Madrigal Pharmaceuticals, Inc. (MDGL) Q4 2012 Earnings Report, Transcript and Summary

Good day, and welcome to the Synta Pharmaceuticals Fourth Quarter and Year-end 2012 Financial Results Conference Call. Today's conference is being recorded and webcast. At this time, for opening remarks, I will turn the call over to George Farmer, Vice President of Corporate Development at Synta. Please go ahead, sir.

Hello. Thank you, all, for taking the time to join us today. With me are Dr. Bahcall, our Chief Executive Officer; Sumant Ramachandra, our new President of Research and Development; Vojo Vukovic, our Chief Medical Officer; and Keith Ehrlich, our Chief Financial Officer. This morning we issued a press release that reported results for the fourth quarter and year-end 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 forward-looking statements based on our current intent, belief and expectations, which are subject to certain risks and uncertainties. Additional detail can be found in related SEC filings, also available through our website. I will now turn the call over to Dr. Bahcall, after which we will open the call to questions. Safi?

Thanks, George, and thank you, all, for joining us this morning. I'll keep my introductory comments brief this morning, since we are approaching an important data event, and there isn't too much we can say before that data. After my comments, I'll turn the call over to Keith for a financial update and then questions. I mentioned an important data event. We specified in our release and recent presentations what to expect from our GALAXY-1 trial over the next few months. Just a reminder, GALAXY-1 is a global, randomized trial evaluating standard of care, docetaxel, with and without ganetespib in the second-line lung cancer setting. We completed enrollment of 252 all-comer adenocarcinoma patients in November of last year. We have a prespecified overall survival analysis for 6 months from the last patient enrolled, which we expect will be conducted in May. At that time, those 252 patients will have a median follow-up of 9 to 10 months, which will be a fairly mature survival data set. We're hopeful that we'll have the opportunity to present those results at a major medical meeting around that time. But of course, we can't guide to any specific meeting until we hear about whether or not we've been selected to present. Since these results will be very important for our future plans with ganetespib, it doesn't make too much sense to discuss future plans right now. We would expect to have more to say about future plans after the results are presented. As many of you are aware, based on encouraging results from an interim analysis of the GALAXY-1 trial last year, we moved forward with a confirmatory trial, the GALAXY-2 trial, which will enroll 500 patients in the same second-line lung cancer setting, with the same design, dose, schedule of docetaxel with or without ganetespib. We've opened sites in a number of countries and expect to announce first patient treated within the next few weeks. As we've described on a number of occasions, the GALAXY-2 trial will be enriched for those patients who show the greatest benefit from ganetespib and GALAXY-1. A prespecified analysis for GALAXY-1 showed that patients who received the normal course of first-line therapy were the ones who benefited the most from ganetespib. In other words, those patients who progressed very rapidly through first-line therapy, what are sometimes called "outright progressors" didn't benefit much. The rest did. This design is fairly common in other second- or third-line trials in other tumor types, with exclusions for primary refractory patients. In our GALAXY-1 lung cancer trial, the outright progressors are about 1/3 of the total second-line population. We've been asked a few times if, in our major presentation, we would provide the results for how this enriched population performed. The answer is yes, we plan to do that analysis and provide that data. That's where we are with the GALAXY program. We should have a lot more to say a couple months from now. A quick update on our monotherapy programs. As we've said on a number of occasions, based on our most recent results and understanding of the science of ganetespib, we see that the combination therapy opportunities -- we see the combination therapy opportunities as the most attractive ones for ganetespib right now, and our monotherapy trials have decreased in relative priority. For our CHIARA trial in ALK+ lung cancer, we're in the process of completing an initial enrollment phase and collecting the data. We expect to make a decision about the future of that program in the next few months. Breast cancer, as many of you know, taxanes are a widely used standard of care. We have seen a very high interest from breast cancer investigators in replicating what was done in the GALAXY trial at lung cancer, a randomized trial of taxanes with and without ganetespib. In lung cancer, single-agent docetaxel is commonly used. In breast cancer, docetaxel was also used but so was paclitaxel. But for ENCHANT trial, which was originally designed to evaluate monotherapy ganetespib in breast cancer, we're in the process of amending the trial to add an arm evaluating the ganetespib/paclitaxel combination in order to enable greater choice in any future breast cancer trials we may do. We should also have more to say about the breast cancer plans a couple of months from now. I'll now turn the call over to Keith, who will review our fourth quarter and year-end 2012 financials. Keith?

