Oruka Therapeutics Inc (ORKA) 2007 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Nuvelo third quarter 2007 financial results conference call. My name is Chantilly and I will be your facilitator for today's call.

At this time, all participants are in a listen-only mode. We will conduct a question-and-answer towards the end of this conference. (OPERATOR INSTRUCTIONS) The speakers on today's call are Dr. Ted W. Love, Chairman and CEO; Dr. Michael Levy, Executive Vice President of Research and Development; and Lee Bendekgey, Senior Vice President and CFO.

Presentations by Nuvelo management on this conference call will include statements regarding our anticipated use of cash in Fiscal Years 2007 and beyond, our anticipated financial results in the Fiscal Year 2007; the timing and progress of Nuvelo's clinical stage and research programs; the potential benefits that patients may experience from the use of our clinical stage compounds; and the expenses, revenues and potential for profits from any sales of any drug products resulting from such programs, which statements are hereby identified as "forward-looking statements" for purposes of the safe harbor provided by the Private Securities Litigation Reform Act of 1995.

Such statements are based on our management's current expectations and involve risks and uncertainties. Actual results and performance could differ materially from those projected in the forward-looking statements as a result of many factors, including, without limitation, uncertainties relating to drug discovery; clinical development processes; enrollment rates for patients in our clinical trials; changes in relationships with strategic partners and dependence upon strategic partners for the performance of critical activities under collaborative agreements; 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 quarterly report on Form 10-Q for the quarter ended June 30, 2007, and subsequent filings. We disclaim any intent or obligation to update these forward-looking statements.

Thank you all for joining us today. We are pleased to share with you an update on the Company and a review of our third quarter accomplishments. As announced on our last call, we have realigned our organization to focus on driving our business forward and building value. Hence we have focused our efforts on programs we expect to yield the nearest-term proof-of-concept data and have taken measures to strengthen the Company financially.

Dr. Michael Levy, our Executive Vice President of R&D will discuss the progress we've made in our R&D programs. And then Lee Bendekgey, our Senior Vice President and CFO will provide an overview of our third quarter financial results and guidance for the remainder of 2007.

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

Thank you, Ted. Let me start with an update on the progress we are making with the alfimeprase program. As announced in August, we have reinitiated a SONOMA-3 trial. This trial is evaluating a single dose of 10 milligrams with a concentration of 5 milligrams per milliliter in up to 100 patients with occluded central venous catheters. Enrollments is going well. And we are now in a position to provide more specific guidance on expected timing for SONOMA-3.

We currently expect to complete enrollment and report topline data in the first half of 2008. While we have shared topline data from SONOMA-2, our first Phase 3 catheter occlusion trial, we've been waiting for an opportunity to present the full data at a medical conference. I'm pleased to report we'll have this opportunity at the upcoming American Society of Hematology meeting taking place this December in Atlanta.

As we've discussed in the past, analysis of data from the SONOMA-2 trial illustrate the alfimeprase is an active thrombolytic, but shows the dose we used did not generate results in line with the target product profile, we believe, needed for commercial success.

We're also making great strides in our stroke program. We recently held a successful investigative [meeting] for the CARNEROS-1 Phase 2 proof-of-concept trial in acute ischemic stroke. We are working with more than 40 investigative sites at various stages of activation with some sites now screening patients. Also, we're expanding the geographic scope of the program to include several European countries in addition to the U.S. and Canada.

CARNEROS-1 is a multicenter open-label dose escalation study that will enroll approximately 100 patients within three to nine hours of stroke onset. We will initially be investigating 1, 5, and 10 milligram bolus doses to evaluate the safety and efficacy of intra-arterial catheter-directed alfimeprase.

The primary efficacy endpoint of this trial is restoration of blood flow within 120 minutes of treatment. (Technical difficulty) will also be assessed, including the rate of symptomatic intracerebral hemorrhage at 24 hours. We expect to record enrollment of the first patient in CARNEROS-1 soon.

Let's turn now to our Wnt pathway modulator, NU206. NU206 is a specific and potent stimulator of gut epithelium. It has the potential to offer a novel approach for the treatment of serious medical conditions, including cancer therapy-induced mucositis and inflammatory bowel disease. We're pleased to announce that we've successfully concluded our discussions with the FDA and now have regulatory clearance to begin clinical evaluation of NU206. We're actively working with a number of investigative centers and expect to announce the enrollment of the first patient in our Phase 1 trial of NU206 in the first half of 2008.

Switching now to NU172, our short-acting direct thrombin inhibitor, we are working with the FDA and remain on track to begin a Phase 1 trial of NU172 later this year or the first quarter of 2008. This trial will be similar to the Phase 1 trial for the first candidate in this program, [R183].

