Oruka Therapeutics Inc (ORKA) 2007 Q1 法說會逐字稿

[begins in process] -- 2007 financial results and accomplishments conference call. My name is Tanya, and I will be your coordinator for today.

[OPERATOR INSTRUCTIONS]

I would now like to read the forward-looking 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; and expenses, revenues and potential for profits from sales of any drug product developing from such programs, which statements are hereby identified as "forward-looking statements" for purposes of the safe harbor provided by the 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; stock market conditions; the impact of competitive products and technological changes; 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 Annual Report on Form 10-K for the year ended December 31, 2006 and subsequent filings. We disclaim any intent or obligation to update these forward-looking statements.

On the call today we have Dr. Ted W. Love, Chairman and CEO; Dr. Michael Levy, Executive Vice President of Research and Development; and Mr. Ward Wolff, Senior Vice President of Finance and CFO.

Please proceed, Dr. Love.

Thank you all for joining us today. We are pleased to share with you our first quarter 2007 financial results and accomplishments.

Following my introductory comments, Dr. Michael Levy, our Executive Vice President of R&D, will discuss our research and development programs, and then Ward Wolff, our Senior Vice President of Finance and Chief Financial Officer, will provide an overview of our first quarter financial results. Finally, I will conclude with an overview of our corporate and clinical milestones that are ahead of us in 2007.

Over the past month, we've been focused on the execution of our milestones, in particular the evaluation of alfimeprase and the advancement of our development programs. Let me quickly review where we are with alfimeprase, and I will turn the call over to Michael to update you on our pipeline.

We have made significant progress on our review of the future strategy for alfimeprase. Our development organization has done excellent work in gathering data from both the NAPA-3 and SONOMA-3 trials, and we are coming to the final stages of discussions with our steering committee, data safety monitoring boards, regulatory agencies and our partner, Bayer. We continue to be on track to complete this analysis and provide guidance on the future direction of alfimeprase in the first half of this year. We look forward to sharing our alfimeprase strategy with you later this quarter and keeping you apprised of our clinical advances with our multiple programs.

I will now turn the call over to Michael to discuss the programs in detail.

Thank you, Ted.

Let me start with a review of our rNAPc2 program. As you know, rNAPc2 blocks the factor VIIa/tissue factor protease complex, which is responsible for the initiation of the process leading to blood clot formation. Over the past several months, results from the Phase II proof of concept trial evaluating rNAPc2 in patients with acute coronary syndromes have been presented at various scientific meetings, most recently the ACC, and we expect the first publication of these data to appear in the Journal of the American College of Cardiology in the first half of 2007.

In addition to its role in coagulation, tissue factor is overexpressed in many cancers, and the interaction of tissue factor with factor VIIa has been shown to play a role in activating the cellular signaling events leading to metastasis and angiogenesis in a variety of cancers. As rNAPc2 is an inhibitor of the tissue factor and factor VIIa interaction, we are investigating its potential role as a cancer therapy.

As part of this program, we initiated a Phase II trial studying rNAPc2 as a second-line therapy in metastatic colorectal cancer at the end of last year. This two-stage trial will enroll up to 100 patients to determine the safety and efficacy of twice weekly subcutaneous rNAPc2 in combination with 5-FU-based chemotherapy regimens. The first stage will evaluate the safety and activity of rNAPc2 in a three-tiered dose-escalation format. The second stage will randomize patients to receive either placebo or doses of rNAPc2 that were determined safe during the first stage in conjunction with standard chemotherapy regimens. Efficacy endpoints will include progression-free, metastasis-free and overall survival.

We are committed to developing rNAPc2 to further understand its potential to help this underserved patient population, and in March we were pleased to announce receipt of two separate fast track designations from the FDA. The first fast track designation is for the first-line treatment of metastatic colorectal cancer when added to Avastin-containing 5-FU-based chemotherapy regimens. The other is for second-line treatment of metastatic colorectal cancer when added to 5-FU-based chemotherapy regimens.

Next, let's discuss NU206, an epithelial growth factor that is a highly specific and potent stimulator of the gastrointestinal epithelial cells. NU206 is active in multiple animal models of disease, including radiation therapy or chemotherapy induced mucositis, inflammatory bowel disease and short bowel syndrome. We expect to initiate a Phase I program the first half of 2007.

