Achieve Life Sciences, Inc. (ACHV) Q2 2014 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen, and welcome to the OncoGenex Second Quarter 2014 Earnings Conference Call. My name is Sam, and I will be the operator for today's call. [Operator Instructions] At this time, I would like to turn the call over to Jamie Welch, Vice President of Marketing and Corporate Communications at OncoGenex Pharmaceuticals. Please go ahead.

Thank you, Sam, and thanks, everyone, for joining us. With me today from OncoGenex are Scott Cormack, President and Chief Executive Officer; Cindy Jacobs, Chief Medical Officer; and Jerry Wan, Director of Accounting Operations. Before we begin, I'd like to remind everyone that today's conference call contains forward-looking statements based on current expectations. These statements are only predictions and actual results may vary materially from those projected. Please refer to OncoGenex's documents filed with the SEC concerning factors that could affect the company, copies of which are available on our website. I'll now turn the call over to Scott.

Thanks, Jaime. Good afternoon, and thank you for joining us. I'd like to begin with an exciting update in regards to our management team. Earlier today, we announced that John Bencich has been appointed as Vice President and Chief Financial Officer effective Monday, August 11. John is a seasoned financial executive in the life science and technology industries, having served as CFO to 3 biotech companies prior to joining OncoGenex. He brings to our management team extensive financial leadership and strategic corporate development expertise. A more complete overview of John's experience is outlined in the press release that we issued earlier this morning. We are thrilled to have him join the team, and we look forward to his contributions as we embark upon this exciting time of growth. Before discussing our development programs, I'd like to first review our recent financing. In early 2014, in July, we completed a financing that provided net proceeds of $22.4 million. We ended June of 2014 with approximately $40.6 million in cash and cash equivalents. So, together with the proceeds of the financing, we had approximately $60 million in early July of 2014. We believe these capital resources will be sufficient to fund our currently-planned operations into the third quarter of 2016, and we expect that we would achieve the following milestones: for apatorsen, the release of Borealis-1 final results and the completion of enrollment in both the Spruce and Rainier clinical trials in 2015; for custirsen, the completion of enrollment in AFFINITY in 2014, as well as the release of final results in late 2015 or early 2016. I'd now like to provide an update on our proprietary product candidate, apatorsen. Apatorsen targets Heat Shock Protein 27, which I'll refer to during today's call as Hsp27. Hsp27 production increases with cancer treatment, as well as with tumor stage and grade. In previous conference calls and presentations, we've discussed the diverse biologic processes facilitated by Hsp27 that enables tumor cell proliferation, migration and survival. Over the past several months, particularly following this year's ASCO Annual Meeting, immuno-oncology is once again gaining momentum in the field of cancer research and treatment. Tumor cells produce several factors that not only help them survive and grow, but also enable them to hide from the host's immune system, which would normally seek out and destroy the tumor. Hsp27 is one of those factors. It not only contributes to cancer cell survival, proliferation and migration, as we've discussed previously, but it also plays a role in dampening immune function by inducing a number of immune inhibitory mediators, including the expression of PD-L1. Various publications have shown Hsp27's immunosuppressive and anti-inflammatory effects. These include inhibiting macrophage activity, inducing immunosuppressive cytokines such as IL-10 and other anti-inflammatory mediators, and increasing PD-L1 expression. These Hsp27-induced immune escape mechanisms are important, and may contribute to apatorsen's anti-cancer potential. Both the potential single agent activity of apatorsen, and the preclinical activity previously demonstrated in combination with several cancer therapies, support the belief that apatorsen may improve existing treatment outcomes through multiple mechanisms of action, and may lead to increased patient survival. We also believe there is biologic rationale that supports the investigation of apatorsen, either in sequence or in combination with a variety of antitumor agents, including immunotherapy agents. Importantly, OncoGenex is the only company with a robust oncology development program evaluating a potent inhibitor of Hsp27. In partnership with leading cancer researchers and institutions, we are evaluating apatorsen across 7 Phase II clinical trials, enrolling nearly 1,000 patients. In non-small cell lung cancer, we have the Cedar and Spruce trials in squamous and non-squamous patient populations, respectively. In pancreatic cancer, we're conducting the Rainier trial of apatorsen in combination with ABRAXANE and gemcitabine. And in prostate cancer, the Pacific trial, in combination with Zytiga, and the previously completed trial of apatorsen in chemotherapy-naive patients. Finally, in bladder cancer, our lead indication for apatorsen, we currently have 2 trials underway in the first- and second-line chemotherapy