Curis, Inc. (CRIS) Q2 2015 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Curis Inc. Second Quarter 2015 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to introduce your host for today’s conference Senior Vice President of Corporate Strategy and Investor Relations, Mani Mohindru. Please go ahead.

Thank you, Mallory. Good morning, everyone, and thank you for joining us. During today's call, we'll provide you with an update on corporate developments and plans and also discuss our second quarter 2015 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 related to our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management; the potential therapeutic benefits and our plans to develop our proprietary drug candidates, CUDC-907, progress in the programs under our collaboration with Aurigene, as well as our expectation of our partners Genentech and Roche's continued development and commercialization of Erivedge in various territories. Actual results may differ materially from those indicated by forward-looking statements in this conference call as a result of various important factors, including those risk factors described in our quarterly report on Form 10-Q for the quarter ended June 30, 2015, that we filed this morning and in other filings that we periodically make with the SEC, and we encourage you to review these risk factors carefully. 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. I'd now like to introduce Ali Fattaey, our President and CEO, who will provide an update on the Company and the various programs, including CUDC-907, our PDL-1 and IRAK4 Inhibitor programs under our collaboration with Aurigene as well as our partnered program, Erivedge. Following Ali's remarks, Mike Gray, our Chief Financial and Chief Business Officer, will review our financial results for the first quarter 2015, after which we will open the call for questions. [Operator Instructions] Ali?

