Merrimack Pharmaceuticals, Inc.
Q3 2015 Earnings Call Transcript

Published: 10 Nov 2015

[Operator:]

Good day, ladies and gentlemen, and welcome to the Merrimack Pharmaceuticals’ Third Quarter 2015 Investor Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder this call is being recorded. I would now like to turn the conference over to your host for today Mr. Geoff Grande, with Investor Relations. Sir, you may begin.

[Geoff Grande:]

Thanks, Ben, and good afternoon everyone, and thank you for joining us on our call to discuss our third quarter 2015 financials and our recent clinical progress. A press release detailing this information issued a short while ago can be found in the Investors section of our website at merrimack.com. This call is being broadcast live and will be archived on our website for six weeks. Joining me on the call today are Bob Mulroy, our President and CEO; Peter Laivins, our Head of Development and Dr. Yasir Al-Wakeel; our CFO and Head of Corporate Development. We’ll end the formal portion of the call with time for Q&A. Before we begin, I need to remind you that during this call, we will be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These may include statements about our future expectations and plans, clinical development timelines, the potential success of our product candidates, and financial projections. These statements involve risks and uncertainties which are described in the Risk Factors section of our most recent Form 10-Q and the other reports we file with the SEC, which are available online at sec.gov. All these forward-looking statements represent our views as of today, they should not be relied upon as representing our views in the future. We may update these statements in the future, we are not taking on an obligation to do so. With that, I'll turn the call over to Bob.

[Bob Mulroy:]

Well, thanks, Geoff and good afternoon everyone. It is a pleasure to speak with you all today. During today’s call we’d like to focus on the following topics. We’d like to review the status of our commercial launch, give an update on our development efforts for ONIVYDE, provide guidance on the expected timing of our next seven clinical indications, and update you on the business activities and our financial results for the quarter. To begin let’s start with ONIVYDE. It has been a transformational last two weeks at Merrimack, progressing from an R&D company to booking our first product sales as a commercial entity. On October 22, the FDA approved ONIVYDE for the treatment of metastatic pancreatic cancer, providing an option for patients who have progressed on gemcitabine. This was a label we sought and planned for, which allows for ONIVYDE to use across multiple lines of therapy. We believe the label provides for total addressable market opportunity of $800 million in the United States. We are now focused on the commercial execution to make ONIVYDE a new standard of care for the approximately 19,000 post-gem patients in the United States. I am pleased to report that prior guidance we executed a full nation-wide launch of ONIVYDE, just two business days after our approval on Monday, October 26. Our field team full deployed, engaged and responding to increase, our marketing and education programs are being used in the field. We have drug available throughout our distribution network, our patient and physician support services are online and active and we successfully shipped drug to customers confirming that our back office systems are up and fully running. From the first moment after the FDA approval, we’ve been exceptionally pleased with the immediate and enthusiastic response from the oncology community. Our partners in the clinical research and patient advocacy communities have issued press releases and direct communications to their members. And Dr. Pazdur, Head of the FDA Oncology Division, send a direct first message to oncologists across the U.S. notifying them of the approval. We considered a privilege to have the opportunity to support the medical practitioners and their mission to help patients and we are thankful for their broad and enthusiastic support. While the Merrimack name to be new to oncologists in the marketplace the launch of ONIVYDE is far from our team’s first commercial radio, we built our entire commercial team with proven oncology professionals from great marketing organizations. Like, Gentech, Onyx and Pfizer among others. I’m very proud of the rapid turnaround we demonstrated in moving from approval to launch and believe, this is an indicator of the commitment to execution we aim to deliver on – for patients moving forward. We are confident that the work we’ve done leading up to the launch has put us in a position for a rapid and successful adoption of ONIVYDE in the post-gem setting and we look forward to updating you on our progress. Let me now turn the call over to Peter Laivins, our Head of Development, to discuss the recent launch of ONIVYDE into a clinical development program in front-line pancreatic cancer.

