Oruka Therapeutics Inc (ORKA) 2005 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Nuvelo's Q2 2005 results and accomplishments conference call, moderated today by Dr. Ted W. Love, President and CEO, Gary Titus, VP of Finance and Chief Accounting Officer, Dr. Michael Levy, Senior Vice President of Research and Development. Also participating on the call today is Lee Bendekgey, Senior Vice President, CFO and General Counsel.

At this time all participants are in a listen-only mode. After the presentation a question-and-answer session will be conducted and instructions to participate will be given at that time. Please be aware that today's call is being recorded. (OPERATOR INSTRUCTIONS). I will now read the following forward-looking statements.

This conference call will contain forward-looking statements regarding our anticipated use of cash in the fiscal year 2005, our success in accessing the capital markets, 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, and the expenses, revenues and potential for profits from sales of any drug products resulting from such programs. Such statements are hereby identified as forward-looking statements for the 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 our 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, SEC review of registration statements that we file to authorize public offering for our securities, 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's 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. I would now like to turn the call over to Dr. Love, President and CEO of Nuvelo.

Thank you all for joining us this afternoon. On today's call we are very pleased to share with you the progress we have made by reviewing Nuvelo's accomplishments over the second quarter of this year. Gary will provide details on our financial strategy as a whole, the Kingsbridge deal which we announced today, as well as our second-quarter financial results. Michael will then discuss the excellent progress we have made in all of our clinical programs, and I will conclude with an overview of Nuvelo's milestones over the coming months.

This year Nuvelo set out to accomplish several important goals that will ultimately serve our mission to build a valuable business through the discovery, development and commercialization of life-improving therapeutics for human disease. We are well on our way to accomplishing every goal we set out to accomplish this year. Right now I would like to go through many of our most recent achievements.

First, we pledged to advance important product opportunities and have made considerable strides thus far in 2005. We continue to make significant progress in moving both our Alfimeprase Phase III programs forward and are on track to begin the second Phase III Alfimeprase trials in acute peripheral arterial occlusion, or acute PAO, and the first Phase III trial in central venous catheter occlusion, or CO, in the second half of this year.

We also completed the Phase IIa trial of rNAPc2 in patients being treated for acute coronary syndromes, or ACS. And we're also on track to begin a proof of concept study to look at the potential of rNAPc2 to replace heparin in treating patients with acute coronary syndromes. Additionally, based upon extensive preclinical evidence, we have determined an initial clinical indication for development of NU206 that offers a substantial market opportunity.

In short, we are exactly where we want to be, rapidly advancing our clinical programs. In a few minutes, Michael will walk you through further details.

This year we also pledged to continue to build a world-class company. In this quarter we have begun to lay the foundation for Nuvelo's entry into its commercial phase. Our first major step in doing this was to bring Michael Fleming on board as our Vice President of Clinical Operations and to add Kimberly Popovits to our Board of Directors. Both Michael and Kim have extensive commercial experience in large companies such as Genentech and GlaxoSmithKline. In addition, we continue to make good progress with our manufacturing partner Avecia for the commercial-scale manufacturing of Alfimeprase.

Finally, we have stated in the past that we would build on our solid financial position. To that end, we have secured a committed equity finance facility with Kingsbridge Capital Ltd. Our agreement with Kingsbridge provides us access to $75 million in capital over the next three years at a very attractive cost of capital.

Additionally, we recently filed a Universal Shelf Registration Statement that allows us to access the financial market when market conditions and our corporate goal -- accomplishment of our (indiscernible) goals make that a desirable approach to raising capital. This financial strategy allows us to further enhance our financial strengths as we continue to advance our clinical programs, continue partnership discussions for our clinical candidates, and begin to lay the foundation for entry into the commercial phase of our business.

Now to speak more to our financial strategy I would like to turn the call over to Gary Titus, our Vice President of Finance and Chief Accounting Officer.

Good afternoon, everyone. At this time I would like to discuss our financing strategies and the financial results for the second quarter of 2005.

