Oruka Therapeutics Inc (ORKA) 2006 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Nuvelo's second quarter 2006 financial results conference call. My name is Angela, and I will be your coordinator for today. [OPERATOR INSTRUCTIONS]

Before we begin, the company has requested that I read the following statement. Presentations by Nuvelo management on this conference call will include statements regarding our anticipated use of cash and financial results in the fiscal year 2006, the success of our collaboration with Bayer HealthCare AG, the timing and progress of Nuvelo's clinical stage and research program, the potential markets for our clinical-stage compounds, our plans for the commercial launch of alfimeprase and the expenses, revenues and potentials for profits from sales of any drug product resulting from such programs, which statements are hereby identified as forward-looking statements for the purpose of the Safe Harbor provided by the Private Securities Litigation Reform Act of 1995.

Such statements are based on 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 discoveries, 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 clinical activities under collaborative agreements, SEC review of registration statements that we filed to authorize public offerings of our securities, stock market conditions, 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 with Nuvelo's filings with the SEC, including, without limitation, Nuvelo's quarterly report on Form 10-Q for the quarter ended March 31st, 2006, and subsequent filings. We disclaim any intent or obligation to update these forward-looking statements. I would now like to turn the presentation over to your host for today's conference, Dr. Ted W. Love, Chairman and CEO. Please proceed, sir.

Thank you all for joining us today. We are very pleased to share with you our second quarter financial results and accomplishments. Today's call will follow our usual format. After my introductory comments, Ward Wolff, our Senior Vice President of Finance and Chief Financial Officer will provide an overview of our second quarter 2006 financial results. And then Dr. Michael Levy, our Senior Vice President of R&D, will discuss our research and development programs.

Finally, I will conclude with an overview of the significant corporate and clinical milestones that are still ahead of us in 2006 and 2007. Throughout the past month, we have continued to build our business through the expansion of our management team, partnerships and our pipeline.

Let me quickly review three milestones. As we prepare for the next stage of our company's growth and product commercialization, we have expanded our management team with several key additions. I would like to welcome one of the newest members, Ward Wolff, our Senior Vice President of Finance and CFO, to the call today.

We also recently appointed Jill Pergande as Vice President of Human Resources, Gregory Yedinak as Vice President of Manufacturing and Process Finances and Dr. Ralph Zitnik as Vice President of Development. We welcome Dr. James Gavin, Clinical Professor of Medicine at Emory University and President and CEO MicroIslet to our board of directors. Dr. Gavin brings a wealth of knowledge in basic science, medicine, public health issues from his years as a scientist and manager at the Howard Hughes Management Institute and as President of the Morehouse School of Medicine.

Additionally, after six years of service, Dr. George Rathmann retired from our board of directors. He remains chairman emeritus, and we'd like to recognize him for his many contributions, which have been invaluable to the growth and direction of the company.

On the partnering front, we announced this week that we have expanded our collaboration with Archemix. The development of anticoagulants with a rapid onset and offset of action continues to represent a great medical opportunity. We've restructured our partnership with Archemix so that they will focus on the discovery of short-acting compounds, targeting the coagulation cascade, and Nuvelo will be responsible for the development and commercialization of the resulting compounds, the first of which is the direct thrombin inhibitor, NU172.

This strategic alliance with Archemix maximizes our respective core competencies. Archemix's unique expertise in the identification and optimization of aptamers and Nuvelo's cardiovascular development capabilities.

We shared our development for rNAPc2 in cancer at our R&D day, held on June 16th. As we have learned more about rNAPc2's potential in cancer, we have stepped back to reevaluate the timing of our partnering plans. We are now moving full speed ahead with the development of rNAPc2 in cancer and expect to initiate a phase II trial in metastatic colorectal cancer in the first half of 2007. It therefore makes most sense for us to defer partnering discussions with RNAPc2 until we can make the best decision for the asset based on data from both indications.

Finally, our collaboration with Bayer HealthCare to develop and commercialize alfimeprase continues to go very well, and we are tracking to our goals and milestones laid out for the program. Bayer will highlight alfimeprase in two events this fall, a satellite symposium at the Cardiovascular and Interventional Radiological Society in Europe, known as CIRSE, held in September, and during Bayer's international news conference, entitled Perspectives on Innovation, in Germany this October.

We are very pleased that alfimeprase will be included in these events, which emphasize the importance Bayer attributes to this program. Let me now turn the call over to Ward to discuss the specifics of our second quarter 2006 financial results.

