Arbutus Biopharma Corporation (ABUS) Q3 2013 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Tekmira Corporate Update and Third Quarter 2013 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce our host for today, Ms. Jodi Regts. Ma'am, please go ahead.

Thanks, Karen. Good afternoon, and thank you for joining us on this conference call providing a corporate update and reporting third quarter results for Tekmira Pharmaceuticals Corporation. Joining me on the call is Dr. Mark Murray, Tekmira's President and CEO; along with Bruce Cousins, Executive Vice President and Chief Financial Officer. I would like to remind everyone that certain statements made on today's call will be forward-looking and involve known and unknown risks, uncertainties and other factors that may cause the actual results to be materially different from any future results expressed or implied by such forward-looking statements. We do not expect to update forward-looking statements continually as conditions change. A more complete discussion of the risks and uncertainties facing Tekmira appears in Tekmira's Form 20-F for the year ended December 31, 2012, which was filed on EDGAR and SEDAR and is available online under the Investor's section of our website. This conference call is being webcast live, and the archive will be available on our website at www.tekmirapharm.com following today's call. Mark will begin today by providing a corporate update. Bruce will then outline some key financial highlights, and Mark will provide some closing remarks before we open up the call for your questions. So now, over to Mark.

Good afternoon, everyone, and thank you for joining us today. The last few months have marked a period of significant progress for Tekmira. First of all, I'm extremely pleased with the positive response to our successful public offering that resulted in gross proceeds of $34.5 million to Tekmira, which includes the full overallotment option exercise by our underwriters. In addition to fortifying our balance sheet, this represents Tekmira's first meaningful placement with U.S.-based institutional shareholders. We certainly appreciate the support. And with our strong cash position, we are on track to deliver on multiple points of value from our robust product pipeline. Now turning to the pipeline. I'm also pleased to report that we had great participation in our recent webinar. There, we outlined our current candidates for clinical development and touched on some of our earlier-stage research efforts. We have taken a measured and rational approach to building out and expanding our product pipeline. Specifically, we are focused on diseases where the scientific and medical rationale for using RNA interference is strong, where our technology can best perform and where there is a high unmet medical need and potentially accelerated development pathways for regulatory approval. Today I'll touch on recent news related to our pipeline programs advancing within the clinic and other key milestones that are driving our company's long-term growth. First of all, our oncology therapeutic, TKM-PLK1, is in a Phase I/II clinical trial, with current enrollment of a 20-patient expansion cohort targeting patients with either advanced gastrointestinal neuroendocrine tumors, or GI-NET, or adrenocortical carcinoma, ACC. We have commenced dosing patients and are on track for results from this Phase I/II trial by mid 2014. We also released new preclinical data from our TKM-Ebola studies showing survival in nonhuman primates despite a delay in treatment after infection with the most lethal Zaire variant of Ebola virus. These "delay to treat" studies in animals infected with lethal doses of rapidly replicating viruses such as Ebola and Marburg are rigorous tests of antiviral efficacy in established infections. For TKM-Marburg, we have similar "delay to treat" data from our collaboration with the University of Texas Medical Branch showing 100% survival in nonhuman primates infected with the Angola strain of the Marburg virus. We're excited about this positive data for the sake of these programs but also because it provides validation to our approach and our technology in other antiviral programs. Now, of course, beyond our product pipeline programs, we also have partnering opportunities with our LNP technology, which is enabling the most advanced RNAi therapeutics in the clinic today. We are pleased to report today that patisiran, or ALN-TTR02, which is enabled by Tekmira's LNP, has entered a Phase III clinical trial. This has triggered a $5 million milestone payment to Tekmira. In addition, our technology continues to be validated by positive clinical progress. ALN-TTR02 Phase II results were reported this week, demonstrating that our LNP technology enabled TTR knockdown in the clinic and was safe and well tolerated. Leveraging our LNP technology is currently the cornerstone of our business development activities and remains an important part of our overall strategy. LNP can enable a wide variety of RNAi trigger technologies, and we continue to see new collaborative opportunities with leading pharmaceutical, biotech and agricultural companies who need our effective and proven delivery technology. As many in the field have acknowledged, delivery is key, and we believe we have the gold standard today. I want to point out that we continue to be on the cutting edge of innovations in delivery. Recently, we presented new preclinical data at a scientific symposium demonstrating that messenger RNA can be effectively delivered using Tekmira's LNP and expressed in both liver and in tumors. Looking at Tekmira as a whole, our development plans reflect a multiple-shots-on-goal strategy, specifically targeting significant unmet medical needs and potentially accelerating development pathways to regulatory approval, where we can demonstrate early and compelling proof-of-concept in the clinic. We also have the ability to derisk the funding of these programs through partnering opportunities and other strategic collaborations, such as our important work with the U.S. Department of Defense. With Tekmira's LNP technology enabling the most advanced RNAi therapeutics in the clinic, we have positioned ourselves to receive recurring revenue from partner milestones and royalties. We believe this smart model sets us up to create value for our shareholders as we advance important new therapeutics into the clinic. At this point, I'd like to turn the call over to Bruce. With our financing now successfully completed, he will provide some further detail on our expected cash runway and other financial highlights for the past quarter. Bruce?

