, I would like to welcome you to our second quarter 2010 corporate results conference call. We released our financial 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 www.gtxinc.com. We'll have a replay of this call available on our website until August 23, 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 will 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 May 4, 2010. We expressly disclaim any obligation to release publicly any updates to forward-looking statements made during this call.

And now I will turn the call over to Dr. Steiner.

Thanks, McDavid. And thank you all for joining us today. This morning I will update you on Toremifene 80 milligrams, SARM, and the GTx-758 clinical programs. Let me begin with GTx-758.

The GTx-758 Phase II proof of concept clinical trial top-line results will be released in September. The study is significant for a variety of reasons. Discovered at GTx by our scientists, GTx-758 is an oral selective estrogen receptor alpha agonist small molecule, which GTx is developing for the treatment of advanced prostate cancer.

GTx-758 has the potential to reduce serum total testosterone to castrate levels, as well as reducing serum-free testosterone, the only form which prostate cancer cells actually utilize for growth, to concentrations lower than what is typically achieved by either orchiectomy or LHRH analogs, but without the adverse side effects of bone loss or hot flashes. The other attractive feature is that the GTx-758 program will follow the well established androgen deprivation therapy regulatory pathway for first-line treatment of advanced prostate cancer, where serum testosterone levels is the accepted regulatory surrogate for clinical benefit, a primary endpoint that can be easily measured. The market for androgen deprivation therapy is known, with worldwide sales today exceeding $3 billion.

Currently available androgen deprivation therapies consist of either surgical orchiectomy or LHRH analogs, either agonist or antagonist, which are effective in reducing total testosterone levels to castrate range, which is less than 50 nanograms per deciliter in advanced prostate cancer patients. Surgical orchiectomy or the removal of the testes remains an undesirable choice. LHRH analogs lower total testosterone to castrate levels by reducing LH secretion by the pituitary to suppress testosterone production by the testes. LHRH agonists are injectable medicines that have to be administered in the physician's office.

Prostate cancer patients may experience serious side effects from castration achieved through either surgical orchiectomy or injection of LHRH agents. Most of these side effects are the result of the unintended significant reduction in levels of estrogen. Testosterone is converted to estrogen by an enzyme called aromatase, and by reducing testosterone to castrate levels, estrogen levels are also significantly reduced. This depletion of estrogen results in estrogen deficiency side effects.

The most common symptomatic side effect of estrogen deficiency is hot flashes, which has been shown to occur in up to 80% of patients on ADT Other serious side effects may include bone loss, with an increased risk of fractures, adverse lipid changes, and an increased risk in cardiovascular disease.

GTx-758 is a selective estrogen receptor alpha agonist that has the potential to achieve medical castration while maintaining estrogenic activity in patients with advanced prostate cancer. GTx-758 has been designed to achieve serum-free testosterone levels lower than can be typically achieved by surgical or LHRH analog castration alone.

In animal models, the reduction of serum testosterone levels have been accomplished by a combination of the following mechanisms of action. One, the reduction of LH secretion from the pituitary through feedback inhibition on the pituitary and hypothalamus. Two, the inhibition of testosterone production by the Leydig cells in the testes, and three, the elevation of serum sex hormone binding globulin, which binds irreversibly to testosterone to thereby further reduce serum-free testosterone. Currently there are no selective estrogen receptor alpha agonists approved for these indications.

There is scientific precedent for the use of a non-selective estrogen as first and second line treatments of advanced prostate cancer. Before LHRH analogs became the standard of care for treating advanced prostate cancer, DES, an oral agent which was used for over four decades, was the only medical alternative to surgery to achieve castration. DES effectively castrated patients by interacting with the estrogen receptor alpha, and patients taking DES did not have hot flashes or bone loss.

DES, however, is a non-selective drug that cross reacts with many types of nuclear hormone receptors. This non-selective action of DES results in a higher incidence of arterial thrombotic disease and heart attacks compared to LHRH agonists. GTx-758, like DES, activates ER alpha, but unlike DES is not a potent activator of ER beta Moreover, GTx-758 is very selective, and appears to have no cross reactivity with other nuclear hormone receptors. DES, on the other hand, cross reacts with the glucocorticoid receptor, minimal corticoid receptor, androgen receptor, progesterone receptor, and estrogen related receptors alpha, beta and gamma.