Thank you, Ted, and good afternoon, everyone. I am very pleased to have recently joined Nuvelo and to participate for the first time on this quarterly call. This afternoon, we released our financial results for the second quarter, ended June 30, 2006, and I will cover some of the highlights of those results.

With respect to our consolidated statement of operations for the quarter, we reported a net loss of $18.9 million, or $0.36 per share, compared to a net loss of $17 million, or $0.40 per share, for the second quarter of 2005. The number of shares of common stock used for the calculation of second-quarter per-share amounts is based upon weighted average shares outstanding during the quarter. This was 58.1 million shares for the second quarter of 2006 and 42 million shares in the same period in 2005.

On June 30, 2006, there were 51.9 million shares outstanding. Revenues in the second quarter of 2006 were $1 million, compared to $200,000 for the same period 2005. The increase was primarily due to the $50 million upfront payment received from Bayer, of which we recognized approximately 800,000 as revenue in the second quarter.

As we discussed on our first quarter call, this upfront license fee will be recorded as deferred revenue and recognized on a straight-line basis over the term of the agreement, estimated to be until September 2020, when the last significant alfimeprase-related patent has expired. Other amounts billable to Bayer for milestones achieved or for sales of alfimeprase to Bayer for use in their country-specific trials or commercial sale outside the United States will also be recognized in this manner.

The method of revenue recognition changes once the development of alfimeprase has been substantially completed. After that, any remaining deferred revenue will be recognized at that point, and any milestones of sales of alfimeprase that are billable to Bayer after that point will be recognized as they are earned. Operating expenses for the second quarter 2006 were 22 million, compared to 17.6 million in the 2005 quarter.

Research and development expenses were 14.7 million in the 2006 quarter and 14.5 million in the prior-year period. These amounts are net of credits for cost-sharing amounts billable to collaboration partners, primarily Bayer, of 8.2 million and 1.2 million respectively. Increases due to clinical trial, drug manufacturing and personnel costs, including stock-based compensation expense associated with the implementation of FAS-123R were largely offset by these collaboration cost-sharing credits.

With respect to general and administrative expenses, such amounts were 7.3 million for the 2006 quarter and 3.2 million for 2005, with the increase due to growth in our infrastructure and pre-commercialization activities for alfimeprase, as well as stock-based compensation expense. With respect to the balance sheet, we ended the quarter with cash, cash equivalents and short-term investments of 179.6 million.

We have included in the release issued today a table which shows cash burn, a non-GAAP financial measure defined in the release and presented consistently with previous quarters of 20.6 million and 2.9 million respectively for the three and six months ended June 30, 2006.

These amounts have been reconciled to cash used in operating activities of 16.1 million and cash provided by operating activities of 1.9 million in the respective periods. The lower amount of cash burn for the first six months of 2006 than for the second quarter is primarily due to the receipt of the $50 million payment from Bayer in January.

During the second quarter, we made a 5.4 million cash payment to Affymetrix to settle a promissory note from November 2001 that we had the option to settle in cash or stock. After analyzing both options, the most effective method was to settle with a cash payment. In addition, we expect to pay an upfront license fee of $4 million as a result of an entry into an expanded collaboration agreement with Archemix, which we announced earlier this week.

Since these two items, totally 9.4 million, were not contemplated in our earlier cash-burn guidance for the year, we are updating our guidance for cash burn, a non-GAAP measure, to be in the range of 43 million to 53 million for the full year 2006, and expect cash used in operating activities to be between 38 million and 46 million. This updated guidance is also depicted in the table on today's press release. In summary, we are pleased with the measures the company has been able to take to strengthen its financial position during the first six months of 2006.

We entered into the year with approximately 70 million in cash and short-term investments and have now completed the second quarter with approximately 180 million is such balances. The increase in working capital during the six-month period was due primarily to net cash proceeds of 112 million from our public offering and the 50 million upfront cash payment from Bayer, which both occurred in the first quarter. These inflows have provided the liquidity and capital resources to allow us to make appropriate expenditures during the first half of 2006 and late-stage clinical trial program and the associated ramp-up leading toward commercialization.

To elaborate on those activities, I will now turn the call over to Dr. Michael Levy, Senior Vice President of Research and Development.

Thank you, Ward. Over the next few minutes, I will provide you with an update of our development pipeline, focusing our acute cardiovascular and emerging oncology programs, as well as share with you our excitement about the progress we've made. Let's begin with an update on alfimeprase, our lead cardiovascular product candidate.

On the clinical front, with the initiation of NAPA-3, we now have four phase III alfimeprase trials ongoing in our acute peripheral arterio-occlusion and cath through occlusion programs and are on track to expand the development program this year with the initiation of a phase II trial in stroke.