As Ted indicated, we have executed a financing strategy that gives us tremendous flexibility and control over the timing and pricing of future financing and that maximizes our ability to benefit from market recognition of continued achievement of our corporate goals in the coming months and years.

I would like to expand on this strategy by outlining the details of our agreement with Kingsbridge Capital, a private investment group that manages several hundred million dollars in assets for its principles. This agreement allows us to access up to $75 million over the next three years in exchange for newly issued shares of Nuvelo's common stock. This transaction is a real positive for Nuvelo and Kingsbridge. This agreement gives Nuvelo ready access to committed capital over time as we continue towards product sales, while giving Kingsbridge the potential to build a position in a strong late-stage company with significant products on the horizon.

The Kingsbridge deal allows Nuvelo to raise capital as desired at the time, price and in amounts the Company deems suitable during a three-year period. If and when we choose to draw down capital, we will have access to tranches of up to $10 million at a time which will be priced over an eight-day pricing period. Kingsbridge is committed to purchase shares of common stock at discounts ranging from 6 to 10% depending on the volume weighted average market price of the common stock on each day during the pricing period.

When compared to the cost of a public offering, including typical market discounts and underwriters commissions, the cost of capital associated with the Kingsbridge facility is very attractive. We are not obligated to utilize any of the $75 million available under the Kingsbridge agreement and there are no minimum commitments or minimum use penalties. This agreement does not contain any restrictions on Nuvelo's other financing options, operating activities, automatic pricing resets or minimum market volume restrictions.

Throughout the term of the agreement, Kingsbridge is restricted from engaging in any shorting transactions. In connection with the Kingsbridge deal, Nuvelo issued a warrant to Kingsbridge to purchase up to 350,000 shares of common stock at an exercise price that represents a 30% premium to the stock's average closing price over the last five trading days. The exercise term of the warrant is five years beginning six months from today. This financing facility, together with our ability to avail ourselves of other traditional financing structures, provides us with added financial security, allows us to benefit from the appreciation we anticipate for all our continued execution of our clinical programs, and allows us great flexibility to make financing decisions that we believe will be in the best interest of Nuvelo and its shareholders.

Our ability to draw on the Kingsbridge financing facility allows us to be more discriminating in determining whether market conditions make a secondary public offering attractive to us. Accordingly, we have filed a shelf registration to allow for future financings as appropriate. This shelf registration allows us to take advantage of the financial markets if conditions are favorable.

In addition, as we continue to pursue partnership opportunities for our clinical development candidates, our financial strength allows us to have partnership discussions with a focus on long-term strategy rather than short-term financial benefits.

For example, the main objective of any partnership with Alfimeprase would be to gain access to an ex-U.S. commercial infrastructure and to ensure that we fully develop Alfimeprase in countries outside the U.S.

In summary, we have put together a financing strategy that allows us to take advantage of the financial markets when conditions are favorable while enabling ourselves to have access to financing at attractive cost of capital and providing a position of strength to maximize our partnership opportunities.

Moving now to our financial results for the second quarter of 2005. We began the quarter with $106.7 million and ended the quarter with $91.9 million in cash and investment balances. Included in the second-quarter ending cash and investment balances is the $2 million upfront payment we received from our collaboration partner, Kirin, for development of our IND candidate NU206. To reiterate, Nuvelo entered a new collaboration with Kirin specifically for NU206 in March of this year. Nuvelo will lead worldwide development, manufacturing and commercialization of NU206, and all expenses and operating profits will be shared in a 60/40 split, with Nuvelo owning 60%. Also expected in the second-quarter ending cash and investment balances is the milestone payment of $5 million to Amgen for the initiation of our Phase III Alfimeprase trial in acute PAO.

Our operating expenses were $17.6 million for the second quarter of 2005, including $2.5 million for the year to date. We spent $14.5 billion on research and development during the second quarter of 2005 and $25.5 million for the year to date as compared to $8.7 million and $24.1 million for the same period last year.

