Merrimack Pharmaceuticals, Inc.
Q1 2013 Earnings Call Transcript

Published: 15 May 2013

[Operator:]

Good day, ladies and gentlemen, and welcome to the Merrimack Pharmaceuticals’ Q1 2013 Investor Call. (Operator instructions.) As a reminder today’s conference call is being recorded. I’d now like to turn the conference over to your host Ms. Kathleen Gallagher, Director of Corporate Communications. Please go ahead.

[Kathleen Gallagher:]

Thank you, Ally. Good morning and thank you for joining us for Merrimack’s Q1 2013 Investor Conference Call. Today I’m joined by Bob Mulroy, our President and CEO, and Bill Sullivan, our Chief Financial Officer. This morning we’ll be focusing on an update on our progress toward our 2013 milestones and also give some insight into our earlier stage pipeline. We’ll end the formal portion of the call with an overview of our Q1 financials and then close with time for Q&A. We issued a press release this morning announcing recent events and our Q1 financials. That release can be found in the Investors section of our website. We’re broadcasting this call on our website and it will also be archived there for six weeks. 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 and 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 other reports we file with the SEC which are available online at www.sec.gov. While 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 but we are not taking on an obligation to do so. With that I’d like to turn the call over to Bob.

[Bob Mulroy:]

Well, thank you Kathy, and good morning everyone. It’s a pleasure to talk to you today and let me begin with a critical review of our company. Merrimack is a cancer-focused biotech with a highly differentiated value proposition. We’re advancing a leading biotechnology pipeline in the field of oncology with six novel therapeutics advancing in the clinic compared with companion diagnostics, all pursuing large unmet needs in significant patient populations. We’re also founded on a systems biology and engineering base R&D capability, a [pro-genomics] platform that we believe is driving exceptional levels of innovation and productivity. We also present a significant technology leadership position that expands our expertise in therapeutic and multi-specific [human] antibodies through third generation targeted nano-therapeutics. As a net result we have a substantial set of future milestones with five key results expected in the balance of the year, delivering data on approximately 1000 patients in multiple Phase III and Phase II trials. Let me turn now to our progress over the last quarter. We set out this year with a set of ambitious goals and I’m pleased to report that we are on track with the execution. On the clinical side we are hitting our enrollment objectives across all of our programs, keeping us on track for robust data flow in the near term and well out into the future. First let me focus on MM-398. We are making progress here in two key trials. The first is a Phase III in second line pancreatic. In the Phase III we are executing the first large study of its kind in second line pancreatic cancer, an indication with very large unmet need and unfortunately very short survival times. The Phase III is testing the use of 398 alone versus 5-FU Leucovorin as the control and the use of 398 in combination with 5-FU and Leucovorin. Over the past year the trial has been overseen by a data safety monitoring board that has met quarterly to review safety and futility. To date there have been no concerns raised to us and we are pleased to be on the downslope with respect to the study recruitment. With respect to top line data we revised our guidance in our last call from the middle of 2013 to the second half of 2013. This was the result of an extra quarter of regulatory review times that took place in the amendment that added the combination arm. The study calls for 405 patients to be enrolled in total with 305 events serving as the trigger for analysis. Given the short survival times in second line pancreatic cancer we anticipate the top line data could be reported relatively shortly after the completion of enrollment. We are pleased with the progress we have made in the Phase III and the potential for our novel technology behind 398 to make a big difference for patients. Bottom line we remain on track for data in the second half. The second key trial we are executing for 398 is a translational study that we have referred to as [SIP] study. It is a multiple indication test of 398 in combination with a diagnostic imaging agent that we are developing to hopefully identify 398 responders in advance of therapy. The first phase of this trial as gone well and it will be progressing into its second stage to focus our efforts on three major cancer indications

[Bill Sullivan:]

Thanks, Bob. I’ll be providing a summary of our Q1 2013 financials that were included in the press release we issued this morning. We reported a net loss of $28.3 million for the quarter. Collaborations revenue totaled $14.7 million. The majority of this revenue related to our license and collaboration agreement with Sanofi for the development and commercialization of MM-121. Research and development expenses totaled $37.0 million for the quarter and as was expected were driven largely by the development of our six clinical product candidates. MM-121 expenses were approximately $12.1 million for the quarter and mainly consisted of expenses associated with executing MM-121’s clinical trials – specifically Phase II trials in seven indications as well as expenses associated with our four Phase I trials. As a reminder, these expenses are reimbursed by Sanofi under our license and collaboration agreement. MM-398 R&D expenses were approximately $7.3 million for the quarter and primarily related to expenses associated with execution of the NAPOLI-I trial in second line pancreatic cancer. R&D expenses for our other four clinical programs – MM-111, MM-151, MM-141, and MM-302 – totaled $8.9 million for the quarter. General and administrative expenses totaled $4.9 million for the quarter or approximately 11.8% of total operating expenses. Now let me turn to our financial guidance. We expect unrestricted cash and cash equivalents and available-for-sale securities on hand as of March 31, 2013, of $86.7 million, interest income and Sanofi reimbursements to be sufficient to fund our operations into 2014. As we have previously mentioned we are currently exploring other transactions including business development transactions outside of the US and Europe, giving us the potential to push our cash run rate even further out. I’ll now turn it over to Kathleen.