NAPA-3, which started this April, is the second of two phase III trials in our acute [KO] program. Under our special protocol assessment, or SPA, with the FDA, NAPA-3 will essentially replicate the NAPA-2 trial. It too is a randomized, double-blind study, comparing 0.3 milligrams per kilogram of alfimeprase with placebo, and it too will enroll 300 patients with the primary endpoint of avoidance of open vascular surgery within 30 days of treatment.

A variety of secondary endpoints are also being evaluated, including restoration of blood flow, which is a key measure physicians use in determining success of treatment. Safety endpoints, such as the incidence of bleeding and pharmacoeconomic endpoints, such as length of hospital and ICU stay. We continue to be on track to complete enrollment in NAPA-2, the first phase III trial in this program in the second half of 2006.

Typically, the time required to lock the database, analyze the data and then provide top-line results in several months. Subsequently, we expect that one of our investigators would submit a more complete analysis of the full data at an appropriate medical conference as soon as possible thereafter.

Moving now to our second target indication, catheter occlusion. We are pleased to announce that results from our phase II trial of alfimeprase in its indication were published in the July 1st issue of the Journal of Clinical Oncology. In addition, our phase III program in this indication is progressing well. We achieved our milestone of initiating the second phase III catheter occlusion trial, SONOMA-3, in the first half of 2006. This open-label single-arm trial is evaluating the safety and efficacy of three milligrams of alfimeprase in 800 patients with occluded central venous catheters.

We also continue to be on track to complete enrollment in SONOMA-2, the first trial in this program, in the second half of 2006, and expect to provide top-line results several months afterwards. More complete analysis of the data will be presented at an appropriate medical conference as soon as possible thereafter.

At our first R&D day in June, we shared with you the progress we've made on our third target indication for alfimeprase, acute ischemic stroke. We've met with the FDA and with our partner Bayer and have agreed upon the design of our phase II trial. And in keeping with our theme of California wine regions, the alfimeprase stroke trial has been designated the CARNEROS-1 trial. This will be an open-label dose-escalation study in up to 90 patients within three to nine hours of stroke onset and will measure safety and arterial re-[catalyzation] rate.

We expect to initiate this trial the second half of this year. At our R&D day, we also had a chance to expand on the potential for alfimeprase in deep venous thrombosis for DVT. At that meeting, we highlighted that the unfavorable risk to benefit ratio for plasminogen activators has limited their use in this patient population. In contrast, the speed and safety profile we've seen today with alfimeprase in our acute PAO and catheter occlusion trials makes it a compelling candidate, potentially, to treat DVT. And we continue to be on track to initiate a phase II trial in DVT in 2007.

On the manufacturing side, we are completing commercial-scale process validation and are planning to initiate commercial production runs early next year. As Ted mentioned, Bayer will be sponsoring a satellite symposium at the CIRSE meeting in Rome, Italy, in September entitled, Advances in Thrombolytic Therapy, a Focus on Alfimeprase.

The symposium will feature Dr. Gunnar Tepe, Associate Professor Radiology at the University of Tubingen, Germany, Dr. Barry Katzen, Clinical Professor of Radiology at the University of Miami, and Dr. Steven Deitcher, Vice President of Medical Sciences here at Nuvelo.

Additionally, Bayer is hosting an international press conference on October 31st entitled, Perspectives on Innovation, which will also feature a presentation on alfimeprase. More information on each of these events will be available as the dates approach.

Now, let's turn to our second cardiovascular candidate, rNAPc2. In June, we completed a phase II heparin-replacement trial with rNAPc2 where we decreased and ultimately eliminated the use of heparin patients with acute coronary syndromes, or ACS.

This study investigated the potential of rNAPc2 to reduce or replace heparin in this patient population. Efficacy data from our previous phase IIa study and the phase II heparin replacement trial will be presented in a poster at the World Congress of Cardiology Meeting in September 2006. As this meeting is held in Barcelona, Spain, we plan to host a conference call to review the data presented at the meeting, which will allow us to take questions from all of you.

As announced earlier this week, we have nominated a new compound from our collaboration with Archemix, NU172 is a short-acting direct thrombin-inhibiting aptamer for potential use of an anticoagulant for patients undergoing acute medical or surgical procedures. Animal models suggest that NU172 is a potent agent with predictable anticoagulant effects, rapid onset and offset of action and the potential for reduced complications compared to the current standard of care, heparin and Protamine combined.

