Syndax Pharmaceuticals Inc (SNDX) 2016 Q4 法說會逐字稿

Good day, ladies and gentlemen. And welcome to a Syndax fourth-quarter 2016 conference call.

(Operator Instructions)

I would now like to introduce your host for today's conference, Melissa Forst. Ma'am, you may begin.

Thank you, Operator. Welcome, and thank you to those of you joining us on the line and the webcast this afternoon, for a view of Syndax's fourth-quarter and year-end 2016 financial and operating results.

I am Melissa Forst, with Argot Partners. With me this afternoon to discuss the results and provide an update on our progress are Dr. Briggs Morrison, Chief Executive Officer; and Rick Shea, Chief Financial Officer. Also joining us on the call today for the question-and-answer session is Michael Metzger, President and Chief Operating Officer of Syndax.

This call is being accompanied by a slide deck that has been posted on the Company's website. So I would ask you to please turn to our forward-looking statements on slide 2.

Before we begin, I would like to remind you that any statements made during this call that are not historical, are considered to be forward-looking statements within the meaning of the Private Securities Litigation Act Reform Act of 1995.

Actual results may differ materially from those indicated by these statements as a result of various important factors, including those discussed in the risk factor section in the Company's most recent annual report on Form 10-K and other reports filed with the SEC. Any forward-looking statements represent our views as of today March 2, 2017 only.

A replay of this call will be available on the Company's website, www.syndax.com following the call. You can find the dial-in information for the replay in today's press release, as well as on the Company's website.

I would now ask you to turn to slide 3 and I'm pleased to turn the call over to Dr. Briggs Morrison, Chief Executive Officer of Syndax.

Thank you, Melissa. Good afternoon, and thank you to everyone who has joined us on our conference call and webcast.

I would like to start by summarizing some of our key achievements in 2016, a year that proved to be transformational for Syndax. I will then review the progress we've made since our last earnings call. And Rick Shea, our new Chief Financial Officer with then provide a financial update. And following that, we will take your questions.

Slide 3 summarizes some of our major accomplishments last year. First, at about this time last year, in fact, exactly one year ago today, we completed our initial public offering, raising $50.5 million in net proceeds; allowing us to focus the remainder of the year on our clinical and business objectives.

Second, we made great progress in advancing our clinical programs. Under the sponsorship of the Eastern Cooperative Oncology Group, American College of Radiology Imaging Network, otherwise referred to as ECOG-ACRIN, and the NCI, enrollment in our phase 3 registration trial in hormone receptor-positive, HER2 negative breast cancer accelerated. And ECOG-ACRIN believes that the trial is on track to complete enrollment in the fourth quarter of this year.

Together with three leading pharmaceutical companies as our partners, we also progressed three immuno-oncology studies called the ENCORE studies. The ENCORE studies are a proof of concept studies evaluating our class 1 specific HDAC inhibitor, entinostat, in combination with three different checkpoint inhibitors in five separate clinical settings.

Third, we also expanded our pipeline with the addition of SNDX-6352, a potential best-in-class anti-colonating stimulating factor 1 receptor, or referred to as an anti-CSF1R monoclonal antibody that we recently advanced into a phase 1 clinical trial. So overall, as you can see, 2016 was really a very productive year for Syndax. I would like to now turn to the important decision that we are announcing today regarding the initial activity observed with entinostat in combination with Merck's PD1 checkpoint inhibitor, KEYTRUDA or pembrolizumab, in patients with refractory melanoma.

Slide 4 provides a summary of the rationale for this signal-finding clinical trial. Entinostat is extinct from currently marketed HDAC inhibitors. It is class 1 selective molecule, administered orally once per week, and has been well-tolerated as both a monotherapy and in combination. Preclinical data has indicated that entinostat can block function of both myeloid-derived suppressor cells, which is abbreviated MDSCs and regulatory T-cells abbreviated as Tregs.

In a variety of preclinical models, entinostat increased the anti-tumor activity of anti-PD-1 antibodies. With this information in hand, we initiated an early signal-seeking clinical trial in patients with [unresectable] or advanced melanoma.

Slide 5 describes the trial we are conducting. We have enrolled patients with unresectable or advanced melanoma, whose disease has clearly progressed on a PD-1 antagonist. Typically in the nivolumab plus ipilimumab, nivolumab alone, or pembrolizumab alone. The patients are then treated with a combination of pembrolizumab plus entinostat, and are followed for safety and efficacy per the trial protocol.