Thank you, Mani, and thank you to the conference call and webcast participants for joining us this morning. We continued to develop the organization and streamline our efforts to build Curis into an oncology focussed company with strategic emphasis on development and eventual commercialisation of innovative and effective drugs for cancer patients. Let me begin this morning with our most advanced molecule CUDC-907 which is an oral Dual HDAC and PI3 Kinase Inhibitor that is being studied in patients with relapsed refractory aggressive lymphomas and separately in patients with certain solid tumors. We are very pleased with the progress being made with CUDC-907 especially in the setting of relapsed refractory Diffuse Large B-cell lymphoma or DLBCL. In the past quarter, we reported results from the ongoing Phase 1 trial of CUDC-907 at the ASCO Annual Meeting and the European Haematology Association Annual Meeting as well as the presentation at the International Congress on Malignant Lymphoma that was held in Lugano, Switzerland. Now these presentations highlighted that six out of the ten responsive evaluable heavily pre-treated patients with relapse refractory DLBCL experienced objective responses including two patients with complete responses and four patients with partial responses, while two out of the ten patients had stable disease. Three of these objective responses is which included one complete response and two partial responses occurred in patients with transformed follicular lymphoma DLBCL, one complete response was observed in a patient with GCB subtype of DLBCL and two partial responses in patients with unclassified DLBCL. Additionally, one patient with Hodgkin's lymphoma also experienced a partial response. Overall, stable disease was reported in 25 of the 44 response evaluable patients with various lymphomas or patients with multiple myeloma. No new dose limiting toxicities or DLTs were identified and adverse events were consistent with our previous reports and were most commonly occurring drug related side effects of diarrhoea, fatigue, nausea, thrombocytopenia and some neutrophil decreases most of which appeared to mechanism related. Based on pharmacokinetic analysis, CUDC-907 appeared to have readily and predominantly distribute to patient tissues including the tumor tissue with a high resident half life which may afford exposing the tumor to significantly high concentrations of potent HDAC and PI3 kinase inhibitor reactivity. We believe this property of CUDC-907 may uniquely contribute to its clinical activity in the population of patients with DLBCL and it also serves as the basis for our ongoing trial of CUDC-907 for treatment of patients with certain solid tumors. We are currently continuing to enrol patients with DLBCL in expansion cohorts of the Phase 1 study where CUDC-907 is administered either as a monotherapy or in combination with rituximab. We are also in the process of finalizing the design of a Phase 2 registration directed trial for CUDC-907 in relapsed refractory DLBCL setting which we expect to imitate in the fourth quarter of this year. We expect to define and enrol a subset of patients in this study with DLBCL based on the genetic background of their disease and are now determining the regulatory path with regards to monotherapy and/or a combination treatment opportunities. We are currently in active discussions with our key investigators and advisors for the upcoming trial and expect to hold discussions with the regulatory authorities regarding our data, our designs and plans for CUDC-907. In addition to the ongoing study in the hematologic malignancy setting, we continue to enrol patients in the second Phase 1 trial testing CUDC-907 in patients with relapsed or advanced solid tumours. Based on insights from our lymphoma study we are exploring the potential modification of this trial to apply a patient enrichment strategies based on similar genetic alterations in solid tumors including the not midline carcinoma setting. We look forward to provide further update from this solid tumor study during this year as well. I’d now like to update on our collaboration with Aurigene. Since the announcement of our agreement earlier this year, we have continued to build a strong and interactive partnership with our colleagues at Aurigene. Both Curis and Aurigene teams are fully aligned and engaged with advancing molecules from multiple programs into the clinic and we expect to exercise options under this collaboration to exclusively license drug candidates in the very near future to initiate their clinical development. We believe immuno-oncology is one of the most exciting treatment approaches that has emerged in the field of cancer therapy which is based on the strategy of employing and activating the immune system against the patients tumor. Our colleague and scientist at Aurigene had been successful at generating small molecules that can be administered orally in order to target and disrupt immune checkpoint receptor ligand interactions including the PD-1, PD-L1 interactions and result in activation of T-cells and anti-tumor activity in the preclinical setting. And these results are similar to that achieved with anti body molecules directed at the same targets. To our knowledge these represent the first and currently only in the class of oral small molecules targeting immune checkpoint receptor ligand interactions. As we had stated previously, our collaboration with Aurigene is a multiyear partnership expected to generate a steady pipeline of novel drug candidates in the coming years. At the time of entering into the collaboration we selected an oral small molecule PD-1 antagonist which was designed to disrupt PD-1, PD-L1 interactions and activate T-cells for cancer immunotherapy. In addition to this PD-L1 antagonist program during the second quarter we also selected a second small molecule immuno-oncology program to advance it further in preclinical developments to support its potential IND filing in clinical development as well. Our partner Aurigene continues to make significant progress in advancing the current two immuno-oncology programs in preclinical development while they are continuing their efforts to address additional immune checkpoint targets with small molecule antagonist. We expect to present preclinical data and results from the immuno-oncology programs at scientific meetings later this year. And we continue to expect to exercise our option to exclusively license and file an IND for one of these molecules later this year. We are also pleased to report that Aurigene has made significant progress in our IRAK4 kinase inhibitor program. During the second quarter, Aurigene presented preclinical data from the IRAK4 program at the American Association for cancer research or AACR Annual Meeting, where it showed a series of potential IRAC4 inhibitors that demonstrated potent anti tumor activity in cell based as well as in in vivo tumor models with activating MYD88 mutations. In addition to the cancer models, some of these compounds also showed activity in in vivo models of information indicating the potential of targeting IRAC4 in both oncology and inflammatory disease settings. We expect to exercise our option to exclusively license an IRAC4 inhibitor development candidate in the near future and file an IND application during the first half of next year for clinical development of that compound in specific haematological malignancies. We strongly believe that our collaboration with Aurigene is a unique example of coming together of two organizations with the goal of aligning complimentary expertise to expedite development of promising molecules in the field of cancer therapeutics. We are each committed to bringing considerable resources in this competitive field and intend to do this in a cost effective manner. We continue to grow internally as a developmental organisation on multiple fronts including project leadership, clinical development and clinical operations, project management, regulatory data management and translational medicine. Now our programs CUDC-907, the immuno-oncology drug candidates and our IRAC4 inhibitor remain our focus and they represent our efforts to transform Curis into a development and eventually commercialisation focus business. I would now like to turn to Erivedge which is being developed and commercialised globally by Genentech and Roche under our collaboration. Roche continues to concentrate on the global commercialization of Erivedge for the treatment of advanced BCC in key territories worldwide. In this regard, we recorded royalty revenues of approximately $2 million for the first quarter this year and as compared to $1.8 million for the second quarter of 2014. Approximately 69% of Erivedge net sales for the first half of 2015 were derived in the U.S. with the remaining sales being generated outside of the U.S. With regards to its development, Roche and Genentech continue with multiple trials for testing Erivedge in earlier settings of basal cell carcinoma. Outside of oncology, Roche continues to indicate an interest in investigating Erivedge in idiopathic pulmonary fibrosis disease. In June of 2014, Roche filed an IND application with the FDA to initiate a multi center Phase 2 clinical study of Erivedge in patients with IPF. After the Phase 2 study opened but prior to patient enrolment Roche suspended the study in August in order to amend the protocol to incorporate Esbriet or pirfenidone, the new standard of care for IPF into the trial design. Roche has stated that the first patient in this study is pending in anticipation of trial design amendment to incorporate the new standard of care, Esbriet. I would now like to turn the call over to Mike Gray our Chief Financial Officer and Chief Business Officer for his discussion of our financial results after which we will open the call for Q&A. Thank you.

