Madrigal Pharmaceuticals, Inc. (MDGL) Q2 2012 Earnings Report, Transcript and Summary

[Audio Gap] Synta Pharmaceuticals' Second Quarter 2012 Financial Results Conference Call. Today's conference is being recorded and webcast. At this time, for opening remarks, I would like to turn the call over to George Farmer, Vice President of Corporate Development at Synta Pharmaceuticals. Please go ahead, sir.

Hello, and thank you all for taking the time to join us today. With me are Dr. Safi Bahcall, our Chief Executive Officer; Keith Ehrlich, our Chief Financial Officer; and Dr. Vojo Vukovic, our Chief Medical Officer. This morning we issued a press release that reported results for the second quarter of 2012. This release can be found on our website at syntapharma.com. Before we begin, I would like to point out that we will be making some forward-looking statements based on our current intent, belief and expectations, which are subject to certain risks and uncertainties. Additional details can be found in related SEC filings also available through our website. I'll now turn the call over to Dr. Bahcall, after which we will open the call for questions. Safi?

Thanks, George, and thank you all for joining us this morning. The past few months have been very exciting here at Synta, and we have a lot more news expected over the coming months, including clinical results that will be critical for how we think about registration for ganetespib, our lead drug candidate for cancer. Ganetespib is being developed along 2 distinct but complementary paths: as a monotherapy for the treatment of certain genetically defined cancer populations, and in combination with chemotherapy, in broader patient population. These approaches are evaluating 2 distinct mechanisms of ganetespib. The monotherapy approach evaluates the ganetespib ability to suppress certain oncogenes, known to drive the growth of specific tumors, such as ALK or HER2. The combination approach, to evaluate for chemo-sensitizing ability of ganetespib. Ganetespib is very effective at inhibiting certain proteins, which drive resistance to chemotherapy. These include hypoxia-induced factor, or HIF, as well as several DNA repair and cell cycle proteins. I'll start with where we are and what's coming up in our combination therapy program. You may remember that our Phase IIb/III GALAXY trial has quite an innovative design. The first stage of this trial is neither a classic Oncology Phase II trial nor is it designed as a classic Phase III trial. It is a 240-patient biomarker signal finding lead-in to the Phase III portion of the study. The Phase IIb portion is effectively a dress rehearsal for the Phase III portion, designed to identify patients most likely to benefit. We invest more early on to de-risk later on. From an interim analysis conducted in June, we identified 3 meaningful signals in GALAXY, all based on prespecified hypotheses. The first hypothesis is enhanced activity in patients with elevated levels of LDH and enzyme that can be a marker of hypoxia, which means low oxygen. We specify this hypothesis because hypoxia is a well-known driver of many aggressive tumor properties, such as angiogenesis and metastasis. Because ganetespib is very good at shutting down the hypoxia pathway, we were looking for enhanced activity in tumors where these hypoxia pathways are more active. And that's what the interim analysis showed. The second hypothesis is enhanced activity in patients with mutant KRAS, which is based both on the underlying biology and the activity we saw with ganetespib in other clinical trials. While the results are quite early there, we're also seeing encouraging trend in this population. Finally, the third signal we've seen in GALAXY to date is a difference in activity profiles between patients with adenocarcinoma and squamous cell histology, similar to what's seen with VEGF or angiogenesis inhibitors. This is consistent again with a known preclinical experiments with ganetespib, which shows that it inhibits angiogenesis and it inhibits VEGF. So what we're seeing is encouraging early evidence that ganetespib is changing the biology of tumors. Ganetespib is making tumors less aggressive, less metastatic, less angiogenic and more sensitive to chemotherapy. The data we have are, of course, early, and this is clinical development. We have to stay tuned for the end of the trial. We expect mature results from the Phase IIb portion in the first half of 2013. In the near term, we've been asked if we can provide details on what to expect at the ESMO Oncology Meeting at the end of September. An updated interim analysis is planned for September. We expect there will be incremental information compared to June, so there's just a 3-month difference since the prior analysis. Until this new analysis is complete and reviewed with investigators and the presentation is finalized, we cannot provide additional guidance. In the longer term, based on our current estimates, we expect we would be in a position to file an NDA, or New Drug Application, for registration in 2014. Switching to our monotherapy trials in genetically defined cancers, we've recently initiated our global KRAS study in ALK-positive lung cancer and our global ENCHANT trial in HER2-positive and triple negative breast cancer. We are excited about the potential for ganetespib to provide benefit to patients and these targeted indications, and are looking forward to results from both over the coming several months. Finally, we've been very pleased with the feedback and reaction from the medical community since we presented GALAXY interim results at ASCO. The favorable safety profile and randomized trial, which is consistent with the data from many prior studies with ganetespib, together with the evidence of broad antitumor activity, as shown to many, the ganetespib is positioned to be the first Hsp90 inhibitor to be available for patients. This is reflected in the many requests we have received over the past several months for cooperative group studies, foundation supported studies and investigative supported studies. We have been very pleased that in the past quarter, 4 such studies began enrolling patients, including studies in lung, breast and rectal cancers, as well as multiple myeloma. All of these are at top-tier academic centers, and we expect all of these to advance both the science and the clinical development of ganetespib. GOG [ph] said that ganetespib third-party supported trials plant the seeds for future expansion of this program. These are future applications above and beyond the most direct next set of trials for ganetespib, which include certain genetically defined cancers, as well as expanding more broadly into the taxing indications, including lung, breast, gastric, prostate, ovarian and head and neck cancer. I will now turn the call over to Keith Ehrlich, who will briefly review our financial results.