The first part of the trial was designed to limit enrollment to only 13 patients, prior to evaluating the initial safety and efficacy results. The protocol specifies if at least two patients have a confirmed objective response, enrollment would be reopened and extended to a total of 34 patients.

The picture on the right-hand portion of the slide is meant to illustrate the type of result we hypothesized we might see. It illustrates the size of the patient's tumor over time, showing the tumor clearly progressing on PD-1 antagonist therapy and then showing a confirmed response when the patient is switched to pembrolizumab plus entinostat.

I want to emphasize that this slide is for illustrative purposes only. This is not actual patient data, but rather illustrates what we're trying to accomplish; to reverse resistance to PD-1 antagonist therapy. I should note that we believe this is a very stringent test of a novel mechanism, which accounts for the rationale for our trial designs.

Now let me put the decision we are announcing today in its appropriate context. First, and very importantly we are not releasing any data today. Data will be presented at an appropriate scientific congress at a future date.

Therefore, unfortunately, we cannot answer your detailed questions about the data until the time of that presentation. We have submitted an abstract to ASCO, and hope to be able to share data at that time.

Today, we are simply announcing that the prespecified criteria to reopen enrollment in the refractory melanoma cohort has been met. Second, of the 13 patients enrolled, the majority are still on trial; hence, at this time we do not know what the overall response rate or durability response will be in this group. We, of course, don't know what the overall response rate or durability of response will be in the larger sample of 34 patients.

Nonetheless, we are excited by the decision we are announcing today, as it represents the first clear clinical support for our hypothesis that entinostat can reverse resistance to PD-1 antagonist. Based upon our review of the literature, discussions with members of our Scientific Advisory Board and discussions with other experts in the field of melanoma, we believe the responses we're seeing are very unlikely to be due to pembrolizumab alone.

Slide 6 illustrates the clear unmet need for new treatment options in these patients. We of course, have seen a number of important new medicines approved for patients with metastatic melanoma over the past few years, including BRAF inhibitors, MEK inhibitors, and of course PD-1 and CTLA-4 inhibitors. Yet there are a significant number of patients who have progressive disease despite these approved therapies. We believe current therapies are really quite insufficient for these patients.

Let me now turn to a more general summary of the impressive clinical progress our Team has made since our last call. This is shown on slide 7. I just spoke about the refractory melanoma cohort of ENCORE 601. As I mentioned earlier, we have also completed enrollment in the two non-small cell lung cancer cohorts of ENCORE 601.

While we previously anticipated being able to make the decision to proceed to stage 2 in all three cohorts by the end of the first quarter of this year, it is possible that the decision could extend into the second quarter. As you recall, the decision to progress a given cohort to the second stage of trial requires a prespecified minimum number of confirmed responses.

At this time, a significant number of patients in both of the non-small cell lung cancer cohorts are still being treated, or are awaiting confirmation of a response which requires some time, making it possible that a final decision could occur later than initially anticipated. ENCORE 602, our trial of the combination of entinostat with Roche Genentech anti PD-L1 antibody, atezolizumab, and women with triple negative breast cancer, or TNBC, has completed a safety run-in portion.

Following a thorough review of the safety data, we've begun enrolling the randomized phase 2 portion of the trial at the 5 milligram dose of entinostat. The data from the safety run-in portion of the trial may be presented at a scientific congress in the second half of this year.

ENCORE 603 is our Phase 1b/2 trial in patients with ovarian cancer, testing entinostat in combination with avelumab, an anti PD-L1 antibody in development by the Pfizer Merck KGa Alliance. The ENCORE 603 trial design is very similar to the ENCORE 602 trial, with a safety run-in component followed by a randomized phase 2 component. Since our last earnings call, we have completed enrollment of the first safety cohort and hope to begin the randomized portion sometime in the second quarter of this year.

Our phase 3 trial in hormone receptor-positive, HER2- breast cancer, E2112, has continued to enroll nicely. ECOG-ACRIN continues to project that enrollment could be completed in progression-free survival results available in the fourth quarter of this year. Finally as I noted earlier, since our last call we have initiated our first-in-human phase 1 single ascending dose trial with our newest clinical asset SNDX-6352, an antibody against the CSF1R receptor. So we're right on track with all of our clinical programs and look forward to continue progression of each of these important trials.

