Oruka Therapeutics Inc (ORKA) 2008 Q2 法說會逐字稿

Good afternoon. My name is Christy and I will be your conference operator today. At this time I would like to welcome everyone to Nuvelo's 2008 second-quarter financial results conference call. (OPERATOR INSTRUCTIONS).

Presentations by Nuvelo management on this conference call will include statements regarding our anticipated use of cash in fiscal year 2008, the timing and progress of Nuvelo's clinical stage and research programs, the potential benefits that patients may experience in the use of our clinical stage compounds, the potential market for our clinical stage compounds, 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 discoveries, clinical development processes, enrollment rates for patients in our clinical trials, changes in relationships with strategic partners and dependence upon strategic partners for the performance of 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's filings with the SEC, including without limitation, Nuvelo's Quarterly Report on Form 10Q for the quarter ended March 31, 2008, and subsequent filings. We disclaim any intent or obligation to update these forward-looking statements.

With that I will turn today's conference over to Dr. Ted W. Love, Chairman and CEO, and Lee Bendekgey, Senior Vice President, CFO and General Counsel. Gentlemen, please begin.

Thank you all for joining us this afternoon to review Nuvelo's 2008 second-quarter financial results and accomplishments. With me today is Lee Bendekgey, our Senior Vice President and Chief Financial Officer.

Over the past quarter we've been building momentum both internally at Nuvelo and among external audiences as we aggressively and efficiently move our clinical programs and research efforts forward. We recently met with Kirin Pharma, our NU206 partner, to discuss our development strategy. They are very excited that NU206 is moving into the clinic and are committed to working closely with us to develop these products and evaluate additional indications.

We also had an insightful and encouraging advisory board meeting for NU172 where we shared the results of our Phase IA trial and our plans for the program moving forward. I'll discuss each of these clinical programs and then I'll turn the call over to Lee to provide an overview of our second-quarter financial results.

Let's begin with an update on our lead candidate, NU172, which is a short-acting aptamer designed to directly inhibit thrombin's ability to stimulate blood clot formation. We are evaluating NU172 for its potential to address markets for short-acting anticoagulation if needed such as medical and surgical procedures including coronary artery bypass graft surgery, or CABG, percutaneous coronary interventions, or PCI, and kidney dialysis. We believe that NU172 could offer an improved approach with more predictable anti-coagulant activity and a rapid onset and offset of anticoagulation without the use of an antidote.

In April we announced positive proof-of-concept data for NU172, demonstrating its ability to produce dose-dependent increases in anticoagulation, measured by activated clotting time, or ACT, with a rapid onset and offset of anticoagulation. On the safety side NU172 was well tolerated with no serious adverse events.

Based upon the encouraging findings to date with NU172 we've now moved the program into a Phase 1B trial evaluating a bolus dose followed by escalating infusion doses in healthy male volunteers. The escalating infusion doses are being given for up to four hours which significantly exceeds the average dose of CABG surgery. So far we've completed three cohorts of the trial and the results continue to be encouraging. Specifically, we've been able to keep subjects titrated at a stable ACT throughout the infusion, and the drug continues to be well tolerated. We expect to complete the final cohort of this study and we expect to report topline data for this trial in the next several weeks.

With the NU172 program moving forward so rapidly we recently convened an advisory board meeting of prominent thought leaders in anticoagulation medicine to discuss the NU172 data to date and plan next steps. Physicians from the Cleveland Clinic, Brigham and Women's Hospital and the University of Vermont participated in the meeting and shared their extremely valuable experience and insight from their previous involvement with bi-valve (inaudible) in other anticoagulation trials.