In addition, scientific interest in NU206 continues to grow. We presented preclinical data at the AACR meeting last month, and a publication on NU206 appeared in the April issue of Gastroenterology. This article, entitled "R-Spondin1, A Novel Intestinotrophic Mitogen, Ameliorates Experimental Colitis in Mice," showed that NU206 was able to decrease the severity of chronic colitis by restoring the epithelial lining and alleviating inflammation of the small intestine and colon. In addition, treatment with NU206 reduced the symptoms of colitis, including weight loss, diarrhea and gastrointestinal bleeding.

Our next development program involves NU172, the compound we nominated as part of our collaboration with Archemix. NU172 is a short-acting, direct thrombin inhibitor for potential use as an anticoagulant for patients undergoing medical or surgical procedures. We're excited about the prospects for this drug candidate, because animal models suggest that NU172 may be a potent anticoagulant that offers the potential for rapid onset and offset of action with predictable anticoagulant effects and no risk of heparin-induced thrombocytopenia. NU172 is currently being evaluated in IND-enabling studies, and we expect to initiate a Phase I trial in the fourth quarter of 2007 or first quarter of 2008.

We're making excellent progress in all of our programs, and I look forward to updating you in the future on our ongoing achievements.

I'll now turn the call over to Ward.

Thank you, Michael, and good afternoon, everyone.

After the close of the market today we released our financial results for the first quarter 2007, and I will cover some of the highlights of those results.

With respect to our consolidated statement of operations for the first quarter of 2007, we reported a net loss of $15.3 million, or $0.29 per share, compared to a net loss of $19.7 million, or $0.40 per share, for the first quarter of 2006. The weighted average number of shares outstanding used in the calculation of net loss per share was 53.3 million shares for the first quarter of 2007 and 48.9 million shares for the same period in 2006. On March 31, 2007 there were 53.3 million shares outstanding.

Revenues in the first quarter of 2007 were approximately $900,000, compared to $1.1 million for the same period in 2006. Both periods include $800,000 of recognized revenue from the $50 million upfront license fee received from Bayer in the first quarter of 2006. This upfront license fee is recorded as deferred revenue and recognized on a straight line basis over the performance period under the agreement, estimated to be until September 2020, when the last significant alfimeprase-related patent has expired.

Operating expenses for the first quarter of 2007 were $18.1 million, compared to $22.3 million in the 2006 quarter. Research and development expenses were $12.7 million in the 2007 quarter and $12.1 million in the prior year quarter. These amounts were net of collaboration partner cost sharing credits of $3.3 million and $7 million, respectively. The increase in net R&D expenses in 2007 was primarily due to lower cost sharing amounts, partially offset by decreases in clinical trial and drug manufacturing costs.

General and administrative expenses were $5.4 million for the first quarter of 2007, compared to $10.2 million for the 2006 quarter, with the decrease primarily due to a non-cash charge in the 2006 period for the quarterly revaluation of a warrant issued in connection with our committed equity financing facility and lower rent expense due to exit costs accrued in the fourth quarter of 2006 related to a vacated facility.

Non-cash employee stock-based compensation expense was $1 million in the research and development line item and $1.2 million in the general and administrative line item for the first quarter of 2007.

With respect to the balance sheet, we ended the first quarter 2007 with cash, cash equivalents and short-term investments of $134.8 million. Our net cash used in operating activities was $17.2 million for the first three months of 2007.

I would now like to turn to our financial guidance.

As stated on our last call, Nuvelo continues to expect both operating expenses and operating use of cash to be in the range of $30 to $35 million for the first half of 2007 and amortization of deferred revenue to be consistent with the 2006 run rate. We plan to update this guidance as soon as possible after the Company provides further details on alfimeprase.

Let me conclude by saying that we are prudently managing our business as we complete the final stages of our alfimeprase evaluation, and we will continue to do so as we move our other development programs forward.

Thank you, and I will now turn the call back over to Ted.

Thank you, Ward.

Over the next several months, we remain focused on achieving our key value-driving deliverables.

For our cardiovascular pipeline, our upcoming milestones include providing guidance on our alfimeprase strategy in the first half of 2007, publication of data from the Phase II trial of rNAPc2 in patients with ACS in the Journal of the American College of Cardiology in the first half of 2007 and expected initiation of a Phase I trial with our direct thrombin inhibitor NU172 in the fourth quarter of 2007 or the first quarter of 2008.

For our oncology pipeline, we are committed to advancing rNAPc2 in the ongoing Phase II trial in metastatic colorectal cancer, and we expect to initiate a Phase I study with our GI growth factor NU206 in the first half of 2007.

We will continue to make achievement of our milestones a priority in 2007. In addition, we intend to evaluate pipeline expansion opportunities that have the potential to enhance shareholder value. We look forward to reporting our progress throughout the year.

