Whitehawk Therapeutics Inc (WHWK) 2018 Q2 法說會逐字稿

Welcome to the Aerpio Second Quarter 2018 Financial Results Conference Call. (Operator Instructions) As a reminder, this conference is being recorded today, August 14, 2018.

I would now like to turn the conference over to Mike Rogers, Chief Financial Officer for Aerpio Pharmaceuticals. Please go ahead, sir.

Okay. Thank you, Daniel. Good morning, everyone, and thank you for joining us for Aerpio's Second Quarter 2018 Earnings Call. Joining me on the call today from Aerpio is Steve Hoffman, Chief Executive Officer; Joseph Gardner, President and Founder; and Kevin Peters, our Chief Scientific Officer.

This morning, Aerpio released financial results for the second quarter ended June 30, 2018. If you've not received this news release, or if you'd like to be added to the company's distribution list, you can do so on the Investor Relations page of our website at aerpio.com. I'd also like to remind you the remarks made on the call today include forward-looking statements about Aerpio. Such statements may include, but are not limited to, those related to Aerpio and its business and its product candidates, including their planned clinical development and therapeutic potential. Each forward-looking statement is subject to risks and uncertainties that could cause actual results and events to differ materially from those projected in that statement. A more complete description of these and other material risks can be found in Aerpio's filings with the U.S. -- with the SEC, including our Form 10-K for the year ended December 31, 2018, which is filed with the SEC. Aerpio does not undertake any obligation to update publicly any forward-looking statement whether as a result of new information, future events or otherwise.

I'll now turn the call over to our CEO, Steve Hoffman. Steve?

Thank you, Mike, and good morning, everyone. Thank you for joining us today. The second quarter marked a period of tremendous progress for Aerpio, as we continue to advance our pipeline of first-in-class products for the treatment of ophthalmic disease, which there is a compelling and substantial unmet need, and also achieved a number of important corporate milestones. Our lead candidate AKB-9778, our first-in-class Tie2 activator, is being tested in the ongoing Phase IIb study called TIME-2b, that is evaluating the effect of 9778 in patients with nonproliferative diabetic retinopathy. As a reminder, the primary endpoint of this study is to evaluate the ability of daily injections of 9778 under the skin to approve the diabetic retinopathy severity score or DRSS by 2 steps or greater compared to placebo following 48 weeks of therapy. We will also assess the number of patients that progressed to proliferative diabetic retinopathy and diabetic macular edema and evaluate kidney function as key secondary endpoints. The study remains on track with top line safety and efficacy results expected in the second quarter of 2019. If the phase IIb results are positive, we expect to initiate phase III studies for diabetic retinopathy in early 2020. Because of 9778's unique mechanism of action, that is to inhibit the vascular endothelial protein tyrosine phosphatase, also known as VEPTP, which results in activation of the Tie2 pathway and leads to vascular stability and diminishing of capillary leak. It has significant potential beyond its initial ophthalmic indications. In February of this year, we announced at the keystone symposium on reducing the burden of diabetes-related end organ injury in Santa Fe, New Mexico, a retrospective analysis of renal function data collected from the TIME-2 phase IIa study of 9778 in the treatment of patients with diabetic macular edema. In this analysis, AKB-9778 treated patients showed a 21% improvement in their urinary albumin -- urine albumin to creatinine or UACR ratio, which is a biomarker for chronic kidney disease. At the end of treatment compared to their pretreatment levels. In addition, 12% of patients improved to a less degree -- less severe degree of albuminuria at the end of the study. These results were extremely encouraging, especially considering the TIME-2 study only treated patients for 3 months of therapy compared to the TIME-2b study, 8 weeks. And these findings were consistent with mechanism of action of AKB-9778 and Tie2 activation. As a follow-up to this initial observation, we are prospectively following markers of renal function in our ongoing 48-week TIME-2b trial in diabetic retinopathy. We are also preparing to begin a Phase Ib study on a topical eye drop formulation of AKB-9778 in patients with open-angle glaucoma in the second quarter of 2019 and expect to report top line results later in 2019.

This quarter was also notable for executing on several corporate milestones. In June, we announced a licensing agreement with Gossamer Bio for AKB-4924, our once-daily oral hypoxia-inducible factor-1 alpha compound and clinical development for inflammatory bowel disease. We believe Gossamer is the ideal partner to develop 4924, which they have renamed GB-004, as they have deep expertise in immunology based therapeutics in inflammatory bowel disease. This agreement will now allow Aerpio to focus our resources on our ophthalmology and diabetes programs that are currently in development. In May, prior to announcing the licensing agreement, we initiated dosing of 4924 in a Phase Ia multiple ascending dose study. The study is designed to evaluate the safety and tolerability of multiple daily doses of -- sorry, GB-004 in healthy volunteers. The single center pharmacokinetic and safety study is expected to enroll 24 subjects in 3-dose cohorts, randomized 3:1 to receive either GB-004 or placebo orally once daily for 8 days.

