AVEO Pharmaceuticals, Inc.
Q2 2015 Earnings Call Transcript

Published: 10 Aug 2015

[Operator:]

Thank you for holding for the AVEO Midyear Update Conference Call. [Operator Instructions]. Please be advised that this call is being taped at the company's request and will be archived on the company's website for two weeks from today. At this time, I would like to introduce David Pitts.

[David Pitts:]

Thank you, Caron, and good afternoon, everyone. We are pleased that you could join us today for AVEO's midyear update conference call. With me is Michael Bailey, President and CEO, Michael Needle, Chief Medical Officer and Keith Ehrlich, Chief Financial Officer. The purpose of today's call is to provide an update on the company's recent developments and corporate goals, as well as discuss financial results for the second quarter. For additional information regarding AVEO's financial results, we direct you to Form-10Q for the quarter ended June 30, 2015, filed today with the SEC and which can be found on AVEO's website at aveooncology.com. Various remarks that we make during this call about the Company's future expectations, plans, and prospects, constitute to forward-looking statements for the purpose of safe harbor provision under the Securities Litigation Reform Act 1995. Actual results may differ materially from those indicated by those forward-looking statements, as a results of various important factors including those discussed in the Risk Factors section of our recent annual report on form 10-K which is on file with the SEC. In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date or we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our views change. And now, I'll turn the call over to Michael Bailey.

[Michael Bailey:]

Thank you, David. And thank you all for joining us today. Since the beginning of 2015, AVEO has implemented several important changes designed to cost effectively advance our portfolio of clinical stage products through partnerships. With a key focus on extracting and retaining the maximum value possible from our lead asset tivozanib. We outlined this strategy early in the year and have made substantial progress in executing against it since that time. As a reminder, tivozanib is a potent, selective inhibitor of VEGF R 1, 2 and 3 with a long half life. Its unique characteristics and resulting clinical profile make tivozanib both an attractive and highly differentiated TKI, both as a single agent and in combination. Opinion leaders with experience using tivozanib have consistently taken note of this and have encouraged us to continue efforts to develop tivozanib and obtain regulatory approvals to ensure commercial access to this important agent. Since reacquiring rights to tivozanib, we've taken several key steps in the interest of advancing this program. First, we've made meaningful strides in establishing a clear clinical and regulatory path forward for tivozanib in RCC, both for Europe and the U.S. which has confirmed our product strategy in these two key geographies. For Europe, in June, after advisory meetings with the Rapporteur from Portugal and Co-Rapporteur from the U.K., we received written guidance to proceed with the marketing authorization application or MAA for tivozanib. This application would be based on the Company's existing dataset using results from the Phase 3 TIVO-1 trial as the pivotal study. As a reminder, TIVO-1 demonstrated a significant improvement for tivozanib over sorafenib in the study's primary endpoint progression-free survival in first line RCC. However, there was an overall survival trend that favored sorafenib, a finding we believe was attributable to a significant imbalance of subsequent therapy in the study. We are currently evaluating partnership opportunities to commercialize tivozanib in Europe, as we continue to prepare the MAA, and our goal is to be in a position to have the filing ready for submission by year end. As a reminder, the EU5 RCC market for angiogenesis inhibitors is estimated at over $0.5 billion in 2015. And we believe tivozanib's differentiating characteristics have the potential to make a meaningful impact in that market. For the U.S., in May we received written feedback from the FDA stating that the third line Phase 3 RCC pivotal study we proposed, which required prior VEGF TKI therapy and allows for PD-1 exposure may support an indication in the third line setting. The dataset that could be generated from this study together with TIVO-1 results may also be sufficient to support a first line approval subject to the outcomes and review of all the data by the agency. We see value in this approach for several perspectives. First, these potential indications represent a high value opportunity with the angiogenesis inhibitors in the U.S. currently accounting for nearly $1 billion in sales for RCC alone. Second, since our third line study design will allow for patients who have received prior checkpoint inhibitors, the final result may have the potential to provide tivozanib with the unique and strategically valuable dataset that includes this potential sequence of therapy. Importantly, our proposed first line and third line approval strategy was designed with consideration for the potential changes in the standard of care in second line market, which we believe will occur as a result of their recent data announcements in second line RCC. Third, we believe that the longer potential overall survival conveyed by checkpoint inhibitors in second line, may expand the third line market by increasing patient survival time and therefore increasing the opportunity for patients to receive more lines of therapy. This market dynamic has been seen in other cancer types as additional therapies have entered the market, notable examples being breast, colorectal cancer, multiple myeloma and CMO. We are currently evaluating our options for supporting this study and are making preparations with minimal capital commitments at this time for a potential start around year end. For CRC, we received feedback from the FDA and recently presented additional biomarker analysis from the Phase 2 BATON-CRC study of FOLFOX and tivozanib or bevacizumab in frontline metastatic colorectal cancer. The Phase 2 study showed a significant PFS improvement for tivozanib versus bevacizumab in patients with NRP levels below the median, represent approximately half the frontline colorectal cancer patient population, a very large market opportunity. Based on continued diligence and our ongoing discussions with cooperative groups, our next step is to identify a diagnostic partner to help develop a commercially viable assay which would enable prospectively define randomized Phase 2 confirmatory study. With these clinical development strategies and regulatory diligences background, I'd like to discuss our partnering priorities. Our goal is to secure a partner for the yield to commercial tivozanib in that territory. In addition, in support of our strategy to realize optimal value from tivozanib, we have sought partnerships to monetize tivozanib in areas outside of our core strategic focus and are looking to generate partnership revenue with the balance of our wholly owned pipeline. The goal of these efforts is to fund tivozanib development and advance our pipeline. To that end, we have completed two partnerships for tivozanib. One, a research and exclusive option agreement with Ophthotech for non-oncologic diseases of the eye, in all territories outside of Asia. And the other, an exclusive license agreement with Pharmstandard for tivozanib in Russia, Ukraine, and the CIS, for indications excluding non-oncology diseases of the eye. If Ophthotech exercises its option under the agreement, AVEO would be eligible to receive a total of up to 105 million in additional option fees and potential milestone payments. As well as double digit royalty payments that increase to the mid-teens. Up to 10 million of these potential payments may be realized in 2016, providing for substantial non-dilutive financing. This transaction also has significant downstream potential for AVEO shareholders due to our double digit royalties, given that the anti VEGF acute macular degeneration market is a multibillion dollar worldwide opportunity, and at the properties of our unique VEGF TKI may lend a important differentiating advantages as a commercial product. The Pharmstandard agreement, we believe conveys additional confidence for near term approvability of tivozanib and RCC. Additionally as a result of this transaction, if tivozanib is granted market authorization in Pharmstandard territories, potentially as early as mid-2016, AVEO will be eligible to receive up to 7.5 million in a milestone payment followed by a high single digit royalty on net sales. Importantly, these potential near term non-dilutive milestones may also help us finance the execution of proposed tivozanib development. Finally because this region is outside of the primary European market and represents a commercial opportunity as a fraction of the EU opportunity for VEGF TKI, we believe we can realize this value without taking away from the strategic interest of a potential EU partner. For both of these tivozanib transactions, the percentage of all upfront milestones and royalty payments received by AVEO are due to KHK, as a sublicensing fee. For the balance of our wholly owned pipeline which includes AV-380 and AV-203, we continue to engage in partnership discussions with the goal of advancing their clinical development while providing financial resources for tivozanib studies. As many of you know, our fourth asset ficlatuzumab, a potent hepatocyte growth factor inhibitory antibody is partnered with Biodesix. Together, we are conducting a confirmatory proof of concept study of ficlatuzumab in combination with erlotinib, in advanced non-small cell lung patients selected using BDX001, a serum protein test similar to Biodesix VeriStrat test. This study known as FOCAL is ongoing and fully funded by Biodesix up to $15 million. Now to briefly discuss financial results for the quarter which will highlight the results of many of our streamlining efforts, I'll turn the call over to Keith. We'll then open up the call for your questions. Keith?

