Oruka Therapeutics Inc (ORKA) 2007 Q4 法說會逐字稿

Good afternoon, and welcome to Nuvelo's fourth quarter 2007 and year end results conference call. Our presenter for today's call are Dr. Ted W. Love, Chairman and CEO, Dr. Michael Levy, Executive Vice President, Research and Development, and Lee Bendekgey, Senior Vice President, CFO and General Counsel.

Presentations by Nuvelo management on this conference call will include statements regarding our anticipated financial results and operating use of cash in fiscal year 2008, the timing and progress of Nuvelo's clinical stage and research programs, the potential benefit that's patient may experience from the use of our clinical stage compound and the expenses, revenues and potential for profits from sales of any drugs, 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 in 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, risk relating to regulatory approval, enrollment rates for patients in our clinical trials, changes in relationship with strategic partners and dependence upon strategic partners for the performance of critical activities under collaborate agreements, stock market conditions, the impact of competitive products and technology changes and uncertainties relating to our ability to obtain funding. These and other factors are identified and described in more detail in the Nuvelo filings with the SEC including without limitation Nuvelo's quarter report on Form 10-Q for the quarter September 30th, 2007 and subsequent filings. We disclaim any intent or obligation to update these forward-looking statements. I would now like to turn the call over to Dr. Ted W. Love, Chairman and CEO.

Thank you all for joining us this afternoon to review Nuvelo's fourth quarter and year end financial results and accomplishments. With me today are Dr. Michael Levy, our Executive Vice President of R&D, and Lee Bendekgey, our Senior Vice President and Chief Financial Officer. Michael will discuss the progress we've made in our clinical programs and then Lee will provide an overview of our 2007 fourth quarter and year end financial results as well as guidance for 2008.

In 2007 we restructured and refocused the company to make the best use of our available resources. With a strong financial foundation, and an experienced research and development team in place, we focused our efforts on the programs with the highest probability of success that could drive near term value. We've been executing on this strategy and in the first half of this year, we will have proof-of-concept data from both Alfimeprase capital occlusion and the NU 172 program. I will now turn the call over to Michael to discuss these clinical programs as well as our longer term pipeline opportunities including Alfimeprase stroke and NU 206.

Thank you, Ted. I'll begin with an over view of our Alfimeprase strategy and an update of the status of our Alfimeprase program. As you know, we are pursuing two programs with trials ongoing in both catheter occlusions and stroke. In each indication we are leveraging a different potential advantage of Alfimeprase. In catheter occlusion we're looking to exploit the potential speed of Alfimeprase which results from it's direct action on the fibrin. The goal here is to offer rapid restoration of catheter function to allow prompt delivery of life saving therapies. Design proposition for alfimaprase in catheter occlusion is to restore function with similar efficacy to [cath block lipase] which is currently approved in this indication but in a much shorter time frame.

In stroke, we're interested in the potential of the drug's unique mechanism of action to provide an attractive safety profile. Alfimaprase's thrombolytic activity appears to be localized at the site of delivery because it is rapidly inactivated by alpha 2 microglobulin as it [indistinct] away from the site of delivery and into the general blood circulation. As a consequence, this can reduce the incidence of hemorrhagic conversion which is the conversion of ischemic strokes into hemorrhagic strokes and potentially improve the safety profile. As we know safety is critical for success in stroke. Both programs are currently enrolling phase 2 trials in order to determine whether these drug characteristics will translate into improved clinical [autopsy].

In August 2007 we initiated the Sonoma 3 trial with Alfimeprase in catheter occlusions. This is an open label phase 2 trial evaluating a single dose of 10 milligrams with a concentration of 5 milligrams per mil of Alfimeprase in up to 100 patients with occluded central Venus catheters. The primary end point is restoration of catheter function at 15 minutes. We're coming to the end of the steady enrollment and plan to report top line data from this trial within the next few months. We're also making strides with our stroke program. In December 2007, we began enrollment in [cornelus 1], our safe proof-of-concept trial of Alfimeprase in acute ischemic stroke. Cornelus 1 is a multi center open-labeled dose escalation study that will enroll approximately 100 patients within three to nine hours within stroke onset. We will initially be investigating 1, 5 and 10-milligram bolus doses to evaluate the safety and efficacy of intrarterial, catheter directed Alfimeprase. The primary efficacy in one of these trials is restoration of blood flow within 120 minutes of treatment with Alfimeprase.

Safety will also be assessed, including the rate of symptomatic intracerebral hemorrhage at 24 hours. We've been granted fast track designation for Alfimeprase in stroke which is a reflection of both the serious unmet medical need and the potential for Alfimeprase in the syndication. As you know, therapeutic options for patients with stroke are limited due to restrictions on the way currently approved drugs can be administered following a stroke. We believe that a safer more efficacious interarterial therapy has the potential to change the treatment paradigm for stroke and that a product candidate such as Alfimeprase could provide the opportunity to rapidly restore flow and expand the treatment window beyond the current three hour time frame.

