Oruka Therapeutics Inc (ORKA) 2005 Q1 法說會逐字稿

Good day and welcome to the Nuvelo Inc. Q1 2005 financial results conference call presented by Dr. Ted W. Love, president and CEO, Gary Titus, VP of Finance & Chief Accounting Officer and Dr. Michael Levy, Senior Vice President of Research and Development.

This conference call will contain forward-looking statements regarding our anticipated use of cash in the fiscal year 2005. Our success in concluding collaboration agreements for our research and development programs and the timing of any such agreements, the timing and progress of Nuvelo's clinical stage and internal research programs. The expenses, revenues and the potential for profits from sales of any drug products resulting from such programs, which statements are hereby identified as forward- looking statements.

For purposes of the Safe Harbor provided by the Private Securities Litigation Reform Act of 1995. Such statements are based on our management's current expectations and involve risks and uncertainties. Actual results and performance could differ materially from those projected in the forward-looking statements as a result of many factors including, without limitation, uncertainties relating to drug discovery.

Clinical development processes enrollment rates for patients in our clinical trials, changes in relationships with strategic partners and dependence upon strategic partners for the performance of critical activities under collaborative agreements, the impact of competitive products, and technological changes.

Uncertainties relating to patent protection and uncertainties relating to our ability to obtain funding. These and other factors are identified and described in more detail in Nuvelo filings with the SEC. Including without limitation Nuvelo's recent annual report on Form 10-K for the year ended December 31, 2004 and subsequent filings. We disclaim any intent or obligation to update these forward-looking statements. At this time I will go ahead and turn the call over to Dr. Ted Love, President and CEO of Nuvelo Inc. Please go ahead, sir.

Thank you for joining us this afternoon. We're pleased to have this opportunity to review our first quarter highlights with you. We would also like to update everyone on our anticipated activities in 2005.

Today we want to cover four main topics. Number one, our recent business highlights, number two, our first quarter financials, number three, our corporate and financial guidance for 2005, and finally number four, an overview of progress we have made with our key programs. I would like to begin by reviewing some of our major recent achievements.

We have made several important accomplishments in just the last few months. First, we achieved a major milestone with the dosing of our first patient in our first phase 3 trial. This of course refers to our phase 3 Alfimeprase program and acute peripheral arterial Occlusion or PAO. In addition, we simultaneously began ramping up the second phase 3 trial in a QPAL (ph) and our first phase 3 trial in patients with central venous catheter occlusion.

Secondly, we advanced our first internal research candidate in this development. A potent gastrointestinal growth factor, that we called NU206, has already progressed into IND-enabling studies. This is a highly significant milestone. It demonstrates that Nuvelo's proprietary research can produce Novel candidates to feel our promising late stage clinical development pipeline.

Thirdly, not only did we advance NU206 and the preclinical studies, but we were able to expand our partnership with Kirin to include development and commercialization of this promising compound.

Fourth, we also made great progress in advancing our other cardiovascular programs: rNAPc2, and ARC183. Michael Levy, will provide an update on these.

Finally, we strengthened our financial position by raising approximately $73 million, in a February public offering, at a time when markets were difficult and many companies could not complete their financing. Including the cash we had, this gives us a total of over $106 million at the end of the first quarter. This is the strongest the company has ever been financially. Now to speak more about our financials, I will turn the call over to Gary Titus, our Vice President of Finance and Chief Accounting Officer. Gary.

Good afternoon everyone. At this time I would like to discuss the financial results for the first quarter of 2005 and the financial outlook for the rest of the year. I would like to begin by touching on cash balance and our cash flow during the first quarter. We ended the quarter with cash and cash equivalent balances of $106.7 million. This is the strongest company has ever been financially. We began the quarter with $50.6million in cash and cash equivalents balances and our public financing completed in February yielded gross proceeds of $73.3 million, which resulted in net proceeds to the companies of $68.5 million.

Our cash burn rate for the first quarter was $12.4 million. As you know in the first quarter we signed an agreement that called for an upfront payment of $2 million as a collaboration fee from our development and commercialization partner Kirin for our NU206 free clinical drug candidate. The cash payment was received in April and is not reflected in the March 31, 2005 cash balances. We will recognize this revenue radically over the estimated performance period under the contract beginning in the second quarter.

Our operating expenses were $14.9 million for the first quarter of 2005. In terms of our research and development expenses, $11.1 million was spent on R&D for the first quarter of 2005, as compared to $15.4 million in the same period last year. As you may recall, in the first quarter of last year we incurred a combined one time license and collaboration fee of $7 million related to our rNAPc2, and ARC183 drug candidate, which significantly increased R&D expenses last year. Excluding these (inaudible) for comparison purposes, in the first quarter of 2005, we increased our R&D expenses primarily related to clinical development activities, by $2.7 million as compared to the same period in 2004.

