Avid Bioservices, Inc.
Q2 2016 Earnings Call Transcript

Published: 11 Dec 2015

[Operator:]

Good day, ladies and gentlemen and welcome to the Peregrine Pharmaceuticals’ Second Quarter Fiscal Year 2016 Financial Results Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. I would now like to hand the conference over to Tim Brons of Peregrine’s Investor Relations Group. Please go ahead.

[Tim Brons:]

Thank you. Good afternoon and thank you for joining us. On today’s call, we have Steve King, President and Chief Executive Officer; Paul Lytle, Chief Financial Officer; Joe Shan, Vice President of Clinical and Regulatory Affairs; Rob Garnick, Head of Regulatory Affairs; and Steve Worsley, Vice President of Business Development. Today our team will be providing an overview of the company’s operations and progress, spanning clinical, preclinical, corporate as well as Avid Bioservices’ contract manufacturing business. After our prepared remarks we will welcome your questions. Before we begin, I’d like to caution that comments made during this conference call today, December 10, 2015 will contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, concerning the current belief of the company, which involves a number of assumptions, risks and uncertainties. Actual results could differ from these statements and the company undertakes no obligation to revise or update any statement made today. I encourage you to review all of the company’s filings with the Securities and Exchange Commission concerning these and other matters. With that, I will turn the call over to Steve.

[Steven King:]

Thanks, Tim, and thanks as always to all of you who have dialed in, and to all of you who are participating via webcast today. I’ll start by saying that we are making great progress in our broad overall development strategy for bavituximab. The strategy is to establish the potential of bavituximab in combination with current and evolving standard of care drugs, with both chemotherapy and immuno-oncology combination in multiple cancer indications. Our goal is to drive to meaningful clinical data points in each of these areas by early 2017. In accordance, today’s development discussion will focus on these efforts. Including upcoming completion enrollment in the SUNRISE trial, it is evaluating a chemotherapy combination and as SUNRISE wraps up our plans for a smooth transition of the key SUNRISE clinical sites directly to the next Phase II lung cancer trial evaluating an IO combination. In addition we are expanding our potential cancer indication through initiation of a Phase II/III metastatic breast cancer study. All of this while continuing to work through several other clinical trial concepts actively under development or initiation in the New Year. On the development front, I’m pleased to report today that we are nearing completion enrollment in the cornerstone of our bavituximab development strategy, our Phase III SUNRISE trial. In fact with over 90% of the expected enrollment complete we currently have sufficient patient enrollment based on the assumptions of the study to allow the trial’s planned interim evaluations and final readout based on the primary endpoint of overall survival. Having said that, we do expect to complete enrollment in it of at least the pre-specified 582 patients over the coming weeks. At this point the next big milestones really are the interim data analysis from the study expected to take place during early and mid 2016 with trial unblinding expected toward the end of 2016. Joe will add little more color to the up coming milestones for the SUNRISE trial during his prepared remarks. For me what has now become the most important thing at this point in our broader strategy is to engage our best enrolling sites from the SUNRISE trial toward a smooth transition to the new Phase II study that will evaluate bavi in combination with AstraZeneca’s anti-PD-L1 antibody durvalumab. We have a golden opportunity here to maintain continuity for our lung cancer program by continuing almost seamlessly working with our high enrolling sites and key investigators in essentially the same even in extended patient population with the inclusion of squamous non-small cell lung cancer patients. I personally had the opportunity to meet with key investigators all over the globe and there is a lot of enthusiasm for continuing to work with Peregrine and bavituximab in the new study. Based on feedback so far we expect that the new study could enroll even more quickly than the SUNRISE trial and the best way to ensure that is to get off to a quick start. Again keeping us on track for data from the new study by early 2017. This would give us two nice sets of data in non-small cell lung cancer to work with. Equally exciting is the Phase II/III metastatic HER2 negative breast cancer study that we are looking forward to starting by year-end. I say exciting because the new trial design has a solid clinical data basis and our previously completed Phase I and Phase II trials in apatient population in these new treatment options. While we don’t have the same benefit as we do for the lung cancer program of rolling right from one study into another. The team has been working diligently to get the study started by the year-end, giving us additional enrollment months, which again can put us on track for some meaningful clinical data from the study by early 2017. The company is also working diligently on a number of other studies including our other collaboration with AstraZeneca, evaluating a combination of bavi with chemotherapy and adding in again their durvalumab antibody in multiple solid tumor indication. So conceptually get an immune response going with chemotherapy and bavi and then keep it going with durvalumab. In addition, we are working toward initiating an earlier stage breast cancer study as well as a number of other concepts that are in development. So stay tuned for future clinical developments. Taken together, these clinical efforts along with the plethora of preclinical and translation collaborations, evaluating new combinations, new potential indications and further validating our immune mechanism of action has a potential to add substantial value over the coming year. We expect a steady flow of scientific and clinical presentations over the coming year as we continue to learn to more about the potential bavituximab. Oh, and by the way, today we also announced another record revenue quarter from our biomanufacturing business with our new Myford manufacturing facility just ready for GMP production, which can help spur even more future growth for the business. Not the least of which is getting ready for bavi commercial production. Rob and Paul will add more detail and discuss the continued growth for our manufacturing business shortly. To say that these are busy times at Peregrine is an understatement. I’ll now turn the call over to Joe.