Operator, can you please poll for questions?

[OPERATOR INSTRUCTIONS]

Your first question comes from the line of Geoff Meacham, of JPMorgan. Please proceed.

Hi, this is Matt Roden in for Geoff today. Thank you for taking the questions. The first question is on alfimeprase, and I think last quarter you talked about preliminary discussions that were going on in regard to the stroke indication. Just wondering whether or not we should expect a decision on stroke and DVT concurrently, or whether or not there would be news on one indication before another.

Hi, Matt. This is Ted. What we really have been trying to do right now is work through all of the data with our partner, Bayer, and come out with a joint decision. We don't expect to serially give decisions. What we expect to do is to work through all of this and then come out with some overall guidance about what will be our next steps. But obviously, as you point out, the molecule does have a different dose profile, a different delivery in indications, and that's important data that we're looking at. But we are doing it together and expect to give you some guidance on that, as we said, in the first half of this year.

Excellent. Thanks. And then if I could ask a follow-up on rNAPc2, is there any update that you can give us on enrollment of the rNAPc2 trial? And then, secondly, should we expect to see the safety data before it moves on to the randomization for the efficacy portion of that trial?

Hi, Matt. Michael Levy here. What I can tell you is, as you know, the rNAPc2 trial started fairly recently, and we're still in early stages. That's going well. We're on track, and the trial is moving ahead. But what we typically have liked to do in the past, and I think we'll continue this policy going forward, is wait until we've had the trial moving at a steady state for some time, and at that point we'll be able to give you a good estimate on when we'll have data based on real information and not just speculation.

Okay. And then just lastly, are there any updates to your plans of development of rNAPc2 in cancer indications other than colorectal cancer?

Nothing that we can really share with you at this time. I think we've mentioned in the past that rNAPc2 in tissue factor looked like an exciting [molecule] and an exciting target in a variety of important cancers, including non-small cell lung, pancreatic cancer, glioma, melanoma, as well as colorectal, as you mentioned. And we are actively and aggressively looking at opportunities beyond colorectal cancer. And we're always focused on ways in which we could demonstrate clinical proof of concept relatively quickly. So that's the overall principal that's guiding our thinking as we move forward.

Okay. Thank you very much for taking the questions.

You're welcome.

Your next question comes from the line of Mark Monane, of Needham. Please proceed.

Alan Carr Hi, good afternoon. It's Alan Carr for Mark. I just wondered if you could elaborate a bit on the last comment in your prepared remarks. What is your thinking on pipeline expansion at this point? Are there certain characteristics or disease areas that you're most interested in at this point?

Hi, Alan, this is Ted again. Well, I think you've known that we've always, as our business model, considered looking at bringing in additional candidates, and we've basically continued that, obviously, with a different set of perspectives after, obviously, December. And we really would like to stay [inaudible] in cardiovascular and our efforts to move into cancer. So those have probably been the major focus of our efforts.

How about in terms of stage of development? Any preferences there?

Well, like most companies, we're obviously interested in something that's late stage. You know, we're obviously working through our strategy with alfimeprase, but we would like to get something as late stage as possible. And, obviously, if we didn't go forward with alfimeprase, this would be something that could fill in that late stage. If we do go forward, then it would create more opportunities for us to have something earlier stage. But I would say overall we've probably been more focused on later stage things that fit into our business model and are focused on cardiovascular and cancer.

Okay. Thanks very much.

Your next question comes from the line of Shiv Kapoor, of Montgomery & Co.

Thanks for taking my questions, and hope you guys are having a good day. I have a few questions on alfimeprase. First one is it seems like from your comments that you also use the information from the suspended trials that you're analyzing currently to make a decision on the future of alfimeprase. It seemed like you already had a lot of information from prior trials. Can you help us understand what exactly you are trying to look for in the suspended trials?

Sure. I mean, what I would say straightaway is that obviously these trials were the first trials that were being conducted with a placebo control, so if you look back at the data that we had generated prior to then, I think you don't have that control as a variable in the previous trials. So I think now we were basically looking at whether or not there was concordance between what we were seeing in those first trials versus the second trials. And that is an important thing, particularly if you find yourself in a situation where you saw something that you didn't expect. It'd be relevant, obviously, to go and see if the second trial was giving you that same signal or not.

So, for example, you would be looking at bleeding risk?

Absolutely.

My second question, in case Bayer decides not to go through with alfimeprase, since you already have the yes from the DSMB, do you think you will go ahead without them and do the stroke indication yourself, or would you look for another partner?