As you may recall, in the first quarter of last year we incurred combined onetime license and collaboration fees of $7 million related to our rNAPc2 and ARC 183 drug candidates, which significantly increased R&D expenses last year. Excluding these onetime fees and the Amgen milestone payment for comparison purposes, during the first six months of 2005 we increased our R&D expenses, primarily related to clinical development activities, by $3.4 million as compared to the first six months of 2004.

To date this year, we have incurred $14.5 million in expenses associated with our Phase III clinical programs for our lead product candidate Alfimeprase. This represents more than half of our total R&D spending this year.

Our general and administrative expenses increased to $3.2 million in the second quarter of 2005 and $7 million for the year to date, as compared to $2 million and $3.6 million in the same period last year. The change was the result of increased public company expenses, including costs associated with the implementation of Sarbanes-Oxley 404 compliance and the ramp-up of our infrastructure to support our research and development programs.

Turning now to our consolidated statement of operations results, for three months ended June 30, 2005 we reported a net loss of $17 million, or $0.40 per share, compared to a net loss of $11 million, or $0.34 per share for the same period in 2004. Our year-to-date loss was $31.7 million, or $0.79 per share, compared to a net loss of $28.6 million, or $0.97 per share for the same period in 2004.

The number of shares of common stock used for the calculation of second-quarter earnings per share is based upon the weighted average shares outstanding during the quarterly and year-to-date periods. For the second quarter this was 42 million shares and 31.9 million shares in the same period in 2004. And for the year to date, this was 40 million shares and 29.6 million shares in the same period in 2004. Our total shares outstanding on June 30, 2005 were 42 million shares. I will now turn the call over to Dr. Michael Levy, Senior Vice President of Research and Development.

Thanks, Gary. For the next few minutes I'll walk you through an update of our R&D pipeline and share with you our excitement for the progress we have made in all of our programs.

We'll begin with an update on Alfimeprase, our lead product candidate. We are pleased to announce that the clinical data from our Phase I trial of Alfimeprase in patients with chronic peripheral arterial occlusion, or chronic PAO, has been accepted for publication in a well-known medical journal. This is the first peer review publication of clinical data on Alfimeprase and we really look forward to additional publications in presentations in the future.

Turning now to our Phase III programs with Alfimeprase, let's start with acute PAO. As you know, our Phase III Alfimeprase program in acute PAO consists of two trials with an estimated total of up to 700 patients.

The first trial in this program, NAPA-2, has already begun patient enrollment and is anticipated to enroll 300 patients in a randomized double-blind multinational trial comparing 0.3 milligrams per kilogram of Alfimeprase versus placebo. The primary endpoint in this trial is avoidance of open vascular surgery within 30 days of treatment.

We continue to experience great enthusiasm for the program and support among the investigators, based on the solid Phase II data and, of course, the need for improved treatment options for these patients. We are achieving our goal of getting sites activated and are building momentum in terms of enrolling patients.

The second Phase III acute PAO trial, NAPA-3, is expected to replicate the NAPA-2 trial. We are currently identifying sites for this trial and are right on target to begin the NAPA-3 study in the second half of 2005.

As we gain momentum with the entire Phase III acute PAO program, we expect to have sufficient enrollment experience that will allow us to give estimated timelines for completion of the program on our fourth quarter and year-end 2005 results call.

Let's turn now to catheter occlusion, our second development program for Alfimeprase. As announced previously, we finalized the design of our Phase III catheter occlusion program. This program is modeled after the program that led to approval for Cathflo Activase in this indication.

Our program will consist of two overlapping multinational trials. The first trial is an efficacy study called SONOMA-2. The study is a randomized double-blind trial comparing three milligrams of Alfimeprase versus placebo in 300 patients with occluded central venous catheters. The subjects will be randomized two to one so that two-thirds will receive Alfimeprase and the remainder will receive placebo. The study's primary endpoint is restoration of function to occluded central venous catheters at 15 minutes.

