Good morning, ladies and gentlemen, and welcome to this First Quarter 2012 Curis Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded for replay purposes. I would now like to turn the call over to Mike Gray, Curis' Chief Financial Officer. Please proceed.

Okay, thanks. Good morning, everybody, and thanks, as always, for joining us. During today's call, we'll provide you with an updated on our corporate plans and developments and also discuss first quarter 2012 financial results. Before we begin, I'd like to advise you that this conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation, statements relating to our and our collaborator, Genentech's expectations concerning the commercialization of the market opportunity for Erivedge in the U.S. following its recent FDA approval; our and Genentech and Roche's expectations concerning the timing and outcome of regulatory reviews that are currently being conducted in other territories of Erivedge, including in Europe, Australia, Canada and Switzerland; our and Genentech's expectations regarding the timing of potential outcome of ongoing clinical studies of Erivedge in cancers other than advanced BCC or basal cell carcinoma, which are currently being conducted by Genentech and other third-party investigators, as well as our plans and expectations for advancing CUDC-101 and CUDC-907 and the potential therapeutic benefits of these development candidates and our and our collaborator, Debiopharm's expectations regarding the advancement of Hsp90 inhibitor, Debio 0932. Actual results may differ materially from those indicated by forward-looking statements in this conference call as a result of various important factors. And we encourage you to review our risk factors as more fully described in our annual report on Form 10-K for the year ended December 31, 2011, and in other filings that we periodically make with the SEC. Lastly, we caution you that we're making these forward-looking statements only as of today, and that we may not update any of these statements even if events and developments subsequent to the date of this call cause these estimates and expectations to change. Okay. So with that, I'd like to introduce Dan Passeri, Curis' President and CEO, to discuss our corporate highlights and provide an update on our pipeline. Following Dan's remarks, I'll review our financial results for the first quarter and then we'll open the call for questions. Dan?

Yes. Thanks, Mike. Good morning, everyone, and thank you for joining us today. We've seen continued pipeline progress in the beginning of 2012 with each of our major programs. A highlight for the first quarter, which we were very pleased to announce was the January 30 FDA approval of our collaborator, Genentech's NDA submission for Erivedge for the treatment of adults with a type of basal cell carcinoma or BCC that has spread to other parts of the body that is metastatic or that has come back after surgery or that their healthcare provider decides cannot be treated with surgery or radiation. These subgroups are referred to as advanced BCC. Now this is an extremely important event to Curis, its shareholders and more and most importantly, the patients that are suffering from advanced BCC. BCC is the most common form of cancer in the United States, and the most common type of skin cancer, accounting for approximately 2 million new cases annually. While the disease is generally considered curable through surgical excision when restricted to a small area of the skin, a small percentage of this population may progress to advanced BCC, whereby, their cancer has advanced further into the skin, bones or other tissues or spread to other parts of the body. In these cases, the disease is difficult to treat and is often debilitating and life-threatening. Erivedge is now the only approved Hedgehog Pathway Inhibitor and also the only approved treatment for this advanced form of the disease. Prior to Erivedge approval, there was no approved medicine for this disease, and this is obviously a very important accomplishment for patients suffering from advanced BCC. Advanced BCC often results in severe deformity or impaired function of the affected organs. And patients historically have typically received 1 or more interventions…

All right, thanks. In the first quarter of 2012, we reported net income of $2.2 million and $0.03 per share on both a basic and fully diluted basis as compared to a net loss of $6.8 million or $0.09 on, again, both a basic and fully diluted basis for the first quarter of 2011. Revenues for the first quarter of 2012 were $10.4 million, as compared to $100,000 for the same period in 2011. The increase is primarily the result of the $10 million milestone payment to be received from Genentech upon FDA's approval of Erivedge in Q1, and $271,000 in royalty revenues that we earned from Genentech's net sales of Erivedge during the first quarter of 2012. I would just like to point out that the royalty calculates out to 5% of the $5.4 million in Genentech's Q1 sales. Our royalty, just as a reminder, ranges from the mid, so this is the lowest or beginning royalty rate to upper single digits on global sales. So obviously, as Erivedge sales increase, the royalty rate to Curis will increase in the future. Operating expenses for the first quarter of 2012 were $8.2 million as compared to $5.5 million for the same period. Most of the increase was related to costs associated with the U.S. approval of Erivedge in Q1. We recorded cost of royalty revenues of $114,000 for the first quarter of 2012. This amount include $100,000 that we paid to a university licensor upon the first commercial sale of Erivedge, and approximately $14,000 that we paid to university licensures, which represent 5% of the $271,000 that we received in -- or that we earned in royalty revenue for Q1. So going forward, this line item should approximate 5% of the royalties that we receive. Research and development spending was…

[Operator Instructions] And our first question comes from Simos Simeonidis from Cowen and Company.