[Kathleen Gallagher:]

Thank you, Bill. Before closing I just want to remind you that we will be presenting at a few events over the next couple of weeks, including the Bank of America Merrill Lynch 2013 Healthcare Conference in Las Vegas, the UBS Global Healthcare Conference in New York, and the Jefferies 2013 Global Healthcare Conference in New York. For up to date information on upcoming events please visit the events page in the Investors section of our website. With that we’d like to open up the line to questions.

[Operator:]

(Operator instructions.) Our first question comes from Gene Mack of Brean Capital. Please go ahead.

[Gene Mack:]

Okay, thanks for taking my question. I just wanted to take it back to the comments you said about MM-398 and the timing of the data analysis. You mentioned, I think it was 305 events that will accrue pretty quickly after completion of enrollment. Given that timing, I’m just curious if you can review for us what maybe some of your baseline expectations are in terms of maybe the benefit that you’re expecting from each of the arms of the trial. Thanks.

[Bob Mulroy:]

Good morning, Gene, it’s a pleasure to talk to you today. So I think we [suspect] that some of the basic assumptions of the trial, so there’s obviously the three different arms. So the monotherapy arm of 398 we’re looking for essentially a six-week benefit over 5-FU and Leucovorin as the control. Part of the issue with timing in the study is that there’s a lot of variable data out there and only some small studies have been done to sort of determine what the real timeline is for patients who are on 5-FU Leucovorin, ranging between two and three months on a median basis. We would assume three months so we’re looking for four and a half on the monotherapy with 398. Our Phase II suggested that in the pretty late stage population that we had over five months, five and a half months or so. With respect to the combination arm again, the 5-FU Leucovorin assumption as the control is about three months. We built the study to assume that we would get on the combination a six-month benefit or a three-month delta there.

[Gene Mack:]

Okay, and just curious – based on what you may know about the trial or not, are you hearing about patients going onto like a third line treatment setting too? Or are they pretty much, once progression, that’s pretty much at this point… Are there patients going onto another treatment after progression?

[Bob Mulroy:]

Yeah, I don’t have any information on that in terms of what patients may go onto subsequent to 398.

[Gene Mack:]

Okay. Will you be looking at that data though or will you be able to capture that at all?

[Bob Mulroy:]

We will eventually be able to capture that data but we don’t have access to any of that data today since the study is ongoing.

[Gene Mack:]

And just one final question on 121

[Bob Mulroy:]

You know, I think with the lung C group in lung cancer, you have to think about the population as a whole. So this is a patient population who tends to respond very well to Tarceva upfront but for those who either don’t respond or progress, become resistant over time it’s very, very difficult to treat. And that patient population is known to have some additional genetic mutations, one that’s broadly talked about right now – the T790M mutation which there are some drugs in development for that. So one goal of the study was to look from the perspective of the role of ErbB3 in a variety of different subsets of patients in that later-stage population. So we did gather data on that that will be useful in the future, and given that we were treating patients with 121 we do have the data to understand how patients may have responded to that which will be useful for future studies. So we do have a perspective, from our perspective valuable information on our biomarker hypotheses and a potential for 121 to have a benefit in that population. But again, the overall result was not unexpected given we were treating everybody and there is really a variety of subpopulations that exist on the patients who progress or fail to respond to Tarceva.

[Gene Mack:]

Great, thanks.

[Operator:]

Our next question comes from Boris Peaker of Oppenheimer. Please go ahead.

[Boris Peaker:]

Good morning and thanks for taking my question. I have just kind of a general management question. With multiple projects under development I just want to get a sense of how do you rank them in terms of value and return. And maybe kind of specifically in a context where you’ll have to make some internal capital allocations going forward which programs do you see as higher priority?