Let me now return to ENCORE 601. The table on slide 8 summarizes the patient populations and the criteria we have specified to advance each cohort beyond stage 1. I've noted in the green shading the observation I referenced earlier, the trial has achieved the prespecified objective response threshold in the refractory melanoma cohort, so-called cohort 3. And we have reopened enrollment, targeting a total of 34 patients by the end of this year.

We have also submitted an abstract task on the preliminary data from this first stage. Pending acceptance we hope to be able to provide more data -- more details at that meeting. So with these important announcements about our IO program, I would be remiss if I didn't also remind you of some the details of our phase 3 trial in hormone receptor-positive breast cancer.

Slide 9 depicts -- sorry about that -- slide 9 depicts the trial design for our phase 3 registration trial. As you can see we are developing entinostat in combination with exemestane, an [aromatase] inhibitor, as a potential treatment for patients with HER2 positive -- HR positive, HER2 negative breast cancer who have progressed following treatment with a standard of care. We are conducting this phase 3 program in collaboration with ECOG-ACRIN and the NCI under a special protocol assessment.

As I've mentioned previously, the US FDA granted the entinostat plus exemestane combination breakthrough therapy designation for this indication, based upon positive results from our phase 2b clinical trial, ENCORE 301. That clinical trial treatment with entinostat plus exemestane demonstrated approximately an eight-month improvement in overall survival versus exemestane alone.

We designed a phase 3 trial with two primary endpoints: progression free survival and overall survival. Under the terms of the special protocol assessment results would allow for a potential registration filing on the heels of either positive PFS or positive OS.

As I noted, ECOG-ACRIN continues to expect that enrollment could be completed in PFS results available in the fourth quarter of this year. Assuming the data are positive, we could potentially file a new drug application with the FDA in the first half of 2018.

Moving on to slide 10, I should say based on its anticipated profile, we believe that entinostat has blockbuster potential as a differentiated second- or third-line therapy for the treatment of hormone receptor-positive, HER2 negative metastatic breast cancer. E2112 represents the first phase 3 trial involving a novel mechanism of action in this patient population since the approval of the CDK4/6 targeted agent.

The addressable market, we believe, is sizeable, as it is estimated approximately 34,000 patients go on to receive hormone therapy, as either monotherapy or in combination following first-line treatment. We believe entinostat could see use in uppers of 20% of this population; a meaningful level of uptake in the second- or third-line setting for these advanced patients.

I may now turn to our second clinical asset, SNDX-6352, a potential best-in-class, anti-CSF1R monoclonal antibody that we licensed in July of last year from UCB. As you can see on slide 11, SNDX-6352 is an antibody directed against the ligand binding domain of the cell surface protein CSF1R.

Which plays a critical role in regulating proliferation, survival, and differentiation of cells variously called mononuclear phagocytes, or tumor-associated macrophages. Tumor-associated macrophages are immunosuppressive cells found in the tumor micro environment that can inhibit the ability of tumor-infiltrating lymphocytes to attack and kill tumor cells. This action is thought to make CSF1R inhibitors well-suited for use in combination with checkpoint inhibitors, particularly in cancers where there may be limited activity of checkpoint inhibitors as monotherapy.

SNDX-6352 has demonstrated some unique properties that we believe helped position it as a potential best-in-class follower -- fast follower in this space. These properties include a high binding affinity, an ability to prevent the binding of both IL-34 and CSF1 to the receptor, and its potential synergistic activity with other therapeutic classes. We believe that SNDX-6352 could be effective against a wide variety of cancers in combination with other agents, including immunotherapy checkpoint inhibitors, but also cell therapy, radiotherapy or chemotherapy.

The mechanism of action of 6352 is also synergistic with how we believe entinostat can inhibit the effect of two other immunosuppressive cell types found in the different micro environment, the MDSCs and Tregs. Therefore, we believe the combination of entinostat plus 6352 could potentially have synergistic effects by suppressing these three critical immune suppressor cell types in a tumor micro environment.

