Oruka Therapeutics Inc (ORKA) 2006 Q3 法說會逐字稿

Welcome to the Third Quarter 2006 Nuvelo, Incorporated Financial Results Conference Call. [Operator Instructions]

Before we begin, the Company has asked me to 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 2007, the success of our collaboration with Bayer Healthcare AG, the timing and progress of Nuvelo's clinical stage and research programs, the potential market for our clinical stage compounds, our plans for the commercial launch of alfimeprase, and the expenses, revenues and potential for profit 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 the 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; SEC review of registration statements that we file to authorize a public offering 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 in Nuvelo's filings with the SEC, including without limitation Nuvelo's Quarterly Report on Form 10-Q for the quarter ended June 30, 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 Chief Executive Officer. Please proceed, sir.

Thank you all for joining us today. We are very pleased to share with you our third 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 third quarter 2006 financial results and then Dr. Michael Levy, our Senior Vice President of R&D, will discuss our R&D 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.

Over the past months, we've been focused on the execution of our milestones, particularly with regards to our alfimeprase Phase III programs and the development of our pipeline. Let me quickly review the most recent corporate accomplishments.

In September, we were very pleased to announce the completion of patient enrollment in the first trial of each Phase III alfimeprase programs. This includes NAPA-2, which is evaluating alfimeprase for the treatment of acute peripheral arterial occlusion (or PAO), and SONOMA-2, which is evaluating alfimeprase for the treatment of catheter occlusion (or CO).

Also, over the past several months our investigators presented positive results from a Phase II proof of concept trial evaluating the potential of rNAPc2 in the treatment of patients with acute coronary syndromes. These data were presented at the World Congress of Cardiology in Barcelona and at the recent Transcatheter Cardiovascular Therapeutics Conference (TCT) in Washington, DC.

And in August, we announced a new agreement with Archemix, which replaced the previous 50/50 collaboration for the discovery of short-acting aptamers for use in acute medical procedures.

Simultaneously, we nominated NU172, a direct thrombin inhibitor, as a development candidate. We see a great opportunity in the development of anticoagulants that have rapid onset and offset of action, as there is an unmet medical need for an anticoagulant with fewer side effects and more predictable dosing than heparin combined with its antidote, Protamine.

Let me now turn the call over to Ward to discuss the specifics of our third quarter 2006 financial results.

Thank you, Ted, and good afternoon, everyone. After the close of the market today, we released our financial results for the third quarter ended September 30, 2006 and I will cover some of the highlights of those results.

With respect to our consolidated statement of operations for the third quarter of 2006, we reported a net loss of $26.7 million, or $0.51 per share, compared to a net loss of $18.5 million, or $0.44 per share for the third quarter of 2005.

The weighted average number of shares outstanding used in the calculation of net loss per share was 52 million shares for the third quarter of 2006 and 42.2 million shares for the same period in 2005. On September 30, 2006, there were 52.2 million shares outstanding.

Revenues in the third quarter of 2006 were approximately $910,000, compared to $120,000 for the same period in 2005. The increase was primarily due to the $50 million up-front license payment we received from Bayer in the first quarter of this year, of which we recognized approximately $800,000 as revenue in the third quarter.

This up-front license fee is 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.

Operating expenses for the third quarter of 2006 were $29.7 million compared to $19 million in the 2005 quarter. R&D expenses were $23.1 million in the 2006 quarter and $14.8 million in the prior year quarter. These amounts are net of credits for cost-sharing amounts billable to collaboration partners, primarily Bayer, of $7.9 million and $0.5 million respectively.

The increase in R&D expenses was primarily due to clinical trial and drug manufacturing activities, a $4.0 million up-front license fee to Archemix, and personnel costs including stock-based compensation expense under SFAS 123(R), partially offset by the collaboration cost-sharing credits.

G&A expenses were $6.8 million for the third quarter of 2006 and $4.2 million for the 2005 quarter, with the increase due to growth in our infrastructure, and pre-commercialization activities for alfimeprase, as well as stock-based compensation expense.

For the nine-month period ended September 30, 2006, the net loss was $65.2 million, or $1.28 per share, compared to a net loss of $50.1 million, or $1.23 per share, in the comparable period in 2005. Revenues for the first nine months of 2006 were $3.0 million compared to approximately $400,000 in the same period in 2005.

Total operating expenses for the nine months ended September 30, 2006 and 2005 were $74 million and $51.5 million, respectively.

With respect to the balance sheet, we ended the third quarter of 2006 with cash, cash equivalents and short-term investments of $157.2 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 $22.5 million and $25.3 million respectively for the three and nine months ended September 30, 2006. These amounts have been reconciled to cash used in operating activities of $24 million and $22.1 million in the respective periods.

