Oncternal Therapeutics Inc (ONCT) 2011 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the first-quarter 2011 GTx earnings conference call. My name is Tawanda and I will be your coordinator for today. At this time all participants are in listen-only mode. Later we will facilitate a question-and-answer session. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to Dr. Mitchell Steiner, Chief Executive Officer. Please proceed, sir.

Thank you and welcome to the GTx first-quarter 2011 corporate results conference call. I will be making forward-looking comments during today's call and I direct you to the Form 10-K we filed March 8 with the SEC where we discuss in detail the risks and uncertainties that affect our business.

Let me begin today's call by first discussing GTx's toremifene 80 milligram clinical development program for the treatment of estrogen deficiency related side effects and men with advanced prostate cancer on androgen deprivation therapy. GTx received regulatory input for the trial design of the second Phase III clinical trial required by FDA for marketing approval. GTx thoroughly evaluated the business case for continuing the development of toremifene 80 milligrams.

Given the amount of resources required to conduct another study, the expense of the program, the time to enroll and complete the study, and our other promising late stage product candidates we have concluded that we cannot justify continuing the clinical development of toremifene 80 milligram. Instead we will look for a partner to out license global rights for the toremifene 80 milligram program and we will focus our resources on the clinical development of Capesaris and Ostarine.

We have made significant progress on the clinical development of Capesaris and Ostarine. Capesaris, also known as GTx-758, is being developed as first-line treatment of advanced prostate cancer. We plan to initiate this study -- Phase IIb clinical trial to compare Capesaris to Lupron in men with advanced prostate cancer this quarter. We expect to have efficacy data from the open label study later this year.

Ostarine, also known as GTx-024, is being developed for the prevention and treatment of muscle wasting, a cancer-related symptom in patients with advanced non-small cell lung cancer. We plan to start two pivotal Phase III clinical trials this summer. Let me provide some additional information about both of these programs starting with Capesaris.

Capesaris is a selective estrogen receptor alpha agonist which is a first in class agent for first-line androgen deprivation therapy for men who have advanced prostate cancer. Capesaris, discovered at GTx, was designed to induce and to maintain effective medical castration while avoiding some of the limitations and serious safety concerns of the currently available androgen deprivation therapy such as Lupron, Zoladex, Trelstar, Eligard, Egarelix and even surgical castration.

The clinical development for Capesaris should be expeditious since the primary endpoint in demonstrating its clinical benefit will be to achieve and maintain medical castration. Recently FDA confirmed that medical castration was the primary endpoint GTx must achieve to be able to seek approval for Capesaris for first-line treatment of advanced prostate cancer.

Let me quote from the February 11, 2011 FDA meeting minutes. A quote -- primary endpoint acceptable to support approval is the probability of testosterone levels less than 50 nanograms per deciliter from day 28 to day 364 in an intent to treat population. This requirement is in contrast to the primary endpoints for second and third-line therapies with typically progression free survival and overall survival required for drug approval.

With the excitement of all the new drugs either recently approved or being developed for advanced prostate cancer, it's important to understand how Capesaris fits into the treatment paradigm for advanced prostate cancer.

First, Capesaris is the only new drug being developed for first-line androgen deprivation therapy for prostate cancer. The other drugs that either have been recently approved or are under development are for second-line or third-line therapies in patients who have failed first-line ADT because their prostate cancer progressed to castration resistant prostate cancer.

Examples of products for second or third-line therapies that are currently being used include abiraterone plus prednisone, ketoconazole plus prednisone, Provenge, cabazitaxel or Dodetaxel and drugs that are under development include MDV3100 and XL184. The market size for first-line therapies versus second and third-line prostate cancer therapies are also very different.

In the United States there are approximately 700,000 men with advanced prostate cancer currently receiving first-line ADT, whereas there are approximately 40,000 patients who have castration resistant prostate cancer. Interestingly patients with advanced prostate cancer who fail first-line therapy remain on ADT as the second-line or third-line drugs are added to their treatment.

Capesaris can be differentiated from currently available androgen deprivation therapy and could become the market leader for first-line ADT. All currently approved first-line ADT drugs are injectables, have nearly indistinguishable mechanism of action and have similar side effect profiles.

LH/RH agonists like Lupron and Zoladex were introduced in the 1980s when patients with advanced prostate cancer only had a life expectancy of approximately two years. As a result of serum PSA testing, advanced prostate cancer is now being detected much earlier. Patients with advanced prostate cancer are initiating ADT sooner and receiving treatment for longer periods of time.

Now with decades of experience with long-term use of LH/RH, the unintended but potentially serious clinical consequences of estrogen deficiency related with these treatments has become well established. In men estrogen is almost completely derived with testosterone. Accordingly current forms of ADT result in both castrate levels of testosterone and estrogen deficiency.

Estrogen deficiency side effects include symptomatic side effects like hot flashes and loss of libido or sexual interest and the more serious side effects of bone loss, increased risk of fractures, adverse lipid changes and fatty body composition changes, increased risk of metabolic syndrome, diabetes and cardiovascular disease. In fact, patients with advanced prostate cancer are more likely to die of complications related to ADT side effects than from the prostate cancer itself.