[Joseph Shan:]

Thanks, Steve. I’d like to start by quickly addressing our Phase III SUNRISE trial, which is evaluating the use of bavituximab and docetaxel in patients with previously treated locally advanced or metastatic non-squamous non-small cell lung cancer. As Steve stated, we have already enrolled the number of patients required to achieve the trial’s main objectives and expect to complete enrollment of the target sample size of 582 in the coming weeks. The next milestones are the interim analyses that will be conducted when 33% and 50% of the targeted number of deaths are reached. While these are event driven, it is our expectations that the first interim analysis will read out in early 2016 and the second interim analysis around mid-2016. The final analysis, which would trigger study unblinding is currently projected to occur at the end of 2016. With the SUNRISE enrollment nearing completion, the Peregrine clinical team is shifting focus to a number of new clinical projects, including those just referenced by Steve. In each case our goal is to generate clinical evidence of bavituximab’s ability to improve patient outcomes when combined with chemotherapy and immuno-oncology agents. With this goal in mind, we are very pleased to be collaborating with AstraZeneca. Through this partnership we will be conducting two clinical trials both of which will be initiated in 2016. One trial which we expect to initiate early 2016 is a global randomized Phase II study in approximately 200 patients with previously treated non-small cell lung cancer. This trial will evaluate the combination of bavituximab and AZ’s anti-PD-L1 immune checkpoint inhibitor durvalumab or MEDI4736. As part of this combination trial, patients will also be evaluated retrospectively for the correlation between their PD-L1 levels and clinical outcomes. As the remaining patients are enrolled into SUNRISE, we have already begin laying the groundwork to quickly initiate this new Phase II combination study at a number of our most active sites participating in SUNRISE. These investigators are very familiar with bavituximab and have access to the appropriate patient population and we believe this experience will greatly benefit our new study. The other trial with AstraZeneca will be a Phase I/1b trial evaluating bavituximab in combination with chemotherapy and durvalumab in multiple solid tumors. The Phase I part of the trial will confirm the tolerability of the two IO agents and establish a recommended dose regimen for the Phase 1b part of the trial, which will assess safety and activity of the triple combination, which includes standard chemotherapy. We’re particularly excited about these trials because we believe that bavituximab and durvalumab have different and potentially complementary mechanism. Bavituximab by targeting exposed PS, a highly immune-suppressive molecule exposed on the surface of cells in the tumor micro environment has been shown to trigger macrophages re-polarization and tumor specific T-Cell activation. Durvalumab is a monoclonal antibody directed against programmed cell death ligand 1 PD-L1 and signals from PD-L1 help tumors avoid detection by the immune system. It’s become apparent that check inhibitors like durvalumab are most effective when there is a preexisting T-Cell response in tumors as it provides those check inhibitors with the immune active environment they need to work best. Importantly, we have demonstrated in preclinical models the ability of bavituximab to activate CD8+ T-Cells and the anti-tumor activity PD-L1 checkpoint blockade is greatly enhanced when combined with bavituximab. Another important observation we recently made is that our PS signaling pathway inhibitors demonstrate multiple signs of immune activation in the low or negative PD-L1 tumors. We believe that this holds great potential to increase the number of patients able to respond to checkpoint therapy as well as traditional chemotherapies. Based on these observations we believe that by combining these two approaches the potential exist for a more complete and durable anti-tumor immune response. We look forward to getting both trials in our AstraZeneca collaboration underway. Now beyond lung cancer we plan to initiate additional clinical trials in breast cancer based on our clinical experience to-date. Data from our Phase I investigator sponsor trial of bavituximab plus paclitaxel published in Cancer Medicine earlier this year demonstrated an impressive 85% response rate of patients with HER2 negative metastatic breast cancer. Data from this IST, together with two prior Peregrine sponsored trials of bavituximab with taxane-based chemotherapy, which yielded between 61% and 74% response rate and a median overall survival of over 20 months in patients with advanced or metastatic breast cancer provides strong rationale to advance this indication. Importantly taxanes continue to be a key standard treatment option for different stages of breast cancer. Accordingly we plan to initiate a Phase II/III trial in patients with HER2 negative metastatic breast cancer with all patients receiving physicians’ choice of paclitaxel or docetaxel, either alone or in combination with bavituximab. The Phase II part of the trial will enroll approximately 150 patients with a primary end point from overall response rate. The first sites in this Phase II/III breast cancer trial are scheduled to be initiated before the end of the year. Furthermore we are planning a trial evaluating neoadjuvant paclitaxel with or without bavituximab, in the hopes of further elucidating bavituximab’s immune modulating mechanism and look for clinical signal in early stage breast cancer. That concludes my comments today I’d like to turn the call over to Steve Worsley to give an overview of business development activity. Steve?