Platelet activity contributes significantly to the occurrence of arterial thrombotic disease, which was the primary safety concern for prescribing DES rather than LHRH agents for ADT. Human platelets have predominantly the ER beta sub-type on their surface. In a platelet aggregation test conducted by GTx using human platelets, DES, which potently stimulates both ER alpha and ER beta sub-types, caused an increase in platelet aggregation, whereas GTx-758 which interacts primarily with the ER alpha did not, further confirming the selective action of GTx-758.

Phase I single ascending dose and multiple ascending dose clinical trials were conducted by GTx in 146 subjects with GTx-758, and the drug was well tolerated. Our Phase II proof of concept clinical trial was evaluating three oral doses of GTx-758 in 70 healthy male subjects, and the primary end point is to achieve medical castration. That is, serum testosterone levels of less than 50 nanograms per deciliter. In addition, key secondary end points include levels of SHBG, serum-free testosterone and serum PSA.

GTx is also measuring bone turnover markers. If we are able to obtain the target product profile for GTx-758, an oral therapy with the potential to achieve medical castration by lowering serum total testosterone, increasing serum SHBG, and lowering serum-free testosterone to levels lower than commonly observed by other means of ADT, but without the bone loss or hot flashes, then GTx-758 would be the first member of a new class of drugs, and the first truly differentiated approach to androgen deprivation therapy since the introduction of LHRH agonists in 1980.

Success in this Phase II clinical trial will distinguish GTx as a leader in the development of a new program to treat advanced prostate cancer. We expect to report the Phase II clinical trial top-line results for GTx-758 later this quarter, and if the trial meets its primary endpoint and the drug is well tolerated, then we plan to advance GTx-758 into several additional clinical trials. In the fourth quarter, we will conduct two additional Phase I clinical studies, a formulation study, and a food effect study. In the first half of 2011, we plan to initiate an open-label Phase II clinical trial to evaluate GTx-758 for the first-line treatment in approximately 100,000 patients -- excuse me, 100 patients, with advanced prostate cancer. That's a lot less. And a second open-label Phase II clinical study to evaluate GTx-758 for second-line treatment in approximately 50 patients with advanced prostate cancer who have failed LHRH agonists.

As for our SARM program, we have been evaluating partnership opportunities to advance the development of our SARMs, and planning clinical studies for Ostarine to treat cancer cachexia . There are several important aspects of a partnership that we would want to achieve. The ideal partner would be a global pharmaceutical company with an existing internal SARM program. The prospective partner has to be a significant and well recognized leader in muscle disease, and be willing to form a research collaboration with GTx. Our partner would commit to the development of Ostarine in cancer cachexia indication, which we continue to believe is a significant near-term opportunity. Additionally, the new partner should have the depth and breadth to also develop SARMs in other indications at the same time for other muscle wasting conditions including sarcopenia.

Based on our successful Phase II-b clinical trial evaluating Ostarine for cancer cachexia in multiple cancer types, GTx is planning a second late-stage clinical trial this time in non-small cell lung cancer. We will also provide more clarity once the details of the study are finalized, and we have received input from the FDA.

As for our Toremifene programs, we announced early in second quarter that the Phase III high-grade PIN clinical trial for Toremifene 20 milligrams, did not meet its primary endpoint. And GTx does not plan to continue the development of the 20 milligram dose of Toremifene. Instead, GTx will focus on the development of Toremifene 80 milligrams, which we have already shown in a Phase III clinical study reduces fractures in men with prostate cancer on ADT.

Following receipt of the FDA's complete response letter, we have secured funding by expanding the Ipsen GTx partnership for TREAT II. TREAT II is the second Phase III clinical trial evaluating Toremifene 80 milligrams for the reduction of fractures and treatment of other estrogen deficiency side effects of ADT. GTx and Ipsen are finalizing the design details of the TREAT II trial now, and the TREAT II study will address in a single trial the two deficiencies raised in the complete response letter. It is designed to confirm the ability of Toremifene 80 milligrams to reduce fractures in men with prostate cancer and ADT, and to show again that Toremifene does not affect the underlying prostate cancer through agreed upon cancer safety end points.

In addition, we're also including in the clinical trial secondary end points to capture the other benefits of Toremifene 80 milligrams to treat estrogen deficiency related side effects such as reduction in hot flashes and amelioration of gynecomastia, which could be included in label. We believe having hot flashes information in the label could substantially increase the US market opportunity for Toremifene 80 milligrams. We are now in the process of completing our discussions with the FDA, and we expect to initiate the TREAT II clinical trial in the first quarter of 2011.