Dan, just to clarify what you said about the patient uptake in -- of Erivedge, is the 175 new patient number that you indicated, is it for the quarter, meaning the February and March? Or is it up to today?

Quarter.

Quarter, yes. It's February and March.

Okay. And my second question, and I'll jump back in the queue. Could you tell us what Erivedge data we'll see at ASCO?

We showed -- there will be data on at least 1 and possibly 2 studies in cancerous sarcoma. There will be data from one of the -- from a randomized Phase II study in pancreatic cancer, and I think there'll will be some additional data in advanced basal cell.

So the operable BCC will be at the week after ASCO at the investigational dermatology meeting?

No, no, the operable BCC data is actually later this week at the Society of Investigative Dermatology meeting. I think the event's being presented on the 11.

Our next question comes from Boris Peaker from Oppenheimer.

I just wanted to learn a little bit more about the initial prescribers. Could you comment the initial docs that are writing scripts for Erivedge? Are they mostly academic, community docs? And how do you see that dynamic evolving with the launch?

Yes. Unfortunately, Boris, we don't have that level of granularity at this point from Genentech. So we don't know where the initial prescriptions have gone. We'll hopefully be able to clarify that over the next quarter or 2.

Okay. And my last question is have you discussed Gorlin's syndrome development strategy with Genentech or Roche? I mean, the data seems very strong. I think I heard you mention that you plan on starting other studies, although I'm not sure how you could do a blinded study in this case given the strong response in the drug arm?

Yes. That's an important question. We have had some preliminary discussions just in terms of the encouraging data. We have not had an explicit discussion with Genentech around the prospects of the current label encompassing Gorlin's. If you look at the particular verbiage in the existing label, it states in the second characterization after the first -- first is metastatic. The second is -- or the lesions returns after surgical excision. Our take is that may potentially encompass Gorlin's, but we haven't had that formally communicated by Genentech, Roche. We do know that Gorlin's is being investigated through an NCI-sponsored clinical trial. As you stated, the data to date looks quite compelling. There was a publication by Irv Epstein out of Stanford a while ago, which showed actually quite dramatic responses in Gorlin's. And I think the key is going to learn how to administer it chronically to this patient population, where the patients will probably need a drug holiday to attenuate or allow the AEs to resolve, and that's going to take some experience and further study. So we look forward to getting clarity from Genentech, Roche as their strategy is communicated publicly.

Just one other comment on that, Boris, is that radiation is counter-indicated for Gorlin's patients. So that's another part of the label where BCC is not appropriate to be treated with radiation.

And your next question comes from Ed Tenthoff from Piper Jaffray.

Yes, I wanted to ask about the CUDC-101 data that you're going to be reporting this year. I know you went through it a little bit on the call, but if you could just kind of run back through a little bit more detail about what we should be expecting there and how that can inform future potential trial design?

Yes. So what we'll be reporting on is the update on the Phase Ib expansion cohort. And potentially at the end of the year, observations from our dose escalation study with head and neck cancer. So to break that into the 2 buckets. The first category looking at the expansion cohort, what we've observed to date is the drug appears to have activity in a number of tumor types, and that activity is stable disease, some long-term stable disease in a number of tumor types, where EGFR is part of the driving mechanism. So that's very encouraging, but we also have concluded with the IV, we have 2 primary obstacles. We had a number of patients although having long-term stable disease dropped out of the study based on clinic fatigue, and that is the inconvenience of having to go back to the clinic for an IV infusion. And then we also have had an observation of a limitation in terms of the exposure of the drug based on its T-half, particularly going in for an every-other-day infusion. So that's where the oral is very important for expansion into those other indications. And on the head and neck, we continue to see some encouraging data. And our expectation is by the end of the year, we'd be able to report on our summary of these observations. I think it's too early to conclude anything. We only have an NF3 right now. So by the end of the year, we would be in a position to report out on the Phase I dose escalation.

All right, great. And then we'll get the oral IND coming soon?

Yes. Thanks for bringing that up. The oral IND filing should be in Q3.

Our next question comes from Joe Pantginis from Roth Capital Partners.

I guess, 2 questions, a housekeeping question for Mike and then maybe one for Dan. Mike, just wanted to be sure about what is the total milestones that are still left and then -- from Roche, for Erivedge. And then secondly, with regard to your 5% payment to the academic institution that -- for your royalty expense, is -- what is the duration? Or is there an expiration for that? Or is the royalty paid in perpetuity as long as you get royalties?

