Achieve Life Sciences, Inc. (ACHV) Q3 2012 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen, and welcome to the OncoGenex Third Quarter 2012 Earnings Conference Call. My name is Matthew and I will be the conference facilitator for today. [Operator Instructions] As a reminder, this conference is being recorded. At this time, I would like turn the call over to Susan Specht, Director, Investor Relations with OncoGenex Pharmaceuticals. Please go ahead.

Thank you, and thanks, everyone, for joining us today. With me from OncoGenex are Scott Cormack, Chief Executive Officer; and Michelle Burris, Chief Financial Officer. Also on the call is Cindy Jacobs, Chief Medical Officer; and Jaime Welch, VP of Marketing and Corporate Communications. Before we begin, I'd like to remind everyone that today's call contains forward-looking statements based on current expectations. These statements are only predictions, and actual results may vary materially from those projected. So please refer to OncoGenex's documents filed with the SEC concerning factors that could affect the company, copies of which are available on the website. I'll now turn the call over to Scott who will provide an overview of the development opportunities and activities for our 2 clinical-stage product candidates, custirsen and OGX-427.

Good afternoon, and thank you for joining us. I'd like to begin today's call with an update on the custirsen development program and the significant progress we've made in the third quarter. Earlier this week, we announced completion of patient enrollment in SYNERGY, our Phase III primary registration trial for custirsen. As a reminder, SYNERGY is designed to evaluate the survival benefit for custirsen when added to the first-line chemotherapy, docetaxel, in men with metastatic castrate-resistant prostrate cancer or CRPC. The target accrual for SYNERGY has been achieved and over 1,000 men are now enrolled. This is truly an important milestone for OncoGenex and for the custirsen program. Completing accrual advances our goal of making custirsen available to men, who are in need of new treatment options for advanced prostate cancer. I'd like to applaud the efforts of the OncoGenex and Teva SYNERGY teams and the clinicians and staff at the 142 trial locations throughout North America and Europe. I'd also like to express my appreciation to the patients who are participating in this study. As we've discussed before, custirsen has received fast-track designation and the SYNERGY study is under an SPA agreement with the FDA. We continue to expect data results by the end of June 2013. However, the endpoint for SYNERGY is event driven and may occur later than predicted. In addition to completing enrollment in SYNERGY in the third quarter, we initiated patient enrollment in 2 other Phase III custirsen studies, AFFINITY and ENSPIRIT. AFFINITY is our Phase III clinical study evaluating an overall survival benefit of custirsen when combined with Jevtana, a second-line chemotherapy for patients with CRPC. The study is now enrolling with a target accrual of approximately 630 men throughout North America, Europe, Russia and Australia. The ENSPIRIT study is designed to evaluate the potential survival benefit of combining custirsen with docetaxel in approximately 1,100 patients with advanced metastatic non-small cell lung cancer, who have progressed after first-line chemotherapy has failed. I'd now like to provide a brief update on OGX-427, our product candidate that is designed to reduce levels of Heat Shock Protein 27 or Hsp27. Preliminary data from the investigator-sponsored Phase II clinical trial of OGX-427 in chemotherapy-naive patients with metastatic CRPC were recently presented at the European Society for Medical Oncology Annual Meeting in Vienna. Consistent with previous data reported, the results showed a higher number of patients without disease progression at 12 weeks and greater declines in prostate-specific antigen and circulating tumor cells with OGX-427 plus prednisone treatment compared to prednisone alone. The study has completed enrollment of 74 patients and we expect final data to be presented next year. As previously announced, an investigator-sponsored randomized Phase II study evaluating OGX-427 in combination with Zytiga in patients with CRPC is expected to initiate in the coming months. In addition, we continue to enroll patients to our randomized Phase II clinical trial of OGX-427 patients with metastatic bladder cancer. This trial will evaluate the overall survival benefit of OGX-427 in combination with gemcitabine and cisplatin and aims to enroll approximately 180 patients throughout North America and Europe. We look forward to providing updates in the near future as these studies progress, as well as on our additional plans for OGX-427 in other malignancies. As I stated in my opening remarks, we have made significant progress in the third quarter. It has been a long road and custirsen is now in the final stretch. With SYNERGY now fully enrolled, our accrual risk of our primary registration study is now behind us. We also now have 2 additional Phase III custirsen studies enrolling, as well as robust and fully funded development plan for OGX-427. We're excited about the momentum we have gained for both of these novel mechanisms. In the field of cancer drug development, custirsen and OGX-427 are unique in that they both have combinability potential with various agents and they also both work by overcoming treatment resistance, which remains a primary concern for clinicians, patients with cancer and their families. At this time, I'll turn the call over to Michelle, who will provide an overview of the third quarter financial results. Michelle?