In addition to investigating the pharmacokinetics profile and safety in healthy volunteers, this trial will also look at whether NU172 can product a profound state of anticoagulation that is rapidly reversed once dosing is terminated. As such, this Phase 1 trial should provide us proof of concept of the drug's potential therapeutic utility, and we expect to provide data from this trial in 2008.

Finally, I want to take a few minutes to provide an update on the many developments from our research efforts, which are focused on identifying novel drug candidates through our Wnt therapeutics program, and our leukemia therapeutic antibodies program.

There has been a growing interest and expectation in the scientific community surrounding the Wnt pathway. Our discovery of it and continued research on NU206 and its mechanism of action has allowed us to gain a deep understanding of the Wnt pathway. Details of this research were recently published in the September 11th issue of the "Proceedings of the National Academy of Sciences," and we expect papers on additional targets from this program to be published soon.

During this research we have learned that the Wnt pathway modulates cell growth and regeneration in the skin, bones, and gastrointestinal tract, as well as potentially playing a role in cancer.

As such, our program targets a broad range of indications, where cell regeneration and differentiation are important.

As many of you are aware, there has also been a good deal of interest in the area of therapeutic monoclonal antibodies for the treatment of blood cancers. There is unmet medical needs for treatment options for acute myelogenous leukemia and refractory chronic lymphocytic leukemia, and monoclonal antibodies represent the most exciting class of drugs to treat these diseases.

We will be presenting two posters at the ASH meeting focused on our findings [with the] antibody program in addition to the alfimeprase Phase 3 test recruiting data.

I'll now turn the call over to Lee.

Thank you, Michael, and good afternoon, everyone. After the close of the market today we released our financial results for the third quarter of 2007, and I will review the highlights of those results.

With respect to our consolidated statement of operations for the third quarter of 2007, we recorded a net loss of $14.4 million, or $0.27 a share, compared with a net loss of $26.7 million, or $0.51 a share, for the third quarter of 2006.

Revenues in the third quarter of 2007 were approximately $100,000, compared with $900,000 for the same period in 2006. The decrease in revenues in Q3 of 2007 is due to the recognition in the second quarter of 2007 of the balance of Bayer's upfront license fee, which previously was recognized on a straight-line basis over the performance period of our collaboration agreement.

Operating expenses for the third quarter of 2007 were $16 million, compared with $29.7 million in the 2006 quarter.

R&D expenses were $9.5 million in 2007, and $23.1 million in the prior-year quarter; net of collaboration partner cost-sharing credits of $300,000 and $8.1 million respectively. The decrease in net R&D expenses in 2007 was primarily due to a decrease in spending on alfimeprase as a result of the refocusing of the Company's alfimeprase development programs.

General administrative expenses were $4.2 million for the third quarter of 2007, compared with $6.6 million for the 2006 quarter. The decrease in G&A expenses were primarily due to decreased personnel costs, commercialization-related expenses for alfimeprase, and occupancy costs.

The Company also incurred restructuring expenses of $2.3 million for the third quarter of 2007 as a result of a reduction in workforce intended to realign the Company's organization. Included in the restructuring expenses were $1.4 million of cash termination benefits and $900,000 of non-cash stock-based compensation.

Non-cash employee stock-based compensation expense was $800,000 in the R&D line item and $1.2 million in the general and administrative line item for the third quarter of 2007.

Turning to our balance sheet, we ended the third quarter of 2007 with $117.3 million in cash, cash equivalents, short-term investments, and restricted cash. Our net cash used in operating activities was $1.5 million for the third quarter of 2007, and $32.2 million for the first nine months of 2007. This reflects the $15 million received from Bayer in the third quarter related to the termination of a 2006 collaboration agreement between Nuvelo and Bayer.

The $15 million is included in the balance sheet as deferred revenue and will not be recognized as revenue until Bayer decides whether to reenter into its alfimeprase collaboration with Nuvelo, at the time of initiation of a pivotal trial in stroke.

I'd now like to turn to our financial guidance. As stated on our last call, Nuvelo continues to expect operating expenses to be $65 million and $70 million for the full year 2007, and expects net cash used in operating activities for 2007 to be between $45 million and $50 million.

The net cash used range excludes any investment we may make in Archemix common stock under our collaboration agreement.

As a reminder, if Archemix has an initial public offering, Nuvelo is obligated to invest an amount equal to the lesser of 15% of the offering proceeds or $10 million. In addition to having more than two years of operating cash on hand, we have also recently paid off the balance of our loans from Silicon Valley Bank and Dr. Rathmann, and we are currently debt-free.