Thank you, Safi, and good morning, everyone. There are no revenues in the second quarter of 2012 as compared to $1.4 million of revenues in the same period of 2011, which consisted principally of amortization of an upfront payment under the Roche agreement that was terminated at the end of 2011. In the second quarter of 2012, our research and development expenses were $11.3 million as compared to $10.4 million for the same period of 2011. Our second quarter general and administrative expenses were $2.9 million, as compared to $2.9 million for the comparable period in 2011. In the second quarter of 2012, our net loss was $14.6 million or $0.25 per basic and diluted share as compared to a net loss of $12.5 million or $0.26 per basic and diluted share in the same period of 2011. As of June 30, 2012, we had approximately $44.7 million of cash resources on hand. In July 2012, the company raised approximately $25.8 million in net proceeds from the sale of its common stock in a registered direct offering to certain of its directors, including its largest stockholder. These shares were sold directly to these directors without a placement agent, underwriter, broker or dealer. Based on our current operating levels, we expect these cash resources of approximately $70.5 million, which includes the recent financing, will be sufficient to fund operations into the second half of 2013. Certain new activities contemplated for 2012 and 2013 will be conducted subject to the availability of sufficient financial resources.

Thanks, Keith. That concludes our prepared remarks. I will now open the call to questions and discussion. Operator?

[Operator Instructions] Our first question is coming from Mike King from Rodman & Renshaw. Michael G. King - Rodman & Renshaw, LLC, Research Division: I had just a couple of related questions. Safi, just to be clear, you gave a tentative timeline to file an NDA in '14. And I'm assuming that's going to be on the basis of GALAXY or whatever extension you might undertake from that rather than a monotherapy sort of ALK-positive patient population strategy?

Right. That's consistent with what we've said before, that we expect final data from the first half of GALAXY, the Phase IIb portion, in the first half of 2013. And we would expect final data from the second portion of GALAXY in the first half of 2014. Michael G. King - Rodman & Renshaw, LLC, Research Division: Okay. So I guess you're not giving any hope for, kind of, an orphaned registration a la crizotinib type of strategy?

It's too early to get visibility on the CHIARA, ALK trial or the ENCHANT breast trial with the targeted indications. Once we have a little bit more data from those trials, we would get more visibility into the regulatory pathways. The GALAXY trial just has a pretty clear direct timeline. Michael G. King - Rodman & Renshaw, LLC, Research Division: Right, okay. And then just given that you're going to be doing studies in genetically distinct tumor types, can you comment about whether you guys have adopted a biomarker and companion diagnostic strategy yet, or are you waiting to see how that all plays out?