In late June, we strengthened our balance sheet by raising net proceeds to approximately $48 million and a follow-on equity financing. This financing will fund operations well into 2020 and will enable us to complete our phase -- our TIME-2b study, finish preparations for our expected AKB-9778 phase III program, and continue to advance our earlier pipeline programs including a topical formulation 9778 in glaucoma. Following the close of financing, we uplifted from the OTC market to the NASDAQ Capital Market. We believe this opportunity gives us greater visibility and trading liquidity as we move toward and beyond the results of our TIME-2b study.

This covers the clinical and corporate update for the quarter, I will now turn the call back over to Mike to review the second quarter financials.

Okay, thanks, Steve. The earnings release details our financial results for the quarter, so I won't repeat for you what is written in the release. And in addition, for those interested, more detail than what is in our press release about our operational results and financial condition is included in our 10-Q, which will be filed later today. However, I do want to point out a couple of items. First, let me briefly cover the financial aspects of the Gossamer license for GB-004. There was an upfront payment of $20 million, which we received in June. We are also eligible to receive up to $400 million in development commercial and sales milestone payments, and if GB-004 is approved and commercialized, Aerpio is also eligible to receive tiered royalties on sales, ranging from a high single-digit to a mid-teens percentage of net sales. Second, you'll note in the press release that we recorded revenue in the quarter and this is a first for Aerpio. The revenue generated is a result of the Gossamer deal, and as I mentioned, we've received $20 million as an upfront payment. Revenue recognition rules require us to record the revenue over the period of time we have continuing obligations under the license. And there is a 90-day technology transfer period that we are in now, so we're recognizing the $20 million ratably over that 90-day period, which began on June 25. Therefore, we recorded $1.3 million for the second quarter and the remaining $18.7 million went on our balance sheet as deferred revenue, and we expect to record this full amount in the third quarter. The other item to note is our cash balance; as of June 30, cash and cash equivalents totaled $68.8 million compared to $20.3 million at December 31 and $13.8 million at March 31. The current balance reflects the $20 million received in late June from the Gossamer deal as well as the proceeds from our June 26 underwritten public offering. The net proceeds from the initial closing of the offering prior to any exercise of the overallotment were $41.9 million and that amount is reflected on our balance sheet as of June 30. Subsequently, the exercise of the over-allotment option closed in early July, so that was not on our balance sheet at June 30. The net proceeds to the company from the sale of the over-allotment shares were $6 million.

And that concludes the financial summary for the quarter, and I'll now open the call for questions and pass it over to Daniel, our operator. Daniel?

(Operator Instructions) Our first question comes from Jonathan Aschoff with National Securities.

Your kidney function data, will that also come in the second quarter? And will it be any more comprehensive than what you got from the earlier trial?

John, we expect that the kidney data will be some of the top line data that we present in the early Q2 of next year. We imagine that it's going to largely reflect what we saw in the TIME-2 study, which is going to be primarily looking at the UACR ratio. We will capture other components, but again, in this number of patients, we probably don't expect to see an effect on EGFR, we could, but we're not expecting that primarily going to be looking at UACR [issues] we did in the TIME-2 study.

Okay. Can you guys expand on any other details on the partnership with Gossamer 4924?

Joseph, do you want to answer Jonathan's question there?

Sure, Jonathan. As you know, the 4924 is the new product candidate in the inflammatory bowel disease, and we had published extensively on the preclinical data of 4924 in animal models. So the team at Gossamer is very excited by this, and we are very excited to have them continue the development of the drug. You may also recall that it worked as both pretreatment mode and postinsult rescue in a variety of models, including the TNBS insult model, the DSS-induced colitis model, a genetic over-expression of TNF-alpha model and the in graft versus host disease models and in all of those models, the drug performed consistently and gave very strong preclinical signals of efficacy. And the mechanism of HIF activation really is very important, because it affects an array of proinflammatory cytokines and actually suppresses the IL-1, it suppresses TNF alpha and IL-6 and it stimulates the pro-healing cytokine IL-10. And we also completed, last year, our single-ascending dose study and we expect to have a once-daily oral drug. So we're actually quite pleased to put this in the hands of Gossamer.