Okay. I'll take the first one. There's $68 million in milestones left. Most of those now are outside of basal cell. We have the 2 remaining milestones in the late indication, and that's for approval in Europe and approval in Australia. And those will be of a similar amount to the amounts received for the filings, the submissions.

On the 5% question, I need to circle back with our IP counsel, but it doesn't go the entire term. If I -- I'll throw an estimate out of 2020, so it's about half the remaining life of the compound itself. Erivedge is covered through 2028.

Okay, great. And then for Dan, based on the potential and additional indications with -- for all the third-party studies, any color you can provide maybe in your discussions with Roche as to how quickly Roche would look to start, say, larger Phase II separate studies for any of these third-party indications?

What's been communicated to us and it's really indicative of Genentech's and Roche's overall strategy in oncology is to follow the data where they have signal. So the key is to wait for public disclosure from the investigative parties, analyze the data, and then where they see a signal to try to make sense out of that and exploit it where appropriate. They haven't communicated to us, Joe, any clarity on timing on that. And so we're awaiting public disclosure as our investors are as well. So once that data becomes available, I think Genentech will then clarify to us what their overall strategy is.

Our next question comes from Brian Skorney from Brean Murray.

Just first one, really quick. Do you guys have a full breakout of Roche's sales? I know on their call, they said there was about CHF 5 million. So just kind of backing out the royalty number, it looks like the rate is just over 5%. Is that a reasonable way to look at it going forward?

Well, okay. So it's 5% right now. And what we've said consistently for a long time, it's a mid- to upper-single-digit royalty that escalates with global sales. So the contract, the sub-terms there or the actual step-ups are confidential under the terms of our contract, so we can't unfortunately disclose more than that. But what we do feel comfortable saying is that to get to that sort of high-single-digit level, we -- global sales need to be well, well, north -- south, rather, of $1 billion. So far south of $1 billion. So it's achievable step-up, and then there a few steps in the royalty schedule, so that as sales increase we'll have incrementally higher royalty. But right now, 5% is the royalty for Q1.

Got you. And then just on 907, I know you're kind of wrapping up the preclinical talks program right now. What are you seeing there? I know there's some concern out there just in the pan PI3 kinase inhibitors that are hitting alpha and beta isoforms since they're ubiquitously expressed, introduced some potential additional toxicities. Can you kind of put what you're seeing in your preclinical tox studies in contrast to what we should expect from pan PI3 kinase inhibitors?

Yes, so we haven't completed the tox studies as of now. But what we've seen to date, we don't have any real concerns about there being an obstacle going forward. The drug appears to be overall well-tolerated. I think we just have to wait until we finish the package and test it in Phase I. I think these generalizations are not helpful in terms of whether pan or isoform. I think you have to look at each drug as an individual entity, particularly ours, where it's hitting more than one target, has the potential of concentrating in a tissue that has those targets amplified. So I think we have to wait and see what the data reveals.

Our next question comes from Red Benjamin (sic) [Reni Benjamin] from Rodman.

Just a couple of questions. I guess the first, Dan, can you just give us a sense as to what the progress is or the progress that's being made on the oral formulation? And will we -- I know that there's going to be an IND filed by the end of the year. But can you give us a sense as to maybe where you are in the path and will we see any of this data maybe at ACR or one of the conferences coming up?

Yes, hang on one second, Ren. So the 101 oral, we have a couple of formulations. We focused on one in particular, looks promising. We have it made in pill form in a capsule. So we're encouraged that we'll be able to file the IND in Q3. In animal studies, we have encouraging early data, showing some oral absorption. So at this point, we're optimistic that we'll be successful to be able to file the IND and test it in humans. And based on our extrapolation of other compounds and what we've seen to date preclinically, we're optimistic that we should have adequate oral absorption in humans, which would give us the ability to now have dosing flexibility.

And is there -- do you have a bioavailability number that you're targeting or based on the animal studies that you can extrapolate right now? Or is it too early?

We're targeting something of the order of 40%-plus, 40% to 50%, I think, would give us a real comfort zone.

Okay. And I guess just on the Debio 0932, the -- I think in your prepared remarks, you mentioned that they're going through the additional expansion cohort with 30 patients. And you mentioned that the Phase II could start in first half of 2013. And I thought, Mike, when you had said your remarks that the Phase II could start shortly in non-small cell lung cancer, so could you just clarify it up for me when this could be starting? And when might we see the data from the initial patients, initial set of patients, not the expansion cohort?