[Peter Laivins:]

Thanks Bob, it’s a real pleasure to update you on our clinical development plan for ONIVYDA. Our primary objective is to build upon the positive results obtained with ONIVYDE, plus 5-FU – in the 5-FU regimen, in post-gemcitabine metastatic pancreatic cancer and expand evaluation of this new chemotherapy backbone in patients’ settings where there is high unmet need and who have physical characteristics of the tumors favor use of our liposomal encapsulation technology. Now, while post-gemcitabine pancreatic cancer was in an improving ground for the ONIVYDE plus 5-FU regimen, other cancers also display characteristics which support evaluation of ONIVYDE based regimens. Along with our partner Baxalta, we have prioritized five expansion indications for ONIVYDE as part of our global development plan. These indications are front-line pancreatic cancer, front-line gastric cancer, pediatric solid tumors, glioma and metastatic breast cancer. Last week we announced the initiation of a trial in front-line metastatic pancreatic cancer, a setting where clinicians continue to search for a chemotherapeutic regimen, which is effective and broadly applicable for an estimated 49,000 patients diagnosed in the U.S. each year. Our full drug regimen called folfirinox is known for its efficacy in this setting the clinicians find it too toxic for all but their most healthy patients. So we said about designing and investigating a new regimen that included those components, but built around the ONIVYDE plus 5-FU backbone. This open label Phase 2 study will be conducted in two parts. First assessing the safety of ONIVYDE in combination with 5-FU and oxaliplatin and then expanding into a three-arm randomized study assessing efficacy and tolerability. In the second part, 150 patients with previously untreated metastatic pancreatic adenocarcinoma will be randomized to receive ONIVYDE with 5-FU/LV and oxaliplatin or ONIVYDE with 5-FU alone for the control-arm of nab-paclitaxel plus gemcitabine. The primary outcome measure will be progression free survival rate at 24 weeks as well as overall survival, objective response rate, tumor marker, CA 19-9 response, safety and most importantly tolerability. Really the central question of this trial is to investigate the balance of tolerability and efficacy of these ONIVYDE based regimens in the front-line pancreatic cancer setting. We’re also excited about this study because it allows us to quickly and efficiently evaluate these potential new regimens and if successful, address a great need expressed by clinicals for a better front-line chemotherapy backbone. Data from the studies expected in the first half of 2017. The next priority indication we expect to initiate is a Phase 3 study in the front-line HER2-negative gastric cancer. Now similar to pancreatic cancer this tumor has very high unmet medical need with no consistent chemotherapy standard of care and very limited progress of targeted agents. Additionally, gastric cancer has physical characteristics such as stromal barriers in the hypoxic microenvironment which we believe favor investigation of ONIVYDE. Together with our partner Baxalta, will provide more details on how we plan to execute our clinical program in gastric cancer in Asia, North America and Europe, as we complete our consultation with regulatory authorities and experts in the field. We expect to launch the Phase 3 trial in gastric cancer in 2016. Three other additional indications are already under investigation, they include glioma and pediatric sarcoma, which our investigator led initiatives as well as an exciting breast cancer trial, with translation of components including drug deposition imaging to identify treatment response biomarkers. As a reminder, we expect preliminary data from these trials in 2016. We look forward to updating you on our progress of these clinical programs in the months ahead. Let me turn the call back over to Bob now.

[Bob Mulroy:]