Switching now to NU 172, our short acting direct thrombin inhibitor. We initiated our phase 1 trial with NU 172 in January of this year. The single center trial will investigate whether NU 172 can produce profound anti-coagulation which is then 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. We're also providing safety, tolerability and pharmacokinetics of escalating doses of NU 172. The trial is being conducted in approximately 30 healthy male volunteers and is progressing according to plan. The first two cohorts have been successfully dosed and we expect to provide top line data in the second quarter. We also remain on track to initiate a phase 1 trial of NU 206, our Wnt pathway modulator in the first half of 2008.

NU 206 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 to its ability to promote regeneration of gastrointestinal epithelial cells. We have several promising programs under way and a proven track record of effectively moving drug candidates through the various stages of clinical development. We maintain an aggressive and [supple] approach to deriving value to our pipeline and look forward to sharing our progress over the coming months. I'll now turn the call over to Lee.

Thanks, Michael and good afternoon, everyone. After the close of the market today, we released our financial results for the fourth quarter and full year 2007 and I will cover some of the highlights of those results. With respect to our consolidated statement of operations for the fourth quarter of 2007, we reported a net loss of $11.6 million or $0.22 per share compared to a net loss of $65.3 million or $1.23 per share for the fourth quarter of 2006. For the year ended December 31, 2007, the net loss was $12.3 million or $0.23 per share compared to a net loss of $130.6 million or $2.54 per share for the full year 2006. Revenues in the fourth quarter of 2007 were $100,000 compared to $900,000 for the same period in 2006. Revenues for the year ended December 31, 2007 were $46.9 million, compared to $3.9 million in the prior year.

The increase in revenues for the full year is due to the recognition of the remaining unamortized balance of the $50 million up front license fee that we received from Bayer under the collaboration agreement terminated in June 2007. The up front license fee was originally recorded as deferred revenue and was previously recognized on the a straight line basis over the estimated performance period of our collaboration agreement.

Research and development expenses were $9.2 million in the fourth quarter, 2007, compared to $39.4 million for the prior year quarter. R&D expenses were $42.7 million for the full year 2007, and $89.4 million for the full year 2006. The decrease in 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 development program.

In addition, in the fourth quarter of 2006, we took a noncash charge of $21.2 million to expense previously capitalized put until trial supplies. Noncash employee stock based compensation included in R&D expenses totaled $800,000 and $3.7 million for the quarter and year ended December 31st, 2007, compared to $1 million and $4.6 million for the same period in 2006.

General and administrative expenses were $3.9 million for the fourth quarter of 2007, compared to $6.6 million for the 2006 quarter. For the full year, 2007, G&A expenses were $20.8 million compared to $30.6 million for the full year 2006. The decrease in 2007 was primarily due to decreased personnel costs, commercialization related expenses for Alfimeprase and occupancy expenses. Noncash employee stock-based compensation included in G&A expenses totaled $1 million and $5 million for the quarter and year ended December 31st, 2007 respectively, compared to $1.1 million and $6.6 million for the same period in 2006. Operating expenses for the fourth quarter, 2007 were $13.1 million, compared to $70.5 million for the same period in 2006.

For the full year, 2007, operating expenses were $65.8 million, compared to $144.5 million for the full year 2006. For the full year 2007 operating expenses were $65.8 million compared to $144.5 million for the full year 2006. Included in the full year 2007 operating expenses were restructuring expenses of $2.3 million, resulting from a reduction in work force in the third quarter intended to realign the company's organization. Included in the restructuring expenses were $1.4 million of termination benefits and a $900,000 noncash charge for stock-based compensation.

Turning to our balance sheet, we ended the fourth quarter of 2007 with cash , cash equivalents and short term investments of $103.6 million. Our net cash used in operating activities was $13.6 million for the fourth quarter and $46 million for the full year 2007. I'd now like to turn to our financial guidance. We expect net cash used in operating activities for 2008 to be in the range of 50 to $55 million. And operating expenses to be between $55 million and $60 million for the full year. The $5 million difference between net cash used and operating expenses is primarily due to stock-based compensation and other amortization expenses.

In summary, we're prudently managing our resources while driving our current development and research programs forward. Our goal was to end 2007 with approximately two years cash on hand in order to provide ample resources for the achievement of our clinical milestones and we've accomplished that goal. Thank you and I'll now turn the call back over to

Thank you, Lee. As you've heard today, with over $130 million in cash, we continue being a strong financial position and have the resources necessary to rapidly move our drug candidates forward. We have near term proof-of-concept results coming in the first half of this year, with both Alfimeprase in catheter occlusion and with 172. If either of these two trials report encouraging reports we will view this as a significant value generator for the Company. We're also on track to initiate our phase one trial with NU 206 in the first half of this year and continue to enroll patients in our phase two trial with Alfimeprase in acute ischemic stroke. Achieving our milestones is a priority and we look forward to reporting our progress throughout the year. Operator, can you please post for questions?

We'll pause for just a moment to compile the Q&A roster. Your first question is fro the line of Geoff Meacham with JP Morgan.