Nonetheless, ADT is the only effective therapy for advanced prostate cancer and even when the patient develops castration resistant prostate cancer, that is when the prostate cancer comes out of remission and starts growing again, ADT is not discontinued. Instead other drugs, including chemotherapy, are added to ADT to treat the castration resistant prostate cancer.

To emphasize, ADT is the cornerstone for first-line treatment of prostate cancer and continues when second and third-line therapies are initiated. The injectable ADT drugs solidified their position as the acceptable standard of care for treating advanced prostate cancer in the 1990s and became a profitable business line for urologists. ADT sales once contributed significantly to the profitability of many urology practices. This is no longer the case.

Several years ago reimbursement rules changed so that urologists now only receive as reimbursement the average selling price for the drugs plus 6%. The economic incentive for urologists to administer ADT is much diminished. In fact, many urologists now report losing money on ADT and they're looking for ways to offload the cost of the drugs by asking patients to purchase drugs directly from the pharmacy prior to being administered in the urologist's office, a practice known as brown bagging.

As a result of urologists' and medical oncologists' diminished profitability from ADT, and their growing concern about the side effects of ADT, urologists and medical oncologists are increasingly using intermittent ADT to treat patients. These patients are given fewer doses of ADT per year to try to mitigate some of the estrogen deficiency side effects.

However, in a recent study reported in April 2011, Dr. Lawrence Klotz, et al, reported the results of a Phase III study in nearly 1,400 men comparing intermittent therapy to continuous ADT in men with advanced prostate cancer. The study showed no statistical difference in survival and adverse events from the two therapeutic approaches was similar.

More specifically, when comparing intermittent to continuous ADT, hot flashes in the intermittent treated subjects were 90% compared to 93% in subjects receiving continuous ADT, loss of libido was 79% in both groups, myocardial ischemia and infarction 10% for the intermittent versus 11% with the continuous ADT, and osteoporotic fractures were 4% in the intermittent versus 3% in the continuous ADT group. It is evident that the estrogen deficiency side effects were not alleviated by intermittent ADT.

Capesaris is being developed to be differentiated from LH/RH agonists and antagonists in three ways. One, it is an oral agent; two, it's mechanism of action may provide potentially greater efficacy; and three, it should result in a more favorable safety profile by avoiding estrogen deficiency related side effects.

Unlike the LH/RH agonists and antagonists which are all injectables Capesaris is an oral drug. The field of oncology is moving to oral chemotherapy agents to be more convenient for patients in a home setting. Having an oral formulation also provides greater control of the administration of ADT. Current LH/RH agents require one month and one year dosing regimens. If a patient gets into trouble it's impossible to retrieve the drug to stop therapy.

Patients who live in rural areas or have busy schedules prefer not to have to go so frequently to their doctors for injections. Capesaris may potentially be available as either a solution or a tablet providing patients with a choice of the oral formulation which works best for them.

Capesaris has a dual mechanism of action to lower testosterone. First, it binds specifically to the estrogen receptor alpha in the pituitary and hypothalamus which causes the pituitary to decrease LH secretion by feedback inhibition. Lack of LH causes the testes to stop production of testosterone. With this mechanism of action there is no initial testosterone surge avoiding a tumor flare.

Second, Capesaris also induces the production of a liver protein called sex hormone binding globulin, or SHBG. SHBG is an important regulator of free testosterone in the blood. SHBG binds directly to free testosterone to remove it from circulation in the blood. As a consequence of higher SHBG induced by Capesaris there are lower levels of free testosterone below which can be achieved by castration alone.

Because free testosterone is the only available form of testosterone that prostate cancer cells are able to utilize for growth, less free testosterone may improve efficacy.

Another important differentiator of Capesaris is an improved safety profile by avoiding estrogen deficiency side effects. Capesaris was designed to preferentially target the estrogen receptor Alpha. This allows Capesaris to bind to the relevant tissue estrogen receptor alpha in the brain, bone and liver without affecting estrogen receptor beta on platelets. Stimulation of ER beta on platelets which occurs with other nonselective estrogens and DEF enhances platelet aggregation.

In summary, the target product profile for Capesaris is an orally available small molecule which acts through the estrogen receptor and to achieve and maintain medical castration while avoiding the estrogen deficiency side effects such as hot flashes, loss of libido, bone loss and fractures, adverse lipid changes, an increase in body fat composition, and without enhancing platelet aggregation associated with DES and other nonselective estrogens.

To date we have evaluated Capesaris in approximately 275 patients in four Phase I clinical trials and in a proof of concept Phase II pharmacokinetic and pharmacodynamic clinical trial. Later this quarter we will initiate an open label Phase IIb clinical trial of Capesaris in 156 patients with newly diagnosed advanced prostate cancer randomized to one of two doses of Capesaris or Lupron.

The primary endpoint to the study is the proportion of patients who achieve castration with total testosterone levels of less than 50 nanograms per deciliter by 60 days. And the secondary endpoints will include maintenance of castration, the presence of estrogen deficiency related side effects, and other safety measures which will be continued to be collected for one year.