Jonathan, let me just add a couple of pieces to that. We -- again, as I said in my opening comments, really can't imagine having a better partner for 4924 than the team at Gossamer. As you know, that Gossamer is founded by Faheem Hasnain and by Sheila Gujrathi, who -- both of whom have tremendous experience in the IBD area as is evidenced by the sale of their previous company, Receptos, to Celgene for $7 billion after completing only a Phase II study with -- their oral IBD drug ozanimod. And I think, as Faheem said in the quote we had in the press release, they looked high and low for another IBD product because this is kind of a nerve in their sweet spot. And they've found 4924 to be the best product candidate that they came across. That's largely based on the preclinical data that -- and studies that Joseph referred to in the early clinical data, which, we think, could mean this could be really effective and safe product for use in IBD, probably even -- potentially even upfront before Biologics. So it's a very extreme molecule. We're happy that they're developing it for us. It removes all the burn that we would have expected to spend in the program plus the financial elements that Mike referred to in terms of the upfront payment, the $400 million in R&D and commercial milestones, royalty rates in the mid-teens. And as was alluded to in the 8-K filing that went with the deal, we have this unique element where we can potentially participate in the sale of the asset in exchange for relinquishing the remainder of our milestone payments and royalty. And that's a very significant aspect of the deal, unfortunately, which we can't really talk about in any detail, because it's been redacted, but suffice to say that's meaningful and could really add significant value to this asset.

And our next question comes from Chad Messer with Needham.

If I could just start with one on 9778. In TIME-2b, you're looking at 2-dose regimens of once and a twice daily. Just wondering if there's any sort of benchmark for what once daily would have to look like over twice daily to give you confidence that's the dose in terms of a delta, or lack thereof on DRSS or any other measure?

Chad, let me take a first crack at this. We're testing the once daily dose because in preclinical studies it appeared that the pharmacodynamic effect of 9778 activating Tie2 was substantially longer than the circulating half-life. So we believe there's a reasonable chance that we will see an effect with once-daily dosing in addition to twice daily dosing. So we're, obviously, looking for the minimally effective dose, which is also what the FDA is going to want to see. And it's also important to see if there is a dose response between once daily and twice daily. So with respect to what we would have to see, we'd have to see, of course, hitting the primary endpoint in terms of efficacy. So if we hit the efficacy endpoint with once-daily dosing, then we will strongly consider taking that into Phase III. Of course, we'll have to look at the data, we have to look at the safety data and everything else, but we recognize that having a once daily dose form is going to be more amenable to commercial uptake than having a twice daily dose form, and we're fully aware of that. We're working on longer acting formulations. Our ultimate plan in the marketplace is to have a once-daily injection or even possibly a once-weekly injection. So we want to make it as easy on the patient as possible. But if we see efficacy as measured by hitting the primary endpoint with once daily as opposed to twice daily, then we would be very excited to study that in Phase III.

All right, great, that makes sense. And then in your pipeline, you didn't talk about it on your press release, but you have another Tie2 abscended antibody, you're calling 1536, just wondering if you have any plans for that, and how you might consider taking that into development given 9778's role?

So 1536 is the really exciting program, which we haven't talked about enough. We haven't been in the position to invest in it sufficiently. But, let me turn this back over to Kevin Peters, our Chief Science Officer, who's really the master of 1536. Kevin, can you take that one?

Yes. Thanks, Steve. So 1536 is actually what we believe is very interesting product candidate, and we haven't spent a lot of time talking about it, but we do have published preclinical data. The clinical candidate is a humanized IgG antibody that binds to the extracellular domain of VE-PTP, and we think prevents association by (inaudible) for Tie2 and has the same biological effect as AKB-9778 in terms of Tie2 activation. And we see preclinical models prickly -- in models of retinopathy, we've seen very similar activity with the antibody injected either intraocularly or systemically, interestingly. So because it has a similar biological effect in AKB-9778, potentially, as you know, a biologic could be administered subcutaneously similar to AKB-9778, but have a much less frequent dose administration. We think it's potentially a good follow on for AKB-9778 in the NPDR space, but also we see potential for the antibody delivered -- and that's delivered systemically of course, but we see potential for the antibody delivered intraocularly, potentially, as an adjunct to -- yes, anti-VGEF agents for more serious eye disease like EME and proliferative diabetic retinopathy, PDR. So assuming that the TIME-2b trial reads out positively, we plan to actually accelerate the development of this product.

And our next question comes from Yi Chen with H.C. Wainright.

Could you please comment on how strong is the existing evidence of the application of 9778 in glaucoma, whether the change of formulation could result in any change in efficacy and the potential development timeline going forward?

Yi, really good question. Again, Kevin, would you mind taking this one, since you know the most about this?