[Stephen Worsley:]

Thanks, Joe. We were very pleased to announce our collaboration with AstraZeneca in August and were even more delighted to announce the expansion of that agreement in October. We believe that AstraZeneca’s enthusiasm for this program is based on the promise and potential of bavituximab. Copious amounts of positive data have consistently demonstrated bavituximab’s therapeutic value and ability to provide solutions to the limitations of currently available treatments. Today checkpoint inhibitors are primarily effective in patients with high PD-L1 expression a minority of all patients being treated. However translational findings have demonstrated that bavituximab is effective in patients with the lowest PD-L1, PD-1 expression highlighting the potential bavituximab to convert patients with the low expression levels who do not respond to anti-PD-1 treatments into responders. In addition to AstraZeneca such data have also been the impetus for our ongoing collaboration with Memorial Sloan Kettering Cancer, which is evaluating combinations of bavituximab with other checkpoint inhibitors and immune stimulatory agents for the purpose of developing new and increasingly effective anti-cancer treatments. It has also been the driver for our ongoing work with the University of Texas, Southwestern as well as a number of other investigator sponsored trials. Peregrine’s goal in partnering with these immuno-oncology leaders is to define the broader scope of utility for bavituximab. Through these collaborations we are actively identifying a range of indications and treatments that will benefit from combination therapy with bavituximab. This will undoubtedly yields important findings in the near-term that will continue to build shareholder value. We continue our dialog with a number of other world leading pharmaceutical organizations and believe that bavituximab will continue to generate partnering interest. I will now turn the call over to Rob Garnick, Peregrine’s Head of Regulatory Affairs, who’ll discuss our drug manufacturing and regulatory activities. Rob?

[Robert Garnick:]

Thanks, Steve. As we’ve reported in our press release today, our new facility has just been commissioned for the initial phase of GMP manufacturing. I’d like to reiterate that this facility currently named the Myford facility is state-of-the-art and its construction was completed for a fraction of the cost of building of comparable facilities. This in and of itself is a major accomplishment and I am very proud of our team for their success of this achievement. Going forward we expect this facility will be a highly valuable asset for Peregrine and Avid. Initial engineering runs which will be initiated tomorrow will be followed by GMP ramps prior to process validation for products entering into the facility. GMP material produced in the new facility can be used either in clinical trials or for commercial sale once Peregrine or Avid’s business partners make the appropriate regulatory filings in the territories where they intend to use the product. This generally requires several runs and demonstrating that the product produced in Myford facility is comparable to product produced in our Franklin facility or in other production facilities. With the Myford site now in the initial phase of GMP manufacturing, we have seen a significant increase in demand for production capacity. Although, we have just opened the doors at Myford we are already contemplating our options to increase further manufacturing capacity. Although no decisions have been made we are pleased to have what appears to be a growing opportunity in this important area of our business. On the regulatory side, we are busy to taking the steps necessary to initiate up the new clinical trials that Joe described. To this end we successfully filed the new IND support expanding the bavituximab breast cancer program and subsequently received FDA clearance to commence the study. We have also taken important steps to de-risk our bavituximab durvalumab combination trials by requesting and receiving critical guidance from the FDA. It’s been a busy time for the regulatory affairs team, but our recent efforts have put us on track to grow our manufacturing business and initiate our newest clinical programs. This concludes my comments and I will now turn the call over to Paul Lytle, Chief Financial Officer who will discuss the company’s financial performance and our Avid Bioservices business. Paul?

