XBiotech Inc (XBIT) 2016 Q2 法說會逐字稿

Good morning, ladies and gentlemen and welcome to the Q2 2016 XBiotech Inc. earnings conference call. (Operator Instructions). As a reminder, this conference call is being recorded. I would now like to turn the conference over to Meg Lewis.

Thank you, operator. Before turning the call over to management, I would like to make the following remarks. During this call, forward-looking statements, including declarations regarding management's beliefs and expectations, will be made. In some cases, you can identify forward-looking statements by terminology such as may, will, should, would, could, expect, plan, contemplate, anticipate, believes estimates, predicts, projects, intend or continue or the negative of such terms or other comparable terminology. Although not all forward-looking statements contain these identifying words.

Forward-looking statements are subject to inherent risks and uncertainties in predicting future results and conditions that could cause the actual results to differ materially from those projected in these forward-looking statements. The risks and uncertainties are subject to the disclosure set forth under Risk Factors in XBiotech's SEC filings. Forward-looking statements are not guarantees of future performance and actual results of operation, financial condition and liquidity and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this call.

Any forward-looking statements that we make on this call speak only as of the date of this call. XBiotech assumes no obligation to update its forward-looking statements whether as a result of new information, future events or otherwise after the date of this call. At this time, it is now my pleasure to turn the call over to John Simard, Founder, President and CEO of XBiotech.

Thanks, Meg and thank you all for joining us this morning for our second-quarter 2016 update. I'm going to provide a brief review of recent developments and then provide an opportunity for Q&A for the audience. At that time, our Medical Director, Mike Stecher, and I will be available to answer your questions.

I'd like to start with some recent highlights pertaining to our European study. In July, XBiotech presented data from the pivotal European trial for Xilonix at the European Society for Medical Oncology World Congress in Barcelona, Spain. An oral presentation was made there by Dr. Tamas Hickish and there we also met with key opinion leaders to discuss our findings. It was a very interesting meeting and I'm sure there may be some questions to follow.

More recently, we had in in-person meeting with European regulators in Europe to discuss our marketing authorization application and the application, I can tell you, remains on schedule and we are currently devoting a good deal of effort to advancing the process.

On other fronts, we continue to move forward with our global Phase 3 study in colorectal cancer. We call this our XCITE study, which is proceeding under FDA fast-track designation. Enrollment in this study remains on track and we anticipate completing enrollment around year's end.

Recently, a Data and Monitoring Committee meeting was held following randomization of 400 subjects. This is a standard process to evaluate the study principally for safety and they found no safety concerns and allowed the study to proceed as planned. Another DMC meeting is scheduled to occur after 600 patients have been enrolled.

We do have another oncology study in non-small cell lung cancer that has actually been in the planning stage for some time. We are organizing this study with the National Cancer Institute of Canada. The plan is for them to launch a Phase 2 randomized study to assess Xilonix in combination with an agent called Tarceva. The combination therapy with Tarceva was inspired by our previous Phase 1/2 clinical results, which suggested a potential for positive interaction with the antibody and the agent.

This is what we call an investigator-sponsored study, and the launch has been a little more complicated than usual with a lot of discussions regarding the study design. However, we are close to getting this launched and we will let you know when we get that going.

Now regarding some of our other clinical programs for infectious disease, the Phase 2 study for the treatment of staph aureus bacteremia is on track for enrollment completion by the year's end. We recently expanded the study as planned into Taiwan and Korea. This took us a little longer than anticipated, but it was an important milestone for some of the kinds of infections we are hoping to see in the study. In fact, in that region in Asia, we understand that bacteremia is particularly aggressive and that is the kind of disease we are looking for with the therapy. So we will see now if there's good patient access in the region and let you know at the next call.

