Whitehawk Therapeutics Inc (WHWK) 2018 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by, and welcome to Aerpio Pharmaceuticals Fourth Quarter and Full Year 2018 Financial Results and Business Update Conference Call.

It is now my pleasure to turn the call over to Michael Rogers, Aerpio's Chief Financial Officer. Please go ahead, sir.

Okay, Dimitris. Thank you. Good morning, and thank you for joining us for Aerpio's Fourth Quarter and Full Year 2018 Earnings Call.

Joining me on the call today is -- from Aerpio is Steve Hoffman, the Chief Executive Officer; Joseph Gardner, our President and Founder; Steve Pakola, our Chief Medical Officer; and Kevin Peters, our Chief Scientific Officer.

This morning, Aerpio released financial results for the fourth quarter and full year ended December 31, 2018. If you've not received the news release or if you'd like to be added to the company's distribution list, you can do so on our Investor Relations page of our website at aerpio.com.

I would also like to remind you that the remarks made on the call today include forward-looking statements about Aerpio, and 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 as well as the announcement of top line results from Aerpio's TIME-2b clinical trial. 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 periodic reports filed from time to time with the SEC. Aerpio does any -- undertake any obligation to update publicly any forward-looking statement, whether as a result of new information, future events or otherwise.

With that, I will now turn the call over to our CEO, Steve Hoffman. Steve?

Thanks, Mike, and good morning, everyone. Thank you for joining us today.

2018 was a very productive year for Aerpio Pharmaceuticals as we continue to advance our pipeline of first-in-class products that activate Tie2 to treat ocular diseases and diabetic complications.

We remain on track to announce top line Phase IIb results from our TIME-2b study, evaluating our lead candidate, AKB-9778, for patients with moderate-to-severe NPDR later this month. The TIME-2b study was designed as a double-masked, placebo-controlled, multicenter trial, where 167 patients were randomized to receive 48 weeks of treatment with either AKB-9778 15 milligrams once daily, twice daily or placebo. The primary endpoint of the TIME-2b study is the percentage of patients who improved by 2 steps or greater in their diabetic retinopathy severity score in the study eye.

We have several secondary endpoints in the trial that are also very important. The first is assessment of DRSS, or the diabetic retinopathy severity score, improvement in the fellow eye in patients that have bilateral disease. One distinct advantage of AKB-9778 is its systemic administration, which we believe is not only more convenient and less invasive for treating patients with NPDR than intravitreal administration of anti-VEGF agents, but also allows for the treatment of both eyes in a patient population where 65% to 75% -- 65% to 70% of patients have bilateral disease.

The next key endpoint is to determine whether AKB-9778 can delay the progression of patients with NPDR to sight-threatening complications, such as proliferative diabetic retinopathy, or PDR, or diabetic macular edema, or DME. Preventing vision loss and blindness caused by these complications is the most important outcome to KOLs, practicing physicians and patients.

Finally, we are hoping to reproduce the improvement in renal function as measured by reduction in the urinary albumin-to-creatinine ratio, or UACR, that we previously observed in our TIME-2 study. At the American Society of Nephrology Kidney Week 2018, back in October, we were very pleased to present a post hoc analysis of renal function data from our earlier Phase II TIME-2 clinical trial of AKB-9778 in diabetic retinopathy patients. This post hoc analysis was very encouraging and showed an improvement in UACR in patients receiving AKB-9778 compared to a worsening in patients receiving placebo after only 3 months of treatment. If prospectively confirmed in the upcoming TIME-2b top line results, this would demonstrate the potential of our systemically administered Tie2 activator to provide patients with diabetes a significant treatment option spanning multiple diabetic complications. We look forward to sharing initial results from the TIME-2b study in the coming weeks, and we'll also provide an update, pending the outcome of the study, regarding our next steps from a clinical development perspective.

In addition to our program for diabetic retinopathy, we're currently advancing a topical ocular formulation of AKB-9778 in open-angle glaucoma. We expect to initiate a Phase Ib trial in the second quarter of this year, and we'll announce top line results from that trial by the end of 2019.

Beyond our pipeline programs, we announced an exclusive global license agreement with Gossamer Bio in June 2018. And under the terms of this partnership, we granted Gossamer the exclusive worldwide license to develop and commercialize AKB-4924, now known as GB004, for the treatment of inflammatory bowel disease. We're very excited about this partnership and believe that Gossamer is the ideal company to develop this drug, given their expertise and prior experience in inflammation, immunology and IBD drug development at Receptos. The license agreement also provided us with an upfront payment of $20 million, potential development, regulatory and sales milestones of up to $400 million and tiered royalty rates up to the mid-teens. We have a joint steering committee with Gossamer on the development of GB004, and we are very excited for them as they have recently completed a very successful IPO where GB004 contributes meaningfully to their $1.5 billion valuation.