Thanks, Ali. We reported a net loss of $8.1 million or $0.06 per share on both the basic and fully diluted basis for the second quarter of 2015, as compared to a net loss of $1.9 million, or $0.02 per share on both the basic and fully diluted basis for the same period in 2014. Revenues for the second quarter of 2015 were $2.1 million as compared to $4.8 million for Q2, 2014. The decrease in revenues was primarily due to decrease in license fee revenues due to a $3 million milestone payment that we earned from Genentech during the second quarter of 2014. Royalty revenues recorded on Genentech and Roche’s net sales of Erivedge increased to $2 million in the second quarter of 2015 as compared to $1.8 million in Q2, 2014. Operating expenses for the second quarter of 2015 were $9.5 million as compared to $6.3 million for Q2, 2014. R&D expenses were $5.9 million for the second quarter of 2015 as compared to $3.3 million in Q2, 2014. The increase in R&D expense was primarily due to increase spending on CUDC-907 and preclinical programs under our collaboration with Aurigene. We incurred expenses of $2.7 million and $1.4 million on CUDC-907 for the quarters ended June 30, 2015 and 2014 respectively related to our ongoing studies. Spending of $2.5 million we recorded, spending of $2.5 million on our preclinical programs including a $2 million milestone payment that we made to Aurigene for selection of a third research program under that collaboration. Offsetting these increases, spending on CUDC-427 decreased by $900,000 during Q2, 2015 as compared to the prior year period as we have wound down investment on this program to focus our resources on the development of CUDC-907 in our programs under the collaboration with Aurigene. G&A expenses were $3.4 million for the second quarter of 2015 as compared to $2.9 million for the second quarter of 2014. Increased legal and stock based compensation cost were partially offset by decreased professional and consulting cost. Other expense was $759,000 for the second quarter of 2015, as compared to $351,000 for the same period in 2014. Other expense primarily consisted of $843,000 and $950,000, and the interest expense for the quarters ended June 30, 2015 and 2014 respectively related to the loan made by BioPharma II to Curis Royalty. As of June 30, 2015 our cash, cash equivalent, marketable securities and investments totaled $99.2 million, and they were approximately 128.4 million shares of common stock outstanding. Lastly, just to touch on financial guidance we have revised our 2015 financial guidance for research and development expense for 2015 we now currently expect that these expenses will be in a range of $30 million to $35 million. We have previously estimated that the expenses would range from $37 million to $42 million. As a result, we currently expect 2015 with cash, cash equivalents and investments of between $72 million and $77 million versus our prior estimate of $65 million to $70 million. We continue to expect that our cash resources will be sufficient to provide for funding our planned operations in to 2017. Our decrease in estimated research and development expenses is primarily the result of decreases in expenses across many of our development programs including a recent reevaluation of our clinical development plans for CDC-427 and 305. We have determined that we would preserve all of our current resources for the continued development of CUDC-907 and drug candidates under our collaboration with Aurigene. We will seek potential partnering opportunities for CUDC-427 and CUDC-305 but do not expect to invest additional capital into these assets. That concludes our prepared remarks; we’d like to now open the call for questions. Thank you.

[Operator Instructions] Our first question comes from the line of Adnan Butt with RBC Capital. Your line is now open.

Hey good morning everyone and thanks for taking the question. One on 907 and then the Check-1 [ph] inhibitor program. The pivotal 907, could you comment a bit about how targeted you expect the DLBCL patient population to be formed only and then if so could it expand to a broader population from there and then on the oral check point inhibitor are the GLP talk studies completed and how do you expect safety to start up relative to the anti bodies? Thanks.