[Bob Mulroy:]

So Boris, good morning, thanks for the question. I think from a priority perspective we tend to look at each program from first an individual perspective in terms of the degree to which it’s meeting an unmet need out there – and core to that is do we have some insight into the biology that’s different that could create a real difference? And so a good example of that is there are lots of EGFR therapies out there. Our biology suggests that they are not dealing with the wild type patients based on the fact that there is some significant amplification that occurs in the pathway of those patients that those products don’t account for. So if you could deal with that you’d have a patient population opportunity out there where patients progress very quickly and in very poor prognosis but it’s also across lung cancer and colon cancer, head and neck – one of the biggest unmet needs out there in cancer. So as long as we identify something like that we’re comfortable advancing the program, and relative to finding supports for those through business development or additional financings we feel very comfortable that the investment thesis on each program is there. And we could walk through each of the programs but that’s sort of the core of it. And then I think on a secondary basis when we look at priorities in terms of trials, you know, we try to focus in terms of trials on ones that are going to sort of knock off the key questions about the biology and the technology. So for example, while we view 398 as something that has very broad application pretty much across all solid tumor types – and basically in all solid tumor types we view that there are portions of patients that have hypoxic tumors, that have poor blood supply that don’t accumulate large amounts of traditional drugs, 398 is designed to accomplish that. It just so happens that in pancreatic cancer that happens in spades and so it’s a great test case for something that we think is a general principle across many cancers. So our view is let’s go attack the core fundamental thesis of the program first and see if we can establish the technology benefit, and then expand to there. So the first hurdle is, is there really something different here that we think can change patient care? We’re not interested in second generations or “me too’s.” And then can we identify a real clear proof of concept that demonstrates the potential of the technology to change patient care?

[Boris Peaker:]

Since you’ve mentioned 398 I guess I’ll just jump directly to one of the concerns I guess some people have raised, and specifically it’s if the study does not meet its goals – which we know that pancreatic cancer is a risky indication; what are the contingency plans that you’ve considered? And would that in any way impact some of your other ongoing programs?

[Bob Mulroy:]

So pancreatic cancer has been a very, very difficult field – you know, over twenty years there are very, very few successes. I think the recent success in Phase III with ABRAXANE may be the first in twenty years or so. So skepticism there is warranted. I think the big difference between 398 and the other therapies that have been tried is just about everything else that’s been tried is really sort of a mechanistic thesis around what’s driving these tumors. And when we studied and modeled pancreatic cancer and some other cancers we found that the central rate limiting step is actually drug delivery to these tumors that have poor blood supply, stromal tissues surrounding them and some other issues that go on with immune response. And 398 is a solution to that problem. So we don’t view it as sort of tied to these historical attempts to try different mechanistic approaches to pancreatic cancer. This is really a drug delivery solution to what we think is a biophysical problem in attacking pancreatic cancer. So from that end we don’t link it to sort of the past history. It does have more of a question around the individual technology of 398 is can it deliver drug to patients, and we’ve seen evidence of that in our other clinical studies that we can deliver drug to hard-to-treat tumors and so we feel pretty comfortable about it. With respect to your question about risk management, I mean the core program that we’re advancing in terms of risk management for 398 is this imaging diagnostic study that I referred to in the call. It’s called the [SIP] study where we have an imaging diagnostic that we can administer to patients and 24 to 48 hours later we can actually see where 398 accumulates in a patient’s body and understand are we actually solving the delivery problem for these hard-to-treat tumors; and then give 398 only to those patients who are really accumulating significant drug. And I think broadly on 398 and the whole nanotechnology, I don’t know how well it’s understood but there’s a lot of interest in the world out there in antibody drug conjugates, other forms of delivery. If you compare our technology and what 398’s doing to sort of any of these newer versions or technologies, we’re getting areas under the curve due to the drug stability that are several hundred folds higher than other drugs. We’re getting ten times as much drug to the tumor, and most importantly we’re getting the drug to stay around about ten times longer. And so relative to those huge advantages over the other delivery technologies we don’t think it’s very risky, that if we can have an imaging agent that tells us if the drug is there then we’re not going to have significant activity relative to any of these other drug delivery technologies that are sort of being deployed out there today or under development. So given that’s the central question I think we’ve got again in our traditional style, this imaging agent really is addressing the central risk of 398 which is accumulation of drug in these tumors. And that’s how we’ll manage the program going forward.

[Boris Peaker:]

Great, thank you very much for taking my questions.

[Operator:]

Our next question comes from Rachel McMinn of Bank of America. Please go ahead.