A Lupron arm will provide safety data to compare to Capesaris treated subjects so we can gather information on the differences in the estrogen deficiency related side effects in order to power the Phase III Capesaris clinical trials planned for next year to make possible comparator claims.

A week ago we held an investigators meeting for the Phase IIb clinical trial. The urology PIs and sub-Is at the meeting were very enthusiastic about Capesaris because it represents the first truly novel approach to androgen deprivation therapy since the Advent of Lupron in the 1980s. There are no competitive trials, so we expect enrollment in this study to proceed smoothly. We anticipate having open label data from this study later this year.

At the annual meeting of the Society of Urologic Oncology last December we presented the results of our Phase II proof of concept clinical study of Capesaris. And at the annual meeting of the American Urological Association being held late this coming weekend in Washington DC, we will present preclinical data regarding the lack of effects of Capesaris compared to DES on breast tissue in monkeys. And at the Endo Society annual meeting being held June 4-7 in Boston we will present preclinical data showing the lack of effects of Capesaris compared to Lupron on fat body composition in monkeys.

The commercial opportunity for a drug like Capesaris is attractive. Sales of ADT drugs currently exceed $2.4 billion worldwide and $700 million in the United States alone. ADT drugs currently sell for $5-$7 per day. Adding the roster of pharmaceutical agents potentially used as polypharmacy to treat the serious side effects of ADT caused by LH/RH drugs, treatments for bone loss, hot flashes, adverse lipid changes can increase the overall cost of ADT to as much as $18 per day.

We believe if Capesaris is able to deliver on its promise of being an oral drug which achieves and maintains medical castration while avoiding the estrogen deficiency side effects common to current ADT agents, Capesaris should garner a premium price. We're looking forward to updating you on the progress of Capesaris' development program.

I'm also pleased to report the significant progress we have made recently on Ostarine. The indication we're pursuing for Ostarine is muscle wasting, a cancer-related symptom, not cancer cachexia, which is an end-of-life palliative condition. The distinction is important as cancer cachexia is a state of physical wasting which is a precursor to death.

Cancer cachexia patients are typically no longer candidates for chemotherapy treatments and physicians are not trying to build body mass, lean body mass or improve physical function in these patients. Physicians typically employ palliative treatments in cancer cachexia patients such as Megace or Marinol in order to stimulate appetite.

Ostarine, in contrast, is being developed to prevent and treat muscle wasting in patients with cancer. Preventing and treating muscle wasting alleviates a cancer-related symptom while improving quality of life and potentially allowing patients to better tolerate and respond to chemotherapy and possibly prolong survival.

To date Ostarine has been evaluated in eight clinical trials involving approximately 600 subjects including three efficacy studies. The results of the efficacy studies have been similar with Ostarine treatment compared to placebo demonstrating an increase in lean body mass on muscle and improvements in physical function.

One of the Ostarine efficacy studies conducted was our Phase IIb clinical trial evaluating Ostarine in 159 patients with non-small cell lung cancer, colorectal cancer, breast cancer or non-Hodgkin's lymphoma. In that study cancer patients treated with Ostarine had greater lean body mass and demonstrated improvement in the ability to climb stairs compared to baseline and compared to placebo.

Moreover, patients treated with Ostarine who had improvements in physical function were also found to have a statistically significant improvement in quality of life as measured by anorexia and fatigue patient reported outcomes scales. Muscle wasting is a common symptom of many cancers including lung, pancreatic, head and neck, colorectal and others.

GTx is initially developing Ostarine to prevent and treat muscle wasting in patients with advanced non-small cell lung cancer. Patients who have advanced non-small cell lung cancer are an ideal patient population to receive a drug that has the potential to build lean body mass and improve physical function.

Up to 50% of patients with advanced non-small cell lung cancer present with muscle wasting and 75% will experience severe muscle wasting before they die. Nearly 90% of lung cancer patients have lower body functional limitations including compromised ability to climb stairs, lift and carry 10 pounds, walk a quarter-mile, or stoop, crouch or kneel.

Performance status is one of the primary criteria doctors use to evaluate whether a patient can tolerate and benefit from chemotherapy and poor performance is a primary reason patients are not offered chemotherapy. Performance also predicts the likelihood of hospitalization, ability to maintain independence and survival.

Advanced non-small cell lung cancer, unfortunately, is an incurable disease; median survival is eight to 12 months depending on performance status, and one-year survival rate is 30% to 40%. A recent review article in a cancer journal for clinicians stated the goals of treatment of a patient who has advanced non-small cell lung cancer or to improve cancer-related symptoms, improve quality of life and prolong survival.

In the Phase IIb clinical study Ostarine demonstrated a potential to treat the cancer-related symptoms of muscle wasting and deterioration in physical function, as well as the potential to positively impact quality of life. We believe Ostarine has the potential to impact chemotherapy tolerability and perhaps even to prolong survival.