Thanks, Scott. We ended the third quarter with approximately $85.1 million in cash, cash equivalents and short-term investments and we continue to expect that these funds combined with our reimbursements due from Teva under the Collaboration Agreement will be sufficient to conduct our operations into 2015. As part of the Teva agreement, we received an advanced reimbursement of $30 million. Of this amount, we incurred cost through September 30, 2012 of $20.9 million. We expect the remaining $9.1 million to be spent by the end of this year. As we've discussed in the past, once the advanced reimbursement is exhausted, all cost associated with custirsen's development will be reimbursed by Teva on a quarterly basis. Revenue for the third quarter of 2012 increased to $6.9 million, that compares with $1.2 million for the prior quarter last year. Revenue for the 9 months ended September 30, 2012 increased to $10.3 million compared with $4.3 million for the same period in 2011. The increase in the both periods compared with 2011 was due to increased revenue earned through the collaboration with Teva, largely resulting from the initiation of the AFFINITY trial in August of 2012. Total operating expenses for the third quarter increased to $14.9 million, that compares with $5.3 million in 2011. And the operating expenses for the 9 months ended increased to $30.1 million compared with $18.6 million for the same period in 2011. The increase in the periods again is due to higher clinical study expenses associated with the start up of the AFFINITY trial, patient enrollment in our clinical trial evaluating OGX-427 in metastatic bladder cancer, and the associated manufacturing costs and finally, employee expenses, including stock-based compensation. Net loss for the third quarter was $5.9 million or $0.40 per diluted common share, that compared with net income of $4.5 million or 46 -- excuse me, $0.45 per diluted common share for the prior year quarter. Net loss for the 9 months ended September 30, 2012 was $17 million or $1.29 per diluted common share, that compared with $5.1 million or $0.52 per diluted common share for the same period in 2011. Net income for the 3 months ended September 30, 2011 included an $8.6 million non-cash gain on reevaluation of our warrant liability. Operating expenses increased for both periods as previously discussed. Before finalizing our financial review, I'd like to reiterate our guidance for 2012. Net cash requirements are expected to be in the range of $45 million to $50 million. Year-end cash, cash equivalents and investments are expected to be the range of $68 million to $73 million. And as guidance obviously reflects our continued development of custirsen under the Teva agreement, as well as our development activities for proprietary asset, OGX-427. Again, I'd like to thank you for joining us and I'd like to turn the call back over to Matt to open the line up for questions.

[Operator Instructions] Our first question is from Katherine Xu of William Blair. Y. Katherine Xu - William Blair & Company L.L.C., Research Division: A couple of questions. With regards to prostate cancer, it just seems [indiscernible] prostate cancer question. Scott, what do you think about the steroid removal in prostate cancer now? There are sort of conflicting data here and there. In your study, apparently there are some response rates from prednisone treated patients. That's another question. The other question is, just mechanistically with clusterin, are there clusterin high, medium, low kind of range in patients? The point I'm trying to talk to you is, are there patients -- some patients are more sensitive to anti-clusterin therapy than others. Do we know those as a fact or everybody's pretty much, once they have chemo, they pretty much over-express clusterin at a very high level uniformly?