Thanks, Mark. Yes, and that's a great place to start. And as indicated, our recent U.S. offering provided USD 34.5 million in gross proceeds to Tekmira. Consistent with the offering and including the overallotment, we increased our shares outstanding by 4.3 million shares to a total outstanding of 19 million shares. We now believe that funds on hand will be sufficient to last until early 2016. And based on updated cash projections, it is expected that the year-end 2013 cash balance will be in the range of $65 million to $70 million. In addition, the company remains debt free. Now turning to the financial highlights for Q3. Tekmira's net loss for Q3 2013 was $6.1 million as compared to a net loss of $3.1 million for Q2 2013. Looking at revenue in Q3 2013, revenue was $3.1 million as compared to $2.9 million in Q2 2013. Most of our revenue in 2013 is from our U.S. Department of Defense contract to develop TKM-Ebola. Under the contract, we are being reimbursed for costs incurred and we earn an incentive fee or profit margin on it. Turning now to expenses. Total research, development, collaborations and contracts expenses increased from $5.1 million in Q2 2013 to $5.7 million in Q3 2013. Some of this increase relates to our TKM-PLK1 program, which was expanded into a Phase I/II trial in the quarter. Also, R&D salaries have increased as we expand our in-house capabilities and our product pipeline. In Q3 2013, we recorded a $2.5 million loss in respect of the increase in fair value for our outstanding warrants. This noncash charge is largely the result of an increase in our share price from the second quarter. I'd like to now turn things back over to Mark for some concluding comments before we open the call up for questions. Mark?

Thanks, Bruce. I wanted to take a moment to acknowledge that our strong balance sheet also supports the growth and expansion of our leadership capabilities. We augmented our clinical development expertise by adding Dr. Mark Kowalski as Chief Medical Officer, and I'm pleased to welcome Bruce, a biotech and capital markets veteran, to Tekmira. We continue to have success in recruiting top-notch talent throughout all levels of the organization. And I know I speak for Mark and Bruce and the rest of the team at Tekmira. We are driven by a clear sense of urgency to bring innovative new therapeutics to patients and maximize value for our shareholders. I firmly believe we've lined up the cash, the resources and the expertise needed to deliver on our stated milestones and have multiple products in the clinic in 2014. At this point, I'll turn things over to the operator. We'll open up the call for questions. Operator?

[Operator Instructions] Our first question comes from the line of Jason Kolbert from Maxim.

Can we talk a little bit about catalysts coming up for the year ahead? So on the DoD side, I mean, you've had -- you've shown 100% protection, which is just amazing. Help me understand what the next steps are and the sequence of events in terms of moving towards a procurement contract at some point.

Jason, this is Mark. So with respect to Ebola, I think the next catalyst that we've talked about is initiating a Phase I clinical trial in healthy subjects in the first quarter of next year, okay. And we imagine that, that will run the balance of the year. And following that, we do an efficacy study in primates. You'll recall this is being developed under the Animal Rule, okay. All things being equal, our view is that once the safety study is completed and some efficacy has been established in animals, we are in a position to enter a procurement discussion with DoD.

Okay. Is there any way you can run the animal study in parallel with the Phase I human study, or it doesn't make sense to do that?

Well, the challenge with that is you need to know -- what you're trying to do in the Phase II animal study is to test a dose which you've shown to be safe in normal humans. So you have to at least -- there may be some ability to overlap them, but you really need to get to the right dose in humans before you can meaningfully start the animal studies.

Okay. Fair enough. So let's switch gears a little bit and talk about PLK1. I mean, great technology. Help me understand where you go with the current Phase I/II trial and what the next events are that we should be focusing on.

Okay. So we're now enrolling patients in a Phase I/II in 2 specific diseases, GI-NET and ACC, right? And our objective here, we're on target to complete those studies and have data available by the middle of next year. And that data will inform us about subsequent steps. We're also going to initiate a Phase I/II study in HCC in the first half of next year. So our objective here is to find the best clinical indication for the subsequent development of this agent.

And help me understand kind of the product rationale in HCC. Is the bioavailability of the drug in hepatocytes very strong? I mean, this is potentially a very, very large indication. So what in the preclinical or proof-of-concept data, to you, suggests that you should have efficacy in hepatocellular carcinoma?

So Jason, I think this comes back to one of the key features of the delivery. We can -- with the appropriate LNP formulation, we get very, very high levels of delivery to deliver. So biodistribution is really working in our favor here.

Okay, got it. And we can talk more offline about kind of mechanistically where you're heading. I guess my last question is regarding Alnylam and the milestone payment. When should we be modeling that? And what other milestone payments should we be focused on as that pivotal trial starts moving forward?

So the key milestone for TTR02 here is the Phase III initiation, which I mentioned. That has occurred, and so I think the payment to us is imminent. And the next payments to Tekmira are royalty payments that are triggered when product sales occur.

Okay. And let me, if I can, if you don't mind, and I'd just ask one more question. On Marqibo, I see that you picked up a milestone payment there. What kind of projection should we be thinking about for royalties back to Tekmira as that product starts generating revenue?

So that royalty model, Jason, is a mid single-digit royalty back to Tekmira as that product rolls out.

And I have no further questions in the queue. I would like to turn the conference back to Jodi Regts for any concluding remarks.

Great. Karen, thank you. We appreciate your participation on the call today and look forward to sharing our progress with you in the months ahead. And with that, this concludes the call. Thank you.

Ladies and gentlemen, that does conclude today's conference. We thank you for your participation, and you may now disconnect. Everyone, have a good day.