Thank you, Peter. Let’s turn our attention to the other late stage product candidates in our portfolio. Let me begin with an update on MM-302. Our HER2 antibody-guided drug conjugate encapsulates doxorubicin. MM-302 is seeking to address the significant need for additional HER2 directed therapeutics in the later lines of metastatic breast cancer. As more and more patients have progressed in the first and second line standard of care. MM-302 is currently enrolling patients in international Phase 2 study called HERMIONE, designed to support a potential accelerated approval in the United States, and conditional approval in the European Union for the treatment of anthracycline-naive HER2 positive breast cancer patients that have been previously treated by pertuzumab and T-DM1. This accelerated approval study, is based on the promising potential of 11 month progression-free survival signal from our Phase 1 study in late line anthracycline-naive patients. The typical expectation for patients in the third-line setting, as demonstrated by the TH3RESA trial presented at ASCO in 2014, is a progression-free survival of just 3.3 months. We are pleased to say that HERMIONE study is progressing well and with both U.S. international sites now fully active. We’ve met our enrollment targets over the past several months, and now expect the study to complete enrollment in 2016. Given the potential for substantial PFS benefit on the active arm of 398, we are projecting the report data in 2017. Moving now to MM-121, earlier this year we launched a Phase 2 study in combination with docetaxel and pemetrexed in heregulin-positive patients in second and third line non-small cell lung cancer. Interest in enrollment have been very strong and we are meeting our enrollment objectives. Moreover, given that the study is perspectively selected only heregulin-positive patients. We are pleased with the study’s screening results, are confirming the prevalence estimates for heregulin-positive non-small cell lung cancer patients of approximately 50% derived from our prior trial. Given this prevalence, the significant interest by investigators, the high unmet need we now expect data from the study to report in the second half of 2016. As we discussed previously, one of our business objectives has been to secure funding for MM-121 in order to expand its regulatory development into breast cancer. This goal is unchanged. And we continue to work aggressively toward securing external capital needed. We are pleased to have the lung study underway, and we are on track to deliver data and remain committed to our objective throughout the program into additional indications. We’re also making steady progress, on the enrollment of MM-141 our dual antibody inhibitor of IGF-1R and ErbB3. We are currently enrolling patients in a Phase 2 study evaluating MM-141 in combination with nab-paclitaxel and gemcitabine versus nab-paclitaxel and gemcitabine alone. This study is enrolling only biomarker positive patients those who test positive for high serum levels of free IGF, based on our current projections, we anticipate results from this study in 2017. In summary, we have substantial sets of R&D catalysts in the next two years, with data readouts from seven clinical initiatives spending four programs. During 2016, we expect clinical readouts from the nal-IRI program in pediatric sarcoma, glioma and metastatic breast cancer, and from MM-121 in non-small cell lung cancer. In 2017, we expect data from the MM-302 HERMIONE study in third line HER2-positive breast cancer, and from ONIVYDE in the front-line metastatic pancreatic cancer setting and from MM-141 in the IGF positive front-line metastatic cancer setting. Let me now turn the call over to Yasir Al-Wakeel, who will review our financial results. Yasir?

[Yasir Al-Wakeel:]