So your first question, I think, was related to some of the new body of data related to steroids in the treatment of prostate cancer and specifically on glucocorticoid receptors. Clearly, that's a fairly big body of data that's starting to emerge. I think it's probably a little early for us to comment on where that goes. As you know in our clinical protocols, we tend to be combining with the standard of care with whatever's being used in that treatment paradigm. Chemotherapy typically is being administered in combination with prednisone and therefore, our combination study certainly in custirsen do use prednisone at the baseline, but that's predominantly because that is the standard of care for use with chemotherapy. I'm not sure that we have a direct need, specifically, to have prednisone in our treatments. I'm not sure that we would have a direct biologic consequence on those glucocorticoids, either it's an investigation that would have to be pursued with, probably both drugs. But I think as far as the data goes in the marketplace, there's still more studies that are going to have to be done because a lot of what's been done so far has been retrospective in looking at patients who have been treated with or without prednisone and their outcome. So I think we need to look at that through the lens with a prospective study rather than retrospective before we draw too many more conclusions. On your second point with respect to clusterin expression as a protein, is it uniform, I think generally what happens is whenever we're applying treatment to patients, you will see an increase in clusterin, it's not necessarily uniform. You'll see patients that have high expression levels, some that have low and some that have medium. As far as responders, as you probably noticed, a fair bit of work that we've been doing through the Phase II studies that still needs to be explored into Phase III. I think it's a little bit early for us to say that there are responders or nonresponders specifically or how they may correlate to their expression levels. I do think over time, these patients will, as you continue to treat them with other therapies, though the expression of treatment resistance factors like clusterin or Hsp27 do increase over time. And from the data that we've been looking at in the publications and obviously generated through various academic institutions, I think those are implicated very strongly in the development of treatment resistance. Did that answer your question, Kat?

Next question is from Howard Liang of Leerink Swann.

This is actually Rene Shan [ph] in for Howard. I wanted to ask on the OGX-427 combination trial with Zytiga. Can you just remind us, is this a blinded study? And so when we look at the progression-free survival at 60 days as the primary end point, how are we going to be sure that the evaluation is not biased? And then also on the same study, in case Zytiga or abiraterone does get approved on the pre-chemo setting, will patients be allowed to -- will that study include with patients in the pre-chemo setting as well?

Cindy is here with us and we'll have her speak to the question specifically. Just keep in mind as we go through this, we haven't released a lot of the details with regards to the Zytiga study. That will come out at the time that we specifically initiate the trial. But with regard to blinding, maybe Cindy can address that question directly for you.

Right. So this study, no, it will not be blinded. It will be randomized and an open-label. Obviously, with the control ARM.

Okay. And have you done any dose ranging to look at the combination of OGX-427 with Zytiga? Is there a need for any dose adjustments?

No, what we are doing is going with the highest dose that we have evaluated in our Phase I and evaluating in other Phase II. And obviously, we have dose modifications if needed for dose reduction from the 1,000 metagrams of OGX-427. And we also have obviously safety reviewing with an independent safety monitor experience in the field for the first 20 patients that go on, comparing it obviously with the 10 control versus the 10 patients that are combined with 427 and Zytiga.

Next question is from Stephen Willey of Stifel, Nicolaus. Stephen Willey - Stifel, Nicolaus & Co., Inc., Research Division: So following up on the previous question on the 427 open-label study, are you guys going to have an -- are we going to be able to get an interim look into the data? And if so, when do you expect that we would get sort of the first tranche of data out of the trial?