Thank you, Safi, and good morning, everyone. There were no revenues in the fourth quarter of 2012 as compared with $3.4 million in the same period of 2011. Our agreement with Roche, which completed in February of 2012, provided $3.3 million of license revenues in the fourth quarter of 2011 from the amortization of the $16 million upfront payment. In the fourth quarter of 2012, our research and development expenses were $14.4 million as compared to $10.9 million for the same period of 2011. Our fourth quarter general and administrative expenses were $3.4 million as compared to $2.8 million for the comparable period in 2011. In the fourth quarter of 2012, our net loss was $18.1 million or $0.29 per basic and diluted share as compared to a net loss of $10.7 million or $0.22 per basic and diluted share in the same period of 2011. As of December 31, 2012, we had approximately $100.6 million of cash resources on hand, including $59.8 million of net proceeds from the registered direct offering of our common stock in December 2012. Based on our current operating levels, we expect our cash resources will be sufficient to fund operations into the second quarter of 2014. Certain new activities contemplated for 2013 will be conducted subject to the availability of sufficient financial resources. I will now turn it back over to Safi for concluding remarks. Safi?

Thanks, Keith. That concludes our prepared remarks. Operator, we will now open the call to questions.

[Operator Instructions] Our first question comes from the line of Gene Mack with Brean Capital.

This is Daniel in for Gene. Can you talk about ganetespib's impact on new metastases or if there's a correlation? I seem to recall that there was a less robust PFS benefit observable in GALAXY data relative to what appeared to be emerging for the OS benefit. Is this correlated to metastatic disease? And can you remind us if this ties to ganetespib's mechanism?

Sure. This is Safi. Yes, in the ESMO data that we presented, in fact, the PFS and overall survival hazard ratios were very similar. And in fact, they followed each other very closely in all of the groups we used. In the enriched population, where you saw better overall survival, you also saw a better PFS, and in the population where there was less benefit, you saw less PFS benefit and less OS benefit. So in fact, they're following each other very closely. I think what is interesting in this trial is -- what's unusual about that is that in most trials, you see a PFS benefit without as much survival benefit. And you raise a good point. A lot of us and a lot of the folks that we talk to have been focusing on understanding why that is, why we're seeing such a sizable impact on survival. And the results that were presented at ESMO that ganetespib appears to be inhibiting the emergence of new lesion growth, that you're seeing a typical pattern of new lesion growth in the control arm but an atypical pattern of new lesion growth in the combination arm, is consistent with the scientific data, the preclinical data, the in vitro data and the in vivo data that shows that the drug is inhibiting or suppressing the growth of new lesions and that, that may be responsible or driving some of the benefits or some of the impact on survival. So that's something we continue to look into, and we'll have a lot more to say about it over the next few months.

Our next question comes from the line of Thomas Wei with Jefferies. Thomas Wei - Jefferies & Company, Inc., Research Division: I wanted to find out -- you've already submitted an abstract for ASCO. I guess I'm curious, should we think about it being a material update of any sort. Or will we really have to wait until we get to the ASCO presentation for any new insights beyond the ESMO interim?

Well, I'm sure -- I know all of you guys have seen this many times before. As we get close to a medical meeting, we can't really comment on any aspect of ongoing trial or any abstract that may or may not have been submitted. So it's fair to say that the next time you can expect data presentation would be around the time of ASCO. Beyond that, we really can't comment any more. Thomas Wei - Jefferies & Company, Inc., Research Division: Okay. And on the interim analysis that we're going to see at ASCO or near the final analysis at ASCO, could you just go through the -- how should we frame our expectations around the different patient populations that you're going to be looking at? And is there -- how should we think of new relations be ESMO interim? Are there -- is there expectation that we should basically see the same sort of benefit, just larger number of patients and therefore, powering wise that would reach statistical significance? Is that a fair way to think of how we should set our expectations?