We are currently conducting a phase 1 single ascending dose trial of 6352 in healthy volunteers, which we anticipate completing in the second half of this year. And we anticipate starting a multiple ascending dose trial in the third quarter of this year. We should also note, as part of our efforts to accelerate the pace of clinical expiration of our lead assets, we recently entered into a cooperative research and development agreement with the NCI for preclinical and clinical research.

Our Team at Syndax will continue to work with the NCI to develop -- evaluate the therapeutic benefit of both entinostat and 6352, both as monotherapies and in combination with each other, and with a range of other therapies as potential treatments for a range of cancers. We're excited by this collaboration as it will allow us to partner with two leading experts, Dr. Jeffrey Schlom and Dr. James Gulley, and their teams at the NCI to enhance our ongoing efforts to identify the most promising potential applications of both entinostat and SNDX-6352.

Slide 12 summarizes some of the key, upcoming milestones for this year, which include announcement of whether the two remaining cohorts and the ENCORE 601 trial, the PD-1 naive and [pretreated] lung cancer cohorts have achieved their pretty specified efficacy criteria for advancement. And to reiterate, we will be restarting enrollment in the refractory melanoma cohort and expect that cohort to complete enrollment by the end of this year.

We also expect enrollment to be completed in ENCORE 602, our phase 2 combination trial of entinostat and atezolizumab in triple negative breast cancer by the end of the year. And ECOG continues to indicate the phase 2 registration trial of entinostat in hormone receptor-positive breast cancer could complete enrollment by the end of this year as well.

Also shown on slide 12, we expect to advance 6352 into a multiple ascending dose trial in the third quarter, and anticipate presenting results from the ongoing single ascending dose trial in the fourth quarter. For all of these ongoing studies, we look forward to sharing data as they become available at the most appropriate scientific congresses.

With that, I'm delighted now to turn the call over to Rick Shea, who just joined Syndax as our Chief Financial Officer. As you know from our recent announcement, Rick stepped down from his position on our Board of Directors to become our CFO, effective on February 13. He has more than 30 years of experience in a broad range of financial and advisory roles in the biotech industry; most recently serving as CFO of Momenta Pharmaceuticals.

We're very excited to have Rick join us in this new capacity. With that, it is my pleasure to turn the call over to Rick to discuss our financial results and update you on our balance sheet.

Thank you, Briggs.

Turning to slide 13, for the three months ended December 31, 2016, Syndax reported a net loss of $10.8 million, or $0.59 per share. Net loss for the full-year 2016 was $47.1 million, or $3.22 per share. Our R&D expenses in the fourth quarter of 2016 increased to a $8.5 million from $2.6 million from the comparable prior-year period, and for the year ended December 31, 2016, R&D expenses increased to $31.7 million, compared to $9.5 million for the prior year. These increases were primarily due to increased patient accrual costs in E2112, higher expenses associated with the phase 2 expansion of ENCORE 601, and the commencement of ENCORE 602, as well as the upfront payments in 2016 relating to the expanding of the pipeline with SNDX-6352.

Our G&A expenses were at $3 million during the fourth quarter of 2016, and $13.3 million for the year, similar to the prior periods in $2.4 million and $11.6 million. The number of common shares outstanding at December 31, 2016, was 18.2 million shares and with 2.9 million shares of common stock equivalents outstanding, we had a total of 21.1 million shares outstanding on a fully-diluted basis at December 31, 2016. Additional financial details will be available in our 10-K, which we expect to file no later than mid to late March.

We ended the year with cash of $105.3 million, which we believe is sufficient to fund our development programs into mid 2018, and which will enable us to reach our key corporate milestones. We believe that we're in a strong financial position. We will continue to make appropriate and measured investments in building our Company.

I'll now turn the call back to Briggs.

Great. Thanks a lot, Rick. In closing, I'd like to acknowledge my colleagues at Syndax for the invaluable insights into innovative cancer drug development and their unfailing commitment to trying to meet the needs of cancer patients with limited treatment options.

I'd like to thank our collaborators, as well as the patients, the trial sites, and investigators involved in our clinical program. Our solid progress this quarter is a direct result of their collective involvement, as well as the efforts of the Team here at Syndax.

Again, as you can see on slide 14, we believe we have a highly promising portfolio of potential best-in-class assets supported by a robust corporate strategic plan and a financial runway that takes us through several critical value inflection points. Including the anticipated completion of enrollment in both our phase 2 trial of entinostat and triple negative breast cancer and our phase 3 registration trial of entinostat and hormone receptor-positive breast cancer at the end of this year.