Typically with those kinds of studies, we don't necessarily put in interim studies per se, but because they're open, we can be doing the data evaluations. This particular one, I think this is true for smaller studies. You want to have specific number of patients that any analysis that you would run is meaningful, so it's not like we're going to be staring at the data on a regular basis. I think it would be after you do a certain number of evaluations, and then what we typically do is, that is tied to a data presentation at a scientific conference. So if you've got half of the patients or a fairly decent proportion of patients accrued and you've got your primary endpoint, then you'd see the various presentations. And again, this is investigator-sponsored trial, so that particular decision would be within the purview of those investigators as well. Stephen Willey - Stifel, Nicolaus & Co., Inc., Research Division: And do you know if that number or percentage of accruals has already been decided or is it going to be dependent upon when they decide to present the data at a scientific meeting?

There is no set number of patients for interim analysis, so it would be an appropriate timing that the primary investigators in Canada and in the U.S. view that there's adequate patients. This is obviously a study that is looking at a pilot study with early analysis of data at the 60-day primary endpoint. So we would assume that it's very similar to our other 427 study that you would have updates appropriate at meetings? Stephen Willey - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And if I can just quickly ask another question, jumping to the lead programs. So now that you're reaffirming the timing on SYNERGY for top line data released at the end of next year. So does that mean you'll start seeing event accruals happening in line with your expectations or?

Well, I guess what we're saying is we still are at the view that the data you should come in for -- by the end of 2013. But as we said in the statements, this is an event-driven analysis and that will ultimately determine the specific timing of getting that data set. So this is the best estimate from where we stand today, but obviously the actual results will depend on the final number of events that we get that will drive that final analysis.

[Operator Instructions] Our next question is from Philippa Flint of Bloom Burton. Philippa Flint - Bloom Burton & Co., Research Division: A couple of questions on 427. A couple of years ago, you had data on combination and some really early stage research work with Enzalutamide, can you talk about plans that you may have to look at those 2 drugs in combination?

Yes, so at this point, Philippa -- at this point, the primary task force is with the Zytiga study. We haven't announced any other plans specifically for any combinations with things like Enzalutamide. I think from our perspective, continuing to watch the landscape as it shifts and see who's moving into the front line setting and success that these other trials is probably going to be thoroughly important. The rational for going forward with Zytiga is obviously biologic SYNERGY and the way these drugs work, and it's a way to evaluate the proof of concept about the potential combinability. And so that's what's going to be done in a fairly small pilot kind of study as we continue to watch the landscape in that study. Philippa Flint - Bloom Burton & Co., Research Division: Great. And also more generally, can you speak about how you would like to progress 427? How far you intend to kind of take it among the pathway yourself and potential for partnering it? What stage in the ideal scenario?

Right. The intent with 427 as you probably know, we completed the financing in March of this year and the intent of that was twofold. It was to ensure that we had sufficient capital to get through to the data on SYNERGY, that was mission number 1. The second part was based on the data that we obtained with 427 and specifically, our enthusiasm around the 2 trials that has been reported out. We wanted to explore the potential of this drug in a more broad development plan that we had already financed. And so, with that, we took on the initiative to expand into other indications. That remains the plan. Obviously, the funding was secured through that financing and we're executing through on additional clinical trials as we've said in again in the prepared statements. There are other trials that we're looking forward to announcing closer to the time and proximity that we have actually started those trials, but the intent is to further the scope of evaluating OGX-427 in other indications. The plan, as Michelle had discussed, we do have capital into 2015. And so the intent is obviously we had finished off the randomized Phase IIs that we have. We have some others that are initiating, the intent just to continue that development plan. Partnering becomes an interesting discussion. It's not specifically something we're looking to achieve at this point because we think, especially since we have a development plan that's going to be robust across multiple Phase IIs, greater value should be achieved when we have realization of randomized Phase II data sets. That is not to say that we don't regularly have communications with potential partners. We want to make keep them informed and aware of data as it emerges and make sure it becomes and remains top of mind as they consider other opportunities. But it's not an act of, we must sell it because we do have the funds to execute on the Phase II plans that we have talked about thus far.

At this time, we have no further questions from the audience.

Thank you very much, everybody, for joining us. We look forward to future updates as the year turns over and into 2013.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Good day.