We would expect to connect a very similar analysis and presentation that was done at ESMO. So it was a standard medical meeting presentation, where you look at the -- all the prespecified endpoints. That's what was reported at ESMO. And if we do present at ASCO, that's what we would expect to report at ASCO. Does that answer your question, Thomas? Thomas Wei - Jefferies & Company, Inc., Research Division: Yes. I guess I'm just curious like how much of the focus should there be on the ITT analysis versus maybe the analysis excluding rapid progressors?

So yes, both are important. Thomas Wei - Jefferies & Company, Inc., Research Division: Or are both important?

Yes, both are important. ITT, for obvious reasons, that would be presented. But both of those were presented at ESMO. Both of those will be presented. If we are selected to present at ASCO, then both of those will be presented at ASCO. They're both prespecified analyses, and they're both important. ITT reflects the GALAXY-1 trial ITT. And what is particularly relevant about the enriched population is that it's the population being evaluated in the ongoing -- or currently initiating GALAXY-2 trial, and so that's particularly relevant for thinking about results going forward. So that, I think, will be of particular interest to a lot of people, including ourselves and all the investigators. Thomas Wei - Jefferies & Company, Inc., Research Division: I guess, I'm trying to get a sense -- and I'll jump back in the queue after this one. When you look at the data from the ESMO interim and whatever you know about the additional patients that were involved through October, is there -- how much do you think that early look at the data on either one of those 2 populations, ITT or excluding the rapid progressors, could be extrapolated to the final analysis?

It's a little -- I think the data speaks for itself at ESMO. It -- the way to think about it is that the patients with some fairly mature follow-up, meaning patients who have been enrolled or on the study for at least 6 months, there are about -- approximately 80 patients at that time. 172 patients have been enrolled, that's the snapshot of September. About 80 or so patients had really been enrolled with sufficient time to really get compelling data. We'll have roughly 3x that number at midyear, around the time of ASCO, at the time of the next analysis. So you can think of it roughly as the ESMO data set was roughly 3x the number of patients that have the mature data.

Our next question comes from the line of Brian Klein with Stifel, Nicolaus. Brian Klein - Stifel, Nicolaus & Co., Inc., Research Division: So firstly, I know you're expecting first patient in into GALAXY-2 in the next couple of weeks. Do you guys anticipate that you'll complete enrollment into the entire trial by the end of this year? And also, can you give us your expectations for patient breakdown between U.S. versus eastern Europe and the rest of world?

Sure. No change to our current timelines. We have an ambitious goal of completing enrollment by end of this year, and we will certainly be doing everything we can to meet that goal. In terms of the geographic breakout, we anticipate it will be very similar to the GALAXY-1 trial.

Our next question comes from the line of George Zavoico with MLV. George B. Zavoico - MLV & Co LLC, Research Division: A couple of questions about some of the ISTs that were ongoing through the last year or 2. Can you provide any update on any of those, in terms of when we might expect some results? I know the ISTs are under the control of the PI there.

Yes, George. Good question. They are under the control of PIs. We haven't heard a lot from them about the details of timing. I think there are some that have -- that may be presenting in the next few months. But that still hasn't been decided or determining so that -- determined in any final way, so not much information there that we can provide about future ISTs. George B. Zavoico - MLV & Co LLC, Research Division: Okay. And with regard to the trials that you're ongoing, first, ganetespib, as you point out, affects multiple pathways. So with each trial, you're gaining a wealth of information with regard to what pathways perhaps are most affected by ganetespib and perhaps the ones that might be the most relevant to the progression of a particular cancer that you're doing the trial in. You mentioned in your press release that you've got, I guess, HIF-1alpha and VEGF are 2 biomarkers that you see considerable effect of ganetespib, but there's multiple others. How deeply are you looking into the other pathways that might be affected that could inform and also educate people about the variability of a specific type of cancer?