During this quarter we incurred $5.4 million expenses associated with our Phase 3 clinical program for our lead product candidate outsourcing (ph) price. This represents half of our total R&D spending in the first quarter. We also incurred development expenses associated with our ongoing phase 2 program for our second clinical phase drug candidate rNAPc2 and our on going Phase 1 program expenses related to our third clinical phase drug candidate ARC183.

Our general and administrative expenses increased $3.8 million in the first quarter of 2005, as compared to $1.7 million in the same period last year. The change was a result of increased public company expenses, including costs associated with implementation of Sarbanes-Oxley for compliant and a ramp up of our operation to support our three late stage clinical development programs, our NU206 pre-clinical program and ongoing research program. We're very proud of we successfully completed implementation of Sarbanes-Oxley 404 internal control and believe that the infrastructure that we put in place as part of this process the positions us well for future growth.

Turning now to our net income results. For the three months ended March 31, 2005, we reported a net loss of $14.7 million or $0.39 per share compared to a net loss of $17.7 million or $0.65 per share for the same period in 2004. The number of shares of common stock used for the calculation of first quarter of earnings per-share is based upon weighted average shares outstanding during the quarterly period. For the first quarter 2005 this was 38 million shares and 27 million shares for the same period in 2004.

Our total shares outstanding as of March 31, 2005 were 42 million shares. At this time I would like to give some financial guidance on our cash burn rate for 2005. We continued to anticipate a cash burn rate of $60 million to $70 million in 2005. Key drivers behind this burn rate are the ramp up of our clinical development operations for our Alfimeprase Phase 3 program and acute PAO arterial occlusion and significant costs associated with manufacturing of Alfimeprase drug products for our clinical trials and future commercialization. Due to the dosing of our first patient and our pivotal Phase 3 trial of Alfimeprase in early April, we will make a milestone payment of $5 million to Amgen in the second quarter 2005.

In addition, we will continue to incur costs associated with our ongoing Phase 2 program with our rNAPc2 and our Phase 1 program with ARC 183. The very ability of our 2005 cash burn rate is due to the design, timing, and the initiation movement of our clinical trials, and the timing and nature of potential business development agreement. I will now turn the call over to Dr. Michael Levy Senior Vice President of Research and Development.

Thank you, Gary. For the next few minutes I'll walk you through our R&D pipeline focusing on our clinical and pre-clinical development programs and sure with your excitement for the progress we've made in all of our programs. Let's begin with an update on Alfimeprase or lead product candidate and phase 3 program that is currently in underway. Let me share with you some additional detail about peripheral arterial occlusion Phase 3 program as a whole and the tremendous progress we have made. The basic program consists of two trials with an estimated total of approximately 700 patients. The first trial on this program, NAPA 2 has already begun patient involvement and anticipate 300 patients in total. The second trial, NAPA 3 is expected to begin in the second half of this year. With the NAPA-2 trial we instituted a thoughtful and comprehensive screening process and now over 100 sites that identified both with in the US and around the world. For those sites that have already been initiated there has been quick IRB turnaround and great investigator enthusiasm for our protocol design. Today, we have held six successful investigators meeting with over 16 investigators in attendance, and witnessed a great enthusiasm and support for the program among the investigators based on the solid Phase 2 data.

For the first quarter we've exceeded our goal in terms of number sites activated and are aiming to have at least half of the sites for NAPA-2 up and running by the end of the second half of the quarter. We have been working hard as an organization to drive the success of this program and are well on the way to achieving our goals. Now let us turn to the design of NAPA-2. This is a randomized double blind multi national trial comparing 0.3 milligrams per kilogram of Alfimeprase versus placebo. The primary end point is the avoidance of open vascular surgery within 30 days of treatment. Open vascular surgery includes procedures such as surgical embolectomy and peripheral arterial bypass graph surgery as well as amputation. It does not include catheter-based procedures., such as pro chi genius angioplasting or stinting. We're also looking at a variety of secondary points, which will yield important information for the market place, including safety end points such as incidents of bleeding as well as pharmaceutical economic end points such as the length of hospital and intensive care unit stay. The second Phase 3 actute (inaudible) trial NAPA-3 is expected to replicate the NAPA-2 trial.