The lower amount of net cash used in operating activities for the first nine months of 2006, compared to the third quarter, is primarily due to the receipt of the $50 million payment from Bayer in January.

During our second quarter call, we identified two payments totaling $9.4 million that we have made in 2006 that were not contemplated in our original cash flow forecast for the year. Specifically, a $5.4 million cash payment to Affymetrix in the second quarter to settle a promissory note and an up front license fee of $4.0 million as a result of our expanded collaboration agreement with Archemix, which we announced and paid to our Archemix in the third quarter.

As a result, on our second quarter call, we updated our guidance for cash burn to be in the range of $43 to $54 million for the full year 2006 to reflect these expenditures. In order to fund these payments, we drew down $10 million of our equity line with Kingsbridge Capital in October, which resulted in our issuing approximately 568,000 shares of common stock to Kingsbridge, as disclosed in our filing with the SEC.

We reiterate our cash burn guidance of $43 to $53 million for the full year 2006.

In summary, we are pleased with the measures the Company has been able to take to strengthen its financial position during the first nine months of 2006. We entered into the year with approximately $70 million in cash and short-term investments and have now completed the third quarter with approximately $157 million in such balances, which of course does not include the $10 million we received from Kingsbridge in October.

The increase in working capital during this nine-month period was due primarily to net cash proceeds of $112 million from our public offering and the $50 million up front 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 nine months of 2006 for our development pipeline and late-stage clinical trial programs and the associated ramp-up leading toward commercialization.

To elaborate on those activities, I will turn the call over to Dr. Michael Levy, Senior Vice President of R&D.

Thank you, Ward. Over the next few minutes, I will provide you with an update of our development pipeline, focusing on 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.

As announced in September, we've completed enrollment in the first trial in both our Phase III alfimeprase programs for acute PAO and CO. These are important milestones for us. We are now working hard to collect and process the data in a high-quality, efficient manner and are on track to announce top line data from each trial before year-end or early in 2007.

In addition to the two trials we've completed, we have ongoing Phase III trials in acute PAO and CO, known as NAPA-3 and SONOMA-3, respectively. NAPA-3 started this April and the trial is designed to essentially replicate NAPA-2.

Earlier this year, we gained agreement from the FDA to transfer select high-quality sites from the NAPA-2 trial to the NAPA-3 trial upon completion of the first study and in fact, we've already begun that process.

As we did with NAPA-2, we plan to announce guidance on when we expect to complete this trial when we have more experience with the trial accrual rate.

SONOMA-3 began this February and is an open label, single arm trial evaluating the safety and efficacy of 3.0-mg of alfimeprase in 800 patients with occluded central venous catheters. As with NAPA-3, we plan to provide guidance on when we expect to complete this trial, when we have sufficient experience with the trial accrual rate.

Moving on to the potential use of alfimeprase in stroke, we remain optimistic that alfimeprase's speed of action and safety profile give us the ideal profile to study in the treatment of acute ischemic stroke. Alfimeprase may be able to rapidly restore blood flow, decrease bleeding complications and side effects, and expand the treatment window beyond the current three-hour timeframe.

We continue to make progress with our clinical plan and expect to initiate the Phase II trial, known as CARNEROS-1, in the fourth quarter of this year. This will be an open label, dose escalation study in up to 90 patients within three-to-nine hours of stroke onset and the primary end points will focus on safety as well as arterial recanalization and reperfusion rates.

Alfimeprase's speed and safety profile also make it a compelling candidate to study for the treatment of deep venous thrombosis (or DVT) and we continue to be on track to initiate a Phase II trial in DVT in 2007.

In keeping with our efforts to educate physicians about our alfimeprase clinical trial results, we continue to make presentations at relevant scientific meetings. The next such presentation will be at the American Heart Association (AHA) Scientific Sessions 2006, where we will be presenting data from the previous NAPA-1 Phase II trial of alfimeprase in acute PAO.

Now let's turn to our second cardiovascular candidate, rNAPc2.

Over the past few months, we've presented additional results from our Phase II ANTHEM TIMI-32 trial evaluating rNAPc2 in patients with acute coronary syndromes (or ACS) at both the World Congress of Cardiology 2006 and the TCT 2006 conference.

In this 255-patient, Phase II proof of concept trial, doses of rNAPc2 that are greater than or equal to 7.5-micrograms per kilogram (µg/kg) reduced the incidence and duration of ischemia by more then 50% in patients being treated with antithrombotics, as measured by continuous electrocardiographic monitoring.