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

Thank you, Lee. As you have heard today, we are making progress in our programs and we remain focused on achieving our key value-driving deliverables.

For alfimeprase, we expect to initiate a Phase 2 CARNEROS trial in acute ischemic stroke before yearend.

Present data from the Phase 3 SONOMA-2 trial and catheter occlusion at the ASH meeting December, and complete and announce topline data from the ongoing SONOMA-3 trial in the first half of 2008.

We also expect to initiate a Phase 1 trial within NU206 in the first half of 2008, and we plan to initiate a Phase 1 trial with our direct thrombin inhibitor, NU172, by yearend or in the first quarter of 2008, and expect to see data from this trial next year as well.

Thank you, and we look forward to reporting our progress.

Operator, can we -- can you please poll for questions?

(OPERATOR INSTRUCTIONS) And your first question comes from the line of Mr. Graig Suvannavejh of UBS. Please proceed.

Hey, Ted, how are you?

Good, Graig, how you doing?

Good. Actually, it seems to be a pretty clean quarter. I just had a curious -- curiosity about your relationship with Archemix and your obligation to -- on their potential IPO. Long term, how are you thinking about that particular investment?

Well, Lee may have something to add, but I would just say that we entered this relationship after having an initial relationship with Archemix where it was a 50-50 term relationship. And based upon, quite frankly, a lot of the things that we liked about that collaboration, we wanted to be in a position to really lead the programs and have more of a licensing arrangement with Archemix.

So we modified that deal and one of the considerations that we provided Archemix in changing that deal was a willingness to participate in the idea, which we're very glad to do because obviously it's based largely upon much of the work that we've been doing with them.

The obligation isn't really significantly financial. It isn't really of financial significance that it's really a burden for us even at this stage.

But Lee, if you want add to that?

I think all I would say, Graig, is that we feel very good about the relationship. We feel good about the compound that we expect to be putting in the clinic shortly and optimistic about the proof-of-principle data that we're looking to sometime next year.

So in terms of news flow associated with our investment, we're quite optimistic. That said, we're not an investment company. And so at the appropriate time consistent with our investment policies, we would look to monetize the investment. But we don't feel any particular pressure to do so with any -- within any timeframe given our strong cash position.

And the amount of money is certainly within the range of what one would see for an upfront payment even for a compound of the nature that we just gained in the collaboration.

And I -- could I just follow-up, can I just confirm comments around how comfortable you are with cash? And did I hear that you've got two years' worth of cash in your opinion?

Yes, I think what I would say, we obviously haven't given estimates for future years beyond 2007. But if you look at our cash position as of the end of the quarter at a little over $117 million and a cash-burn this year between $45 million and $50 million, using that as a rough proxy, we are comfortable that we have at least two years.

Okay, thank you.

And your next question comes from the line of Mr. Jason Zhang of BMO Capital Markets. Please proceed.

Hi, this is actually Sam Kim filling in for Jason. A couple of quick basic questions. It seems that for SONOMA-3, your dose of 10 milligrams is actually a little bit lower than what we've seen in the past. If we assume 75 kilograms for the average American, can you go through the thought process behind that a little bit?

Thanks for the question. Yes, I think probably what's happening here is you're comparing apples to oranges because you're referring back to the doses we used in our peripheral arterial occlusion trial.

So as the best comparative here is the dose we used in our previous catheter occlusion trial, where we used a dose of 3 milligrams plus a potential second dose of 3 milligrams for patients whose catheter didn't open initially. And the important thing here is that both of those doses were at a concentration of 1.5 milligrams per [ml].

And now in this trial, we've roughly doubled the total dose, say, from a potential total 6 to 10. And more importantly, we've increased the concentration significantly from 1.5 to 5 milligrams per ml because the preclinical work we've done -- and frankly, this is consistent with other work seen in enzymology, suggests that by raising the concentration we can have a profound impact on the ultimate activity. Certainly, that's our hope.

I'm sorry. That's actually a mistake on my part. And then for your PAO, it seems like -- I would say that ischemic stroke is the far more -- the gravity of ischemic stroke is a lot more serious than PAO and catheter occlusion. So it seems like you're skipping over PAO even though it's more milder or safer to treat. Can you go behind the thought process of that and why you're just going straight for ischemic stroke?

Well, we are very excited about the potential for ischemic stroke. So I'm glad you raised that.

And frankly, we're getting a lot of interest from the investigative community because there is such a huge unmet medical need.

And if you want, we'll go back to first principles, I'd say that's what's driving it, is the huge unmet medical need in stroke, the huge burden, both health-wise and financial, on the health system, coupled with the fact that we think we have the potential for a therapy that could have a real impact and can change the paradigm of treatments.