We began the meeting with a detailed discussion of the ideal profile for an anticoagulant for use in medical and surgical procedures. The advisory group not only reinforced many characteristics that we anticipated; they also highlighted several characteristics of NU172 which could address limitations of currently available therapies. For example, pre-clinical studies have shown that NU172 is able to work in stagnant blood. Our advisors stressed the importance of this attribute and explained that this attribute is one of the reasons that Heparin is still used in these procedures versus other anticoagulants. Also NU172 is cleared through the blood, and they viewed this as a distinguishing factor from other anticoagulants that are renally cleared and may require dose adjustments in renally impaired patients. Patients undergoing CABG surgery or dialysis are often renally compromised; thus, this could be a clinically important advantage for NU172.

In evaluating the various possible indications for NU172, the advisory board highlighted its potential in CABG procedures due to its ability to work in stagnant blood, its non-renal clearance and its rapid onset and offset of anticoagulation without the use of an antidote. The current standard of care for these procedures is anticoagulation with Heparin followed by protamines to reverse anticoagulation once the procedure is complete. Once an antidote has been given it is very hard to anticoagulate the patient again. This can be an issue in CABG procedures as patients sometimes need to go back into surgery.

The board also stressed kidney dialysis as a procedure where NU172 could potentially offer an improved anticoagulation approach due to several aspects of its profile. As you know hemo-dialysis requires anticoagulation to prevent blood from clotting in the extracorporeal circuit or dialysis machine. And as an outpatient medical procedure, rapid reversal of anticoagulation is important to allow discharge of the patient without increased bleeding risk. Again NU172's ability to work in stagnant blood and its non-renal clearance could be important differentiators from the other anticoagulant options available to physicians.

Finally it was pointed out that NU172 may have the potential to avoid patients being exposed several times per week to the pro-thrombotic effects of Heparin and protamines. As you know, 40% of dialysis patients die due to cardiovascular events. Increased pro-thrombotic activity is a serious concern in these patients, and it is believed to contribute to the cardiovascular mortality. An anticoagulant that avoids introducing pro-thrombotic risk could have a major impact on reduced cardiovascular risk and improve survival in dialysis patients.

Based on NU172's profile and input from the advisory board, we've come to see dialysis as a potential priority. We believe that the unmet medical need in dialysis may be greater than previously appreciated, particularly if reduced pro-thrombotic activity translates into reduced cardiovascular mortality. As a result we remain focused on CABG as our lead indication, but we are also excited to begin to understand potential roles for NU172 in dialysis. We remain on track to begin Phase II in the fourth quarter of this year or the first quarter of 2009.

Let's now turn to NU206. As you know NU206 is a recombinant, secreted protein that acts as a key regulator of the Wnt pathway. The Wnt pathway is critical in regulating development, growth and differentiation of certain cells in the human body. In order to accelerate NU206 clinical development, we are about to initiate a healthy, normal volunteer study in Australia. As you can imagine enrolling a healthy volunteer study should be much faster than a cancer trial, and we are scheduled to dose the first patient in the healthy volunteer, single, ascending dose study in the next several weeks. We plan to report data from this trial in the second half of this year and to initiate a multiple ascending dose trial in the fourth quarter of this year or the first quarter of next year. The information we gather from these two healthy volunteer trials will provide us with useful insight to the multiple indications we plan to investigate, including treatment of gastrointestinal diseases such as cancer therapy induced mucositis and inflammatory bowel disease as well as bone disease and wound healing.

In summary we are working aggressively to advance our clinical programs with the goal of becoming a Phase II development company toward the end of this year or the beginning of 2009. I will now turn the call over to Lee.

Thank you, Ted, and good afternoon, everyone. After the close of the market today we released our financial results for the second quarter of 2008, and I will cover some of the highlights of those results. Revenues in the second quarter of 2008 were approximately $15.1 million compared to $45.8 million for the same period in 2007. $15 million of the revenue for the second quarter of 2008 was a result of the recognition of the $15 million termination payment received from Bayer in June 2007. That payment had been recorded as deferred revenue and was recognized as revenue in May 2008.

The second quarter 2007 revenue was a result of a termination of Nuvelo's collaboration agreement with Bayer in June 2007. Nuvelo recorded as revenue $45.8 million of the $50 million up-front license fee that it received from Bayer in January 2006, which was originally recorded as deferred revenue.