settings. We're excited about the opportunity in bladder cancer, not only because of the potential to improve patient survival in a disease that has had little progress in decades, but also because of apatorsen's supporting clinical data in this disease. As you may recall, we've previously reported preliminary results from the clinical trial led by urologic oncologist Dr. Alan So, evaluating apatorsen in superficial or muscle invasive bladder cancer. These results demonstrated a pathologic complete response rate indicating no identifiable tumor at the time of surgery of approximately 33% after only 1 week of treatment. Dr. So has recently provided us with updated data, and we are pleased to report that the data have shown 38% pathologic complete response rate. These impressive response data, together with the preclinical data supporting apatorsen in combination with chemotherapy, reinforce our enthusiasm for apatorsen in our ongoing metastatic bladder cancer studies. Dr. So is currently preparing the manuscript, and full details of this study, including the final response rate and the primary endpoint data of target regulation, will be made available upon publication. I'd now like to quickly review our 2 trials of apatorsen in metastatic bladder cancer. Borealis-1 is our company-sponsored, randomized, placebo-controlled Phase II trial of apatorsen in combination with first-line gemcitabine and cisplatin in patients with metastatic bladder cancer. This trial completed enrollment of 183 patients in July 2013, and we expect to announce data results in the first quarter of 2015. Borealis-2, which is currently enrolling patients, is an investigator-sponsored, randomized Phase II trial evaluating apatorsen in combination with docetaxel in approximately 200 patients with metastatic bladder cancer, who have progressed following first-line platinum-based chemotherapy. Finally, we are assessing potential strategies to expedite apatorsen's development in bladder cancer. Turning now to custirsen. We continue to make excellent progress with patient enrollment in advancing the Phase III AFFINITY trial. AFFINITY is evaluating custirsen in combination with cabazitaxel, a second-line chemotherapy, in approximately 630 men with metastatic castrate-resistant prostate cancer, or CRPC. As a reminder, the FDA has granted Fast Track designation for custirsen in this trial. Importantly, patient enrollment is expected to be completed in the near future, and we will issue a press release at that time. Final data from the Phase III SYNERGY trial will be presented next month at the ESMO Conference. Over the past several months, we've been working closely with investigators to thoroughly understand these results. Our subsequent exploratory analysis suggests that patients in the SYNERGY trial who had the worst poor prognostic factors and received custirsen treatment, appear to have lived longer. This supports our belief in evaluating custirsen in patients who typically have a poor prognosis, and are exposed to more treatments prior to treatment with custirsen, such as patients in the second-line chemotherapy CRPC AFFINITY trial. Regarding the ENSPIRIT trial, we expect the first interim futility analysis before the end of this year. ENSPIRIT is designed to evaluate the potential of custirsen to improve survival outcomes in patients with locally advanced or metastatic non-small cell lung cancer, who have progressed after initial chemotherapy treatment. Patients are being randomized to receive second-line standard of care docetaxel treatment, with or without custirsen therapy. Custirsen has also received Fast Track designation in this trial. That concludes the development program updates. I would now like to return to our review of our second quarter 2014 financial results. Revenue for the 6 months ended June 30, 2014, increased to $16.7 million compared with $11.4 million for the same period in 2013. Total operating expenses for the 6 months ended June 30 increased to $32.2 million compared with $29.1 million for the same period in 2013. Revenue was earned through our collaboration with Teva. Changes from period to period largely result from clinical development activity associated with the AFFINITY trial. Changes in total operating expenses predominantly result from the patient enrollment and treatment in the AFFINITY trial, and the apatorsen investigator-sponsored trials. Net loss for the second quarter of 2014 was $7.0 million, or $0.47 per diluted common share, compared with $8.4 million, or $0.57 per diluted common share, for the prior-year quarter. Net loss for the 6 months ended June 30 was $15.7 million, or $1.05 per diluted common share, compared with $15.1 million, or $1.03 per diluted common share, for the same period in 2013. In conclusion, we're in the midst of an exciting time of growth and opportunity. We now have the financial resources to fund our operations into Q3 of 2016, and an experienced and dedicated team that will enable us to achieve our upcoming milestones. To recap, these include the expected release of Borealis-1 final results and the expected completion of enrollment in both the Spruce and Rainier clinical trials in 2015 for apatorsen, and the completion of enrollment in AFFINITY in 2014, as well as the expected release of final results in late 2015 or early 2016 for custirsen. Thank you, again, for joining us today. And at this time, I'd now like to invite those participating on the call to ask us some questions.