We're also pleased by the progress we've made enrolling ENCORE 601 and of course, are pleased by that the melanoma cohort achieved the minimum prespecified efficacy hurdle. Of course, we're waiting to determine whether either of the remaining two cohorts of ENCORE 601 will also successfully meet their respective go criteria for [advancement].

Finally of course, we're pleased to have advanced our second potential best-in-class program, 6352 into phase 1. And we look forward to sharing results from those via single ascending dose trial towards the end of this year. We continue to remain externally focused with respect to business development opportunities that we believe offer an attractive risk reward profile for Syndax to add to its pipeline as evidenced by the decision to in-license 6352.

We're also pleased to remind you that shortly after the close of the fourth quarter, we made an important addition to our Board of Directors and to our Scientific Board of Advisors. In January, we announced the appointment of Pierre Legault to our Board of Directors.

Mr. Legault has extensive executive management experience, including more than 35 years spent executing creative financing strategies, driving corporate development, and constructing value-enhancing transactions for international biotechnology and pharmaceutical companies. In addition, Mr. Legault has significant experience serving on the board of directors, and audit committees of public companies, and has taken over for Rick as the Chair of our Audit Committee as of February 13.

Also, last month we announced the appointment of Dr. Lisa Coussens to our Scientific Advisory Board. Lisa currently serves as the Chair of the Department of Cell Developmental and Cancer Biology, and Associate Director for Basic Research at the Knight Cancer Institute at the Oregon Health and Sciences University. Through her research, she has identified critical immune-regulated pathways that can be targeted therapeutically to block or slow cancer development. Her expertise will help in advancing the development of both entinostat and SNDX-6352 in multiple cancer indications.

I'd also like to mention that AACR abstracts were made available yesterday. We are pleased to note that there will be multiple presentations highlighting entinostat's ability to alter an immunosuppressive tumor micro environment to enhance immunotherapeutic approaches. Specifically, there will be some new data presented in how entinostat inhibits the function of MDSCs to enhance anti-PD-1 and vaccine approaches in preclinical models of renal cell cancer, lung cancer, breast cancer, and pancreatic cancer.

Finally, I'd like to close by reminding the audience that during this quarter, the Syndax Management Team plans to present at healthcare investor conferences hosted by Cowen and Company, Oppenheimer, and ROTH Capital. We look forward to seeing many of you at one or more of those conferences. With that, I'd like to open the call for questions.

(Operator Instructions)

Christopher Marai, Nomura Instinet.

Hello, good afternoon, guys. Thanks for taking the questions. And congratulations, Richard, on joining the Team.

I was wondering if you could actually elaborate a little bit, potentially, on Syndax 6352, the CSF1R antibody you recently in-licensed. I was wondering -- one, perhaps how do you look at that clinical path forward giving many others similarly targeted antibodies and molecules in the space?

And then, what can we anticipate from the SAD trial update that you're going to provide? Is that just going to be potentially safety and healthy? And is there anything specific you're looking for to help differentiate you as a best-in-class molecule? Thank you.

Right. Chris, thanks very much for your question.

So in terms of the clinical development strategy for 6352, at this stage, we've really only talked about the single ascending dose and the multiple ascending dose. We anticipate that a little bit later this year, we will be able to share with you details around the clinical development strategy.

I think I would just -- to preface that conversation with the comments I made in my prepared remarks that there's quite a bit of preclinical data showing the ability of this agent -- of this class of agents to enhance the efficacy of not only checkpoint inhibitors, but chemotherapy, radiation therapy, and cell therapy.

So, we believe there's quite a bit of opportunity from a development point of view, and we will say more about that in a subsequent call later in the year. In terms of the single ascending dose trial, it is a single dose in normal healthy volunteers. The main things we're looking to characterize are the PK/PD and of course, tolerability in normal healthy volunteers.

The potential information that we can get from that trial that could inform differentiation at this point, is really the PK/PD relationship, the dose level we need to go to, to get good pharmacodynamic effects, and potentially some information from modeling of that data on what might a dosing frequency.