The second study, SONOMA-3 will be an open-label single-arm trial evaluating Alfimeprase in 800 patients. The study's primary endpoint is safety; however, we will also be evaluating efficacy in these patients as well. Now that the SONOMA-2 protocol is finalized, we're focused on getting the study up and running. As part of this effort, we're identifying and qualifying trial sites, getting sites activated and beginning to hold investigator meetings. We remain on target to begin the Phase III program in catheter occlusion in the second half of 2005.

Let's turn to rNAPc2. In May we announced the completion of a Phase IIa trial being conducted with Dr. Eugene Braunwald and a TIMI group evaluating rNAPc2 in patients being treated for acute coronary syndromes, or ACS. This trial was a dose escalation study investigating the safety of rNAPc2 in combination with other antithrombotics in 200 patients being treated for ACS. The data show that rNAPc2 has an acceptable safety profile and is well-tolerated in doses up to 10 micrograms per kilogram in ACS. We look forward to sharing the remainder of the data with you as we plan to present the full data set at a major medical meeting during the second half of the year.

With completion of this trial and a desirable safety profile now in hand, we are commencing a proof of concept study to evaluate the potential for rNAPc2 to replace heparin in ACS patients. This second Phase II trial will include up to 100 patients and will provide supplementary efficacy data by demonstrating whether rNAPc2 can replace heparin, the cornerstone of ACS therapy. We remain on track to begin this study in the second half of 2005.

Let's now discuss ARC 183, a direct thrombin inhibitor being developed in collaboration with our partner Archemix. Let me remind you that the rationale for this program is to provide rapid onset and rapid offset of anticoagulation in patients undergoing acute cardiovascular procedures. Because ARC 183 is designed to alter the capacity of blood to coagulate rather than treat a disease, the data we generate in Phase I in healthy volunteers should provide a good indication of proof of concept and will (indiscernible) guard our development strategy going forward.

ARC 183 is currently in a Phase I study of its safety, tolerability and pharmacokinetic profile in both normal volunteers and coronary artery disease patients. To date, the normal volunteer portion of this study has been completed and we will update you once the entire study has been completed and announce topline data at that time. We will then work with Archemix to review the data and determine next steps.

Finally I would like to discuss NU206, a potential cancer supportive therapy. NU206 is the first preclinical compound to advance into IND-enabling studies from our own internal research efforts. And research to date indicates that NU206 acts as a specific and potent stimulant of gastrointestinal epithelial cells, and it shows potential in animal models for the treatment of chemotherapy and radiation therapy-induced gastrointestinal mucositus, as well as inflammatory bowel disease.

After evaluating development options for NU206, we have decided to pursue initially therapy for radiation and chemotherapy-induced mucositus in the GI tract. We have seen promising results from our preclinical studies with NU206 and are thrilled to announce that the first NU206 report has been accepted by a prestigious scientific journal. You can expect to see publication in the second half of the year.

I will now turn the call back over to Ted.

Thank you, Michael. As I hope you have heard, we continue to make great progress in building our important business. This includes advancement of our preclinical and clinical programs, building our financial strength, as well as continuing to attract great talent to the Company. Let me close by taking a few moments to reiterate key milestones for the remainder of this year.

First, we are on track to begin enrollment in our second Phase III acute PAO trial, as well as our Phase III trial for catheter occlusion in the second half of 2005. Second, we look forward to the first peer review publication of clinical data from our Alfimeprase program. Third, in the second half of this year, we expect to initiate the heparin replacement Phase II trial with rNAPc2 in patients being treated for acute coronary syndrome. Fourth, we look forward to sharing clinical data from our Phase IIa rNAPc2 study in patients with ACS, as well as our ongoing Phase I trial with ARC 183 in presentations at major medical meetings later this year. And finally, on the research side, we look forward to sharing with you publication of exciting preclinical data for NU206 in a well-known scientific journal.

In closing, we have many important milestones upcoming in the second half of this year. We remain committed to accomplishing our goals of advancing significant product opportunities and building a world-class company. We look forward to reporting our progress on the next quarterly call. Operator, can you please poll for questions?