Looking back on 2018, we can confidently say that we executed on all of our milestones and time lines. As we move forward to the rest of 2019, we plan on continuing our execution and advancing our lead candidate, AKB-9778, for patients with non-proliferative diabetic retinopathy. We also look forward to advancing our earlier-stage pipeline programs, such as our topical formulation of AKB-9778 for open-angle glaucoma.

I'll now turn the call back over to Mike for -- to review the financials for the quarter.

Okay. Thanks, Steve. The earnings release details our financial results for the fourth quarter and full year 2018, so I won't repeat for you what's written in the release. For those interested, you can find additional details on our operating results and financial condition beyond what's in our press release in our 10-K, which will be filed later this week. However, I'll take this time to quickly point out a couple of items.

Starting on the income statement. For the 3 months ended December 31, 2018, our net loss attributable to common shareholders was $8.5 million, up from $6.2 million in the same period in 2017. And operating expenses for the fourth quarter of 2018 were $8.9 million compared to $6.3 million for the same period in 2017. For the full year ended December 31, 2018, net loss attributable to common stockholders was $10.4 million compared to $22.3 million for the full year ended December 31, 2017. And operating expenses for the full year ended December 31, 2018, were $31.3 million compared to $21.4 million in 2017. So despite the approximate $10 million increase in operating expenses year-over-year, we had an $11.8 million reduction in net loss in 2018 versus 2017, and this was attributable to the $20 million upfront payment we received and recorded as revenue as part of our license agreement with Gossamer for AKB-4924, which, as Steve mentioned, is now known as GB004.

Research and development expenses for the year ended December 31, 2018, increased by approximately $5.7 million or 47% to $17.9 million from $12.1 million in 2017. This was a result of increased spending on our lead candidate, AKB-9778, primarily for the TIME-2b trial, partially offset by a decrease in spending on our pipeline candidate, GB004, as a consequence of our license deal with Gossamer.

General and administrative expenses for the full year ended December 31, 2018, increased by approximately $4.2 million or 46% to $13.5 million from $9.2 million in 2017. And this increase was primarily attributable to personnel and related expenses during the period.

One quick note on the balance sheet. Our cash position at December 31st was $62.6 million. And as many of you on the call know, we have no debt.

So that concludes the financial summary for the quarter. We'll now open the call for questions. Dimitris, are you there?

(Operator Instructions) And our first question comes from Ellie Merle with Cantor Fitzgerald.

So in terms of the upcoming TIME-2b study, you mentioned the secondary analysis looking at delay in progression to PDR. I guess, what is the baseline rate that you would expect for progression to PDR in the placebo? And I guess, what difference in progression to PDR from the treated group would be viewed as clinically meaningful?

I'm going to ask Dr. Pakola to handle that one.

Sure. Great. Morning, Ellie. Thanks for the great question. So this, not surprisingly, depends on the baseline stage of diabetic retinopathy severity that patients have. So recall that in this study, we're looking at moderate-to-severe NPDR at baseline. And the vision-threatening complications, you mentioned PDR, we also care about DME, diabetic macular edema. And we do have various studies and natural history studies, where we can gauge roughly what we might anticipate in this study looking at the mix of moderate-to-severe patients that we have. And please take this with a grain of salt, of course, because each study is different. But we anticipate roughly 15% to 20% developing DME and 15% to 20% developing PDR over a 1-year time span in a mix of patients that have moderate-to-severe NPDR. If, for example, you would look at just the very severe end of the NPDR spectrum, actually over 50% of patients develop PDR within that time frame. So that's why you have to really take into account the baseline characteristics. If you combine those, which is the endpoint of looking at vision-threatening complications at 1 year, we'd expect anywhere from 30% to 35%, roughly speaking. And that's what we think of when we kind of back-of-the-envelope think of what might occur in this trial. To the second half of your question, what reduction would be clinically meaningful? When we speak to retina specialists, who treat these patients, and at this stage of disease, moderate-to-severe NPDR, keep in mind that currently it's really watchful waiting. There is the option to treat with anti-VEGF repeated injection of the eye, but generally patients are not being treated at this stage of disease. So it's really a key issue for these doctors and their patients is that they know a high proportion of these patients are going to progress over time even within 1 year to these potentially blinding conditions. So when we ask them that very question you just asked, Ellie, of, "What reduction would be clinically meaningful?" They say, "Any reduction, frankly."