For the monotherapy genetically defined indications, you need companion diagnostic strategy. The FDA has been very -- and AMA has been very clear about that recently. So that is part of the development plan. So we work with identified vendors, and work hand in hand with vendors to have a companion diagnostics that can be filed simultaneous with any potential registration. So you think about that going into the trial. Michael G. King - Rodman & Renshaw, LLC, Research Division: Some companies publicize who they're working with. Are we going to expect the same from Synta at some point?

Yes, down the road as we get a little bit further into those trials, we would discuss that.

Our next question is coming from Mani Mohindru from ThinkEquity.

I actually have a couple of them. One, on your Phase III portion or the second portion of the GALAXY trial. Based on the information you have in hand, what design are you going after? Are you going after -- will you expand into just all adenos or will you expand into KRAS or LDH? So what can we see because that would determine how many patients you would need to enroll in each subcategory? And then I have...

We are actively discussing that right now. We plan to discuss that with the regulatory agencies, discuss that with advisers. And once we have made a final decision, we will communicate that.

Okay. And in terms of -- you have a number of investigator-initiated or cooperative group sponsored trials. What should we focus on? Which ones from your preclinical work are, sort of, the most important ones that we should be looking for in terms of next data set?

It's hard for us to really identify or highlight any one of them. I think we received many requests, many more requests than we can actually support. So the ones that you see that have initiated or are about to initiate are the ones who we think have a strong scientific rationale and create some very interesting potential to learn both about the underlying science, the underlying biology of how ganetespib interacts with the drivers of that particular disease, as well as continually move the program forward. I think we've seen a lot of interest in the breast and lung cancer community. In the breast cancer community because there's a fairly long history or a fairly recent history of encouraging results with the Hsp90 inhibition. And while that was focused several years ago primarily on HER2 positive patients, we've seen quite a bit of interest in hormone positive disease. We recently started a randomized trial there that was initiated by Dana-Farber and Sloan-Kettering group. And then in the triple negative disease, another combination trial is getting started at Sloan-Kettering. So a lot of interest in the breast cancer community, clearly because of the GALAXY results and the investments we made in lung cancer. A lot of interest in the lung cancer community because of the results that we and others have demonstrated in ALK-positive disease. A lot of interest in looking in combination in ALK-positive disease, and then in other genetically defined indications within lung, such as BRAF, ROS and RET where Hsp90 inhibition has shown a lot of promise.

Okay, and one final question. So in terms of -- you obviously have a -- like a large number of trials that you're doing and working on like big programs in breast and lung, but I was trying to understand from your commercialization and development strategy going forward. When do you absolutely need to partner this program, especially like going in for lung. Do you anticipate that you can go ahead and file on your own in lung as a first initial indication even before you partner? Or you absolutely feel that you need to find a partner before you're ready to make that commitment?

I think that it's a little too early to say right now if we could file on our own or we have to have a partner. I think we're in a position, fortunately, that we are in late development. We have quite a bit of encouraging data in a couple of directions. And where we are in development, it's not that far or that hard to get to a registration package. It is something we feel comfortable and confident we can do on our own. So we're certainly not in a position we feel we have to partner. We have the support of, as you can see from our last financing, our board for -- what really represents a long-term commitment and belief in the program and our ability to advance the program to registration and commercialization. That doesn't mean that we would never partner in the program. It just means that we have many options available. And as we've done in the past, we engaged in discussions. And right now there are quite a few very actively interested parties that we're talking to. We engage in those discussions and systematically think through our opportunities in a pretty rational way: what makes sense for shareholders, what make sense for the drug, what makes sense for patients.

Our next question is coming from Robin Davison.

First of all, the updated interim analysis or the second interim analysis that you intend to present at ESMO, is that based on the same 114 patients that were in the original analysis or will it actually be of more patients that are included in the study at that point in time?