In the heparin reduction portion of the trial, which included 52 patients, 10-µg/kg of rNAPc2 reduced ischemia even in the absence of heparin or enoxaparin. rNAPc2 did not cause a statistically significant increase in the rate of bleeding. Four cases of procedure-related thrombosis occurred among the no-heparin treatment arm. Additional data from this trial will be presented in a poster session at the AHA 2006 meeting.

The newest addition to our cardiovascular franchise, NU172, is a short-acting, direct thrombin-inhibiting aptamer for potential use as an anticoagulant for patients undergoing acute medical or surgical procedures. After nominating NU172 in August, we now have a research plan in place, are making progress in our preclinical work and plan to initiate IND-enabling studies in the fourth quarter of 2006.

We are also collaborating with Archemix to identify additional preclinical candidates that modulate other targets along the coagulation cascade and look forward to sharing information, as it becomes available.

Now let's switch our focus to our oncology pipeline.

We continue to make progress with the expansion our rNAPc2 program into cancer. This program is based on the role that the Factor VIIa 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 association with multiple cancers.

We plan to initiate a Phase II program studying rNAPc2 in metastatic colorectal cancer in the first half of 2007. This trial will enroll up to 120 patients. In the open label stage, up to 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 end points will include progression-free survival, metastasis-free survival, and overall survival.

Or interest in rNAPc2 in cancer continues to grow and as indicated in the past, we will await data from this indication to better understand the complete value of rNAPc2 before pursuing a partnership.

Further expanding our oncology pipeline, we're developing NU206, a novel and potent growth factor that is a highly specific stimulator of the epithelial cells that line the gastrointestinal tract. NU206 is active in multiple models of human disease, including radiation therapy or chemotherapy-induced mucositis, inflammatory bowel disease, and short bowel syndrome.

The NU206 program is progressing well and we're on track to initiate a Phase I program in the fourth quarter of this year. This trial will be a single-center, double-blind, dose escalation study to evaluate the safety, tolerability and pharmacokinetic profile of single and multiple doses of NU206 in up to 80 healthy volunteers.

We're proud of the progress we've achieved over the past months. We've 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. Over the next several months, we will remain focused on our key value-driving deliverables, execution of our milestones, and producing and announcing top line alfimeprase results in acute PAO and CO.

For our cardiovascular pipeline, our upcoming milestones include presentations of alfimeprase and rNAPc2 at the AHA in November. This will include data from the NAPA-1 Phase II trial of alfimeprase in acute PAO and further safety and efficacy results from the Phase II ANTHEM TIMI-32 trial, evaluating rNAPc2 in patients with ACS.

Second, the release of top line data results from both the NAPA-2 and SONOMA-2 by the end of this year or early in 2007. Third, the initiation of CARNEROS-1, our Phase 2 trial evaluating alfimeprase in acute ischemic stroke, in the fourth quarter of 2006 and last, the initiation of a Phase 2 trial evaluating alfimeprase in deep venous thrombosis in 2007.

For our oncology pipeline, initiation of an NU206 Phase I study in the fourth quarter of 2006 and initiation of a Phase II program evaluating rNAPc2 in metastatic colorectal cancer in the first half of 2007.

In closing, 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 on our next quarterly call.

Operator, can you please poll for questions?

[Operator Instructions] Chris Dimitropoulos of JP Morgan.

Hi, actually this is Chris Dimitropoulos for Jeff. Good afternoon.

Hi Chris.

Hi. Just if you can give us some more color on the AHA presentation of NAPA-1, specifically what incremental data might we see there in terms of end points?

I am actually not intimately familiar with that presentation. I'll actually be going to the meeting, but I don't expect there will be a great deal of incremental data. I think it'll probably be some additional data, but mostly sharing the data with a broader audience.

Okay. Second question, in terms of the stroke trial. How many centers would you expect to plan participating in the trial and is there a sufficient demand already where you can enroll this trial pretty quickly and turn it around to actually get data in 2007?

Hi, Chris, Michael Levy here. Thanks for the question. Well, there's certainly sufficient demand for a new stroke therapy. I mean, stroke, as you know, is one of the leading causes of disability in the United States today and has a huge impact on the economics of the healthcare system. So there are a lot of patients.

We're in the process now of just finalizing our plans to get this study up and running this quarter and we're in the process of finalizing our agreements with various sights. So we don't typically disclose how many centers we're working with until the study is underway, but we every confidence, because there's such a huge medical need, that the study will progress well.

All right. Thank you.

Maged Shenouda of UBS.

Sure, thanks for taking my questions. First, just as a market question, can you help us size the DVT opportunity relative to the PAO opportunity? And also, what are you thinking, at least at this very early stage, in terms of dosing and pricing? And then also, could you just elaborate on NU172 a little bit?