With respect to our consolidated statement of operations for the second quarter of 2008, we reported a net loss of $200,000 or $0.00 per share compared with net income of $29 million or $0.54 per share for the same period in 2007. In the second quarter of 2008 we reported a $4.7 million charge for impairment of goodwill. The impairment was a result of the continued decline in our market capitalization subsequent to the announcement of our decision to end alfimeprase clinical development.

Research and development expenses were $7.6 million in the second quarter of 2008 compared to $11.2 million for the prior year quarter. The decrease in R&D expenses was primarily attributed to a decrease in personnel-related expenses due to a reduction in head count. General and administrative expenses were $3.7 million for the second quarter of 2008 compared to $7.3 million for the 2007 quarter. The decrease in general and administrative expense in 2008 was primarily related to a $1.8 million decrease in personnel-related expenses and the 2007 non-cash impairment charge totaling $1.1 million to write off software implementation costs.

Operating expenses for the second quarter of 2008 including the $4.7 million non-cash goodwill impairment charge were $16 million compared with $18.5 million for the same period in 2007.

Turning to our balance sheet we ended the second quarter of 2008 with cash, cash equivalents and short-term investments of $76 million. Our net cash used in operating activities was $11 million for the second quarter.

I would now like to turn to our financial guidance. We are reiterating our prior guidance for 2008 net cash used in operating activities to be in the range of $43 million to $48 million. As a result of the goodwill impairment charge in the second quarter of 2008, we expect total operating expenses in 2008 to be in the range of $52 million to $57 million for the full year. The $9 million difference between net cash used in operating activities and operating expenses is primarily due to stock-based compensation, goodwill impairment, restructuring and other amortization costs.

In summary we recognize the importance of prudently managing our resources. We've worked diligently to maintain a strong financial foundation with close to two years of cash on hand while driving our clinical development and research programs forward, and we will continue to make this a priority. Thank you, and I will now turn the call back over to Ted.

Thank you, Lee. As you've heard today we continue to be in a strong financial position and have the resources necessary to rapidly move our drug candidates forward. Achieving proof-of-concept for NU172 was a major milestone for Nuvelo, and we are encouraged by the advisory board's enthusiasm as we complete our Phase I program in the upcoming weeks and move into Phase II development toward the end of this year or the beginning of next year. For NU206 the initiation of our Phase I single ascending dose trial in healthy volunteers is imminent, and we expect data from this trial before year end. We also plan to initiate a multiple ascending dose trial in healthy volunteers toward the end of this year or the beginning of next. We also continue to move our Wnt therapeutic and leukemia therapeutic research programs forward and expect to identify a new candidate from one of these programs this year.

We are well on our way to becoming a Phase II company and look forward to reporting our progress as we continue to achieve our milestone. Operator, can you please poll for questions?

(OPERATOR INSTRUCTIONS). Your first question comes from the line of Liana Moussatos of Pacific Growth.

For Lee, going forward recognizing deferred revenue or any other kind of amortized payments, what should we expect?

The only deferred revenue that you can expect to continue to see, Liana, is the amortization of an upfront payment we received some years ago from Kirin for the NU206 collaboration, and that amounts to around $100,000 a quarter. So for example in this quarter that was the 0.1 of the $15.1.

Okay, so no more $15 million payments in the near future for revenue?

Well, maybe there will be some other payments, but not currently in contract, not.

Okay. All right. Thank you very much.

Yes.

(OPERATOR INSTRUCTIONS). There are no further questions at this time. Mr. Love, are there any closing remarks?

Sure, I'd be happy to do that. First of all it sounds like no questions; things were pretty clear. But I do want to thank everybody for joining us as usual on the call today. We look forward to updating you all on future calls as well as at upcoming meetings, and I wish you all a happy and a good day.

This does conclude today's conference call. You may disconnect.