We also have data from our Phase IIb study supporting the development of Ostarine in patients who have advanced non-small cell lung cancer. In a four-month Phase IIb clinical trial of the 159 patients enrolled in the study, 61 patients had advanced non-small cell lung cancer which was the largest cancer subset. In this subset subjects treated with Ostarine compared to placebo demonstrated an increase in lean body mass of 1.9 kilograms.

As for physical function changes in the stair climb test, the Ostarine treated subjects climbed stairs faster while patients receiving placebo saw no change in speed. And patients taking Ostarine demonstrated an 18% improvement in stair climb power while patients receiving placebo saw no change in power. Deaths in SAEs were similar across the groups.

We will present at the upcoming ASCO meeting additional sub analysis of data from our Phase IIb Ostarine clinical trial. One presentation will be about the effect of Ostarine on stair climb power in patients with advanced non-small cell lung cancer and another will include the effect of Ostarine on survival. The effect of Ostarine on physical function in patients with non-small cell lung cancer will also be the subject of a podium presentation at the annual meeting of the International Association for the Study of Lung Cancer being held in July in Amsterdam.

In summary, the data from our Phase IIb study, and particularly the non-small cell lung cancer sub analyses, give us confidence that this patient population will demonstrate the benefits we expect from Ostarine treatment. Although we're awaiting final input from FDA, our expectation is that the two planned placebo-controlled Ostarine studies will each have approximately 300 advanced non-small cell lung cancer patients who are initiating first-line chemotherapy platinum doublet regimens.

We expect to evaluate lean body mass and stair climb power as co-primary endpoints at three months with the studies continuing to five months to assess secondary endpoints. We anticipate gathering overall survival data through a descriptive but not statistical analysis. We plan to run both of these studies in the US and abroad.

If this design is confirmed by FDA later this month, GTx will start both Phase III clinical trials at the same time in July 2011. With this shorter clinical trial design GTx expects to have the last patient visit in late 2012 and if both trials are successful we plan to file in NDA for the indication for prevention and treatment of muscle wasting in non-small cell lung cancer as early as 2013.

The Ostarine opportunity for the prevention and treatment of muscle wasting of patients who have advanced non-small cell lung cancer is large. Cancer supportive care is an $11 billion market worldwide with many treatments priced as high as $30 to $50 per day.

There are no drugs approved to prevent or treat muscle loss in cancer patients. Each year in the United States approximately 100,000 patients initiate first-line chemotherapy to advanced non-small cell lung cancer. Our market potential could be over $750 million in the US alone. I will now ask Mark to provide a brief review of our financial results.

Thank you, Mitch. The details of our financial results for the first quarter 2011 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 March 31, 2011 was $2.6 million compared to net income of $44.3 million for the same period in 2010. Revenue for the first quarter of 2011 was $9.3 million compared to $56.6 million for the same period in 2010.

Revenue for the first quarter of 2011 included $8.1 million of collaboration revenue from Ipsen as a result of the termination of our license and collaboration agreement during the quarter. Revenue for the first quarter of 2010 included collaboration revenue of $922,000 from Ipsen and $54.9 million of collaboration revenue due to the termination of a license and collaboration agreement for our SARM program. Revenue also included net sales of FARESTON of $1.2 million and $799,000 for the three months ended March 31, 2011 and 2010 respectively.

Research and development expenses for the quarter ended March 31, 2011 were $7.3 million compared to $7.7 million for the same period in 2010. Research and development expenses for the first quarter of 2011 included a non-cash impairment charge of $1.6 million related to our toremifene 80 milligram intangible asset following the decision to discontinue development of toremifene 80 milligram.

General and administrative expenses for the quarter were $4.7 million compared to $4.5 million for the same period in 2010. At March 31, 2011 GTx had cash, cash equivalents and short-term investments of $49.4 million and GTx had no debt and no warrants. Now I will turn the call back to Mitch.

Thank you, Mark. Operator, we're ready for our first question.

(Operator Instructions). Schmidt, Cowen and Company.

Good morning, Mitch. Just a question on the Capesaris Phase II study. You mentioned that the Lupron arm will be used as kind of a safety compare. Are there any statistics on efficacy and do you have to see castration resistant patients at day 60 equivalent to the two arms to move forward? Or are you hoping to see Capesaris potentially prove superior to Lupron? How do we think about that?

Yes, it's a good question. The intent all along -- so the question basically is, why is Lupron added and I understand the safety piece of it but tell me about the efficacy piece. Well, we are going to get some efficacy information. We do fully believe that Capesaris and Lupron will be pretty close from the standpoint of what happens by day 60. So that's not really intent from a standpoint of total testosterone so there are no statistics built in for whether a non-inferior or superior. Okay?

All we have to hit for clinical benefit is to show that we can achieve castration less than 50 nanogram -- total testosterone levels less than 50 nanograms per deciliter by day 60. The expectation is by day 28 that all patients in the Lupron arm or most patients -- at least 90-plus-percent in the Lupron arm and 90-plus-percent in the Capesaris arm will have done that. Okay?

The difference though is how you get there. So for example, with Lupron what you expect to see is that you'll have a testosterone surge the first two weeks, which means your testosterone levels will actually go way above normal and then it will come down and PSA was followed at the same time. You'll see that PSA will go up and then PSA will go down.