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

Thank you, Mitch. The details of our financial results for the second quarter 2010 are included in this morning's press release, and are available on our website. I will review with you the highlights. The net loss for the quarter ended June 30, 2010, was $12.9 million compared with a net loss of $11.3 million for the quarter ended June 30, 2009. The $12.9 million net loss for the second quarter of 2010 included a noncash $1.7 million impairment charge related to the conclusion of the Phase III high grade PIN clinical trial of Toremifene 20 milligrams.

Since the Toremifene 20 milligram study did not meet the primary endpoint, we wrote off $1.7 million of intangible assets attributable to fees we paid to Orion Corporation and the University of Tennessee Research Foundation for the Toremifene 20 milligram license and technology.

Fareston net product sales were $599,000 the second quarter of 2010, compared to $949,000 for the second quarter of 2009. The decline in net sales is due primarily to an increase in the provision for sales returns as a result of an increase in the price of Fareston, which occurred during the second quarter of 2010. Adjusting for the change in the allowance for returns, our sales volumes of Fareston in the recent quarter was slightly below second quarter of 2009.

Also related to Fareston, the cost of goods for the current quarter decreased as compared to the same period of the prior year, which reflects a substantial reduction in the royalty we pay to Orion on Fareston net sales. This reduction in royalty took effect in September, 2009, in accordance with our license and supply agreement with Orion.

Collaboration revenue was $336,000 in the second quarter of 2010, compared to $2.9 million in the same quarter a year ago. The difference is attributable to two factors. In March 2010, we and Merck mutually agreed to terminate our SARM collaboration.

Therefore, all remaining Merck deferred collaboration revenue was recognized in the first quarter of this year. Second, with the expansion of the Ipsen Toremifene partnership which we announced earlier this year, we have extended the estimated development period for Toremifene 80 milligram. The remaining Ipsen deferred collaboration revenue is now being recognized over a longer time period.

Research and development expenses in the second quarter of 2010 totaled $9.5 million, and included the earlier mentioned $1.7 million impairment charge, as compared to R&D expenses for the same period in 2009 of $7.7 million. General and administrative expenses for the current quarter declined to $4.3 million from $7 million in the same quarter of 2009. The decline is attributable to the delay in the potential regulatory approval of our Toremifene 80 milligram product candidate, and the associated workforce reduction that occurred in December, 2009, and reductions in marketing and other expenses.

At June 30, 2010, GTx had cash and investments of $28.4 million. This does not include a $5 million reimbursement for SARM research and development expenses which we will receive from Merck in the fourth quarter of this year in accordance with our contractual agreement. Our current cash position does not take into account clinical trial milestone payments, which we expect to receive from Ipsen under our recently expanded partnership agreement, or cash we may receive and off-load of operating expenses if we partner SARMs.

Now I will turn the call back to Mitch.

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

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

Hi, thanks a lot. Let's see, so I have a couple of questions on 758. The first is, when you get the data in the healthy males, how applicable is that to prostate cancer patients? And I have a follow-up after that.

Okay, go ahead and give me the second question, I'll answer them both.

Okay, sure. And then, I want know when we're going see that data. Is it going to be in a press release, or at a medical meeting? And then regarding the Phase II's for next year, I'm wondering if they're going to take place at the same time, in the first line and second line populations?

Perfect. The first question is how applicable -- first of all, it's Joel Sendek. They called you Joel Deck, I was a little confused. I didn't know who that person was.

I changed my name.

That's very good. Very good. Look, I almost had 100,000 patients a moment ago.

I was going to ask you about that study next and how long it will take.

It's going to be 100 patients, not 100,000. But in any case, the first question is why are you using healthy males, and how applicable could it be to a prostate cancer patient. The mechanism of the drug is purely endocrine like most hormonal therapies in breast cancer and prostate cancer. In this setting, what we're doing is we're reducing testosterone by decreasing LH by feedback inhibition on a pituitary and hypothalamus.

The pituitary and hypothalamus really doesn't know whether you have prostate cancer or not. And, by picking healthy males what we have really done is stack the cards against us just a little bit because healthy males are tough to castrate. Prostate cancer patients which tend to be more in the age range of about 65 will be easier to castrate. So our feeling was, let's go after the more difficult patient population. The mechanism is exactly the same and if we are able to show that we can reduce total testosterone and increase SHBG, reduce free testosterone, decrease LH, then it will give us a sense of what we need-- give us the confidence that we will be doing the same thing in prostate cancer patients. The other benefit of doing it this way is it allows you to do the trial quickly. If you have to open up a center and have to have 70 patients that may take you a few months to just fill the trial with patients.