[Rachel McMinn:]

Hi, yeah, thanks very much. I wanted to ask a little bit more about MM-121 specifically with the Exemestane breast cancer trials and if that’s reading out, I think you said that was kind of the next major read out for proof of principle. How are you thinking about what a good result is from that study given the AFINITOR results in this population and then as well as some of the other novel agents that are in development for the HER2 negative population? And then secondarily, how do we think about 121 development going forward? You have so many different programs reading out – do you and Sanofi expect to wait until all of the Phase IIs to complete or would you consider going into a Phase III study kind of piecemeal as each indication reads out? Thanks very much.

[Bub Mulroy:]

Thanks, Rachel, and good morning. Your first question is a very good one. Since we launched the 121 study in the HER positive breast cancer space the AFINITOR results from the BOLERO study have come out and the drug did get approved, and so the landscape has changed since the time we launched this study. So I think we tend to look at the results in a few different ways. One obviously is in the efficacy world where we have a control expected to go about four months on PSS – we’re hoping to double that up to eight. The AFINITOR results was higher than eight; I believe it was somewhere around eleven. And so within the efficacy world there’s a couple different things, and a lot of it relates to hopefully the potential safety of 121 – that AFINITOR while it had very significant results also had some significant toxicities. And so one avenue with a successful study in the eight months area is that we could go with an earlier-line therapy. We could also look to combine with AFINITOR, reduce its dose, potentially get more effective. We could potentially go after. So there’s different options related to that development path based on the results and based on the safety profile relative to where we’re headed there. I think with respect to the whole program, I think that we’re blessed to have a partnership with Sanofi whose got a lot of expertise in the oncology space in the area and the teams have been busily working on a series of different plans relative to the potential outcomes of these studies such that we’ve been able to sort of think about different priorities, different programs, different avenues related to different avenues of success. So I don’t necessarily believe that we’ll wait for all the studies to come in but we are looking for some clear answers particularly around the diagnostic which could hopefully become the basis of a really focused, really successful program going forward. And we just need to gather the data on that and its performance in these controlled settings to build some confidence around that but also begin to see the data. Thankfully there’s not a huge window here where we’re going to get really the lion’s share of data through the fall, but we have been busy planning; we have been busy thinking about various indications and how they’ll play out. And hopefully on the results of some data we would get back to the markets relatively quickly with a sense of what our priorities might be.

[Rachel McMinn:]

And I’m sorry, just you didn’t really address the Pfizer CDK 4/6 program in the HER2 negative population. Has that changed your view internally about breast cancer as an opportunity?

[Bob Mulroy:]

So right, so there is the new data from the CDK drug and that efficacy is in a subpopulation. So again, it hasn’t changed our broad view on 121’s opportunity across its populations of breast cancer patients. And again, we’ll need to see their full results more completely and we’ll need to see our results. There is hopefully the potential for us to identify our own patient populations within what is a pretty large space across breast cancer.

[Rachel McMinn:]

Great, thank you.

[Operator:]

Our next question comes from Eric Schmidt of Cowen & Company. Please go ahead.

[Eric Schmidt:]

Good morning. Bob, apologies if I misheard you, the connection wasn’t perfect, but when you were talking about the MM-398 trials and you mentioned the DSMB has looked at multiple safety, and I thought you said either feasibility or futility analyses were done, too. Can you just clarify that?

[Bob Mulroy:]

Sure, so they are charged with looking at both futility and safety and have been meeting regularly, quarterly on the program.

[Eric Schmidt:]

So what can you say about the futility analyses that they would have looked at?

[Bob Mulroy:]

I think we’re not prepared to comment on their activities or the ongoing study. I think today we’re just focused on that the most negative case has not occurred in the study to date and that at least to us suggests that we’re on track to see full data results this fall.

[Eric Schmidt:]

Okay. And you said the analyses were quarterly so there would have been the latest analysis I assume in Q1?

[Bob Mulroy:]

That’s correct, yes.

[Eric Schmidt:]

Okay. And then the second question in terms of your business development activities, it sounds like you’re in a ton of ongoing discussions across the pipeline and platform. Is there a targeted percent of the capital that you might need that you’d hope to get through these business development activities or is that still in flux depending on how the data look and how your stock price might perform?

[Eric Schmidt:]

I think that there isn’t a specific target that we have overall. I think it relates to, all of these business development activities relate to a whole mix of terms. A lot of it relates for our purposes in terms of gaining commercial capabilities if we don’t have in a broad portion of the globe accessing development expertise but also excessing capital to sort of advance the programs. And so you sort of put all three of those in a mix and you want to find the best possible opportunity; when it comes to the technology side you want to find things that provide a benefit to us and our shareholders in the long term and don’t distract us from our views. So you know, I think that we’re pretty comfortable that we’re going to find our way through there and that there’ll be a substantial portion of our capital will come from business development in the future but we haven’t set a specific percentage target on it.