[Paul Lytle:]

Thanks, Rob. I’ll start with an overview of our contract manufacturing business. The Avid Bioservices business continues to strengthen. During Q2, our wholly owned subsidiary achieved record quarterly revenue of $9.5 million, a 52% increase over the same prior year quarter. Year-to-date, we recorded manufacturing revenue of $18.9 million or a 61% increase compared to the same prior year period. Our outlook for this business remains very positive with our customers continuing to book available production capacity. This has raised our current revenue backlog to approximately $49 million. Based on this increase in demand, we are raising our revenue guidance to a range of $35 million to $40 million for the full fiscal 2016 compared to previous guidance of $30 million to $35 million. We also believe that business has more opportunity to grow as our second manufacturing facility has the capacity to generate approximately $40 million in new revenue. As Rob mentioned, the new facility is ready for the initial phase of GMP manufacturing to support both to manufacturing of bavituximab in addition to growing our revenue from third party customers. As I wrap up this discussion on Avid, I can’t emphasize enough the strategic importance of this business. Avid continues to generate non-dilutive income that in turn continues to offset the amount of capital we need to raise by other means, plus it’s important to note that preparing bavituximab for commercial production is a significant financial endeavor and this strategic asset saves us millions of dollars each year in manufacturing cost. Turning now to expenses, R&D expenses for the quarter increased primarily due to increase expenses associated with our Phase III SUNRISE trial and our newly planned later stage company sponsored trials in breast cancer and lung cancer. While G&A expenses remained relatively flat quarter-over-quarter. Lastly, during the quarter Peregrine closed a registered direct offering with a single institutional investor raising $20 million. These funds will help support our ongoing Phase III SUNRISE trial as well as our newly planned later staged company sponsored trials. In more detailed analysis of our statement of operations is included in our Form 10-Q that was filed today. This concludes my financial overview, I now turn the call back over to Steve to discuss some important upcoming milestones. Steve?

[Steven King:]

Thanks, Paul. As you’ve just heard from the team although our SUNRISE enrollment milestone has been reached we have no intention of slowing down, quite the opposite. We are aggressively moving to initiate the clinical trials that will allow us to build the most robust oncology business possible. By mid 2016 we will initiate two breast cancer studies, a Phase II/III trial in metastatic HER2 negative breast cancer and the Phase I trial in early stage breast cancer. Our new Phase II trial in lung cancer and a Phase I/Ib trial for multiple solid tumors. These studies will set the stage for expected clinical data readouts from at least three trials by early 2017. Our SUNRISE Phase III trial, the new Phase II non-small cell lung cancer trial as well as the Phase II breast cancer study. In addition we have other potential data coming from ongoing ISTs as well as the other studies that we will be initiating. With each of these studies our goal is the same, we are committed to identifying key indications, patient populations and therapeutics that can benefit from combination treatment with bavituximab. From what we have seen to-date the opportunity appears vast and we are hard at work converting the most promising prospects into true value. This includes our prepared remarks and we would now like to open the call for questions.