Hi guys, this is Terry calling in for Geoff today. Just a couple of quick questions for you guys. In terms of the SONOMA three trial, can you just give us an idea of what you're going to need to see in terms of results from that efficacy from that trial in order to look to move into face phase 3 trial and then, also can you give us an idea of when we -- when you would be thinking about beginning a phase three trial? And I have a follow-up as well.

Thanks for the question. And that's a good question. I think what we'd be looking for in this particular case is looking to exploit the speed of Alfimeprase which results from it's direct action on a fibrin. So the goal really with this trial is to offer rapid restoration of catheter function and our prompt delivery of life saving therapies. So the value proposition really for Alfimeprase in catheter occlusion is to restore function with similar efficacy to Cathflo but in a much shorter time frame. That's really what we'd be looking for.

And when would you be thinking about potentially moving it into phase three trial? Would that be late 2008 or early 2009?

Well we haven't given any color on that. Right now what we're focused on is completing this trial which incidentally is going very well. And looking at the data. And once we have that data in hand, if everything looks positive, we embark upon conversations with the FDA to design and agree our phase 3 pivotal development program and then really take it from there.

Okay. And then to follow up on guidance, it looks like year-over-year pretty significant declines and that was expected and I'm just trying to get an understanding if R&D or SG&A, if one area is going to see more significant declines year-over-year?

Well, I think what you will see is roughly a continuation of what you saw in 4Q where there were significant declines in both. But the magnitude of the decline on the R&D line was as a proportion higher simply because of the refocusing of the R&D -- or the clinical development strategy, particularly with regard to Alfimeprase. I think on the G&A side we've gotten about as tight with our G&A dollars as you can be and still be a publicly traded Company. So we continue to look at that. But that side of the expense story is a little bit -- it's less elastic, if you will.

Okay. Thank you.

Yep.

Your next question is from the line of Liana Moussatos.

I was wondering if Michael could repeat what he said about NU 172 in the first half of '08. Something about starting with a modulator, another trial? Did I get that wrong?

Well with NU 172, that's our short acting anticoagulant, what I mentioned is we're in a phase one trial, currently that's progressing very well and that we've already completed the first two cohorts of patients. You might be thinking of NU 206 which is our Wnt pathway modulator, where we're gearing up to begin a phase one trial first half of this year.

Okay. And the EPS reported, is that non-GAAP?

No, that's GAAP.

Okay. Thank you very much.

Sure Liana.

Your next question is from the line of Graig Suvannavejh from UBS.

[Luke] calling for Graig Suvannavejh. I had a couple of questions. First questions are based on the finance and the rest are on the drug trial. So on the financial side, I was wondering, are you estimating that you will be starting a stage three trial and as occlusion or -- I'm trying to get a feel for what is and is not including in the 55 to 60 mill in operating expense.

As Michael said, we haven't given any particular guidance in terms of a timing of the initiation of a stroke trial. And so -- of phase 3 catheter occlusion trial, I'm sorry, and so all I can say really is that the forecasted budget that we've outlined for you on the financial side takes in our base case assumptions in terms of the timing of the progress of that trial. But beyond that, I think I probably would not give any color except to say that when we are able to give more specific guidance on the future development path in catheter occlusion, we'll let you know if there's any adjustment at that time.

Let me try asking it this way then. The current R&D spend, can you give me like a rough break down of what's going on, how much is being spent in control versus, catheter occlusion versus the other R&D efforts.

Well if you look at our -- well if you look at our 10-K we do break those down at least among the clinical stage programs fairly clearly. And you'll see that in our 10-K. All I can say at this point is that Alfimeprase has two phase 2 programs and the other two compounds are in phase 1. And our research organization is pretty modest. So you can probably come to some reasonable conclusions as to how the R&D line breaks out as among those.

Okay. Let's see. And the next question was on the strokes trial. The phase 2 trial. Can you give us any color on how the enrollment is going, kind of like slower, faster, in line with expectations and about when you could expect to get a top end result?

Well, I can give you some color on that. I can tell you that in all honesty, like many of these trials, it started a little slow as we built up a number of centers participating. It's a difficult area of clinical research. But we're very pleased with the progress we've made and we feel that we're on plan now that things are going well. In terms of when we'll complete, what we like to do and what we've done with our other programs, is we generally wait until we're quite a bit into the program and we can give you an enrollment rate based on data rather on guesses and from that, of course, give you an expected completion date. But let me just reiterate by saying that we're very happy with the way the trial is currently progressing.

Okay. And the key dosage often [indistinct] is delivered through catheter delivery in the strokes trial?

That's correct. It's delivered through a micro catheter right up to the site of the clot.

So it's actually in direct contact, right next to it?

Direct contact with the clot, yes.

Okay. All right. I'll get back into queue for further follow-up questions.

Thank you.

And there are no further questions at this time. Dr. Love, do you have any closing remarks?

I do. I would like to end by simply thanking everyone for joining us on the call today. We hope to see many of you up at one of the upcoming financial conferences and I wish you all a good day.

Thank you for joining us on our call today. We hope to see many of you at our upcoming financial conferences. Have a good day.