That's a great question. In fact, we have a lot of ongoing translational research, some internally, but a lot we've collaborated. So we have about 40 active collaborations at many different centers, primarily in North America but also increasingly in Europe. We're looking at exactly the type of questions you say: What are the key -- what are gene signatures that might predict activity? What are the key pathways that are inhibited that might predict activity or lack of activity? I can tell you that there are several papers that we expect will be published during the course of this year that will be very interesting. As you say, the inhibition of HIF, the inhibition of angiogenesis are particularly interesting. The synergistic activity is particularly interesting. The effect on the emergence of new lesions is particularly -- and then the metastatic genes, the metastatic phenotype are particularly interesting. There'll be a lot more published on that later this year. George B. Zavoico - MLV & Co LLC, Research Division: Cool, looking forward to that. That's great. And finally, last question, and I think Vojo is going to enjoy this. I'm really glad to see elesclomol in your press release. You mentioned that you got to the prespecified -- or that the GOG got to the prespecified efficacy endpoint to advance to Stage 2. What is the next step here? What can we expect coming down later this year or next year with this trial?

Well, the next step is for GOG to move to Stage 2 of the trial. They, of course, own the data, so we're in some ongoing discussions with them about the timing of next steps and timing of data release and presentation. And those discussions are continuing. But the program will move forward with the GOG driving it in ovarian right now. George B. Zavoico - MLV & Co LLC, Research Division: And it's all -- that's financed entirely by GOG? Is that correct?

That's right. We have a minimal expense. We provide drug and some minimal expense. But it's -- primarily all expenses are pref borne by GOG.

Our next question comes from the line of Robin Davison with Edison Investment Research.

Just a few quick ones. I think you quickly said that you were looking at the first stage results of the CHIARA trial and yet to make a decision there. I'm just wondering is that a decision based on the scientific merits of that or is there a sort of commercial aspect in that decision, whether that study perseveres, taken forward?

Well, there's 3 elements: number one, it's -- in most part, it's the clinical data; number 2 is the relative priorities compared to other programs at the company; and number 3 is landscape. So we look at all 3 of those and make a judgment about what's the best way to allocate our resources for our programs.

All right, okay. Secondly, on the addition of a combination arm in the ENCHANT study, I wonder whether that's you actually are sort of increasing the size of the study so you've got 2, for example, 70-patient arms that could be compared or you're sort of reallocating and this is like 35 patients per arm rather than in the 2 arms. Is that like it's being increased, really?

That -- it's still all in progress. But the way we think about it now it's more of a reallocation. Given that our interest has shifted less on monotherapy and more on combination therapy, that's probably a better way to allocate our resources.

All right, I see. And just one sort of final one. I'm not sure that you would do this, but I was wondering whether you've had, within Synta, any further data from the GALAXY-1 study. I mean, I don't know, whether the 172 patients sort of at the September cutoff followed up further and whether that's informed the decision -- the design of GALAXY-2 or whether the GALAXY-2 design has specifically been made on the basis of the data that was presented at ESMO.

The GALAXY-2 design was based on the data that we had from the interim analysis that was conducted in September of last year.

Our next question comes from the line of Jason Zhang with Edison Investment Research.

I apologize if you have touched on this already. My question is related to the update analysis that we are going to see at ASCO and what is relevant to, let's say, to GALAXY-2. I know I'm speculating here. What if your ITT analysis did actually reach statistical significance for the overall survival? Is your GALAXY-2 trial design flexible that it can actually incorporate that into the final? Now you've, of course excluded patients that are fast progressors, if the data actually turns out to be different, the ITT has benefit, is your trial design flexible that it can incorporate that? Or is the GALAXY-2 trial design set and no matter what happen to those update analysis you're going to accrue patients that you are set to accrue and not much change from here?