So the second part of your question, the Phase Ia, will be presented at ASCO. And the second part of your question is the Phase I/II study, so it's a combination with chemotherapy. So the Phase I portion will start very shortly and we expect that sometime in the first half of next year, we'll have the Phase II portion starting. So this trial itself starts, but it's the Phase I portion that starts this quarter. And then the hope is that they'll advance that to Q2 first half next year.

And the milestone only hits after the -- after advancing to Q2?

After advancing to Phase II, yes.

Our next question comes from Ed Arce from MLV.

So just wanted to get a little more detail around the operable nodular BCC data that came out recently. With 42% complete histological clearance, it's pretty good data. I was just wondering when we could expect some data around the second and third cohorts of that study. And assuming that we see continued strong results, what would the plan be to progress it further?

Yes, so I think, overall, first of all, it's indicative of their sort of detailed systematic approach to studying mechanistic activity, which I think is going to be really important in properly positioning the drug more broadly. So I agree with your sentiments, the 42% complete histological clearance is very encouraging. And just to remind everyone, it's doubtful that this would be used to replace surgery, but to supplement it in those severe cases of operable nodular BCC. So the second cohort is looking for durability of response. So they were part of that first group of patients that were treated for 12 consecutive weeks. So the first cohort then ended at that point, and they did a systematic surgical excision to look at the histological activity. The second cohort at the end of that 12-week period are then followed out for an additional 24 weeks or up to an additional 24 weeks, where they will then have a surgical excision, and that's to look at durability of the effect and the possibility that there may be an enhancement of effect. Just to remind you, the drug has a T half of about 7 days. So the drug still has activity pass that 12-week dosing period, so we may see some clarity there. So I think what they're looking at is a very systematic analysis of the drug's molecular action and activity mechanistically on the lesion. And then the third cohort is to look at the difference of dosing for an 8-week schedule, then giving a drug holiday, and then an additional 8-week schedule to see if you can enhance that 42% histological clearance potentially. And by giving the patients that 4-week period off to attenuate and potentially resolve the AEs that start manifesting at around that 8-week period. So to try to learn the best way to give this drug and so to your question, I think the data would likely be released on the second cohort possibly by the end of the year. Third cohort, I would say early 2013.

Okay, great. The only other question I had was now that you've got between Roche and Genentech submittals across the U.S., EU, Canada and Australia, I'm just wondering if there were any other markets that perhaps are being considered, in particular, Japan or perhaps somewhere in Latin America?

Yes, I think Japan and Asia, per se, is not an attractive market for BCC because the populations don't typically have the rates of BCC that you have from sort of Western Europeans that have moved to other areas of the globe, where they're exposed to a high degree of UV radiation. I think Latin America is another territory. Eastern Europe is another territory. So those are the markets that they're looking at exploiting.

Our next question comes from Mani Mohindru from ThinkEquity.

Most of my questions have been answered, but a couple of quick follow-ups, one on a prior question on basal -- operable basal cell carcinoma. As I look at the abstract, that's the only thing I found on the Journal of Investigative Dermatology. I do see that over and beyond the 42% complete histological response, there were CRs as well. I think 5 patients had CRs. I thought that it was pretty compelling data in Roche and Genentech's end, so maybe do they have any internal discussions ongoing that even with this short duration of therapy, they were able to hit CRs? And a follow-up on the AEs, what AEs are the primary reasons for discontinuation in this trial and others? And then maybe I'll take one more question, a short question.

Sure. So the primary AEs that manifest our muscle spasm, alteration of the cessation of taste and alopecia. Those are the primary ones. There's some other AEs involved as well. I think the most prevalent one that results in patients dropping out are the muscle spasm, particularly if it gets to a great, great rate, and the alteration of the cessation of taste. I think that's one of the reasons, Mani, they're looking at the 8-week dosing regimen followed by a 4-week holiday to allow those to attenuate, and possibly resolve and then dose again for an 8-week period.

Okay. And any comments on the CR part of the -- like the responses? Has there been full data published? Or is it just the abstract and we should just wait for the full data?

Yes, just the abstract and we would prefer for communication of the full data before we communicate on anything.

And just quickly on 101, so the gastric forms you've so far in your dose escalation, where solid tumors is stable disease and is that with monotherapy?

So just to clarify, on the 1A, we had a confirmed PR in gastric cancer. We had some signs of activity at the single agent in some head and neck cancer patients and 2 patients. One was a mixed response. And in the Phase Ib expansion cohort, particularly with the every-other-day dosing, we saw a significant amount of stable disease, some long-term stable disease and that was as a single agent. We're confident that the drug is hitting its targets. It has a biological and clinical activity. But we're also -- what we observed is a potential exposure liability with this IV formulation. So again, that is why the oral is so important for us to expand out into other indications. That being said, we think with the IV, the head and neck trial has a potential path forward for a registration path based on the synergies we've seen. Pre-clinically, we're encouraged that, that actually would be an applicable application of the drug in the current IV formulation.