Okay, great. Thank you. And then, I was just wondering, would there be any additional color you provide perhaps on the face of re-enrollment and how that is going relative to your expectations? Thank you.

Yes. So, as I said, ECOG provides us regular updates on enrollment. At this stage of the game, things are still progressing quite nicely and they remain comfortable that the enrollment should be able to complete by the end of this calendar year.

Great. Thank you.

Tony Butler, Guggenheim Securities.

Yes, Briggs, thanks very much. Two brief questions.

One around 601. Is it your hypothesis or Syndax hypothesis that entinostat in the reversal of resistance, or the notion of reversal of resistance, is solely due to its effect as diminishing Tregs in MDSCs as is anticipated or as is known? Or is there another mechanism? That's point one.

And number two is, could you maybe address the notion of when you think about moving -- if in fact, non-small cell lung also was to demonstrate some positive outcome, wouldn't you assume that this notion of reversal of resistance would not necessarily be tumor specific?

And I just wondered if you could address that. Or would you anticipate it to be tumor specific -- it's not that you actually know that answer today. But I'm just trying to think about this from a hypothetical standpoint. Thanks very much.

Great. Thanks very much, Tony. I think the question of the mechanism by which entinostat can reverse resistance is an interesting question. And I think as those who have surveyed the literature, there is actually a number of different mechanisms. So clearly the MDSC, the effect that the Hopkins group had described on inhibiting both the function and proliferation of MDSCs, work that Roberto Perli's group has done quite extensively on Tregs.

There is also of course, data on HDACs, in general, not entinostats specifically, on sort of reversing exhaustion. There is data on up-regulation of class 2, enhancement of NK activity, inducement of T cell cytokines. I think there will be some data at AACR from some of the preclinical work looking at effects on other mediators. So, I think at this stage of the game, it's hard to say exactly what the mechanism is.

As we pointed out before, we've been quite diligent in trying to get biopsies both before and after therapy in the ENCORE 601 trial. And particularly the melanoma cohort, the investigators have been quite successful. So we hope to learn more by analyzing what's happening in those tumors with treatment. So, I think, stay tuned on more science to come on how this is working.

I think your question about whether this reversal of resistance is a tumor-specific one, as you say, at this stage, speculation based upon the mechanisms that we just discussed. It's of course, our hypothesis that this could extend to a number of different tumor types, which is why we're doing experiments in lung cancer melanoma, triple negative breast and ovarian, where there may be slightly different operative immunosuppressive mechanisms.

And again, because it's not entirely clear which one of those entinostat effects. That's why we're testing in multiple ones.

I would tend to agree with you that, should we have evidence of reversal of resistance in two different tumor types, and as we learn more about the characteristics of the tumors in those patients, I think that will inform how much broader we think this mechanism could be operative.

That's very helpful. One last question if I may, is really around -- I only know of one other agent having one part response in a resistant -- in an IO-resistant tumor from Macrogenics. Do you know of others? And that, I believe is only in one patient, which makes this even more interesting.

Yes, I don't know that we've done an extensive literature -- and everything about every company that is out there. We are aware of that, I mean that you referenced. But, and we are aware of other agents who have tried to do the same experiment that we're doing of trying to reverse resistance and did not see any responses.

So, you know at this stage of the game, I can't cite you other good examples. But of course, we keep -- what was that old saying? Only the paranoid survive? So we worry about it and we keep looking and you know. For now, we're pressing on aggressively with our program.

Fantastic. Thanks very much. Congratulations.

David Lebowitz, Morgan Stanley.

Thank you very much for taking my question. I had a question on the thresholds in the various cohorts. Could you just run us through the rationale on how those particular thresholds were selected?

Sure. So again, the so-called Simon's Two-Stage design is set up where one enrolls a certain number of -- you try to limit the number of patients you enroll, in case the drug has no activity at all.

If the drug doesn't have any activity, you don't want to be exposing large numbers of patients to it. So, the idea for the -- and then having said that, if the drug does have activity, then you have a hypothesized target rate that you are essentially trying to test for. So, if we take the melanoma cohort, as an example. At the end of the 34 patients, the total 34, the hypothesized response rate that we're looking for is 25%. And we're trying to rule out a lower bound of the cost interval of 10%.