[Operator:]

Thank you. [Operator Instructions] Our first question comes from the line of Thomas Yip from FBR and Company. Your line is now open. Thomas Yip Hey, guys. Thank you so much for taking my questions and congrats on a good quarter especially for Avid. So my first question just wondering about the timing of your Phase II trials in lung cancer and breast cancer, are there other advantages to follow SUNRISE so tightly than to try then to speed up enrollment? Because like you said we are expecting SUNRISE unblinding in second half 2016 and then in early 2017 we’ll have two Phase II readouts in lung cancer and breast cancer. Steven King Yes, thanks Thomas. I think the goal of the new studies is to continue to build the value proposition for the overall portfolio. I think the key to success eventually commercially for bavituximab is to be able to be used in multiple lines therapy. Clearly the SUNRISE trial represents the combination with docetaxel a chemotherapy regiment, which is going to continue to be used and the new Phase II study will then expand that into a combination in the IO space with the combination with the PD-L1 inhibitor. And clearly those types of drugs are going to be used as the lung cancer space continues to evolve over the coming years. And so the more we can be a part of both those better off we are and again it’s really a golden opportunity to enroll right from the SUNRISE trial, which is in a again a very similar patient population to the new trial. The new trial has some advantages and that it will actually include both squamous and non-squamous so it increases the number of eligible patients. So really to keep those investigators engaged suddenly moving right from one SUNRISE study into another SUNRISE study is a huge advantage and building that relationship with again these key investigators and KOLs in the area. The breast cancer study this is an area we wanted to move forward in previously. We’ve had some great Phase II data as Joe mentioned along with the data in HER2 negative breast cancer patient, which we saw nice 85% tumor response rate. That represents as big or a bigger market potential as long as non-small cell lung cancer. So taken together that really is going to add tremendous value to the program, give us multiple data readouts and again from a partnering perspective adds a lot of potential value to the program. And Steve maybe you want to expand on that a little bit from partnering perspective? Stephen Worsley So I think again the exposure that we’re seeing with these two collaborations have significantly increased who are talking to but also the ability for bavituximab to act in a variety of different indications. This is obviously leading to further discussions with some of the leading oncology players worldwide. Steven King Okay, thanks again Thomas. Thomas Yip Thanks, that makes a lot of sense. I actually want to make sure. So the Phase I breast cancer trial will that be an IST or is that sponsored by Peregrine? Steven King I think the Phase I study will end up being a company sponsored study. It will obviously be a much smaller study than the two Phase IIs we’re talking about. But it will allow us to run in multiple institutions who have actually a lot of interest from number of different institutions allows us to run a study we think can add a lot of value, but also that we can move forward on a nice timeline that again sets the stage for within the breast cancer space a very nice addition to the Phase II study that we’ll be running in another big patient population represented in that trial. Thomas Yip Okay. I have one last question this is regarding you collaboration with AstraZeneca. It seems that the Phase II cancer trial has now been accelerated ahead of the solid tumor trial. So can you remind us what the advantages of combining bavituximab with durvalumab over your previous planned Phase II trial combination with Opdivo? Steven King Yeah I think the advantages are on several fronts. Number one is it really gives us the flexibility to run the study in the way we want to run the study where we want to run it. Because otherwise we’d have to source Nivo or one of the other PD-1 inhibitors on a regional basis in which the drug isn’t approved in lot of different regions where you may want to run the study. So just operationally it gives us the freedom to more efficiently run a study and get it up and running much quicker than we otherwise would have able to. Secondly it really gives us I think a great opportunity to potentially reduce the cost of what study otherwise would have been. Because if we’ll have to again to go out and acquire the drug for a clinical study. It could as much as double the cost of the trial. And so really again just all around allows us to run a much more efficient trial with the drug that’s in our discussions with the KOLs in the field, people with direct experience they feel that the PD-L1 antibodies work at least as well as the anti-PD-1 antibodies. So really our goal is to answer a key question, which is can bavituximab add to the activity of a PD-1 PD-L1 inhibitor and again allows us doing on a timeframe. So I think there is just a lot of huge advantages. I’ll end that with the fact that also we’re working with a what we think is a great partner. They’ve been very interactive so far. They also have a lot of knowledge of PD-L1, PD-L1 status in the patients. That’s one of the things we want to be looking at as part of both the Phase II as well as in the other study we run in non-small cell lung cancer as our ability to have a positive impact on potentially those PD-L1 negative tumors, which don’t typically response well the PD-1 therapy. So again just that’s sort of one of those things that’s hard to put a numeric value to but is a true advantage of working with a great partner. Thomas Yip Yeah that makes a lot of sense. Thank you again for taking my questions and look forward to see you - JP Morgan. Steven King Yeah, thanks Thomas.