Thank you, Adnan. I’ll try and address those two questions for you. Regarding 907 based on what I described today and obviously what we presented. As we indicated DLBCL, even though it’s about a third of non-hodgkin lymphoma, so little more than third of the non-hodgkin lymphomas and it’s an aggressive disease, its not just one disease type itself. Obviously patients can come and be considered as DLBCL, either de novo and those generally are classified as either GCB subtype or ABC subtype of DLBCL. But patients can also be considered DLBCL based on transformation from follicular lymphoma or from other diseases for example include CLL transformation Richter syndrome. So, it turns out to be a relatively complex disease. We had patients that were enrolled in our study, and as I indicated we’ve seen responses now in patients with transformed follicular lymphoma. We’ve also seen in fact their complete response with the patients with GCB subtype of DLBCL and also in unclassified subtypes of DLBCL. And this is where we put our attention to, of course to figure out how we determine a commonality between these and we think some of that is related to the genetic background of the tumors that come in from different types of DLBCL, but then they do respond with CUDC-907. With regards to whether the Phase-II registration directed study itself only focus on a small population and that’s what we are examining right now. We’d like to draw patients from these different subtypes and types of patients and then begin their enrolment and inclusion into this study. With regards to whether later on this can actually expand into additional subtypes or additional types of lymphomas, we certainly believe that would be the case going forward. But right now we’d like to see how we can enrich and be able to select the patients that can actually see the most benefit for this initial Phase-II registration directed study. With regards to the oral checkpoints inhibitors themselves, as we indicated we are in preclinical development which includes GLP type oncology studies. These are ongoing studies that weight not to, if you don’t mind, I’d like to not comment on they’ve been completed yet. There are obviously ongoing studies and they need to be conducted in multiple species. With regard to their safety as compared to antibodies or other molecules targeting these receptors and ligand interaction, I would say based on everything that we’ve seen from initial non-GLP safety studies in rodent model as well s the efficacy studies that have been conducted in preclinical models, we certainly see nothing different in regards to their safety signals and adverse event profiles than what has been seeing with antibodies. They seem to be relatively safe with very little in term so of adverse event signals associated with them. Very much akin to what we see with antibody molecules both on the safety side so far, as well as with respect to their preclinical anti-tumor activity in certain models they seem to be very much similar to the anti….

Ali, has the company said which target could follow the PD-L1?

We have not disclosed the target yet at this point.

Okay. Thank you.

Thank you. The next question comes from the line of Brian Skorney with Robert Baird. Your line is now open.

Thanks guys for taking my question. I think you’d recently planned to expand 907 Phase-II study with the combination with ritux, I’m just wondering have patients been dosed in combo in that study. And how will data from this combo determine the path forward in the registrational study given kind of proximity between initial dosing and your plans to move forward with registration on directly study?

Thank you, Brian. With regards to 907, as we’ve indicated the expansion on the enrolled patients as monotherapy and yes the expansion cohort that enrolls patients with CUDC-907 with rituximab has enrolled patients and patients have been dosed. So we are continuing to treat DLBCL patients with both monotherapy as well as in combination with rituximab in separate expansion cohorts. With regards to how that translates into the Phase-II trial, as we’ve indicated we do see obviously the benefit that we’ve seen in patients so far has been monotherapy, however that’s not necessarily mean that that’s how patients will continually treated, especially in the relapsed/refractory setting. And this was part of the reason we wanted to include a combination treatments and get some experience with that with rituximab. Whether the study will be -- the Phase-II study will be a monotherapy study or whether it will include combination is really the part of the design that we’re looking at now based on the types of the patients that we are likely to enrolled. And so that’s probably the best that I can describe the analysis for you. And I should also say that its not necessarily that it would be – that the things would not be necessarily mutually exclusive, it is possible that we will continue the treatment of patients with rituximab and its possible that we would actually initiate this study as a monotherapy for the drug as well. It’s just a little bit too early to try and describe all of that at this point.

Got you. Thanks.

Thank you. [Operator Instructions] Our next question comes from the line of Boris Peaker with Cowen. Your line is now open. Please go ahead.

Good morning. Just question on the competitive front, maybe we’ll start with, Novartis recently had hedgehog inhibitor approved. Just curious how you think that may affect the Erivedge market and when the impact will be felt?