Well, it's a little bit premature for us to be discussing that. We have really focused on being a great partner for Bayer, and they've really focused on being a great partner for us. And we've put a lot of effort into working through everything with them. So we really have not put a lot of effort into saying, you know, how do we get another partner? We've really focused on working with our current partner. And that -- we really feel that's the right way to do business, and I think Bayer would feel the same way.

Thanks. That's very useful. Can you remind us your relationship with Bayer again? Let's say if they decide to not continue funding the alfimeprase program, does the funding stop right then, or does it continue?

No, there are provisions for the funding continuing for 12 months on notification of termination. And obviously we've received no notification of termination. Obviously, if we had, you would know about that right now. But there is a provision in the contract that has a trailing twelve-month obligation.

Thanks. My last question, Ted, what are you spending most of your time on these days?

Well, I think I'm spending a lot of my time on looking at various scenarios for the Company and trying to make sure that we're positioning ourselves to be strong in all of those scenarios. I spend, obviously, a fair amount of time looking at the alfimeprase data and trying to work with people in our consultants and internally to make sure that we're making those decisions appropriately, and also with our partner in Bayer in doing that.

We also, as we said, all along have been very focused on making sure that we look at other opportunities. That's something I've done a lot of all along. That's how we originally got alfimeprase and NU172 and rNAPc2, so I've continued to put a lot of time into that as well.

Great. Thanks a lot.

Your next question comes from the line of Liana Moussatos, of Pacific Growth.

Hi. Thanks for taking my question. I just have a couple of follow-ups on previous questions. One is, for the Phase II rNAPc2 colorectal cancer trial, how many centers are active in enrolling now? And then with your pipeline expansion initiatives, are you in any late-stage discussions? Do you have any term sheets? And as far as stage of development, what is the earliest stage that you would accept right now, if you were going after a new product?

Well, hi, Liana, it's Michael Levy. I'll answer the question on rNAPc2 and then pass the strategic question over to Ted to answer. So our plan is to have approximately 40 centers working in the colorectal cancer trial. And we're scaling up to that currently.

Okay, but you're not going to tell us how many are active now?

We typically don't.

Okay.

And, to be honest, I don't know off the top of my head anyway. I do know that we're exactly on target, though, for our internal goals.

Okay.

And, Liana, I think you already know that we tend to not give a lot of play-by-play discussion about partnering discussions, because, unfortunately, I find that it could be very misleading and not very helpful. What we really have been trying to do is to put all of our effort into those discussions, and when we get to a point where we have news to share do a good job of coming out and presenting that news in a transparent way that really gives you the insight that you need. But, I mean, that's -- I think that's really where we'd rather leave things at this point in terms of partnering.

Okay. What would be the earliest stage product that you would consider? Would you consider preclinical or Phase I?

We really have not put much effort into preclinical things. What I think we really have tried to make sure that we're focused on is product candidates that we feel very good that have a chance to get up off the finish line. And obviously the later stage you are, the better off you are. But there are occasionally molecules where it's an enhancement on an existing set of drugs, maybe a validated target where you could think about going earlier. But we really put most of our efforts at later stages.

Thank you very much.

Your final question comes from the line of Graig Suvannavejh, of UBS.

Hey, everyone. How are you guys doing today?

Hi.

Most of my questions have been answered, and one question I do have, though, is could you just please remind us if the changes over at Bayer in terms of their merger of two companies, has that impacted in any way the collaborative nature of how things are going and how decisions are being made?

Actually, that's a good question. We were asked that question quite frequently after the initial announcement of the Schering merger. And I'll say the same thing. I got a call very quickly from Arthur Higgins to give me a heads up that this was happening even before it was public knowledge and the assurance that it would not adversely affect our collaboration. They took our collaboration very seriously, and they continue to do so. So it really has not had any adverse impact.

As you also know already, I think, Nuvelo really does the work for the clinical development. And, as a consequence, the major things in terms of moving NAPA-3, NAPA-2 forward, all that burden was really on Nuvelo from the very beginning. And we obviously are very transparent with Bayer, but the work really does reside here.

Thanks. I look -- we look forward to the update.

Thank you.

Ladies and gentlemen, this now concludes the Q&A portion of this call. I'd like to turn it over to Dr. Ted Love for closing remarks.

I'd just like to end by thanking you all for joining us today. We hope to see many of you at our upcoming financial conferences, and we wish you all a good day.

Thank you for your participation in today's conference. This now concludes the presentation. You may disconnect. Have a great day.