[Operator:]

And our next question comes from the line of George Zavoico from JonesTrading. Your line is now open. George Zavoico Thank you and hi everyone congratulations on a good quarter particularly with the Avid revenue, which is topic of my first question. You mentioned the possibility of expanding Avid’s manufacturing capacity further. So two questions on that first without including fill and finish capability because I think there is a probably pretty good business there as well. And two if you do expand do you have space there and you are starting where you are now you have to expand to some other property? Steven King Yeah so I think the expansion really is driven by our existing and new clients that have come in and so obviously primarily that’s driven in the bulk drug specimens area not necessarily the fill finished area. So that will probably the primary focus we have considered and eventually would like to move into the fill finished business just we’ve been so busy expanding our drug specimens business we really haven’t had the option to do that. But for the question of space there’s space in the current buildings that we’re in, but we’re also looking at other opportunities nearby with the same model as we did for the Myford facility and allowed us the most efficiently grow the business. So at the end of the day it will be a business decision and we’ll take on space as needed to expand the business, again it’s all really right now supported by the client base, which has had an extremely positive response to the Myford facility and that’s really driving we think even beyond what we expected going into it. George Zavoico And then in terms of financing that would you finance it by as sort of debt against the revenue coming in or you just sort of keeping that also wide open all your options open for that? Steven King Yeah I think we’re keeping our options wide open on that I think at this point again we’ll do what’s best for the business itself. It really it’s a nice growing backlog of future revenue it’s really has been change in the way the Avid business can be view as more a long-term go forward business. So I think that it’s really we just need to make the right business decision based on the cost of capital whatever avenue that takes in and then we’ll make the right decision. George Zavoico Okay. Now moving on to SUNRISE there have been a couple of interesting and unfortunate events with some other companies where the placebo arm of a trial has the overall survival has been much longer than expected and some of these indications status been pending with the particular drug that was used in the standard of care the placebo arm. What are you seeing in that regard because SUNRISE has been going on now for about two or three years right if I’m I am not mistaken? What kind of advances have you seen in the standard of care that might either make us more confident or maybe I guess little bit more worried about the possibility of having a surprise like that? Steven King Yeah I can start off and maybe Joe can add in, but I think when we designed the SUNRISE study itself we did take into account kind of the variability that have been seen in the docetaxel studies that have been reported up to that point. I don’t think we’ve seen any really significant variations from that as overtime as more readouts have come. So I think that’s one thing that we did really take into account that we were toward the upper end of what have been previously reported for docetaxel. I think secondly when we powered the study in the Phase II study we saw about a four months difference in median overall survival and the SUNRISE study again was designed to really show a statistical difference even at two months so we did built in some powering assumptions we think that gave us some opportunity there should be arms behave in a way that was little bit unexpected. So I think we’ve tried to hedge against that going into the stage design and we think we’re in good shape and now it’s just a matter of getting the readout which we’re little under two years right now from when we started to study. So at this point there’s really nothing more we can learn from the ongoing operations of the SUNRISE trial itself. Joe I don’t know if you want to add anything to that? Joseph Shan Sure yeah I mean George obviously the very dynamic field right now like Steve mentioned we tried to make the study SUNRISE design it in such a way that homogenous is practical, we obviously have some stratification criteria built in and some preplanned, subgroup analyses that are going to be pre-specified and probably the biggest change in the landscape since we started enrollment there is going to be approval of checkpoint inhibitors in this space and I think we probably have patients that have received checkpoint therapy and if there is an imbalance in between the two arms of the study the subgroupanalysis it should account for that, but I think it’s something that’s really impossible to predict how the changing standard of care is going to effect the results of the control arm. I mean this is why we have to run the double-blind. And probably one predictor would be if our interim analysis or we reach the number of interim events necessary to trigger the interim analysis and the general projections that can give us a little bit of confidence that these aren’t too different than what we have previously seen. George Zavoico Quick question about MSKCC, Memorial Sloan Kettering, are they a site in of the SUNRISE trial? Joseph Shan They are not a site in the SUNRISE trial, but we are discussing opening again some of the new trials there. George Zavoico Okay. And then my final question regards to durvalumab, in the non-small cell cancer space we already have the two other PD-1s approved. How are you thinking of positioning means the durvalumab-bavi in combination in the already approved Opdivo/Keytruda space? How are you going to differentiate it and do you ever anticipate head-to-head comparison study? Joseph Shan Great question. Steven King Go ahead Joe. Joseph Shan For now we mentioned the reason why we think this is a great opportunity is anti-PD-L1 which none of them are approved yet in lung cancer, so far clinically they are behaving very similarly to approve anti-PD-1 agents. And so we think monotherapy head-to-head that’s not a trial that we are anticipating doing I think the differentiator is really for us can bavi make durvalumab had to PD-L1 better if so I mean we would I guess extrapolate that into that we would also see that benefit with other PD-1 or PD-L1 inhibitors. So that’s really our strategy eventually by showing that like in the preclinical setting that bavi modulate to meet focal immunity and activate some T-Cells and drives PD-1 expression, which makes PD-1 access blockhead more effective. George Zavoico So basically if some positive result durvalumab actually open source for you with the other players in the space? Steven King I mean we still have to run the studies I guess. Steven King Right, of course. Joseph Shan Yeah. Steven King Yeah. But George I think that’s really the key here is that from an activity standpoint I think all the PD-1, PD-L1 targeting agents are all more or less interchangeable and I think that there is no clear signal right now that any of them is really outperforming the others and I agree that’s not really our job to show which one of those is best, but really to show how we can actually make them all better. That’s really how we view the durvalumab study is the ability to show that bavituximab can potentially make targeting PD-1 and PD-L1 a better therapy and we can get more patients to respond. And I think this is a phase II study, if we can improve the long-term responses to durvalumab again we think that really extrapolates to the other molecules and is still leave a potential of a Phase III with any other molecules and I think really sets the stage again on the partnering front for lots of opportunities to again work with the difference groups. George Zavoico Okay, great. Congratulations, sounds like next year is going to be really interesting one to watch. Thank you. Steven King Thanks, George.