With Capesaris we do not expect a surge. So what we expect to see happen is that PSA levels will in fact drop sooner than Lupron and they will be no surge and therefore no potential for tumor flare. Where we're really focusing our activity from an efficacy side is to also understand more specifically what's happening to free testosterone which is the form of testosterone that the cancer cells actually see.

So what we'd love to see in this study, although it's not -- all this is is just a secondary endpoint at this point -- is whether free testosterone is in fact lower in the Capesaris treated patients compared to the Lupron patients, because if that's the case then urologists do believe that a lower testosterone level will lead to better survival. But for regulatory purposes all we need to show is that total testosterone is less than 50 nanograms per deciliter.

The reason we're adding the Lupron arm from a safety standpoint is because we do plan to make comparative claims against LH/RH agonists and antagonists and we're going to start with agonists because that's the biggest market. In fact, 95% of the market is agonists such as Lupron and Lupron is the number one seller in the US. So our feeling is let's do a head-to-head from a safety standpoint where we avoid estrogen deficiency side effects. It will be nice to know in a head-to-head study what is the effect side -- the safety effect side.

So for example, we just heard from the intermittent versus the continuous therapy study done by Klotz -- I mean, if you read the Lupron label it tells you that the hot flash rate is 25%. Well, Dr. Klotz in his study showed that intermittent therapy was 90% and that patients on continuous therapy, which would be like Lupron given every three months, was 93%.

So we want to find out in our hands what is the actual rate of these estrogen deficiency side effects and use that to help us power our Phase III's so that we can have two well-controlled studies to make safety comparator claims.

Okay. And then on the Ostarine side, how do we think about a partnership there? And would you kick off these two Phase II studies -- Phase III studies, excuse me, without a partner?

Yes. So, the way to think about it is we are absolutely going to start both those Phase III studies in July. We had initially signaled to everybody that we were going to do one study; and the reason we said that -- and then do a second study later -- was because that was going to be a 12-month study. However, it's very clear from our interactions with the FTA and given the patient population, given what we need to demonstrate, we can do a shorter study.

And because we're doing a shorter study and because costs are less per study, it made sense for us to go ahead and do both studies at once because when you're at the end of this all then you're going to have all that you need for -- and assuming you're successful -- for filing an NDA for non-small cell lung cancer.

It also increases our value from a standpoint of partnerships because now people can look at the trial design and say, well, it looks like by 2012 they have the last patient out and that means in 2013 you're filing. It's a big market opportunity, so therefore it's helping us in the marketplace from a standpoint of potential partnerships.

GTx will definitely entertain a partnership; our preference is to keep the United States and to partner ex US. But we're working down that path because the other feature about Ostarine is that muscle wasting is a side effect of -- a cancer-related symptom is going to require touching medical oncologists and education. And with the right partnership you can leverage their strategic power.

If you were to move forward without a partner how long would the cash last?

Mark?

Sure. So, Eric, our current run rate basically is roughly $9 million a quarter. And so right now we have our -- the current cash will take us essentially into -- towards the end of or to the end of the second half rather of 2012. But again, this is -- we believe that going down parallel paths is the right approach and starting the study at the -- both studies at the same time is very important.

Okay, thanks a lot.

Thank you, Eric.

Lucy Lu, Citi.

Great, thank you. Mitch, can you please just explain to us a little bit this -- with Capesaris that you need -- the primary endpoint is efficacy from day 28 to day 364, exactly what that means? If some patients have some variation on the testosterone level how do you interpret that? Does it mean the requirement is that the patient has to be within castration level the entire time?

Right. So this has more to do with the Phase III trial design for Capesaris. And the way that works is that you want the patients to achieve castration by day 28 and then maintain castration day 28 to day 364. And it's done by Kaplan-Meier analysis in the intent to treat group and patients do fluctuate. The trial will allow patients to fluctuate because that's a natural biology of the hypothalamic-pituitary-gonadal axis.

But what you want to do is make sure that the patients maintain. What that means is that you're allowed to have quote, a few escapes where somebody may -- one reading go up. But if at the next reading they still go up, then that patient will be considered a patient that has escaped and has not maintained and then that patient should then go to standard therapy.

So it's not if a patient quote, is at 51 or 52 or 60 nanograms per deciliter he's out. You're allowed to go back and see because sometimes there can be a whole host of reasons for that. But the way it works basically is you set the rules and you're basically looking for patients to maintain castration during that period of time and then maintaining from -- like you said, from day 28 to day 364.

Great. And then so what percentage of patients who can reach castrate level of testosterone is considered necessary for Capesaris to be competitive?

Yes, so you look -- oh, to be competitive? Then you have to be similar to Lupron because that's the number one seller. And Lupron, depending on the study, it's anywhere between 91% to 96% of patients are maintained -- excuse me, are castrated and are maintained. And so there are patients that for whatever reason are not castrated and that's true in Lupron, Zoladex and all of these hormonal approaches.