Thanks for the question. Let me start off, then, with the question about the DVT opportunity. Looking strictly in terms of the epidemiology, clearly there are a lot more DVT patients diagnosed and ready for treatment in the United States every year than there are acute PAO patients and it's difficult to estimate exactly how big the DVT opportunity is in terms of patients. It depends a bit on diagnosis.

But the best conservative estimates indicate that something like 650,000 patients are diagnosed in the United States every year and treated and with acute PAO, it's more like 100,000 to 125,000, so a bigger unmet medical need, in terms of the patient load. And we think that translates into the size of the market opportunity as well.

As you know, typically you don't finalize decisions on pricing until after the Phase III trials are complete and you move forward with discussions with various governmental agencies around the world. And we're just not at a stage yet where we can share much information with you, with regard to pricing.

But we think DVT is a huge opportunity for us and when you run through the math, even on the back of an envelope, you can see that you don't have to have a very large share of the market before it becomes a very big commercial opportunity indeed.

Okay and then just --.

On NU172, NU172 is an aptamer, which means it's a DNA fragment that we're developing in collaboration with our partners Archemix, which is a privately held company in Cambridge, Massachusetts.

Last year we announced results of the prototype compound that we are developing with Archemix, ARC183, where we were able to demonstrate in humans, clinical proof of concept. In particular that we were able to cause short onset and rapid offset of anticoagulation.

And there were a number of issues with that particular compound that meant it was not ideal to take forward into further clinical development and to the marketplace. And within NU172, we went back to the drawing board and we feel confident that we've addressed the issues we need to and look forward taking that into clinical testing as well.

Okay, thank you.

Jim Birchenough of Lehman Brothers.

Hi guys, just a couple of questions in looking ahead to the NAPA-2 results. What do you think an acceptable excess bleeding rate is or is there any acceptable excess bleeding rate and in particular, when we think about intracerebral hemorrhage, is there any acceptable rate? Or should we expect to see really none with alfimeprase?

Well, that's a very good question and let me tell you what we're aiming for. Obviously we're aiming to develop a compound that has the best possible profile in terms of the risk/benefit ratio in particular and what we'll do is look at the data in its totality. So we need to look at how fast and efficacious alfimeprase is and then we need to look at the side effect profile.

But at this time, we're very confident and optimistic that we'll be able to show in Phase III that we have a drug that has a great risk/benefit profile and that it has the potential to be an important new treatment.

And just as a frame of reference, I can't remember the STILE or TOPAS study where the protocol was amended, very early on, because of excess bleeding, where heparin was removed. I just want to confirm that that hasn't happened in this case and does that provide some reassurance that we shouldn't see excess bleeding, at least in ICH with alfimeprase.

Well, I can answer your question very factually that no, we have not removed the heparin treatment from the trials. We think that's very important. Obviously alfimeprase is a thrombolytic and it removes the acute clots, but you need onboard anticoagulants to prevent the formation of new clots in the future. But beyond that, I wouldn't read too much into that.

The good news is that the first trial, as Ted mentioned, is complete and hopefully the end of this year, beginning of next year we'll be able to share the data with you and won't need to speculate.

Just as a final question and just to stick with that theme, looking ahead to stroke, when you're looking to dose a thrombolytic beyond that three-hour window with TPA. Are the problems that you run into with ICH in that setting really related to the systematic lytic affect of other thrombolytics? Or is it just inevitable when you lose a certain amount of integrity in the area of the stroke, that you're going to get some excess bleeding risk and how do you think about that with alfimeprase?

Yes, I'm happy to take a stab at that in part. I mean, I think that the real answer is, probably, nobody knows, Jim. Because, in fact, to really understand this, what you would need is a tool to actually reperfuse patients without introduction of any systematic lytic state and that really has not existed heretofore. So, I think alfimeprase is really the tool that will ultimately get at that question.

If you ask smart people in this area to speculate, I think what most people will tell you is that clearly there appears to be some contribution due to the introduction of a systematic lytic state. And that's even reinforced by your comments earlier about the contribution of heparin in these patients.

So it clearly is an interaction of patient being put at risk by having tissue, which has been compromised in terms of its integrity. But that risk appears to interact significantly with the introduction of a lytic state or the introduction of an anticoagulant, as you referred to earlier.

Great, well, thanks for taking the question.

At this time, we will conclude the Q&A portion of this conference. I'll return it back to Dr. Love for any closing remarks.

Well, I would simply like to end by thanking you all for joining us today. We hope to see many of you at our upcoming financial conferences this quarter. I'd like to wish you all a good day.

Thank you for your participation. Have a wonderful evening.