At a very superficial level, there is a lot of comparisons between catheter occlusion and stroke that makes this attractive to us. In both cases the clogs are very small, where you remember in PAO, the clogs can be huge, they can be up to 60 centimeters in length, but catheter occlusion and stroke they're very small, typically a centimeter or so. And both tend to be freshly formed and amenable to this kind of therapy.

So those are some of the reasons that we're thinking of. And again, also the other thing you could say is that we have a high level of optimism around the delivery system for stroke because there has been a lot of work done in recent years by the neurology community and the radiology community in looking at ways to deliver drugs directly to the clog that's causing a stroke and we hope to take advantage of that with alfimeprase.

So just on the -- on how this trial would be run, I would think that if you have a patient or if someone comes in with a stroke you would want to give them an approved and active drug first before considering an investigational drug. How would that process work in terms of patient consent?

Well, you're exactly right and we've lined up the trial to be consistent with that thinking. So as you know, [TPA] is approved for patients who present ready for therapy within a window of zero to three hours.

Now, unfortunately, the vast majority of patients come into the hospital and are diagnosed ready for treatment somewhat longer than that, and those are the patients that we're looking at in this trial. So we're looking at patients who would not be available to the approved therapy, patients coming between three to nine hours, and those frankly are the ideal patients to test with this new and promising agent.

And then, what about like cath care labs and stuff like that? I would -- how do you account for patients that would go through the -- through that road?

Right now, there is no standard of care for patients in terms of reperfusion after three hours. And what we're basically doing is trying to understand the dose of alfimeprase which can affect reperfusion after the three hours, where there's nothing currently approved.

Okay, thank you.

And your next question comes from the line of Mr. Geoff Meacham of JP Morgan. Please proceed.

Hi, it's actually [Keith Waugh] here for Geoff. Thanks for taking my question. The question I have is actually about exclusion criteria in the for your stroke patients in CARNEROS trials. As -- versus -- are patients who are predisposed to stroke or previous stroke, are they excluded from that trial?

Patients with previous strokes are excluded, right. We're looking for patients who are suffering from the first stroke.

And then the second question is in terms of a follow-up for efficacy of the agent, are you doing any work on brain blood flow imaging to evaluate reperfused areas, that kind of thing?

The principal endpoints we are looking at are restoration of blood flow, so eradication of the clog and restoration of blood flow as seen by angiography and confirmed by CT and MRI.

Okay.

But we're not doing specific perfusion/diffusion scanning.

Okay. And are sites allowed to adlib on if they wanted to look at like an [oxygen water] study or something else?

Sites obviously can do it if they want as long as it's not inconsistent with the protocol but our preference would be if people keep treatment and diagnosis straightforward so that patients can move through the system quickly and with access to the best possible care without any unnecessary studies.

Okay. Thanks a lot.

And your next question comes from the line of Mr. Jim Birchenough of Lehman Brothers. Please proceed.

Yes, hi, guys, a follow-up questions, just on the catheter occlusion study. Can you remind us what the original dose was when that study was initiated?

So the original dose that we studied in Phase 3 trials in catheter occlusion was 3 milligrams, with a potential second dose of 3 milligrams if the first dose didn't open a catheter. And importantly, that was at a concentration of 1.5 milligrams per ml.

In this new revised study we're looking at a dose of 10 milligrams with a concentration of 5 milligrams per ml. And we really believe based on some preclinical data that the increase in concentration could potentially, and we all hope, give a dramatic increase in the activity.

And so to be clear the evaluation of the efficacy and safety endpoints in this study will be just based on this 10 milligram dose, not on the prior data with the two doses of 3 milligrams?

That's absolutely correct.

And just in -- I know it's more of a peripheral treatment, but what gives you comfort on the safety profile and absence of bleeding risk with this higher dose and more concentrated dose form?

Well, we were very happy with the safety profile that we saw in the original trials. So that gives us a sense of comfort. And remember that in PAO, as was pointed out by a previous person, the doses that we used were substantially greater than this.

So we feel we're within a ballpark that we understand well and can be comfortable with.

And just a final question, as we look to assess the risk benefit in stroke, when should we expect to see full publication or presentation of the PAO data?

Well, I can tell you that we've submitted the PAO data now to a major medical meeting. And we're all waiting to hear back if we had the publication accepted. And if it has been, then we'll be sure to announce the date very quickly.

Great. Thanks for taking the questions.

At this time, we will conclude the q-and-a portion of this call. I would like to turn the call back over to Dr. Ted Love.

Please proceed, sir.

I'd like to conclude by thanking you all for joining us today. We hope to see many of you soon and we wish you all a good day.

Thank you for your participation in today's conference. You may now disconnect. Good day.