Now, let's switch our focus to our emerging oncology pipeline. At our R&D day, we gave further details on the planned expansion of our clinical development program for rNAPc2 in cancer. This is based on the role that the factor 7A tissue factor protease complex plays in the cellular signaling of metastasis and angiogenesis in a variety of cancers, as well as initiating the thrombotic events which occur in end-stage cancer.

We plan to initiate a phase II program studying rNAPc2 as a second-line therapy in metastatic colorectal cancer. And this trial will enroll up to 120 patients. In the open-label stage, four ascending doses of rNAPc2 will be given twice weekly, with the goal of selecting appropriate doses for study in the double blind stage.

Efficacy endpoints will include progression-free survival, metastasis-free survival and overall survival. We look forward to initiating this trial in the first half of 2007.

Further expanding our oncology pipeline we are developing NU206, a novel and potent growth factor that is a highly specific stimulator of the epithelial cells that line the gastrointestinal tract to reduce cancer therapy induced mucositis. Gastrointestinal mucositis is a condition that causes extreme discomfort in patients undergoing radiation or chemotherapy and can often prevent patients from receiving their full regimen of these potentially lifesaving treatments.

Currently, there are few treatment options available. The NU206 program is progressing well, and we're on track to initiate a phase I program in the second half of 2006. We're proud of the progress our research and development organization has achieved over the past months. We've got a lot to accomplish in the coming months and look forward to sharing these achievements with you as well. I'll now turn the call back over to Ted.

Thank you, Michael. As you can see, we have a number of exciting milestones coming up, including for alfimeprase, completion of patient enrollment in both the NAPA-2 and SONOMA-2 trials and initiation of CARNEROS-1, our phase II trial in ischemic stroke, all expected to occur in the second half of 2006.

In addition, we expect to initiate a phase II trial in deep venous thrombosis in 2007. For rNAPc2, presentation of efficacy data from both the phase IIa and phase II heparin replacement study in patients with ACS at the World Congress of Cardiology in Barcelona and September, and initiation of a phase II program in oncology in the first half of 2007. And lastly, for NU206, initiation of a phase I study in the second half of 2006.

In closing, this was a productive quarter for Nuvelo, and we remain on track to successfully complete each of the milestones that we established in 2006. We look forward to updating you on our progress at our next quarterly call.

Operator, can you please poll for questions?

[OPERATOR INSTRUCTIONS] Our first question will come from the line of Chris Dimitropoulos with JPMorgan.

Hi, good afternoon. Thanks for taking my question.

Hi, Chris.

Hi. Just a question on NAPA-2, if you could provide some color on the geographic distribution of sites enrolling in the trial. I know that's kind of specific, but is there any color you can give on that?

Hi, Chris. Thanks for your call. Yes, I can provide you a little bit of color and give you some of the information that we have provided in the past. So this is a global trial that's taking place at a little more than 100 centers around the world, and what we've said in the past is that the bulk of these centers, or at least the largest contributor of centers, is of course the United States, but beyond that we have contributions from Europe, South America, Australia and Eastern Europe.

Could you just remind us once again how you go about monitoring these sites just to make sure they're in full compliance with how the various endpoints are checked?

Well, that's a great question and I appreciate you asking it, because obviously our goal, our number one goal, is to provide high-quality and reliable data to the FDA and to other regulatory agencies around the world so that they can make informed decisions about alfimeprase when we submit our BLA.

So what we do is, in the first instance, we monitor the sites around the world in our regular practice, in keeping with GCP guidelines. And we do that through the use of various CROs that are regionally spread, and beyond that we use quality assurance teams, partially from our own company and partially through contract organizations, to go around and do a QA check on the sites above and beyond the routine GCP monitoring that we perform.

Great, thanks.

And the only thing I might add to that is that before sites can qualify for the trial, there is actually a prescreening process to make sure that all of the things that we expect are in place before we even initiate a site.

That's a great point.

Thanks a lot.

Your next question comes from the line of Liana Moussatos with Pacific Growth Equities. Please proceed.

Hi. Besides the conference call when the rNAPc2 data is released in Barcelona, anything else going on at the World Congress of Cardiology, and what day in September is the buyer satellite symposium in Rome?

I am not sure, Liana, if I have the dates, the specific dates, at my fingertips. I know we will be releasing those data, so you can expect something publicly from the company with specific information.

In terms of your question about Barcelona, we don't plan, the company doesn't plan, to be at the meeting, and that's why we have made a plan to have a communication strategy done from the U.S.

Okay, thank you very much.

Your next question will come from the line of Mark Monane with Needham & Company. Please proceed.