(OPERATOR INSTRUCTIONS). Tariq Kassum, CIBC.

Congratulations on a very busy quarter. Just a quick question for you regarding the funding facility. I guess the first question is the one thing I noticed about this is that there's a lot of flexibility associated with it. You can draw down on it whenever you want; you don't have to draw down on it. And given the clinical path for Alfimeprase, which seems relatively straightforward, it doesn't seem like it necessarily requires a lot of flexibility. So I'm wondering if that implies that you guys might either be holding off on (inaudible) partnership for a while, or you may even be looking to in-license another product. So just giving us an idea of why the flexibility was important would be great.

I will just start off. I think I want Lee to answer the question. Fundamentally what I want to remind everyone is that this is one element in an overall strategy to build options to finance the Company from strength. And we wanted flexibility in this arrangement because we did not want to be obligated to do this or to take any particular action. What we were trying to do is create a variety of options. We recognize having options is in fact part of the strategy to (indiscernible)

I would just add, Tariq, that we are very excited about the way the Alfimeprase clinical program is going. And one of the attractive features of this facility is it gives us added security today, but it allows us to benefit from what we anticipate will be market recognition of our accomplishments, not just in the Alfimeprase clinical program but as we progress towards commercialization, this being a three-year facility.

Deanna Lucado (ph), Pacific Growth Equity.

The ARC 183 timing. How long -- do you think you'll be done by the end of the year, and why were the normals treated first and the (indiscernible) patients later?

This is Ted. Maybe Michael --

Good question. We plan to share the ARC 183 Phase I data at a major medical meeting the second half of this year. That has been our stated goal for some time and we are on track to do that. And we started in the Phase I program with healthy (indiscernible) volunteers as a matter of -- I'm losing the word I'm searching for -- but anyhow; that is the standard way of course to test new drugs in terms of looking at the safety of the subjects who participate in these trials. You start with young healthy volunteers and then move on to the target patient population when you have gained the initial experience.

How long do you think -- but the data that you're going to present second half is only on the healthy volunteers, or will it include the cabbage (ph) patients?

Our intention at this stage is to present data on the whole Phase I program the second half of the year.

So the whole thing will be done by then?

That's correct.

Just on that point, the whole point of the Phase I program was to prove the concept. Because the real issue here is that there's really no way in medicine today to induce an anticoagulant state to do a medical procedure, and then at the end of that procedure have the drug spontaneously resolved. So we used Heparin and Protamine, two drugs which have problems. So the concept that we were trying to prove in our Phase I program was that we could actually do that. And I think by the end of the year, as Michael said, we feel very comfortable that we will be able to demonstrate to you if we have successfully proved that concept.

My other question is the $5 million payment to Amgen upon dosing of the Alfimeprase Phase III program; was that included in the $14.5 million R&D, or us that somewhere else?

Gary?

That is included in the research and development expenses this quarter. We did make that payment in April I believe.

So R&D quarter-over-quarter went down?

The total R&D expenses did not go down if you take -- keep in mind that in the first quarter of last year we had expenses of $7 million for license arrangements with -- for rNAPc2 and for ARC 183.

I'm thinking of Q1 '05. That was 11 million R&D. And Q2 is 14.5 minus a $5 million payment to Amgen. It just seemed like -- it doesn't seem logical that it would go down minus that payment to Amgen given your clinical activity. And so how would I think about modeling in the next couple of quarters?

This is Lee. I think what you're seeing is that in Q1 there were a lot of initial payments made to get the Alfimeprase clinical program going. And so there's a little bit of choppiness there associated with the start-up in Q1.

Would we expect Q3 then to be lower than Q2?

We would not expect Q3 to be lower. We expect expenses to increase as we launch into the additional trials.

I think just to follow-up on that, there are different things driving (indiscernible) and they move things around. But early on it's the front-end costs of starting these efforts, and then later on you're actually paying the costs of actually enrolling the patients and getting the trial done.