We are on target to begin the NAPA-3 study the second half of 2005. Let's turn now to catheter occlusion, our second development program for Alfimeprase. We recently had a very productive end of phase 2 meeting with the FDA and have made good progress from phase two study design, which I look forward to updating you on in the near future. While I am unable to give you the specifics until we finalize our discussions with the FDA, I can tell you that the program is modeled after the program that led to approval for (inaudible). That program consisted of two trials. A smaller blinded placebo control efficacy study and a larger single arm open labeled safety study. We're finalizing the protocol and remain on target to begin the Phase three program in catheter inclusion in the second half of 2005.

Now let us turn to rNAPc2, our Phase two drug candidate focused on potential treatment of acute coronary syndromes for ACS. Our rNAPc2 is currently in a Phase 2A trial, known as TIMI 32 being conducted with Dr. Eugene Braunwald and TIMI group. This trial is a dose escalation study investigating the safety of rNAPc2 in combination with other anticoagulants and patients with ACS. We've completed enrollment of the scheduled 175 patients and have added an additional cohort of 25 patients at the highest dose level, 10 micrograms per kilogram to enrich the data set and confirm the encouraging safety profile we have seen to date. With the additional we're still on track to complete enrollment in this Phase 2A trial in the second quarter of this year and announced top line did at that time. We plan to present a full data set and a major medical meeting during the second half of year. With the completion of this trial and ended disable stage profile and we are aiming to do a proof of concept study to look at the potential rNAPc2 to replace heparin as the first line therapy in ACS. This second Phase 2 trial called TIMI 32B include up to100 patients and will include supplementary efficacy data. We will begin this heparin replacement study the second half of 2005.

Let's now discuss ARC183, a direct thrombin inhibitors, being evaluated as an anti coagulation for potential use in coronary artery bypass graft surgery or CABG surgery. Let me remind you that the rational for this program is to develop a drub which rapids onset and offset of anticoagulation and patients undergoing medical such as CABG surgery. Because ARC183 is designed to alter the capacity of blood to coagulate rather than to treat the disease, the data we generate an Phase 1 should provide a good indication of proof of concept and will guide our development strategy going forward. ARC183 is currently completing a Phase 1 study looking at safety, tolerability pharmaco kinetic profile. We are on track to complete this trial the second quarter this year and will announce top line results at that time. We will then look present the full data set at a medical meeting during the second half of the year.

Finally, I would like to discuss NU206, the potential treatment for support of cancer therapy. Let me first take this opportunity to thank our research team for the hard work and dedication to that went in to the discovery and advancement of this compound. NU206 is the first compound to advance into IND neighboring studies from our own internal research efforts. This is an impressive accomplishment as we were able to achieve this milestone with a small but highly focused research team, that was able to generate large sequence data, determine the corresponding protein, elicit its biological function, all resulting in the discovery of a potentially important new therapeutic agent. Research today indicate that NU206 acts as a specific and potent stimulator of gastrointestinal epithelial cells and therefore could have potential as a treatment for chemotherapy or radiation-induced therapy induced oral and gastrointestinal mycocides as well as inflammatory bowel diseases such as Chromes disease or ulcerates colitis.

We are working with our co-development partner Kirin to finalize the initial clinical development strategies and look forward to sharing the details of this plan in the second quarter of this year. And to filing IND in mid 2006. I would now turn the call back over to Ted.

Thank you, Michael. Let me briefly discuss our business and partnering strategy. It is important to first note that we hold worldwide rights to all our clinical candidates and they all have attracted significant interest from potential partners. While we are dedicated to seeking collaborations for our development programs, we believe partnerships must accelerate or improve our efforts and expand our capabilities and resources to broadly commercialize our product candidates. We have been active in potential partnering discussions; nonetheless as you are all aware, these can take a while and we are committed to ensuring that any partnership we enter into serve to strengthen our development and business efforts. One such partnership we recently announced was our Kirin relationship. We entered a new collaboration agreement with them for the future development of a potential post gastrointestinal agent NU206 which answered IND enabling studies in late 2004. This is the first compound to come out of this collaboration, and we're thrilled that under the terms of the new collaboration, Nuvelo will lead worldwide development from preclinical to commercialization. With regards to our rNAP2, ACS is a very large and exciting marketing opportunity. It is also an indication that will eventually require large and expensive trials. With the additional data that we anticipate from our upcoming Helprin (ph) replacement study, we believe we have identified a cost-effective strategy to generate safety and efficacy data that will facilitate our objective to secure a strategic partner to support further development and commercialization in this indication. And to reiterate our partnering strategy for Alfimeprase, we have stated that we aim to retain commercialization rights in the United States and to look to a partner for commercialization outside the United States.