Whereas in this setting we were able to just basically say we're going to open the doors this day and the healthy volunteers show up and you basically get to use all of patients as a cohort all at once and get the study done expeditiously, and that's what we did. So it's very applicable to prostate cancer patients in our situation by moving into prostate cancer patients next year it allows us to now focus on the dose more so than trying to focus on whether or not we're going to achieve castration. As related to the second question, which is when will you see the data, and what kind of data will you see, and then finally, will the rest of it appear in scientific meetings, our intent is to have the data in September. We're on track to do that. And the goal will be to announce the top-line results.

Did we achieve castration, are we working with some of the mechanisms that are critical for the drug's actions that separates it from the other drugs that are out there. Is it well tolerated. And then what we plan to do, there are many scientific meetings coming up both in urology and cancer that we want to take advantage of the wealth of data that we will be getting from this Phase II study and begin to present it in peer-reviewed scientific meetings so that everybody can see the scientific data as it comes out. So that would be the goal. But we will know in September exactly what's going on, but then the details will come as the scientific meetings occur. And that will happen in the fourth quarter as well as into the usual spring meetings.

As related to your next question is the Phase II studies, the Phase II studies, there are two of them, as I mentioned. One in 100 patients with first-line prostate cancer. That's in roughly 100 patients, and that will be an open-label trial. The reason it's open-label is it allows us to do two things. One, we can collect data in real time. Two, we can report and update on a regular basis on how the trial is progressing and what the results of that trial is. All these patient will have prostate cancer, it will be unethical to give them a placebo. Consequently, it's open-label. Our goal is to run that trial expeditiously.

We do plan at the same time to do the second Phase II study which would be in second-line prostate cancer and these patients are patients that have been on LHRH agonist and have failed. The definition of failed means they have either measurable disease with elevated PSA or a bio chemical elevation of PSA and the endpoint there is going to be whether or not we can reduce PSA in those patient that have failed first line. And that's about 50 patients. That will also be open label so we do expect over the first half of next year and into the second part of next year to be providing data, important data in relevant patient populations, i.e., newly diagnosed prostate cancer and prostate cancer's become refractory to LHRH agonist during this next year so that the results of those trials we will see on an ongoing basis. I think I answered your questions.

Yes That's good. Just one quick follow-up. If things go well with 758, could you get into a Phase III trial maybe in 2012?

Yes. If things go well, absolutely. What we've been doing, we've been following the regulatory pathway that's been well established. There's a drug called [Degeralix] that was approved in December 2008. It's an LHRH antagonist. And we've been looking at their regulatory and clinical development program very carefully.

They also started out in healthy males, then they were able to bridge directly into prostate cancer patients with similar results as we would expect with our drug, but more importantly, they do lay out what a Phase III program should look like, and in the summary basis of approval, the FDA makes it very clear what they're looking for, where total testosterone reduction less than 15 anagrams per deciliter is a well established surrogate for clinical benefit. That will also help us move these studies quickly in first line. In second line, you probably will have to show whether or not you have effective measurable disease, but in first line you do not.

Great, thanks a lot.

Thank you.

(Operator Instructions) Your next question comes from the line of Eric Schmidt of Cowen and Company. Please proceed.

Good morning, thanks for taking my questions. Mitch, on the Treat II study, can you tell us what's rate limiting there in terms of gearing up for the start in early 2011 and also I didn't quite get what you indicated would be required in terms of showing no impact from a safety standpoint on survival and progression-free survival.

Okay so the first question is what is rate limiting. What's rate limiting at this point is to get the final documentation from the FDA that everything we've agreed upon is memorialized in some kind of regulatory document. So we do have a very good idea of what we need so there's really no rate limiting step except waiting for the regulatory documents to reflect what we discussed.

With that said, to answer your question on cancer, as you know, when we received our complete response letter, it had had two issues, and only two issues, and the two issues were the requirement for a second well controlled adequate Phase III study showing the fracture benefit and then- the second requirement was that we show that we had no detriment to the underlying prostate cancer and what was unclear at the time we got the complete response letter was whether that would be -- whether we'd be required by GTx to -- for the cancer endpoint portion of it-- to have to do a second study, or more importantly, do we have to do a study that takes longer than our efficacy component of the study so that we can show no effect on the underlying cancer.