Yes. I’ll touch on that immediate. It’s a little bit uncertain, the drug was just approved the Novartis compound. It was approved in the U.S. It was approved for locally Advanced Basal Cell Carcinoma. Only you may recall the Erivedge is approved for metastatic and locally advanced BCC. All I can really say at this point is discussion with Genentech, if they do – they plan for growth, they plan for growth with or without this competing molecule. This is only competing molecule that I’m aware of in the pipeline for Advanced Basal Cell. So, we do continue to expect until unless we see otherwise that there would be continued top-line sales gross with the molecule for Erivedge.

Okay. Also on the Erivedge IPF study, could you -- do you have sense of the timeline exactly on the study which start as well as when we should see data from it?

We don’t have a great. I mean, the sense of timing for start would be sort of end of Q4 or Q1 next year, Q4 or Q1 next year. The prior design was had an endpoint of one year. We need to the see the final design, so unfortunately we don’t have a lot of clarity on that right now.

Great. And my last question is on the PD-L1 oral candidate, what specific data do you anticipate to provide when you make the announcement of that candidate? Is it going to be any kind of specific presentation at Medical Meetings?

Yes. Our expectation is – let me separate the two things. In terms of selection of the candidate, exercising our option and continuing to push forward for initiation of clinical development of it, it’s in term respect separate from scientific presentations. We do expect to do both of those this year. Presentation at scientific conference is coming in the latter half of the year, as well as the exercise of our option to license the molecule and initiate its clinical developments. Both of those are slated for this year.

Great. Thank you very much for taking my questions.

Thank you. Operator The next question comes from the line of Assaf Vestin with Roth Capital Partners.

Good morning. Thanks for taking the question. Just one regarding 427 and 305, you briefly mentioned them in the press release about revaluating your clinical development plans. Could you just clarify what you mean by that? And what would trigger your decision to maybe go back to them and proceed with development?

Sure. I think probably better way to characterizing it, I think, one of the things that we see is with regard to CUDC-907 or immuno-oncology programs as well as the IRAK4 program for the remainder of the year we view that as being the priority for the organization in the clinical development settings. With regards to CUDC-427, we did complete the dose escalation stage of that study and that was conducted in solid tumor patients. Our expectation is that based on our preclinical studies that drug could be potential useful in the lymphoma setting, however we’ve decided not to initiate that and at the moment focus on the initial programs that I described, CUDC-907 or immuno-oncology programs as well as the IRAK4 program. With regards to CUDC-305 as we indicated there has been – we reacquired that program through the debut form [ph] collaboration, based on their decision not to continue development of that in non-small cell lung cancer. There is the potential use of HSP90 inhibitors in other cancer indications and that had been our interest. I think one of things that we’d like to do right now is focus more potentially on a corporate development or business development opportunities with that drug as opposed to development of it internally ourselves.

Got it. Thanks for clarifying.

Okay.

Thank you. And we do have a follow-up question from the line of Adnan Butt with RBC Capital. Your line is now open.

Thanks. Just wanted to know for the oral checkpoint inhibitor did you plan to run these programs in sequence or could you potentially run them in parallel as well for more than one compound. And then one for Mike, does the R&D guidance include any payments to Aurigene? Thank you.

Thank you, Adnan. I can just answer the first part of the question for you. We would – the way that the collaboration and our expectations of, and the working relationship with Aurigene is, there are multiple programs that are ongoing at Aurigene and as they advanced we would exercise the inclusion of the program in the collaboration. And as the compound in that program would progress we would exercise our option to exclusively license it and take it into clinical development? That is completely and purely at the mercy of how the compounds develop and how the programs come forward. So there is the opportunity to parallel develop compounds. There is no reason for sequential. So, as compounds come forward and they show us their data, we would exercise including programs and also as I indicated taking them forward. So there is definitely the opportunity for a parallel development of multiple programs in this regard and there’s no sequentiality associated within that regards.

And Adnan, this is Mike, the guidance includes $10 million in Aurigene payments, milestone payments.

Okay. Thanks.

Thank you. I’m showing no further questions at this time. I would now like to turn the call back to President and CEO, Ali Fattaey. Please go ahead.

Thank you very much. I’d like to thank everyone for being present on the call. I’d also like to thank all of our employees at Curis for their wonderful work advancing our program. And I’d also particularly like to thank our investigators that conduct our clinical studies and all of the patients and their families who were participating in our trial. Thank you very much.