That's helpful. And then I guess, on the glaucoma program, you mentioned that you'll have data before the end of the year. Can you just sort of walk us through what data exactly we'll be getting? And I guess, what you're hoping to see in that data?

Steve, go ahead and take that one, too, please.

Sure. So keep in mind this is a first-in-human Phase I study with the topical ocular formulation. However, since it is in an indication where we have an objective, noninvasive pharmacodynamic measure, intraocular pressure, IOP measurement, already at the Phase I first-in-human stage of testing, we have the opportunity to look for a pharmacodynamic effect on that clinically relevant endpoint. So we are going to take advantage of that. These are generally healthy volunteers that we'd be including in this first study, but we do plan to somewhat enrich the population by selecting "healthy volunteers" who also happen to have above-normal IOP but not yet a traditional ocular hypertensive or glaucoma patient population since it is a first-in-human study. So that will give us a greater likelihood or greater sensitivity to see a potential IOP lowering effect at the different doses and dose regimens that we would look at in this Phase I study. So it's really those IOP measures and changes from baseline. We will take advantage of looking at a traditional diurnal IOP measurement at baseline, pretreatment and also at the end of the multidose -- day dosing treatment period so that we can, at least, have that kind of traditional assessment on a diurnal basis of change from baseline on IOP. Does that answer your question?

And our next question comes from Jonathan Aschoff with National Securities.

So I'm looking forward to the TIME-2b data, for sure. But I was thinking about your topical 9778 formulation for OAG. And I was wondering if you could possibly develop that formulation for NPDR, if and only if Phase IIb showed no systemic benefits?

Well, we've -- historically, we've tested a topical formulation of 9778 in animal models of retinal angiogenesis. And the topical formulation just doesn't get sufficient levels of drug to the back of the eye to treat those kinds of conditions, we don't believe. But it gets a lot of drug to the front of the eye, which is where Schlemm's canal and the primary outflow tract are, so we're much more confident of giving -- getting sufficient drug levels to the site of action in glaucoma. But based on animal data, we were not successful in getting high enough drug levels to the back of the eye, the retina, the vasculature with topical administration to use in those indications.

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

My first is on the upcoming 2b release. I assume the -- of course, the primary endpoint will be in there. How much of the -- how many of the secondary endpoints will you be able to put out at the top line? I mean, will UACR VTCs be a part of that release?

Well, right now, Adnan, we're planning to release the top line data around change in DRSS score for the study eye and the fellow eye the percentage of patients that progress to DME NPDR and UACR changes from baseline. There might be some additional data that we would include, but those are the primary and secondary endpoints that we'll be talking about.

Okay. And Steve, at this time, is there a placeholder at any medical meeting? Or where do you expect to present the data, assuming it's positive?

Again, Steve Pakola, can you take -- can you answer that one?

Yes. Morning, Adnan. Thanks for the questions. We are in active discussions with our advisers on that. There are the usual meetings throughout the year in both the ophthalmology forum and specifically the retina forum. So we're keeping a close eye on that. But we feel confident we'll be able to present at the key meetings. We'll be able to say more about that at our next update on the program.

One more on the release contents for the top line. Will you be able to report on multiple time points? And I'm wondering if, so far, there has been any time series data, so that we know the result continues to improve over time?

Steve?

Yes. So we'll definitely look at that since that's one of the related aspects that not only what point estimate do we see at the end of treatment but what that time course is over the 48 weeks of treatment. You can look at the press release and what Steven just reviewed as far as what we'd be looking at to disclose in terms of the top line results at sometime this month. Of course, as you know, the top line is just a component of the overall picture. And in the weeks after that, we'd be doing a lot more cuts of the data.

Okay, Steve. And there's been a few questions on the topical formulation. I wanted to ask, if it's feasible to develop a long-acting form of 9778 or if the company has done any work around that.