Cory Kasimov, Oppenheimer.

It's actually Sar Umiv (ph) for Cory. I wanted to ask you about the NAPA-2 and the NAPA-3 trials. First, the easy one, the NAPA-3. I think I might have missed it. Did you mention the number of patients in the NAPA-3 trial?

: No, we didn't. What we have said of course is that we expect up to 700 patients in total between the two Phase III trials.

And (indiscernible) you mentioned 300 for the NAPA-2?

Correct.

And what about the SONOMA-2 trial? Did you mention the -- did I miss the number of patients, or did you not mention that at all?

No, we talked about that. We said that that program was modeled after another successful program in its indication, and that we have 300 patients in the initial efficacy trial and 800 patients to follow in the open-label single-arm safety trial.

How is the NAPA-2 enrollment going? How is the trial progressing so far? Can you talk about that a little bit?

I would be happy to. We are delighted with the way the trial is progressing. We have obviously put a lot of resource behind it. This is a key corporate priority and it is going well. We are happy with the number of sites that we have enrolled and we're happy with the enthusiasm, and dare I say it, the passion we're getting from our clinical investigators in pushing this forward. And we look forward at our fourth-quarter call, our 2005 year-end call to giving you some color on the specific enrollment details.

So you have no -- you don't have any forecast as to when you will complete the enrollment?

At that fourth quarter end of 2005 call we are going to give you detailed forecasts on when we expect the trial to complete.

A final question about the SONOMA trials. Are you expecting to start both of them around the same time? I know you said that --

We'll start the efficacy trial first, but the two trials will overlap and run in parallel. But just in terms of parsing our effort to get maximum bang for the buck, we'll start the efficacy one a little earlier.

David Wood, America's Growth Capital.

Just a couple of questions. One, Gary or Lee, just the cash burn guidance and that cash burn guidance for 2005; is that still intact?

Gary Titus. The cash burn guidance remains the same, 60 to $70 million. And we define that cash burn as net change and cash in investments excluding capital financing activities. And we do believe that is an important measure for investors. Thanks for the question.

The other question I had is I think you had mentioned that the manufacturing for Alfimeprase was going well. Can you give us a little bit more color on that?

Sure. Michael actually might be the one to give you more detail, but at the end of the day there is as you well know a front-end loading of all these manufacturing activities. Because when you launch the product you actually need to have demonstrated a great deal of testing around the stability of the product. So we have a reasonably -- actually a very aggressive strategy in place to make sure that we are moving the product to commercial scale (indiscernible) that the FDA and other regulatory authorities will want to see when we file it, and that that is front-end loaded with all the work, all the material, and all of the associated testing of that material over time to support the approval.

One last question if I may. I know you talked a little bit in terms of the NAPA-2 enrollment and you want to give a better, more complete update in the future. But I seem to recall in the first quarter you talked about looking to have about half of the sites active by the end of the second quarter. First of all, if that is incorrect then I apologize. Can you give us some sense of where you are in terms of percentages of the sites that you thought would be active?

: I'm glad you asked that actually. Yes, we did in fact say that we anticipated having over half the sites roughly enrolled by the end of the second quarter. And in fact, we did achieve that. And things continue to go very well.

(OPERATOR INSTRUCTIONS). Robert Hoffman, Candlewood Capital.

Just a quick clarification on the Kingsbridge transaction. I am assuming that when you notify them that you're going to take down a tranche that we the public markets don't hear about it until after the eight-day period. Is that correct?

This is Lee. Yes. What you will see is at the end of the eight-day period there will be a filing indicating what we have taken down.

(OPERATOR INSTRUCTIONS). That does conclude the Q&A portion of our call.

I would just like to end by thanking everyone for joining us today. It really is a pleasure to have the opportunity to update everyone on the progress that we make. We're very happy with the progress we make, and we wish you all a good afternoon.

Ladies and gentlemen, that does conclude our conference call for today.