And so the way that Simon's Two-Stages are set up is essentially, you are looking for some preliminary evidence that you've exceeded that 10%, that lower bound of what you're trying to exclude. And if you have some evidence of that, then you go to the full 34, which again, should give you a pretty good cost interval around a point estimate of 25.

That is the sort of logic that we've applied to each one of these. For the patients with non-small cell lung cancer who progressed on a PD-1 antagonist, the target response rate is 15%, with a lower bound of five. And for the non-small cell lung cancer patients who are naive, the target response rate is 35 with a lower bound of 15 approximately. So, that's sort of how we've come about it.

But again, I want to emphasize. This stage 1 portion is really just if the drug is not doing anything, just stop because it is the not the right thing to do for patients. If it is, then you enroll more. And the statistics are around what the cost interval will be around your hypothesized point estimate. I guess one other point, David, why pick those numbers? Right?

So, if you say in refractory melanoma, there really isn't anything for the -- if they failed both -- if they're BRAF mutant, and they failed both the BRAF, MEK inhibitor plus PD-1 or PD-1/CTLA-4, essentially there's really not much for those patients. They might go on DTIC, which has a response rate of somewhere in the 5% to 7% range.

So, if you can rule out a lower bound of 10%, we think you're clearly better than what would be the only sort of alternative for those patients. And again, it was that sort of logic that we used as we set these lower bounds and the point estimates for each cohort.

Excellent. Thank you very much. That was very helpful.

Bert Hazlett, BTIG.

Yes, thanks, and congratulations on meeting the threshold. Just to continue along the thought. So, is your expectation, then, if you do reach that 25% threshold, in melanoma, that you would advance the registration direct to studies?

Or is there an ability to even expand further the second stage of the Simon's Two-Stage design where you might have an expedited route to registration?

Right, so I think Bert, I want to be very clear that we've not had any conversations with regulators about pathways to registration. I think what I would say in general terms, when you are studying a patient population like these refractory melanoma patients, where there really aren't good available therapies, and the standard would be something like DTIC, then I think that is part of where the sort of 25% came from.

If you're in that range, and you can rule out a lower bound of 10%, then we believe that that is clinically important for those patients. And you know, could potentially be something that a regulator might be willing to look at. But I don't want to -- but we have not talked to any regulatory agencies about a path there, so I don't want to leave you with an impression that we think that that is or isn't likely.

We will let you know once we have the appropriate regulatory interaction.

Okay. So, what would then -- with that as a backdrop then, what would -- assuming you achieve the threshold in the 34 patients, what would a logical next step be then? Even away from the regulatory discussion?

Right. So, I think it's -- drug development is always hard to separate from a regulatory discussion because that's part of the barrier, of course. In order to make this available to patients, you've got to get through that regulatory discussion.

So we would clearly want to think about enlarging that sample size to get a better estimate of the response rate, the durability of response, and the safety in that patient population. Again, I will point out that these are sort of designed as signal seeking proof of concept trials. And the fact that you could potentially reverse resistance of advanced patients, of course, may give you a rapid path from a development point of view.

But it also raises the question of, do you want to study your agent in an earlier line of therapy? Do you want to study it in first line? Which we have not undertaken yet. So that something else that we're thinking about

Okay. Thank you and again, touching on a number of points you brought up there. Do you have any comment on the particular types of patients in the melanoma study that showed response or where you showed activity?

Yes, as it is, we can't really talk at all about the data. That sort of makes it difficult for presenting at scientific congresses. But we do -- as I said, we've been trying to get biopsies, pre-treatment and post-treatment. And from those, that biopsy data, it is possible that we'll be able to make some, at least again, a small number of patients, and general observations about what are the characteristics of the patients who seem to be responding.

Okay. And then shifting gears, entirely. I would like to just ask a general question about the trajectory of R&D spend. Is was a little lower in the fourth quarter than in prior quarter.

Do you have any comment about the trajectory as we move through 2017? Thanks.

Sure. I'll let Rick take that question.

Yes, clearly as we expand these clinical trials, the R&D spending will be ramping up into 2017. I think any dip in Q4 is probably just the quirks of these expenditures, depending on accrual rates and when activities are kicked off, manufacturing activities and that sort of thing.

So I don't think there was anything particular in Q4. But again, certainly you know, we haven't provided precise guidance on our spending levels for 2017. But, the spending will be increasing.

Okay. Thank you very much. Congratulations on the progress.