It will be incrementally more patients.

Have you had any more data from the first analysis? I mean, for example, only 2/3 of the patients had been screened for KRAS at that point in time. I don't know whether -- I don't want to give -- you've you seen any difference in the data based on a larger number of patients?

We haven't done the next interim analysis yet. But as you say, there would be some more -- both some more patients and some more follow-up from earlier patients. So both of those, we would expect to have additional data on by ESMO.

There's another thing I was wondering about. In fact, in the Phase II data for monotherapy in non-small cell lung cancer, you had a number of squamous patients. I'm wondering, is there any way, if you take those patients out because we know the drug is not effective in that group, that you see any significant difference in the responses that you've seen?

The data that was reported end of June was entirely in the adeno data set.

For the monotherapy study?

I'm sorry, for the GALAXY study that we reported in June. In the -- the prior Phase II study, which was reported a year ago at ASCO, I actually don't remember off the top of my head what the adeno versus squamous breakout was. If I remember right, I think in there, we also reported -- we certainly expanded the cohort in adeno only in that study, but we can take a look at that and get back to you later.

On the Phase III portion of the GALAXY study, do you know at this point whether you're likely to have an interim analysis?

On the Phase III study, are we likely to have an interim analysis, was that the question? I couldn't quite...

That's the question, yes.

We haven't gotten that far in the planning of the Phase III or that specific in terms of finalizing the design where we could communicate that publicly. Once we have finalized the design, then we will communicate that level of detail.

Just finally. I think you've guided that you expect to get interim data from the CHIARA study in the second half this year. I'm assuming the study has only just started, so it must be the end of this year. But what specific data are you likely to be able to see at that point?

What we said is we expect to have some preliminary results. And since the trials just initiated fairly recently, I wouldn't expect a lot of patients. I would say fairly initial preliminary results in a small number of patients is what we will have internally. And it's -- I just want to be clear, we have not guided to presenting at a particular medical meeting. It's a little too early to decide on where and when and how those results will be presented. As we get a little bit further, we'll get more specific guidance on when, where and how CHIARA and ENCHANT data will be presented.

Our next question is coming from George Zavoico from MLV & Co. George B. Zavoico - McNicoll, Lewis & Vlak LLC, Research Division: I just have a very general question regarding how you're monitoring ganetespib and its penetration to tumors, for example, or Hsp90 activity. Sort of just a general question really.

As you know, in patients, it's fairly difficult to get into that level of detail of pharmacodynamic markers, particularly inside a tumor, because that would require doing repeat biopsies in patients, which is fairly problematic in the course of a clinical trial. We look at -- we have done some of that work and then what you do in some of our trials, some of the investigators, particularly where there are tumor types that are more amenable to biopsy and lung cancer, for example, it's much more difficult, but in other tumors it's a little more possible. In that case, we're -- there is some early -- there is some exploring of how are the client proteins inside a tumor, Hsp90 client proteins inside a tumor being affected. Are they -- how much are they being down-regulated, and how long do they stay down? So in the clinic we're looking at that. That's above and beyond sera [ph] markers, which are obviously much easier to measure. But then in our preclinical studies, we have a number of trials in -- a number of preclinical studies, not only in your fairly standard xenograft models in rodents, but also in canines, so in dogs with naturally occurring tumors. And there we're looking quite specifically at some of the pharmacodynamic markers, and we're getting, I would say, quite a bit of interesting information from that. George B. Zavoico - McNicoll, Lewis & Vlak LLC, Research Division: With a multitude of client proteins, I imagine it's quite a task to try and sort of ferret out for each tumor type, especially since it might be different for each tumor type.

Yes, we would agree.

Our next question is coming from Mike King from Rodman & Renshaw. Michael G. King - Rodman & Renshaw, LLC, Research Division: My follow-up was actually asked and answered.

That concludes the question-and-answer session. I would now turn the conference back to Dr. Bahcall for closing remarks.

Thank you, everybody, for your time and attention today. This ends our call.