And so we're targeting a -- we want to be over 90% and be comparable to Lupron. Even though in the US most likely we're not going to be required to do a non-inferior study to Lupron, we may have to do that for Europe if we follow the same regulatory pathway as degarelix. In which case we do believe that we're going to be as efficacious as Lupron from a standpoint -- Lupron and other LH/RH agonists as it relates to total testosterone.

Part of our confidence also comes from the fact that Diethylstilbestrol, DES, was out there for six decades and there have been head-to-head studies done with DES. And DES in fact does maintain and achieves and maintains castration at a rate comparable to Lupron and they did not see escapes. And so if we're acting by that same mechanism from an efficacy standpoint, there is long-term efficacy data available out there.

Great. And then last question on Ostarine. Can you please talk about why you decided to use the stair climb versus some of the other functional tests like six-minute walk distance?

Yes, that's a good question. There is a very specific reason we use stair climb because most of these other studies that use six-meter walk -- six-minute walk tests are not really changing the body composition of the patient. So for example, in the pulmonary arterial hypertension study drugs where six-minute walk test is very classically used, or in some of the neurologic diseases or in some of the rare diseases like lysosomal storage diseases and some of the muscular dystrophy diseases, it's not uncommon to use a six-minute walk test, okay.

All of those diseases, the patients do not gain additional weight. You're basically treating and then you're looking at a very specific measurement and that is how many additional meters do they walk in six minutes? In our situation we have a confounding issue, the confounding issue is that these patients indeed are losing or gaining body weight and muscle. How do you account for that?

Wouldn't you agree that somebody who is able to go up the steps with the same speed but they have five more kilograms of weight has a different kind of functional physical function than somebody who has lost 10 pounds and can do the same? So do how do you account for the weight changes in the patient?

Well it turns out that stair climb tests allows you to assess power and power basically is a measurement that takes into account not only the time to do the physical function but also the change in mass that occurs with our drug. And so you're getting a real snapshot of multiple variables changing all a part of one formula, if you will, and one calculation. Power is probably the best way to determine the work exerted by that individual.

The other issue about stair climb power or test is that stair climb test does push the ability of the individual so that you can see differences. What do I mean by that? If you're doing a six-minute walk test it turns out that you really have to be pretty darn sick to begin to see changes in the six-minute walk test.

Walking is one of those things that you get to do even very, very late in the disease and therefore the differences are not going to be dramatic. Whereas with a stair climb test going up in this case eight stairs really stresses the patient to a point that you can see meaningful differences in power. And you want to do that so you don't have what's called a ceiling or floor effect on the test.

The other reason we're using stair climb test is because the experts in the field of testosterone claim that this is another good way to determine what's happening to the quadriceps and the quadriceps is where -- which is the group of muscles that's most sensitive to testosterone and androgenic stimulation, and also the most relevant from a standpoint of daily activity.

So for example, if you can climb stairs you should be able to get into a car. Stairs are in your house, this is not floating somebody in a tub of water and trying to determine what their power is. I mean this is a real -- a functional test. Getting in and out of a chair requires the same muscles. Getting in and out of the shower, going to the doctor's office -- these are all activities that stair climb tests can help you with.

Finally, the reason we're using stair climb tests is because we were able to show in two other efficacy studies, one in patients that are basically the same age as these patients with non-small cell lung cancer in 12 and three months, and then a second study in which we actually looked at cancer patients, that stair climb test was able to show a benefit in patients with Ostarine.

And so we're comfortable with that test, we're comfortable with that test in this timeframe. So we know what to expect, and so we want to de-risk the Ostarine program as much as possible by choosing a test that makes sense, that takes into account body composition and that can make -- that can have changes in the period of time that we're measuring it.

Great, thank you.

Joel Sendek, Lazard Capital Markets.

Hi, thanks a lot. I appreciate the comprehensive review here. I guess first on Capesaris, I want to go into a little bit more detail on the difference between what you're going to learn in Phase IIb and what you'll be asked to do in Phase III specifically. Is it a higher bar to go out to day 364 in Phase III since we want to make sure that the Phase II will be totally able to be replicated in Phase III? And then I have a question on Ostarine after that. Thanks.

Okay, very good. So the question is, again, and this goes back to the question that I answered earlier regarding DES. It turns out that although Capesaris is novel, it's mechanism of action from a standpoint of the pituitary in efficacy is not novel, in a sense that feedback inhibition using estrogens has been done for six decades. And in those six decades it's very clear that estrogens are able to achieve castration and they can maintain castration.

In our situation, and we know it works through feedback inhibition through the pituitary because in the old days they didn't measure free T, it was all total T. You go back and look at the Zoladex data that they used to get approved against DES, and if you look at the Lupron data in which they also were able to use -- get approved against DES, you have two well-controlled studies in which DES was used as comparator in which patients which were treated for a year or more.

In all of those studies DES is able to castrate and maintain castration. So in some ways we don't have to reinvent the wheel. What we're trying to do is create a compound that has a better safety profile and maybe even a better efficacy profile now that we can measure free testosterone and free testosterone is where all the action is.