Thanks, Bert.

Joel Beatty, Citi.

Hi, good afternoon. Thanks for taking the question. Could you tell us a little bit more about the difference in timing between the melanoma announcement today and the two lung cancer cohorts ongoing.

Was there a difference in enrollment time? Or are there different courses of the diseases that could help explain that? Thanks.

Yes, I think it's actually a combination of both, Joel. There was a little later completion of enrollment in the non-small cell lung cancer cohort. And again, when we had projected the end of the first quarter, the -- I guess to be very transparent on the thinking behind that, if you think about the time it takes to respond to a PD-1 inhibitor, sort of the mean time to respond, I think in many of the large trials, is somewhere in the 12-week timeframe.

So we thought if patients were in, and they had a 6-week scan and a 12-week scan, that potentially you could able to score those patients relatively early. You may remember from the [Sitzi] data that we presented that response that was there did take a little bit longer to develop than you might expect from PD-1s alone.

So, I think it is a combination of enrollment and, perhaps, taking a little bit longer for responses to be confirmed in the lung cancer population.

Okay. Thank you.

Hartaj Singh, Oppenheimer & Company.

Hello, can you hear me?

Yes, how are you?

Hey, sorry. And I apologize ahead of time. There is some background noise here. Now I'm in a good place. Just a couple of very quick questions.

One is, with the increasing use in melanoma of [Hertuda] for Opdivo and Yervoy in combination, and in non-small cell lung cancer, you're seeing increasing testing with PD-L1 expression. Just any thoughts with melanoma -- how does how to think about your trial there and potential -- if it moves on further. And the same thing if you decide to move on with the two lung cancer trials. What does that mean, the PD-L1 testing for your trial?

And then secondly, just the CSF1, is there any specific tumor types that right now, you think that could be amenable for and would it be mono or combo down the line? Thank you.

Sure. So, first let me say a comment about Opdivo Yervoy -- and I apologize, I've always been trained to use generic names, so I call them ipi nivo. Either way, we do have patients on our melanoma trials who have failed the combination, as well as those who have failed maybe in individual monotherapy.

So, you know, I think as we finish out the cohort, we'll be able to have data on failing the doublet, as well as a PD-1 mono -- it appears that ipi mono is probably being used a little less nowadays, given that the PD-1s have shown superiority to a -- at least in monotherapy.

And so, back to the earlier question about the mechanism and how broadly active this is. If we see activity in ipi nivo failures in melanoma, then I think it's based upon the mechanism you potentially could see the same thing in lung cancer or other tumor types where people are studying that combination. I think the question about PD-L1 testing is of course quite relevant. You see in melanoma, that PD-L1 testing plus some other biomarkers can actually separate out those who are more or less likely to respond. Of course, we know that is true now in lung cancer. We're getting PD-L1 data on every patient in our trial. So we'll be able to make some comments on that.

But, clearly in non-small cell lung cancer first line, PD-L1 testing is becoming, from our understanding, pretty sort of standard of care. So, we're doing that and we'll be able to give some information on, sort of where our drug works or doesn't work relative to PD-L 1 status. It's actually a quite important variable.

I think your question about where does CSF1R work, what tumor types, there's -- based upon the presence of tumor-associated macrophages, if you want to use that sort of your indication of where you think an agent that affects tumor-associated macrophages might work there's actually quite a few tumor types including breast cancer, colon cancer, certain lung cancers, melanoma, ovarian cancer, it's actually quite broad.

And so again, that's one of those things similar to your question about PD-L1 testing. Can you assess the tumor-associated macrophage signature or environment in tumors as you think about the right population of patients to treat, and we're working on that as we get ready to move into patients with cancer.

Great. Thank you. Thanks, Briggs.

At this time, I'm showing no further questions. I'd like to turn the call back over to Briggs Morrison, CEO, for any closing remarks.

Great. So thanks, everybody, again for joining us for the call.

I want to again, thank all of the employees at Syndax who have done just a fabulous job keeping our programs moving along. And again, thank the investigators and patients and clinical trialists who have been working with us. And thank you very much for all of you, for your questions. We'll see you at upcoming conferences.

Ladies and gentlemen, thank you for your participation in today's conference.

This does conclude the program. You may now all disconnect. Everyone, have a great day.