[Operator Instructions] And we have a question from Katherine Xu with William Blair. Filippo Petti - William Blair & Company L.L.C., Research Division: Just wanted to -- this is Fil in for Katherine. Just wanted to follow up a little bit on some of your comments on the timelines. You had touched base in terms of the interim analysis for ENSPIRIT this year. Is that going to both a PFS and an OS futility analysis, or is there something else that we're looking at there?

Thanks, Fil, and again, thanks for the question. So the futility assessment for ENSPIRIT, there are 2 components to that. That includes both PFS and OS, and we'll be reporting predominantly on the OS outcome. Filippo Petti - William Blair & Company L.L.C., Research Division: Okay, that's great, appreciate the color there. And then in terms of OGX-427 apatorsen, in terms of -- can you give us a little bit of an update on the Pacific study and how that's going, and potential timelines regarding preliminary data from that study?

Yes, so preliminary data, again, looking at the second half of this year, and as we've talked about before, that trial has additional accrual to go on, and we'll take a look at that data, and get that out and have a discussion around that when that data is available. And just to clarify on the Pacific trial, that is an open-label trial, which is what is allowing us to do that interim assessment as we're talking about.

Our next question comes from Stephen Willey with Stifel. Stephen D. Willey - Stifel, Nicolaus & Company, Incorporated, Research Division: I know you've mentioned the longer-than-expected timelines to data with respect to apatorsen and frontline bladder, and kind of beyond the obvious rationale as to what might be causing that. Just wondering if you know anything maybe about baseline patient characteristics or, I guess, anything of the sort that might allow you to provide a little bit of color as to why you think that delay may or -- may be happening?

Yes, we don't -- again, thanks again for the questions, Steve. We don't really have a lot of specifics on what is causing the shift. And I think as we've talked about in previous conference calls, we usually form our baseline of expectation around other published studies, and there are a couple of primary ones. The main one is Dr. Bellmunt's study that was published a number of years ago using the same baseline comparison against -- that they used the same that we are using as controls, versus that with M-VAC. And then there's another study that was done by the Dr. Vondermoss [ph]. And so those are kind of the baseline expectations. And of course, geographies and different [indiscernible] can contribute to the expectation of survival around those. That's probably the best that we can really do. There's nothing that -- it's pretty hard in trying to make cross comparisons in patient prognostic factors or baseline characteristics that would give you a lot of precision. I don't think we can give a lot of additional information to say this group is a lot different, or anything like that. At this point in time, we're just basically using it as a tracking metric. That's about as far as we can go at this point, I think, Steve. Stephen D. Willey - Stifel, Nicolaus & Company, Incorporated, Research Division: Understood. And then, I guess, strategically, do the additional resources maybe change the way you may or may not pursue kind of a positive efficacy signal coming out of that study? I guess specifically, with respect to how quickly you would look to follow up on that with a larger study with registrational capacity? And I guess, as you kind of look at some of the immunotherapies now starting to play around in bladder cancer, does that kind of create a little bit of a greater sense of urgency just with respect to trying to get something up and running so that you're not maybe competing for patients?