Thanks, Bob, and good afternoon, everyone. Let me start by expressing how excited I am and have joined the Merrimack team in both the finance and at corporate development role. I’m excited by many things that are taking place at Merrimack. The first of which is our science. We have a unique pipeline to company of our size, with the potential for multiple transformational events over the next two years. Secondly, our people. I’m delighted to be surrounded by a highly-talented and innovative team here at Merrimack. Execution is everything in biotech. And I’m glad that I’ve joined the team that has a proven track record. And thirdly I’m passionate about our patient-centered approach. Having patients with core value decision making, in short that we approach problem solving in the right way. We plan to deliver on this through our biomarker strategy. Delivering medicines specifically tailored to the individual is in our view very much the future of drug development. Now before turning to the detail around this quarter’s financial results, I’d like to begin by highlighting several financial highlights that were recently achieved. The most significant achievement with the FDA’s approval of ONIVYDE on October 22. With this approval we are beginning a new journey as a commercial company and will record revenue related to commercial sales of ONIVYDE from here onwards. Also during the third quarter we successfully concluded sales under our at-the-market or ATM program that was initiated in July of 2015. Under this program we sold approximately 3.8 million shares of common stock generating approximately $38.6 million in net cash inflows for Merrimack. Additionally, as part of our partnership with Baxalta, we achieved $15 million milestone in Q3, associated with the initiation of our front-line pancreatic cancer trial for ONIVYDE, as detailed in our 10-Q. This milestone was classified as non-substantive under our proportional performance model and therefore did not result in a one-time increase in revenue during the quarter, but did result in net cash inflows of $15 million. Subsequent to quarter end, we earned a $47.5 million milestone related to the dosing of the first patient in the trial. The milestone along with the $15 million payment related to the protocol submission, triggers for Merrimack a total of $62.5 million in milestones from Baxalta as highlighted in our October 27 press release. This milestone is another non-substantive milestone and therefore will not result in a one-time increase in revenue, but will result in net cash inflows of $47.5 million in the fourth quarter of 2015. As Peter outlined, together with our partner Baxalta, we are very excited by the potential prospects of ONIVYDE in front-line pancreatic cancer. While the post-gem commercial opportunity at an estimated $800 million total market size, it certainly not in significant the front-line opportunity reflects the patient population that is both significantly larger and has the potential for a greater duration of therapy. Let’s now turn to our Q3 2015 financial results, which were included in our press release distributed a short while ago. Net loss during Q3 2015 was $42.4 million, which consisted of $16.4 million in collaboration revenues under the proportional performance model, $54.7 million in operating expenses and $4.1 million in net losses from other income and expenses, approximately $37.8 million or 69% of operating expenses consisted of research and development expenses. This is 12% lower than the prior quarter, primarily due to $11 million of expenses incurred in Q2 2015, related to an ONIVYDE milestone which was paid to Pharma Engine in Q3 2015. The other $17 million or 31% of operating expenses consisted of general and administrative expenses with a significant proportion related to costs incurred to prepare for the launch of ONIVYDE in October. This is also evident in the 38% increase in G&A expense over Q2 2015. Let’s now turn to our net milestone and cash runway guidance. At the start of 2015, we guided to net payments of $66.5 million related to our Baxalta partnership after offsetting payments to Pharma Engine. With the dosing of the first patient in our front-line pancreatic study, I’m delighted to announce that we have achieved this guidance. With that I’d like to turn your attention to guidance on cash milestone payments in 2016. In 2016, we expect to receive $46.5 million of net milestones related to ONIVYDE from Baxalta, after offsetting payments to Pharma Engine. With respect to cash runway, Merrimack expect to be able to fund operations into the second quarter of 2016, through its unrestricted cash and cash equivalents and available for sale securities of $62.4 million as of September 30, 2015. The markets [ph] have already been triggered for this year, at this right earlier and anticipated cost sharing reimbursements from Baxalta. Three sources of capital potentially take our cash runway beyond Q2, 2016. Firstly, commercial revenues of ONIVYDE. Secondly, the $46.5 million of net milestone payments that we have guided to receiving in 2016. And thirdly, an additional $15 million available to us under our loan agreement with Hercules. With that, I’ll turn the call back over to Geoff.

[Geoff Grande:]

Thanks Yasir. Before we wrap up, a quick mention that we'll be attending a number investor conferences over the coming months, including the Credit Suisse Healthcare Conference later this week in Arizona, the Jefferies Global Healthcare Conference on November 18, in London. The Oppenheimer Healthcare Conference on December 8 in New York and the Guggenheim Healthcare Conference on December 15 in Boston as well as the JP Morgan Healthcare Conference in January. We hope to see you at one of these events. And with that Ben, we'd like to open up the line for any questions.

[Operator:]

Yes sir. [Operator Instructions] Our first question comes from the line of Tony Butler of Guggenheim. Your line is open. Please go ahead.

[Tony Butler:]

Yes, thanks very much for the color on the cash runway that was very helpful. One question though, Bob I thinking the previous quarter, you spoke about initiating 151, you didn’t mention at this quarter, and I wondered if you would spend a moment on that either as a standalone or in conjunction with 121, while, the other programs really appreciate that color on as well. Thanks so much.

[Bob Mulroy:]

Well, thanks Tony. I appreciate the question, with 151 which is our super-potent EGFR inhibitor, we are very excited about a clinical program in colorectal cancer, we had announced earlier this year Phase 1 results where we saw 18.5% response rate in patients who are colorectal cancer patients and progressed on our prior therapies. We are still working on a finalizing a trial design for that study in colorectal cancer, and we’re hopeful that we be able to announce the design and launch that study in the not too distant future. So we are still working actively on it and plan to be talking about that very soon.

[Tony Butler:]

Thanks Bob.

[Operator:]

Thank you. Our next question comes from the line of Anupam Rama of JP Morgan. Your line is open. Please go ahead.