From a regulatory standpoint we think that the risk that we have to castrate -- to maintain castration -- this is a completely novel mechanism; I would agree with you that you're not going to get the information. However, in the Phase IIb we're going to see the exact number of patients that are required for castration, exact percentage of patients that get castrated.

And if that numbers anything like the Phase II that we just did in healthy, because we expect older patients with cancer would be even more dramatic, then we're going to be in the range that's similar to Lupron and Zoladex and those kinds of compounds and we fully expect that patients will maintain because the drug is doing pretty much what its predecessors did except we're more selective.

So for practical purposes then -- I guess what I'm trying to get comfortable with is the Phase IIb endpoint is the same as the Phase III endpoint that presumably you'll be testing for?

Right. So the way to handle that is for the Phase IIb we are capturing the same information as the Phase III, but the primary endpoint for purposes of moving into Phase III is that all we wanted to do was get an understanding of what was the proportion of patients that castrate compared to Lupron and that will get us the dose that we need to move into Phase III.

The Phase IIb will continue for a year, which means that by the time we actually start our Phase III we would have most of that information in, but we're making a decision on what dose we do in Phase III sooner. That's why we can start the Phase III, for example, a year from now and the study is starting basically now. So that means we're going to have a pretty good understanding of in the Phase IIb whether or not if this was a Phase III would we have hit the same endpoint.

Got it.

With that said we're capturing that information and we're going to be able to see not only what happens to a patient by day 60, because if you remember from the Phase II that we've already done, Capesaris was able to castrate at the 1,500 milligram dose on average about day 17 and then -- excuse me, in the 1,000 milligram -- I'm sorry, 1,500 milligrams day 17 and 1,000 milligram was around day 23. Both of those are clearly less than 28 days with no surge.

So the thought would be that we would get the information that we need for proportion, and the reason that's important is so you can power your Phase III. But we will have the same exact endpoint which is what happens from day 28 to day 364 in the Phase IIb that we're starting and the Phase IIb that we're starting we're going to keep the patients on the medicine even after year one because we want to get long-term safety information and even then we're going to be able to measure testosterone.

So I think the program is a comprehensive program where the Phase IIb starts and will not stop until we're approved. And the Phase III's will start next year and, again, they will not stop until we get approved, because what we're going to be submitting on is the day 28 to day 364 maintenance of castration data.

Thank you. And then on Ostarine, I just want to be clear on the co-primary endpoint, if you need to hit both lean body mass and physical function or you can just hit one. And then why not look at the statistics for the secondaries for survival and durability?

Right. So what is required at this point that's crystal clear is that it's a co-primary with lean body mass as one of the co-primaries and the second co-primary is physical function. They both have to hit -- each one has to hit their particular endpoint success with an alpha of 0.05. So you do have to have both of these endpoints hit in order to call that a successful trial. So if you hit on lean body mass and you don't hit on physical function that is not a successful trial.

With that said, in every efficacy study that we've performed to date -- two that GTx did, one that Merck did -- we always hit on efficacy -- excuse me, we always hit on lean body mass and we always hit on physical function. And so we do believe that now with three studies under our belts, including one in cancer patients, that those co-primary endpoints are achievable and the fact that the alpha is only 0.05 for each of them.

And then you're going to run two studies, the bar is -- and the study is going to be read out, if you will, the primary endpoint at three months these are all -- we feel we've really de-risked the hell out of the program because of the fact that we've seen in our hands in the Phase IIb and Phase II's and even Phase I's that we hit in a lean body mass and we hit in physical function every time.

Thank you.

Thank you, Joel.

Howard Liang, Leerink Swann.

Thanks very much. I thought the feedback from the FDA on the endpoint for Capesaris was quite important. Just can you -- I wonder if you can give some more color on that and just sort of what FDA said regarding that. And specifically also, was there anything else that (inaudible) wants to see before approval?

Right, thank you, Howard. I'll be honest with you, when we first went down this path, we always knew that for first-line all you had to do was show that you can castrate and maintain castration and we used the degarelix regulatory summary, or I should say summary basis of approval which they call a medical review in the US, and then in Europe they have a comparable one. And we followed it pretty closely.

And we were quite surprised when we came out started talking to investors that investors said to us, well, no, the FDA is not going to accept testosterone as an endpoint, you're going to have to show progression free survival and overall survival. And I said, well degarelix showed in 2008 they got approved. Well, no, it's a different FDA now. Then that's not going to be the case.

And so I'll be honest with you, I got nervous because, look, things change. And so what we wanted to do before we came back out and made a definitive statement was to meet with the FDA and actually get their feedback for a first-line study -- excuse me, for a first-line ADT drug, what the primary endpoint would be. Do they want clinical data or do they want a biomarker, if you will?

Well, the FDA made it very clear, they actually view testosterone being less than 50 nanograms per deciliter from day 28 to day 364 is the clinical benefit. And their minds and, interestingly, only in prostate cancer is this true that testosterone is held in such established regard that you can use that to even get an approval for your program.