But you don't want to try anything with combination with the IV formulation and try to improve some of your responses?

So that's an important question, and we are actually asking that question internally. So at this juncture, we're not going to say we'll not look at that. We are actually assessing based on what we've seen in the head and neck trial, and the synergies we've seen pre-clinically to conduct some very systematic preclinical studies of synergies, where we may be able to apply the IV formulation in a defined setting for a defined period of time.

Our next question comes from Ling -- I'm sorry, from Jason Kantor from RBC Capital Markets.

Thought you might have forgotten about me. On the royalty step-ups, did those step-ups cover the entire sales for the whole year? Or is it just on the incremental sales above the threshold?

It's cuts. So the 5% rate applies from 0 to x, and then it cuts up a few more times to the upper single-digit range. So it doesn't go retroactive back to stellar one.

Within the year.

Within the year, yes.

Okay. So the royalty rates starts low at beginning of the year and potentially gets higher as the year goes on and then resets every year?

Yes.

Okay. And then in terms of the Debio 0932 data at ASCO, what are we going to see in terms of patient numbers and indications for that?

Yes, so we're going to provide data on the dose escalation. I apologize. The actual number of patients treated is alluding me right now, Jason, but I think it's over 30, I don't know.

No, it's over 50.

It's over 50, yes.

Yes, they had 2...

They had an everyday dosing schedule and an every-other-day dosing schedule.

That's right. So it's larger than normal Phase I study.

And they're going to be reporting on the tolerance of the drug and the drug appear to be very well-tolerated in that dosing schedule. And as Mike said, they had 2 cohorts. It was an everyday and every other day, and they'll be disclosing data on those 2 cohorts and then on activity, clinical activity within the Phase Ia. And I don't want to comment on that because they're going to be presenting that at ASCO.

Okay. And then in terms of the operable BCC, do -- did the data crossed any kind of hurdle in terms of what Genentech would want to see to move that forward for both safety and efficacy?

I think it's premature for us to forecast that. We would rather have Genentech and Roche make that statement. I would just convey that the data is very encouraging at this point. In terms of the safety profile, it's consistent with what we've seen, no serious AEs. The AEs tend to manifest later on in the dosing schedule. So that's the third cohort trying to attenuate the AEs through a drug holiday. And having -- this is not meant to replace surgery, per se, but to augment it. So I think the data's very encouraging and we can't put Genentech and Roche's thoughts out there at this point. They have to disclose that.

Our next question comes from Ling Wang from Summer Street Research.

My question's on CUDC-101 and how that cancer remission trial has on that [ph] on the patient population. Could you provide us a little bit more details in -- for the scientific rationale for the expansion? And whether you need to -- I mean, whether you need more patients in this trial?

Yes, it's predicated on a couple of observations. One is our CMO, Dr. Maurizio, has always been working very closely with the PIs. And the amendment is meant to expand patient access for the trial, also to capture the changing demographics that we're seeing, particularly in major centers such as the Northeast and the West Coast, where there's an increasing number of head and neck patients that are HPV positive. So the HPV negative population and subset is clearly an attractive indication, where these patients do not respond as favorably to standard of care, and it is driven by EGFR and a subset Her2 as opposed to HPV. The amendment is meant to capture those patients that are HPV positive, but have a history of significant smoking, which puts them into a category of also having a likely involvement of EGFR. So that subset of HPV positive also do not tend to respond as favorably as just the HPV positive non-smokers. So it's meant to enhance our access to patients during the clinical trial stage, but also to potentially increase the market potential of the label.

Do you need to involve more patients than you previously originally planned?

No. Just the rate of enrollment. We want to try to escalate. And then going forward, at the end of this year, we want to be able to ramp-up the patient numbers at a good rate going forward.

All right then. When do we expect to see the initial data for this trial?

Yes, we're still optimistic we'll complete the dose escalation towards the end of this year, possibly the beginning of 2013, and then we'd report on that data and make a decision to proceed with a randomized Phase II.

Our next question is a follow-up from Simos Simeonidis from Cowen and Company.

Actually, I show no further questions in the queue, and would like to turn the conference back over to Mr. Dan Passeri for closing remarks.

Okay. So I think we've made significant progress during the first quarter. We look forward to giving you further updates as we become available, and thank you very much for your attention and support. And look forward to further details going forward. Thank you.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program and you may all disconnect at this time.