[Eric Schmidt:]

So as follow up would it make sense for you to see some of these readouts before you embark on substantial other business activity?

[Bob Mulroy:]

I think you know, some of the readouts that we’re going to see this fall will hopefully be supportive, or at least we’re hopeful that they’ll be supportive of the really critical role that we believe ErbB3 plays in development. And that probably has its most significant impact on something like a 111, but at the same time for the past two years we’ve all seen Pertuzumab which blocks the dimerization of HER2 and HER3 come into the space and provide a validation that we’re not crazy. ErbB3 is engaged and at least attacking it in some way provides some clinical benefit. Our science suggests that it’s involved much more broadly than the Pertuzumab data, much more differently in a different set of tumors and with a different mechanism than with Pertuzumab potentially gets at in a lot of patients. So proving out that specifically may be aided by the 121 work but again, it is a separate patient population. So perhaps that’s linked but for the rest of our pipeline I think that there’s considerable data on the products and the programs to drive interest. I don’t think that there’s any substantial data milestones out there in the near term that are going to change our opportunities on these. The roll of EGFR is known. Other companies, you know, [Genomokalt] has put out some big data suggesting that the existing therapies may only work in these low [FMA ligon] settings. Our therapy 151 looks to be really the first that can actually tackle (inaudible). So there’s a lot of science and research that’s been done since we started those programs out in the world that’s provided a lot of support that we’re on track with at least the biology we’re attacking. So I don’t think I see any continuous situations out there and feel comfortable that the situations we’re under, we can get some significant and important deals for us once we can get the terms pulled together.

[Eric Schmidt:]

Great, thank you.

[Operator:]

Our next question comes from Geoff Meacham of JP Morgan. Please go ahead.

[Mike:]

Yeah, hi, it’s Mike in for Geoff – thanks for taking the question. I had a question on the Phase II 121 study, specifically in ovarian cancer. Can you maybe share with us what you need to see from that study to warrant taking it further into Phase III? Thanks.

[Kathleen Gallagher:]

Hey Mike, this is Kathleen, thanks for the question. So from a statistical perspective what we’re looking to see there, we’re expecting that the control arm will be about a four-month PFS and what we’re looking for is a six-month PFS, and that basically helps us hit the primary endpoint. But I think you know, as Bob touched on during the call there’s really two ways for 121 to move forward in ovarian cancer. The first is the obvious one which is hitting the primary endpoint. I think the secondary one which is really equally important here is us understanding the biomarker population in the ovarian space and being able to potentially move MM-121 forward even in just that patient population into hopefully the Phase III setting with a prospective diagnostic approach there.

[Mike:]

Great, thanks.

[Kathleen Gallagher:]

Thank you.

[Operator:]

Our next question comes from Brett Holley of Guggenheim Securities. Please go ahead.

[Brett Holley:]

Yes, thanks for taking the questions. I think the first question I have is on the Phase II for 151 I think you said that your intention was to run the trial versus Erbitux. So I’m wondering would that be in combination with Irinotecan for 151 and have you done any preclinical work with that combination to make you confident that you can move forward with that combination?

[Bob Mulroy:]

God morning, Brett, thanks for the question. So yes, so to get in the second line Erbitux is used in combination with Irinotecan so part of the work that’s underway is exploring that combination with 151 so we can launch that study. And we have done significant preclinical work with 151 and at some future one of these science conferences I think we’ll put up that combination data for all to view.

[Brett Holley:]

Okay. And then I think there’s a Phase I combination of MM-121 and Sanofi’s PI3 Kinase inhibitor. That seems like a pretty intriguing combination. I wonder are you enriching for any particular solid tumors in that Phase I trial and when might we see the initial data from that trial?

[Bob Mulroy:]

So with none of the studies that we’re going through today with the 121 program are we stratifying or enriching upfront in any way. The current biomarker program is really a retrospective program and designed retrospectively because we need to see that negative control to be confident about only moving into specific patient populations in a Phase III program. With respect to the Phase I program I can’t comment on it now until it’s completed and we have presented clinical data on it, but hopefully that will occur in the not too distant future.

[Brett Holley:]

Okay, thank you very much.

[Operator:]

With no further questions at this time I would like to turn the conference back over to Ms. Kathleen Gallagher for any closing remarks.

[Kathleen Gallagher:]

Thank you again everybody for listening in today. Sorry we ran a little bit later but we appreciate you listening in and we look forward to updating you on our progress. Hope you have aa great day, thank you.

[Operator:]

Ladies and gentlemen, this does conclude today’s conference. You may now disconnect and have a wonderful day.