Sure. GALAXY-2 is designed as a registration study, so unless there's an overwhelming urgent need to make an amendment to that protocol, one generally doesn't want to make amendments to the protocol and one generally doesn't do that. Your question was if we need to be -- if there's a survival advantage observed in the ITT all-comers population in GALAXY-1, that will be interesting. But the more relevant question is not whether the ITT is positive, but is there a difference. If the outright progressors, the patients who blew through first-line therapy, if they're really not receiving any benefit from ganetespib or any benefit from the docetaxel/ganetespib combination or if it's just docetaxel alone, there really isn't any reason to include them. If they're not benefiting from the drug, why include them in a future trial? So the real question is going to be if the patients who got a normal course of first-line therapy are showing a particularly enhanced benefit, that's the right thing to do. You want to give your drug in enrolled trials that's focused on the patients that get the most benefit from your drug. You want to see the highest benefit to risk profile. And that's what the FDA has guided consistently over many years, and in fact, just in December of last year, they issued another guidance about clinical trial enrichment, where that was exactly what they were saying. They're looking for sponsors to try to narrow populations, enrich populations where there is the best benefit to risk profile. So if one sees, around the time of ASCO and we present updated data, that in fact the rapid progressors are just not benefiting much and the normal progressors is where you see the best benefit, that's a very good validation of the strategy of focusing on the normal second-line patients. Does that answer your question, Jason?

Yes, yes. On that note, could I also explore further the issue of the fast progressors versus slow progressors? In order to -- I'm thinking down the road, for labeling, other things that could be considered. Because the time from diagnosis certainly can be affected by a lot of things other than clinical presentation, I wonder why the criteria was not set to how long after the patient progress, after the first-line treatment, that to me is a more practical or even more widely acceptable criteria.

Now that's a great question, and it's very interesting. We've had a number of discussions. We've met with many of the very well-known lung cancer thought leaders, medical investigators in U.S. and Europe and thought through this point. The way to think about it is there are essentially 4 ways -- in a second- or third-line trial, once you're after first line, there are 4 ways to focus on essentially normal and more stable patients and try to not include the patients who are extremely rapid progressors, who are blowing through first-line therapy. I think most investigators know that those patients tend to not have much benefit from any subsequent therapy and tend to die very quickly, regardless of what treatment they get. So historically, there's been 4 ways to do that in second- and third-line trials. Number one is the way that we did in GALAXY-1 and GALAXY-2, which is prespecified, which is the time since diagnosis of about 6 months. Number two is time since first chemo, so #2 end up being about the same as #1, since the time between first diagnosis and the time since first chemo is usually pretty fast. So #2 and #1 tend to be pretty equivalent. Number 3 is time since last chemo. So some trials use either one of the first 2. In some trials, you use whether time since last chemotherapy was more or less than 3 months. You'll see that often in breast cancer trials or ovarian cancer trials or sometimes in lung cancer trials as well. It turns out #3 is also about the same as #1 and #2 because duration of treatment in first line is, on average, about 3 months. And then, number 4 is best response to first-line therapy. So was it a CR or a PR or an SD or did the patient progress? So # 4, as it turns out, is also very closely correlated with numbers 1, 2 and 3. So these 4 ways of looking at how do you define a patient who is progressing extremely rapidly and not likely to do very well, they tend not to all be about the same. There isn't that much difference between them. Of the 4, in lung cancer, the one that we're using has 2 advantages: number one, it was prespecified and it's what we used in GALAXY-1. So there's really no being cute about trying to do something different as you go between -- go to the next trial, so it was prespecified; number two, it's the most objective because things like response in prior to first-line therapy depend on a subjective analysis of CT scans in general. And then, there is a particular change that's happened in lung cancer in the last couple years. It used to be that time since last chemotherapy was a pretty popular way to do this. In lung cancer, in the last few years, maintenance, which means continuing to treat patients with maintenance therapy after first-line therapy, has become increasingly common, particularly in the U.S. So that's made using time since last chemo much more ambiguous and a bit more difficult. So in discussions with our medical advisers and lung cancer physicians in the U.S. and Europe, when considering those 4 options, firstly, they end up being about the same. But within those 4 options, the one that we are using has a number of advantages, and so that's why we ended up going with it.

That concludes the question-and-answer session. I will now turn the conference back over to Dr. Bacall for closing remarks.

Thank you, all, for joining us this morning. This concludes the call.

Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation. Good day.