So what the FDA actually did is they affirmed and confirmed that the requirement for approval is to -- with an agent for first-line prostate cancer is showing that you can reduce testosterone to less than 50 nanograms per deciliter by day 28 and from day 28 to 364 that you maintain it. This is going to be a Kaplan-Meier analysis in the 95th percent -- lower limit of 95th percentile, confidence interval is going to be about 90%, so you have to castrate at least 90%. And that was it.

They told us we didn't -- that carcinogenicity studies were not required. They did not -- as long as it had, quote, no safety issues. And we even suggested a safety database which was comparable to ICH guidelines. There was no specific requirement to do anything more than that.

And this is very consistent to what they've required in the past from other first-line prostate cancer drugs. Even though Lupron and Zoladex were approved 25 plus years ago, degarelix was in 2008, the FDA is holding pretty clear on total testosterone as the endpoint for first-line.

What do you envision the Phase III trial to be? Is it going to be a non-inferiority trial compared to an active comparator and how large (inaudible)?

So in the US, the expectation is that we're not going to have to do a comparator trial for efficacy, and that was the same case that degarelix had to do. And the reason for that is the FDA has already put a line in the sand saying that if you can achieve castration in 90% of your patients and you can maintain castration from day 28 to day 364, which means less than 50 nanograms per deciliter, by that analysis that is your clinical benefit.

In Europe, I do believe you're going to have to do a head-to-head study with a LH/RH agonist; a degarelix used Lupron will do the same. And I believe in that study they had to show something like a 15% to 20% non-inferiority margin, and you do have to do non-inferior and have the statistics for that. I am not worried about that, but I would envision for that study you would.

Now what we are going to do and what we envision for our Phase III program is that we are going to pick a single dose of Capesaris and go head-to-head with Lupron. And the reason we are doing that is on the efficacy side, we want to measure free testosterone that is not required for approval or for regulatory requirements.

But it would be important for us to know clinically whether or not because of the SHBG mechanism this Capesaris indeed have lower free testosterone levels than Lupron. That would be a major selling point for GTx and would also be the basis for Phase IV studies and beyond where we would actually look at survival and things of that sort. But for purposes of regulatory, all we have to show is less than 50 nanograms, da da da da.

The other reason we would include Lupron in both of these Phase III studies is because we do plan to make comparator claims, particularly around hot flashes where hot flashes are a big issue and the number one symptomatic side effect that patients complain of; decrease in libido; and then the bone loss and body composition changes. And the bone loss -- interestingly, urologists worry more about bone loss and fractures.

So in order for Phase III -- excuse me, in order for us to have a label that reflects these claims, we have to do a head-to-head study, and to have two well-controlled head-to-head studies against Lupron will allow us to do that. And the Phase IIb that we're getting ready to do now will give us the ability to get the effect sizes.

So what will drive the patient numbers in a Phase III is going to be the effect size for safety that we get out of the Phase IIb. And since the Phase IIb is an open-label study, which means we're going to get data on a regular basis, we can actually monitor these side effects -- effect sizes, if you will.

So that by the time we get to Phase III in May, we're going to have a pretty good understanding of what happens to free T, what happens to SHBG, what happens to total T, what happens to PSA, since these are prostate cancer patients we're going to get a lot more clinical information about their prostate cancer. And then of course we're going to have all of that safety information that we'll be able to use in the design of our two Phase III's (technical difficulty).

So the two Phase III's are really going to be confirmatory Phase III's of the Phase IIb the way that we have it set up. And because the Phase IIb will continue even after we file the NDA so we can provide additional data from a standpoint of safety, we could have as much as two, two and a half, three year safety data from our Phase IIb.

Okay, great. And just a last question if I could. Since the -- given the difference in mechanism of action is there any interest in looking at Capesaris as a second-line hormonal agent?

The answer is there is interest and there are a couple of ways to get to that, okay. The reason there's interest is because if you go back and look in the literature people still use diethylstilbestrol which is a nonselective -- mostly in estrogen, but has off target effects, but its mechanism for efficacy, primarily it's estrogenic activity.

And DES, because of its mechanism of SHBG, actually decreases testosterone further so your free T goes down. And so Lupron failures, or Zoladex failures or LH/RH agonist failures -- one way that medical oncologists have treated these patients is to give them DES. And DES does work, their PSA will come down.

So we do plan to do studies where we'll take Lupron patients that have failed, i.e. that is they develop castrate resistant prostate cancer measured by a rising PSA and then you would treat them with -- they usually don't escape castration, they just have a rising PSA, then we would treat them with Capesaris just like medical oncologists have been using DES. And it will work, I mean you will lower their PSA.

And so there is interest in doing second-line therapy, but the market size is so large for first-line and no competition from a standpoint that there are no other novel drugs coming out and second-line field has gotten awfully crowded. So our feeling is the best way to get into the marketplace is to start out with first-line and then move into second-line after we've gotten first-line. Or at least start running some of the second-line studies while the first-line study is being reviewed.

Thanks very much.

Thank you, Howard.

And with no further questions I would now like to turn the conference back over to Dr. Mitchell Steiner for closing remarks.

Thank you. We'd 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.

Thank you for joining today's conference. That concludes the presentation. You may now disconnect. And have a wonderful day.