Sure. So the -- I mean, I think the data are very strong and range from preclinical data in mouse genetic models of glaucoma to now newer genetic data in patients with congenital glaucoma, implicating the Tie2 pathway in both the development and the maintenance of Schlemm's canal, which is to push more, in layman's term, which is the major component of the conventional outflow tract, which in turn is the major drainage route for the front of the eye -- fluid from the front of the eye. And as you know, both congenital glaucoma and more common primary open-angle glaucoma are caused by defects in that conventional outflow tract. And so there's been -- in the field of glaucoma, there's been a push to find targets that actually work the influencing or increasing outflow from the conventional outflow tract and particularly targets that may influence the maintenance of Schlemm's canal.

And so just to put the human data, which is always the most convincing, the human data in perspective is that there is data that basically prove that in certain patients or certain individuals with congenital glaucoma that mutations in Tie2 that decrease Tie2 activity are directly involved in the development of congenital glaucoma. And they prevent the development -- basically prevent the periphery development of Schlemm's canal and prevent outflow. And then there's more recent data that suggest that single-nucleotide polymorphisms in both entry point 1, entry point 2, which are the ligands that bind to and influence the activity of Tie2 are implicated in the risk of developing primary open-angle glaucoma. So those data together with the preclinical data that basically mirror the clinical data, I think really support targeting a Tie2 in the conventional outflow tract. And what our data adds to this overall thrust in terms of finding a target is that we have data in both animal models in terms of in rabbits that we've presented at national meetings, that show a topical ocular formulation of AKB-9778 reduces intraocular pressure in rabbits. And then probably more importantly or as importantly, the subcutaneous formulation of AKB-9778 in the TIME-2b study actually reduced intraocular pressure in patients and these patients are all normotensive by design, so they have normal intraocular pressures, but despite having normal intraocular pressures, we saw a statistically significant reduction in intraocular pressures in patients receiving 9778. That was in time to [8], as a reminder. So those data together with data that were actually -- with collaborations that we're actually working on currently, the strongest bargaining VE-PTP via topical ocular administration for glaucoma. So we're actually very -- at this early stage, we are very excited about the potential for this program, and I think, as Steve mentioned earlier, we plan to file an IND early next year, and we hope to have clinical data by the end of next year to report that again in next year.

Anyone who has heard me talk about the company knows how excited I am about this particular opportunity. It's one of those cases where we had a surprising clinical finding with the subcutaneous dosing of 9778 showing statistical significant reduction in IOP in normotensive patients. And at the same time, all this mouse genetic data was coming together with the human genetics and it makes sense from a mechanism of action perspective in that Tie2 activation leads to not only formation of Schlemm's canal in animals and probably humans, but also induces ENOX expression and hence you get a local pharmacologic effect from the product. So we think this is an interesting program. It could be a new mechanism of action directly of stimulating conventional outflow tract drainage and it has tremendous opportunity. So we're really excited about the development of this.

And our next question comes from a Adnan Butt with Guggenheim Securities.

This is Blair Cohen on for Adnan. Just a couple of questions for you. You've given an update on the timeline for TIME-2b. Since you are this far into the study, can you give us a sense of how things are going, for example, like in terms of dropouts and compliance?

The study is ongoing, so we can't make any specific comments in any kind of quantitative way on dropouts and so forth, but we're very pleased with how the study is progressing, as everyone knows this trial enrolled very rapidly. We completed enrollment about 3 or 4 months earlier than we'd expected. The dropout rate that we have seen is completely what we anticipated and within the statistical powering of the study, so nothing unexpected there. The compliance that we expect to see during the 48 weeks has been very good and consistent with what we've seen in shorter duration trials. We don't comment specifically about the data-safety monitoring committee, but they've met per protocol and has always given us the advice to continue the trial. So we think that things are going on just as we expected them to be. And we're all excited about how the data is going to readout Q2 next year. So all we should say is it's going well, and we think we're on track and nothing unexpected has happened so far, but thanks for the question.

Okay, great. And will you be reporting interim results before 48 weeks? And what percent of patients do you think need to achieve the 2 step for the data to be meaningful or approvable?

So we don't have any interim efficacy evaluation plans, that's not part of the protocol, we won't be doing that. The primary endpoint is -- the percentage of patients that are approved by 2 steps or greater in DRSS score compared to placebo. What we expect from many previously published trials in this patient population that the placebo rate ought to be around 4% to 5% 2-step approvers after 48 weeks. And we are planning to see a net 25% improvement over that. So a difference of 30% versus 5% or 34% versus whatever. So we need to -- we're targeting a net 25% improvement in DRSS 2-step approvers compared to placebo.

And I'm not showing any further questions at this time. I would now like to turn the call back over to Steve Hoffman for any further remarks.

Well, that concludes our call this morning. Thank you very much for participating. We look forward to keeping you informed on future company progress in the months to come. We'll be presenting at a number of investor conferences this fall, so hope to see you all there. And thank you very much for participating this morning. Goodbye.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program, and you may all disconnect. Everyone, have a wonderful day.