In the area of dermatology, enrollment of our Phase 2 pilot study in subjects with pyoderma gangrenosum has completed. Pyoderma is a potential orphan indication and is part of our demonstration of the overall therapeutic role for interleukin-1 alpha antagonism in dermatological disease. As you all probably know, we have completed a number of studies in this area and this is developing again what is really an orphan application as part of a regulatory strategy to get us approved in this area. So the plans to pursue a regulatory path relating to pyoderma gangrenosum will be under evaluation with respect to the data readout that is coming in the coming weeks.

We also have a Phase 2 study in hidradenitis suppurativa that has completed enrollment. This is an investigator-sponsored study that will follow patients out for about another six months and readout we would expect shortly after that. Again, this is a very serious type of skin disorder and is a part of the identification for us of an orphan indication that's relevant.

Changing gears now from the clinic, our manufacturing expansion is nearing completion. Over the quarter, construction continued largely event-free. We anticipate final building completion and receipt of our occupancy permit this month, in fact. I'm extremely proud of the job done by our team here at XBiotech to design and build what will really be a ground-breaking example of the state-of-the-art in biologics manufacturing. We will actually be having a grand-opening event around the middle of September and we will let you know the details soon. Manufacturing operations and validation will start very soon after our opening event to build the registration package for the new facility and in the end, I can say that we will end up very close to our budget on the project.

We have had some activity in business development in the past quarter. We announced the execution of an exclusive licensing agreement with Megapharm Ltd. to commercialize Xilonix in Israel for the treatment of advanced colorectal cancer. Megapharm is an important oncology player in Israel. They will pursue the regulatory activities now in Israel to facilitate product launch in that region based on the outcome of the EU process. The use of regional expertise to help distribute Xilonix is part of our global distribution strategy and according to our deal, Megapharm will pursue registration for us and purchase drug from XBiotech at a transfer price that will slide based on sales performance of the product.

Regarding our team at XBiotech, we have been in a considerable growth phase and been building our talented group here through all areas of operations in the past year. In June, we appointed Trey Benson as our new commercial head. Trey brings more than 16 years of marketing and commercial development experience in the pharmaceutical industry and is coordinating commercial efforts.

On a down note, we would like to thank Scott Whitehurst for his achievements during his short tenure with XBiotech as CFO. Unfortunately, health developments with him has made it -- forced a difficult decision upon him to step down from his position as CFO and he will be retiring. We do wish him well and thank him for being a part of us for the short time. We are now working to find a suitable replacement.

Regarding financials, from inception through June 30 of this year, the Company has accumulated a deficit of about $155 million. During the past quarter, the Company had about $13.6 million in operating expenses, which was about $7 million more than our expenses during the second quarter of 2015. Higher expenditures compared to last year are largely due to increased clinical trial costs associated with the global Phase 3 study, which is quite large and the growth in headcounts, which, as I mentioned, has seen an expansion of our workforce in all areas.

As of June 30, the Company had cash and cash equivalents of approximately $64.7 million and our cash run rate remains adequate to achieve our major clinical and commercial milestones. With that, I would like to open the call to questions from the audience. So I will ask the operator if you would please go ahead. Thank you.

(Operator Instructions). Kumar Raja.

Congratulations on all the progress. A couple of questions here. First, for the XCITE study, when do you expect the first planned efficacy analysis and what efficacy parameters will you be looking at during this efficacy analysis?

Mike will you answer that for you.

So it's difficult to know exactly when to expect the first efficacy. We are following the event rate very closely. Right now, we are projecting that it could occur anytime between the very end of the year and Q1 of next year. So as you know, the efficacy analysis is based on the number of events. As far as the effect size we are looking for, it's the same as what we would have to see at the end of the study. It would just have to be very highly significant so that the P-value is what drives that. So it would be a difficult bar to reach on the first interim, but we are hopeful and so sometime between end of year and then Q1 of next year.

And for European (inaudible), what can you guys say about the interaction with the European regulators and also [parts] on why there was a change from expedited review to standard review? And also the timing for the publication of the European data.

So we've had a clarification meeting with the regulators and this is a standard meeting where we are able to ask questions and that was very productive. We were able to get some more details as to what they are thinking and we were able to give them some insight into our data.