So that was kind of a wildcard, quite frankly, and we just didn't know. We were surprised that that even appeared in the complete response letter. With that said, we went ahead and had our discussion so it's become clear now that those cancer end points are going to be included or nested in the single trial and will be followed in the same time frame of the efficacy component of the trial. And that the cancer end points that we would have to measure are reasonable and are basically standard of care and we'll be able to do that, and so when we're done with the efficacy portion of the study, we should be also done with the cancer endpoint portion of the study, and that's a big step for us. Now we can say this is a single trial, and once we get the regulatory documentation that agrees with -- excuse me, confirms what we've agreed to then we'll feel comfortable moving forward.

Got it, thanks. Moving to Ostarine, could you repeat what you said about an additional study in lung cancer? I'm not sure I caught the time lines there. And how soon do you think you could sign a partnership for Ostarine?

Here's the concept. We had a very successful Phase II-b trial for Ostarine. We did it in five different cancer types. That was all built on having done seven clinical studies in 580 patients which includes that Phase II of Ostarine. So we have a wealth of data that drug increases lean body mass and increases performance. What we were stuck with was we didn't know whether all cancers should be included or whether we should focus on a homogeneous population of patients in one cancer type, we really didn't know. So we ran this Phase II-b with five different cancer types.

What I can tell you is that we hit our primary endpoint and we increased muscle mass, we increased performance. But what became clear is that not all the cancers were acting exactly the same. So consequently our feeling was that why not, again, stack the deck in your favor by picking a cancer type that will allow you to get homogenous,information and control for some of the variables such as chemotherapy and the way certain cancer types respond to chemotherapy, so the thought was you now have in your back pocket this Phase II-b that you hit your primary endpoint that was an adequate and well controlled Phase II-b.

Now the second one we're going focus primarily in non-small cell lung cancer and make that a homogenous patient population so we can control for additional things like chemotherapy and survival. When I say control, meaning to at least have similar survival and similar chemotherapy. And what that will allow us to do is to go beyond just whether or not we have an effect on lean body mass and effect on performance, it would be nice to capture information like do we have an effect on the adverse events that occur because of chemotherapy.

Can patients tolerate chemotherapy, can they get more chemotherapy and do we have an impact on survival because they're able to tolerate and get more chemotherapy for example So the time line there is we're planning to meet with the FDA this summer. That's the intent. It may go into the fall, depending on scheduling. And start as soon as we can after that the Phase II-b study for cancer wasting in this case and not small cell lung cancer. However, it needs to be clear that we can't start that study until we have a partnership. And that makes sense. And so the timing for the partnership has to be pretty darn close to the timing of starting that trial.

And as I mentioned, in our opening comments is that the partnership has to be a very special partnership because it is our job at this point to make sure that we have sufficient resources and commitment to move us down this path specifically, which is cancer cachexia which we believe is a important near-term revenue opportunity. GTx is anxious to get started with revenue. It also turns out this is a big revenue opportunity. So it's not like this is an orphan drug indication. So that is important for us that the partnership reflect the commitment into cancer cachexia

All the other indications should be worked on but we need to have at least one that we make sure that we stay focused on, and that would be the goal. In summary, the timing for the Phase II-b study we hope will be the end of this year, beginning of next year. The timing for the partnership would be parallel to that.

Okay. So, even if you are able to secure a partnership you don't think you would go right into a Phase III? You think the Phase II-b would be initiated initially, then not concurrent, but following Phase II-b you'd start a Phase III?

I think probably the better way to look at, the FDA really doesn't care what you call it, whether it's a Phase II-b or III It may end up being a Phase II-b/III I'd tell what you what would be missing. You need to have 12-month data of safety and so if you take your Phase II-b study, and you continue to collect the safety information then you basically are getting your Phase II-b/III information.

The FDA requires two well controlled studies two, well controlled large studies with the adequate primary end points. So we've been thinking that more in terms of is this next trial potentially can be a registrationable trial, and the answer is that's how we're designing it and that's how we're discussing it.

So yes, the answer is, rather than focus on whether it's a Phase II-b or a Phase III or whatever, we want to design, like the first Phase II-b, which was 159 patients, that's a large study for cancer cachexia So this second one would be similar in scope and size and will collect safety information so that if it's successful, then we'll certainly be aggressive in trying to see how we can move this product to the market.

Great, thanks a lot.

Thank you.

If there are no further questions, way now like to turn the call back over to Dr. Steiner.

Thank you, operator. We would like to thank you all for your interest in GTx, and we look forward to providing with you updates on our future progress. Thank you again for joining is us on today's call.

Thank you for your participation in today's conference. This concludes the presentation, and you may now disconnect. Have a good day.