[Operator:]

And our next question comes from the line of Rahul Jasuja from Noble Life Science. Your line is now open. Rahul Jasuja Hey everybody, thanks for taking the questions. So just a couple of questions here and maybe some clarifications from me. So in planning your combination studies going forward in the news that have combination landscape we are looking at PD-L1 low tumors because PD-L1 low tumors are likely to be non-responsive to PD-1 in the patient so far [indiscernible]. So is that the only the rational or do we know for a fact that or is it likely that PD-L1 low tumors also more responsive to bavituximab or is it both of those? Steven King Yeah I think that’s what we want to show out in some of these studies we’re starting. So we’re not planning on selecting for PD-L1 negative patients in the Phase II study or the initial combination of bavi with chemo and durvalumab, but rather taking all comers and then doing some subset analysis and determining which patient populations we’re having biggest impact it. Because really I mean based on our translational data that’s been presented this year at ESMO and SITC. We’ve shown that we can take PD-L1 negative tumors and actually elicited an immune response in those tumors. And that’s the reason that we think that we can really have this potential to turn those into better responders on a PD-1 or PD-L1 therapy as I mentioned during the prepared remarks it’s basically use bavi to get the immune response going and then you use durvalumab to keep it going. And so it’s the reason there is a great scientific rationale right now for why we maybe will have the biggest impact in those patients who don’t do well because the delta between how they would normally do and how they might do with bavituximab may be the largest. But again we’re going to have some great insight into that from the studies we’re planning on running and the ability to go in and do subset analysis. Joe I don’t know if you add any more to that. Joseph Shan No I think I was going to use the word delta, but you beat me to it. I think the PD-L1 negative patient there again you have more opportunities to demonstrate the delta. Rahul Jasuja Great, thanks. So one of the concepts that’s evolving pretty rapidly is that you’ve got the two negative and the till positive and till positives are responding to PD-1 checkpoint immunotherapy. So is it fair to say or is it an extrapolation that PD-L1 positive tumors are the ones that are TIL positive more likely. And in your case are you also seeing that till negative tumors probably the ones that are going to respond to chemo combination therapy better than our other ones that are the non-responders in combination with PS you can make them responders. Steven King Yeah I think that’s certainly what our evidence has so far is that or I think the general assumption is that till negative or till low tumors the ones that have low levels of the need for PD-L1, right. I mean that’s really meant to stop an ongoing immune response. So I think that’s generally true. Now it gets a little bit more complex because you’ve got T-rigs and all kinds of T-cells present inside the tumor. So it also depends on the particular makeup. What we know is that when you get bavituximab, we seem to see a nice change in the levels of MDSCs its Myeloid Derived Suppressor Cells who are really the cell type that’s responsible for controlling the immune response in the tumors. As been shown that patients with high level of MDSCs do where you have very poor prognosis. So as much as probably getting new tails end of the tumors is important it’s probably more important to change the makeup of those cells into a more productive immune response positive phenotype. And again that’s exactly what we see with when you get bavituximab treatment when we take a look a look at our translational data it shows an increase in CD4 positive T-Cells and an increase in CD8 positive T-Cells along with the changes in the suppressor cells types and the expression of immuno suppressor cytokines in which both decrease after treatment. So I think it’s a matter of getting things move in the right direction. Again this is the role we