Thank you very much. Can you talk about dose considerations for alfimeprase as you move beyond the PAO indication? Is there evidence from any preclinical work or just from being a smart cardiologist about what kind of doses might be used and how that might affect the use of the drug when we think about it in DVT, which generally requires a bigger load, as well as a potential in stroke?

Well, I'm not a smart cardiologist, but I'm going to step in for Ted, and that way you can have a smart cardiologist batting backup to correct anything I say that's wrong. But in general, with DVT, and you do ask a good question, we don't have a lot data available to us at this time. But our suspicion is that in terms of order of magnitude, we would expect the dose in DVT to be similar to the dose in PAO. The sizes of blood clots are generally similar, slightly larger on average in DVT, but similar. So you may see a small increase in dose in DVT, and certainly that's what we would expect, but we have no real data at this point in time.

No, I would agree with everything Michael said. The big factors are obviously going to be the age of the clot, the size of the clot and the relative rate of flow in the culprit vessel, obviously there being much more flow on the arterial side, probably help to dissolve arterial clots with slightly lower doses. But, again, I would emphasize that we think the doses in DVT, if one had to guess, are likely to be slightly higher than PAO, but probably not dramatically so. And, obviously, in disorders like stroke, where the clots are much smaller, we would expect them to be correspondingly lower doses.

Very good. Thanks for the added information.

And your next question will come from the line of Jim Birchenough with Lehman Brothers. Please proceed.

Thanks. That was close. I'm going to ask a specific question, and that is just in the NAPA-2 trial, I'm assuming that you're observing for any protocol violations. Can you just tell us how you address protocol violations, and whether in your review of the NAPA-2 trial you've seen any excess rate of protocol violations in the trial itself.

Thanks for that great question. So we are carefully monitoring all of the sites, as we've discussed previously. As Ted mentioned, we put a huge premium on selecting sites that we thought would comply well with the protocol, and of course we have a lot of knowledge of these sites through our various contacts within the company. So we picked sites that we thought would comply well and we continue to monitor them on an ongoing basis.

Now, any clinical trial that's conducted, typically, you see some sites that perform very well in terms of enrollment and in terms of following the protocol, and you'll always see a small number of sites that perform less admirably. And woefully I don't have the exact data in front of me. This trial, and all the trials we conduct at Nuvelo are no different, and we're always gratified to see that the vast preponderance of centers performed very well, but there will be a few stragglers and we deal with them appropriately, you can be sure.

And just one other question, just on the type of patients that may come in to the trial with an acute occlusive event. I'm imagining that for PAO they may be a bit of a heterogeneous group with some patients that may have enlarged fixed [inaudible] occlusion already and then a minor thrombus on top of it, a direct fibrinolytic might not help that much, whereas a patient with a small fixed lesion and a large thrombus may derive more of a benefit.

Can you just talk about the heterogeneity of the patients that you expect in this trial and how you I guess avoid the risk of patients coming in with enlarged fixed lesions that you might be able to help much with a thrombolytic.

So, as you suggest, the group of patients that present are heterogeneous. Almost all the patients, if not all the patients, do have some sort of underlying fixed peripheral vascular disease, and that a thrombus generally forms on top of that when flow is diminished to a critical stage. We do of course select in this trial for patients who have had an acute occlusion of less than 14 days. That's one thing we do. And obviously I have no data to share with you about this particular trial, but I can say that we were very gratified in phase to find that alfimeprase worked very well on big clots and on small clots, and we've discussed that in the past, that we've had some examples of very large clots, clots up to 60 centimeters in length, that we've dissolved rapidly.

And it's worked on what we thought were new clots and old clots, based on the angiograms that we read showing extensive collateralizations, which tend to be evidence of an older clot. And on top of that, in phase I, we looked at patients who had chronic peripheral vascular disease where the burden of their illness was fixed disease and very little was acute thrombus. And we were gratified that in 40% of those patients as well we could see improvements on the angiogram and restoration of blood flow.

So I think in general, if alfimeprase lives up to its potential, as we all hope it does, it will be an ideal agent for dissolving clots in all of these circumstances.

Great. That's very helpful. Thanks.

[OPERATOR INSTRUCTIONS]. At this time, we will conclude the Q&A portion of this call. I'd like to turn the call back over to Dr. Ted W. Love for the closing remarks.

Well I would simply like to close by thanking all of you for joining us on the call today. We'd also like to note that we look forward to seeing many of you at our upcoming financial conferences this fall. I hope you all have a good day.

Ladies and gentlemen, we thank you again for your participation in today's conference. This does conclude the presentation and you may now disconnect. Have a wonderful day.