As far as the change in status, again, this was something that we found to be pretty standard with a novel endpoint that they needed some additional time to review responses. As far as the publication, that's currently under review and we hope to have something to announce soon.

And a final question on the combination trial with Tarceva in non-small cell lung cancer. What are your expectations in terms of a safety profile there? Obviously, you are combining two drugs there. You said that you guys have seen some positive interaction of the (inaudible). What effects are you seeing in terms of safety there?

So the study hasn't started yet, but our anticipation would be that there would be no change in the safety profile of the drug combining it with Tarceva. There's no reason to believe that a combination with an EGFR inhibitor would cause any change in the adverse event profile of Xilonix. We are quite hopeful though that it might improve the safety profile of Tarceva though. As you know, skin toxicity is a major issue with EGFR inhibitors and as we mentioned on the call today and several times before, we've seen some pretty good results in dermatology, a reduction in psoriatic skin lesions and acne. So we hope that potentially we could see an improvement in the safety profile of Tarceva along with the improved efficacy of the combination.

Okay, great. Thanks for taking my questions.

(Operator Instructions). [Tom Costas], Private Investor.

Hello. My name is Tom Costas. I'm a private investor. I had read an article about the European Society of Medical Oncology questioning your Phase 3 study and I was wondering if you had anything more to say about their opinion and how you plan to address that?

Well, people are welcome to their opinions. We didn't see anything credible or illuminating in the review that was put out by the ESMO individual. One thing I should note is he failed to mention his affiliations with competitor drug products. He is the spokesperson for regorafenib and the regorafenib launch, yet he omitted that statement. And regorafenib is really the target for us in the marketplace and will be the loser should we get approved. So there is special interest in that individual and we didn't see any new insight or analysis there, so there wasn't really too much that we saw to address.

Do you anticipate his opinion has any effect on the medical community in Europe adopting your drug should it be approved?

I can't really comment on that. I don't know that one individual's opinion could influence an entire medical community, but I will leave that up for you to ponder. I really couldn't speak to that.

All right. Well, thank you very much.

Monish Bahl, MHB Capital.

I just have two quick questions. One is can you talk about the time to the disposition for European disposition? Is that Q4 still because the press release said Q4 and then your 10-Q says anticipated by probably Q4? So is Q4 still looking like a good date for you guys for Europe?

Yes, it is. Yes, it is.

Okay, great.

Yes, I'm sorry, the language isn't definitive, but that is still our expectation.

Okay. And with regard to the endpoint, I know when you did the trial, the endpoint was already discussed with the European Union. Now they are asking for more time, which is why they changed the disposition of the expedited process. Was there a change with regard to that, or was that something that they just changed their mind?

No, there is no change of mind. It's interesting. The way that organization is set up is you go to a body for scientific advice and study design, and we spent a considerable amount of time with them in that process. But when you move to the registration part of it, it's a completely different group and even though there's some communication between them, the new group has to relearn the study design and the data and why it was done and how it was done all over again. So it's not like this group was familiar with it.

Okay, that helps a lot. And then just really quickly, I know you announced a partnership this quarter. Can you talk about your pipeline of other partnership opportunities given your robust pipeline of drug candidates? Thank you.

Sure. We have a number of discussions ongoing. Part of our core strategic concept here at this Company was to put our own legs under us and that goes with our manufacturing, our ability to take drugs to market through our internal process from bench to market. So when we look for partnerships, we look for those that really suit us, not for things that are short-term band-aids or ways to get us to the end. It's really things that are a strategic fit. So we are engaged in that and we do have a number of interesting discussions going on that does support our strategy.

Okay, thank you.

Ladies and gentlemen, there are no questions at this time. I would now like to turn the conference back over to John Simard.

Thank you again, all of you, for spending some time with us this morning. I hope it was of some help and I do look forward to our next opportunity to update you and hopefully some of you can come to our new facility opening here next month. Have a nice day and we meet again.

This concludes today's conference call. Thank you for your participation and have a wonderful day. You may all disconnect.