think PS plays by blocking it and activating immune response were able to turn that around so. Rahul Jasuja You I mean that does make sense, I mean I think you’re looking at patient selection as being helpful in defining the population as well as the data you showed at SITC’15 where you talked about immuno-profiling and looking at response to bavituximab. Those are very interesting datasets. The other question I have was there is a couple of trials running that are IST trials, one of them is the one in combination with Yervoy. And then the other one is the rectal cancer any updates on those? Steven King Yeah so the rectal adenocarcinoma we expect to have some data coming up this year from that study. If any investigate sponsored trial I think it’s always a bit difficult we do whatever we can to encourage them. But we do expect data to be becoming out of that study in 2016, which I think will be a real positive because in that study we did have the opportunity to collect pre and post-treatment biopsies. Number one, so we can see what happens following bavituximab treatment, but also that was a combination with radiation which we expect to be a very strong inducer of piece tumor antigens, which can then be taking advantage of by bavituximab treatment to make CD8 positive T-Cells or killer T-Cells. For the melanoma study, obviously the since that investigator started this study the standard of care has changed pretty substantially. So right now I think we're trying to work with that investigators as well as some others to probably change the profile of that study or start a new multi-center study in which we can then look at little bit more closely at what is the current standard of care and make sure it’s an attractive trial for patient. So just advantage of as the treatment options for patient’s change you need to be able to change with it and luckily it's a small IST trial and we may have an opportunity here to run a trial that I think would be very attractive for patients and will allow us to answer some key questions. Because that was really the point to that study was to answer some of the key questions of combining with Yervoy. But in addition obviously we’re starting the combination of durvalumab in multiple solid tumor types after the beginning of the year. So one way or another we’ll have lots of information coming from those studies. Rahul Jasuja Great. And then one final question is that any updates any more color or comments on collaboration with Sloan Kettering and Jed Wolchok on combination approaches more likely now in the preclinical study any data coming that way in the next few months? Joseph Shan Yeah I think it’s an ongoing process. We’re very actively working with them to study a new combinations so looking for potential and different indications as well as those different combinations. So yeah I mean we fully expect that will be a fruitful collaborations, there will be a lots of data coming from that that we’ll see a very scientific meetings coming up. Obviously we already see a lot of data coming out of all for other collaborators. We’ve had examples of presentations in multiple conferences this year. So it always takes a while for them to get started but then once they are going you tend to have a lot of data that continuously comes through them because the all the systems are up and running. Rahul Jasuja Great thank you and congratulations on the healthy revenues of your Avid. Thanks. Steven King Yeah, thanks Rahul.

[Operator:]

And I’m not showing any further questions I would now like to turn the call back to Mr. Steve King CEO for any further remarks.

[Steven King:]

Well again I’d like to thank all of you for participating in today’s phone call. As always I want to especially thank our stockholders for their continued support, our manufacturing clients for their continued business and as always our patients and their families that are participating in our bavituximab clinical trials. With that we will now conclude the call.

[Operator:]

Ladies and gentlemen thank you for participating in today’s conference. This concludes today’s program and you may now all disconnect. Everyone have a great day.