[Anupam Rama:]

Hey, guys thanks so much for taking the question. I just had a question on MM-121 and potential additional indication breast cancer, for example, how are you thinking about those trials as you approach year-end in the context of the broader competitive landscape and the potential urgency to do a deal or is it something that you’re just going to sit back and wait for what you think is the most appropriate development pathway for this drug?

[Bob Mulroy:]

Hi Anupam, this is Bob and very much appreciate the question. So I think our perspective on MM-121, when we got the drug back from Sanofi last December, with that – there was significant competitive pressure to move into non-small cell lung cancer and we did that right away and we believe the drug has significant potential there and I’m wanted to make sure that we continued to be first-in-class on the ErbB3 inhibitors and that was our lead. With breast cancer, we had a great data and our desire to get that into 121 cancer study as we said earlier. At this point, we continue to monitor the competition about 20 other ErbB3 inhibitors out there and have not seen anyone move forward into later stage study in that space. So we continue to monitor it, I think on the transaction side, we continue to have active conversation, continue to pursue different transactions that could move that forward and I think hopefully when we get something that we think is right for Merrimack and for the drug, we can move forward with that as well.

[Anupam Rama:]

Great. Thanks so much for taking my question.

[Operator:]

Thank you. Next question comes from the line of Jeff Chen of Cowen and Company. Your line is open. Please go ahead.

[Jeff Chen:]

Hi, thanks for taking my questions. On ONIVYDE, I was wondering if you can give us a little understanding in terms of how reimbursement is going and when you anticipate concluding reimbursement discussions and if you also expect any stocking in Q4?

[Bob Mulroy:]

Hi, Jeff, this is Bob and I appreciate the question. So we have launched the drug and we’re in the early days on the reimbursement process, it takes considerable number of months to move through that with all the different payers, we’re very comfortable in the pricing that we set to the drug based on our expensive market research before we launched and we really don’t anticipate any issues based on those prior discussions as we move through the reimbursement process. But it does take a significant number of months to get through that process in total. And so we’ll continue to work through process and update you. But so far smooth sailing and we don’t expect any issues moving forward. And I think with respect to stocking, we don’t expect anything there.

[Jeff Chen:]

Thanks very much.

[Operator:]

Thank you. [Operator Instructions] Our next question comes from the line of Eric Criscuolo of Mizuho Securities. Your line is open. Please go ahead. Please check to ensure that your line is not on mute.

[Eric Criscuolo:]

Sorry about that. Can you hear me?

[Bob Mulroy:]

Yes, we can. Hi, Eric.

[Eric Criscuolo:]

Hi, I apologize for that. Just on the initial or on the colorectal cancer trial for 151, do you expect that to be compared to trial versus erbitux?

[Bob Mulroy:]

Hey, Eric, this is Bob, so we are still in the planning stages of that study and we are very excited about the opportunity to move forward with that, given the data we’re seeing today, I think we expect to provide significant details once that study is ready to go on a design alarms protocol the whole deal, so, you can look forward to some more news on 151 from us in the near future.

[Eric Criscuolo:]

Okay, and then on 121, I appreciate your comments that you just said but, can you maybe provide a little insight into, how the landscape has changed over the past year or so. Your strategy has changed for that – for the development of that compound given new competitive entrance and scientific advancements.

[Bob Mulroy:]

So Eric, I appreciate that. We are always sort of looking at the competitive landscape here and trying to model this, I think we haven’t seen anyone move forward in the breast cancer space. And it perhaps created any additional urgency there. I think our urgency really is around some very good results. And I think if we saw something move there we might, we consider our strategic direction. But I think we are very comfortable with the fact that our lung cancer study as the lead provides an opportunity to validate the program for perspectively, opportunity to provide a lot of value and continue to assure that we can move first to market with ErbB3 given the opportunity, and that when we have the opportunity, we will be happy to talk to you about what we can do in other indications in the future.

[Eric Criscuolo:]

Okay, thank you.

[Operator:]

Thank you. And ladies and gentlemen, this does conclude our question-and-answer period. I’d like to turn the conference back over to management for any closing remarks.

[Bob Mulroy:]

Very well, thank you everyone for joining us. We look forward to updating you again next quarter.

[Operator:]

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program and you may all disconnect. Have a great rest of your day.