Well, Adnan, we recognize that a more convenient formulation for the drug is going to be one that patients have to administer as less frequently as possible. So we are working on sustained-release formulations of 9778 that we think can get down at least once a day as opposed to twice a day, if we need it twice a day. So we're working on a patent formulation to get 9778 once per day. And then, we'll also be working on longer sustained-release formulations, again, hopefully getting to be once a week. But the physical chemistry components of 9778 makes some of these quite challenging. And we always like to talk about one of our pipeline products that we don't put much emphasis on when we speak with investors, and that's our monoclonal antibody 1536, which is a humanized monoclonal that appears to block the vascular endothelial cell protein, tyrosine phosphatase, by binding to the extracellular domain. And in early animal pharmacology, it seems to have to the same effect on Tie2 activation that 9778 does by inhibiting the intracellular domain of the phosphatase. So one of our life cycle management programs with positive data would be to accelerate the development of 1536 into these indications. And that could be a once every 3 to 4 weeks subcutaneous administration of an antibody to hopefully achieve the same kind of benefit we would with 9778. So we recognize that convenience for the patients is important. We're working hard to get to a once-a-day formulation. We think it's possible to get to a once-a-week formulation, but we think that the antibody might be the best long-term solution for patient convenience. Admittedly, that's going to be several years down the road.

Great. Just one last one on the numbers. Did you say how long the current cash will last you?

We have said that cash will go into 2020. And that's what we've set up to now. We believe cash will last at least through the first quarter of 2020 and into the second quarter.

And our next question comes from Chad Messer with Needham & Company.

This is Gil, on for Chad. Just a question about the UACR data. If the data reads out positive, what kind of clinical study would you think of moving forward with in that population? Would be -- would it be in patients with kidney disease who are diabetic that don't have any ocular symptom?

So right now, we are doing a lot of planning around that scenario. And we think right now the best course of action would be to do a Phase II trial in diabetic patients with chronic kidney disease, irrespective of their retinal disease. And whether we do that in CKD Class 2 or Class 3 or Class 4, we still need to refine, but the objective there would be to look exclusively at diabetic nephropathy, and over the course of 6 to 12 months, can we affect not only UACR but possibly GFR. And we need to refine that study design, but that would be our next planned study in the nephropathy area, something like that. But again, right now, we don't have a clear design or a time line for that trial.

Excellent. Just a bit of a clarification. So I know that in the PANORAMA study for EYLEA, they were looking at events and you talked about TIME-2 progression. Are these similar endpoints?

Dr. Pakola?

Great question on the terminology. So in fact, they are. So when they refer to when -- in the PANORAMA releases, they refer to vision-threatening complications, and that's basically the same as concerning progression to these events or progression to vision-threatening complications of DME or PDR. When I discuss the importance of baseline characteristics, you'll recall from those release, they -- the PANORAMA study is looking at a more severe end of the spectrum, moderately severe to severe. We're looking at moderate to severe. And in their studies, they saw 40% of patients progress to either DME or PDR, in other words, vision-threatening complications.

And we're all looking forward to the TIME-2b data.

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

My first question is, assuming the TIME-2b data are positive, would you pursue the Phase III program by yourself or with a potential partner?

Well, thanks for your question. Right now, we're planning to progress TIME-2 into Phase III on our own. We believe that the prescribing population for 9778 and the NPDR patient population will primarily be retinal specialists and ophthalmologists. And that's a call point that we think as a small company that we can tackle on our own. So we're primarily going to be focused on that. Of course, there are a lot of other parties involved in identifying and referring these patients from primary care physicians, diabetologists, endocrinologists, nephrologists, optometrists. So at some point in the future, we may want to have a commercial partner with a broader reach. But for the initial launch and focusing on the NPDR population in the ophthalmology setting, we think that we can tackle that on our own.

My second question is, do you happen to have any update on the time line of development for GB004? And whether you expect to receive any development milestone from this program in 2019 and 2020?

Well, the development of GB004 is in the hands of Gossamer. They're now a public company, so we really can't comment on what they're going to be doing and when they're going to be announcing data. What we can say is that they've continued this multiple ascending dose study that we have initiated in the spring. It seems to be going well. They're working very hard on the formulation development to go into the Phase Ib study in IBD patients. And we're hopeful that we'll have some news we can share on that this year, but I can't say because that's really in their control. Our first milestone payment will probably not come from them until early 2020. We don't expect it to happen this year, but it should happen in the first half of next year.

Thank you. Ladies and gentlemen, this now concludes our Q&A portion of today's conference. I would now like to turn the call back over to Dr. Stephen Hoffman for any closing remarks.

Thank you very much, and thanks, again, for participating in this morning's call. We look forward to sharing top line results from the TIME-2b study with all of you later this month. Thanks again, and have a great day.

Ladies and gentlemen, thank you for attending today's conference. This does conclude the program, and you may all disconnect. Everyone, have a great day.