Let me close by taking a moment to summarize what we intend to accomplish in 2005. We have kicked off an exciting Phase 3 clinical program for Alfimeprase. We recently started the first of two Phase 3 Alfimeprase trial in acute PAO and expect our second Phase 3 PAO trial as well as our Phase 3 trial for catheter occlusion to begin enrolling patients in the second half of 2005. In the second quarter we expect to complete enrollment in the TIMI 32 rNAPc2 trial in patients with acute coronary syndromes currently being conducted with the TIMI study group let by Dr. Eugene Braunwald of the Brigham and Women's Hospital in Harvard Medical School, and to start enrollment in the heparin replacement study TIMI 32B in the second half of 2005.

In the second quarter our Phase 1 ARC183 program for potential use in coronary artery bypass surgery should complete enrollment and provide us a good indication of proof of concept. And on the research side, we plan on sharing with you our clinical strategies for NU206 in the second quarter 2005. Nuvelo is committed to executing on our diverse acute cardiovascular clinical program and we continue to focus to moving our development programs forward and pursuing strategic partnerships where appropriate. In closing, the second quarter is an exciting one for us and we look for its reporting our progress on the next quarterly call. Operator, can you please poll for questions?

[Operator Instructions]. The first question is from the site of Mark Monane of Needham. Please go ahead. Your mic is open.

Thank you and good afternoon. Thanks for taking my question. Couple of questions, could you comment on the design of the Phase 3 trial and the power calculations. From the Phase 2, I know we learned about the patency rates and time to patency and they were very impressive Phase 2 data and Phase 3 clinically more relevant looking at avoidance of open (inaudible) surgery. Can you talk about the congruence of these two outcomes and then how you use the information to design and plan the Phase 3 trial?

Thank you, Mark. I think Michael Levy would be happy to answer this question.

Hi Mark, good to speak with you. This Phase 3 trial as you know -- is a phase 3 trial is a randomized double blind multinational trial, and we are comparing directly 0.3 milligrams per kilograms of Alfimeprase with placebo. As you mentioned in this trial, the primary end point is the avoidance of open vascular surgery within 30 days of treatment, and that was a secondary end point that we looked at in the phase 2 trial. In a phase 2 trial, the primary endpoint was looking at the respiration of the blood flow in the previously accorded arteries, and we expect there to be a good correlation between patients whose arteries open up and not requiring further surgery. So we expect the power in this trial to be very large, and in fact when we do the power calculations we find out that we have more than sufficient power to detect quite a large difference between -- quite a small difference rather between placebo and optimum price. And really the numbers in this trial are driven by the need to put in place a good size safety database rather the need to confirm the efficacy of this drug, which we are all very bullish on obviously.

And could you go over Michael the secondary endpoints then. What where the secondary endpoints in that Phase 2 trial, and what were the outcomes there?

As we look at a series of secondary endpoints including endpoints such as safety, where we were are delighted to see that there was no systemic bleeding, no evidence intro (inaudible) hemorrhaging and of course, no death. We started to looked at some exploratory endpoints, so we can began to peace together a story demonstrating the pharmacal economic value of this drug, And we looked at secondary endpoints that pertain directly to the primary efficacy outcome. So we did look at the avoidance of surgery as a secondary endpoint in the Phase 2 trial. And we found that something like 50 to 70% of patients, depending on dose were are able to avoid surgery. And what is important to remember is that all the patients coming into this trial were considered patients that required surgery by the primary treating physician, and so the avoidance of this surgery is clinically very significance and of course a great importance to the patients and their family.

Terrific. That was very helpful. Last question, Gary can you tell us how many people are at Nuvelo at this point and what's the optimal number going forward? There's an awful lot of programs going on there now. How do you prioritize between those programs -- among those programs, excuse me?

The prioritization actually occurs largely R&D of course there has really been some staffing up in G&A but the focus is really on R&D as we go forward. And we are currently about 90people in the company. We do look to increase that to around 100 by the end of the year. But we continue to stay a very lean and effective organization.

And I see Lee's not on the call because he is busy finding his development opportunities for Nuvelo?

He is actually on his way to Europe, to do a talk, I think tomorrow or the next day.

Terrific, thanks a lot for the added information. And congratulations on your progress.

Now we will take the following question from the site of Chris Moore (ph) of Janney Montgomery, please go ahead your mic is open.