Yes. Again, thanks for that question. Obviously, with a disease like bladder cancer, where we haven't seen improvements in treatment outcomes for just about 2 decades now, the time to market is critical for trying to make an improvement for those patients and their families. So the focus is always trying to get to market as quickly as possible. As far as the financing goes, the dollars are really earmarked to continue to execute and underwrite basically the organization, so that we can see more of the Phase II trials mature out. Obviously, if we see a spectacular result or a result that would suggest going into a bigger Phase III trial for metastatic bladder cancer, taking those resources and allocating them to a Phase III, I think you'd have to do other things, like partnering or financing or a whole bunch of other activities that would justify being able to go into those subsequent development studies, just because of the size of the trials and the extent of those. So I don't think we would necessarily look to shorten our runway in order to advance that more quickly. But obviously, that would be a discussion that we would have with not only our board and management team, but also investors, as we think about other ways to develop and move the bladder opportunity as quickly to the patients as we could. Stephen D. Willey - Stifel, Nicolaus & Company, Incorporated, Research Division: Okay. And then just a housekeeping question. Should we expect the collaborative revenue to just continue to trend downwards here as some of the Teva-sponsored stuff begins to wrap up a little bit?

Yes, that's exactly what we would expect. As we come to the completion of AFFINITY accrual, then you'll have those patients on treatment, which obviously has some reimbursement elements to it. But as that starts to come off, then those -- the collaboration revenues would also decrease, as would the expenses. So there should be an offset from those, because those expenses basically pass through. I just want to return back to your comment on the landscape for bladder cancer if I could, as well. We spent a bit of time in the prepared statements for Hsp27. It's a fairly new field that we're starting to look at for the role of Hsp27, and its impact on the immune system, and specifically immune modulation. As we talked about, there is appearing to be a fairly direct correlation for Hsp27 expression, allowing for, let's call it, a no-danger signal, which is exactly what's happening with some of these PD-L1 works. So while that field is advancing, and there's a lot of enthusiasm for it, I think it's a very interesting component of Hsp27's biology that is suggesting that not only do we get to manifest the biology that we've talked about previously for proliferation migration, et cetera, but this ability to also potentially hide from the immune system when Hsp27 is there, I think, facilitates a very interesting opportunity as we go forward in not just bladder cancer, but this probably operates in a number of different diseases. So it's a pretty exciting field. I think, that is starting to open up for apatorsen because of that combined biology.

[Operator Instructions] Our next question comes from Chad Messer with Needham. Chad J. Messer - Needham & Company, LLC, Research Division: Scott, you mentioned that -- and I know we'll get final data -- or a presentation at ESMO, but that worse patients in SYNERGY appeared to live longer, I presume you mean in custirsen-treated versus the control arm. Is there anything you can share now about what worse, what constituted worse in that statement?

Yes, there'll be a lot more coming out at ESMO, obviously, and I don't want to preempt what is going to be presented there obviously, because we don't want to lose a potential presentation spot. But what we've basically done is, and I think many of the people on the call would recognize, there's a number of baseline factors that generally contribute to survival, and they form the basis of a number of different assessments. You've probably seen Dr. Susan Halabi's nomogram that she uses, which is basically putting those same factors into the system, and then basically reporting out a survival outcome when you take a look at those. This is kind of using a similar methodology. We know things like hemoglobin, LDH, PSA at different times and different assessments. All these different things will contribute to different survival. The worst of those prognostic factor is typically the shorter the survival is. So what we have done is gone through that same assessment, and that's what is starting to reveal that those patients with worse or poor prognostic factors did, in fact, live longer on custirsen, as we talked about in the prepared statement. Chad J. Messer - Needham & Company, LLC, Research Division: All right, great. Looking forward to seeing that exciting data.

Yes, it will be an exciting presentation, and we'd love to do some follow-up, obviously, after that data set is available in the public domain and be able to speak to it.

I have no further questions at this time. I would like to turn the call back over to management for further remarks.

Great. Thank you very much, Sam, and thanks, again, everybody, for participating on this call. We look forward to providing some further updates as we look forward to announcing the completion of AFFINITY accrual, and some of the other milestones that we talked about on the call. And at this point, we will let everybody go, and thanks, again, for participating.