[Keith Ehrlich:]

Thank you, Michael, and good morning everyone. Total collaboration revenue for the second quarter ended June 30, 2015 was approximately $0.1 million compared with $1.8 million for the same quarter of 2014. The decrease was primarily due to the $1.8 million in revenue recognized in 2014 in connection with our agreement with Astellas which concluded in August of 2014. Research and development expense for the quarter was $1.8 million compared with $9.3 million for the second quarter of 2014. General and administrative expense was $2.9 million compared with $4.8 million for the second quarter of 2014. Restructuring and lease exit expense was $25,000 compared with $5.2 million for the second quarter of 2014. These significant expense reductions are the result of Management's efforts in the second half of 2014 and the first half of 2015 to substantially reduce its operational cost including the reduction of two-thirds of its employment based, elimination of its research function, exiting lab and office leases, and moving its offices to appropriately sized quarters. Net loss for the second quarter of 2015 was $5.5 million or $0.10 per basic and diluted per share as compared with a net loss of $18 million or $0.35 per basic and diluted loss per share for the second quarter of 2014. AVEO ended the second quarter of 2015 with $26.8 million in cash and cash equivalents. We believe that our cash resources will allow us to fund our current operations at least through the third quarter of 2016. This estimate does not include our payment of potential licensing milestones or the cost of conducting any contemplated clinical trials, and assumes no additional funding from new partnership agreements, equity financings, debt financings or accelerated repayment thereof or further sales under our ATM. The timing and nature of activities contemplated for 2015 and 2016 will be conducted to subject to the availability of sufficient financial resources. I will now turn the call back over to Michael Bailey. Michael?

[Michael Bailey:]

Great, thanks Keith. We will now open up the line for questions. Operator?

[Michael Bailey:]

Thank you all for joining us and we look forward to providing further news through the year.

[Operator:]

Thank you. Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program and you may now disconnect. Everyone have a good day.