Thank you. The first question I have is on the stock option plan for the employees. It seems like the current plan has run out of stock, which is down to about 46,000 shares. Since you're going to increase the employee base from what I just heard, my question is the new plan is going to have 500,000 shares. Looking in the proxy statement and I think that's a wrap and most of directors all the way down have options ranging from 1 million to 1.5 million from 8 to 10 to roughly $10 a share. My question is, can the plan be adjusted for current market conditions where, I mean I see where Dr. Rodman had $9.67 to forgiveness of debt or whatever to take the stock, and since the stock is currently trading at $6 a share which is a full three points under regardless that the employees can get the stock at a 15% discount, is there some kind of adjustment that can be made? That's the first part of my question. Second is, the actual in the annual report, you show the Alfimeprase and I heard originally what the Amgen collaboration that there was a dollar figure for US alone of half-a-billion dollar. Can you tell me what's the revision if any on just the US and then, the worldwide rates? No one has really put a dollar value if all or part of these products do come to the commercial stage? Thank you.

We will have Gary answer the questions relating to options. I will start off by saying that the number you referred to $500 million per year has been our estimate of what the market potential in the United States could be for Alfimeprase in the two lead indications of peripheral occlusion and catheter occlusion. That number would obviously have an additional upside if we gain additional indication and things like stroke and DVT. So that's where that number comes from, and we provided no update beyond that. Gary would you provide some insight on some of the stock questions?

Be happy to. Thank you, Ted. So, just to clarify and make sure everyone understands correctly, in our proxy this year we are actually increasing the employee stock purchase plan. That is what is contemplated for shareholders to vote on, so the question, I do not think was directed towards the ESVP (ph) but I just want to make sure there was clarity there. Regarding the stock option plan there are many options for us to consider, as to whether we want to make changes to options that have been issued to people in the past. We at this point do not have any plans to make any changes to existing option grants. We would rather leave those as they are currently; offer to people our focus is really on the long-term value in the company. And we feel that those options will be valuable in the future. In addition, we do have an adequate number of shares to grant in that option plan and so we should not need to increase that option plan.

Thank you, Gary.

The following question is from the site of Clay Wilson of Needham.

Thank you very much. I was wondering if you could give me a little bit of guidance on the Amgen payments? I know that said there would be a $5 million payment in the second quarter, is there going to be another $5 million payment soon thereafter?

Gary do you want to answer the outcome?

Sure be happy too and thanks for the question. Amgen's milestone coming up this quarter is related to the first patient and a pivotal Phase 3 trial for Alfimeprase. And that is the only milestone payment to Amgen that we contemplate making in the near future.

Okay, thank you. Could you also mention, have you heard anything more on this SEC request for information since you last announced it?

We do not have any update. It does not appear that that request for information was directed specifically at Nuvelo, rather just ask for us to provide some information. There is no current investigation of Nuvelo that where we are aware of.

[Operator Instructions] It looks like we have a follow-up from the site of Chris Moore (ph) of Janney Montgomery. Please go ahead, you mic is open.

(technical difficulty) for the 700 clinical patients, is that a prepaid amount against the $5million that I just heard reference to? Is it a total of eight plus five or is that including the 5 million in the 8.3 million?

We did not hear the initial part of your question, so we only heard the end. Could you ask the question again?

The question is I heard or saw in one of the reports that $8.3 million was advanced to Amgen for the dosing of 700 clinical patients. And now I just heard another figure of $5 million. Someone said the dosing would cost anywhere from $10,000 to $15,000 a dose, which I understand that they have already made up the solutions and that is a prepaid figure?

There are quite a few things been mixed in the question. The first number I think that you referred to, approximately $8.3 million actually referred to a payment that we made to Amgen in 2004. And that was for all of the material that Amgen manufactured that we would use to conduct our Phase 3 programs. The $5 million number represented a milestone payment that we will pay to Amgen in the second quarter of this year, and that is a milestone that ties to the initiation, specifically the dosing of the first patient in phase 3. Those are very separate events, and obviously represent progress of the molecule and we were happy to make both of those payments.

At this time it appears as though we have no further questions, so I will go ahead and turn the call back over to Dr. Ted Love for closing remarks.

I would like to close by thanking you all for taking the time to join us today. You will have several additional opportunities to hear more about Nuvelo this month. I will be presenting at the Deutsche Bank conference tomorrow in Baltimore on May 3. Lee Bendekgey, our CFO and General Counsel will be presenting at the Rodman & Renshaw conference on May 4, and finally our Annual Shareholder Meeting will be held on May 24. Information on all of these events as well as others can be found on our website. Again, I want to thank you all for joining us this afternoon.

This concludes today's conference call. We'd like to thank everybody for their participation. You may now hang up at anytime and have a great day.