Madrigal Pharmaceuticals, Inc.
Q2 2013 Earnings Call Transcript

Published: 1 Aug 2013

[Operator:]

Good day, and welcome to Synta Pharmaceuticals' Second Quarter 2013 Earnings Conference Call. Today's conference is being recorded and webcast. At this time, for opening remarks, I will turn the call over to George Farmer, Vice President of Corporate Development at Synta. Please go ahead, sir.

[George Farmer:]

Hello, and thank you, all, for taking the time to join us today. With me are Safi Bahcall, our Chief Executive Officer; Vojo Vukovic, our Chief Medical Officer; Iman El-Hariry, our Vice President of Clinical Research; and Keith Ehrlich, our Chief Financial Officer. This morning, we issued a press release that reported results for the second quarter of 2013. This release can be found on our website at syntapharma.com. Before we begin, I would like to point out that we will be making forward-looking statements based on our current intent, belief and expectations, which are subject to certain risks and uncertainties. Additional details can be found in related SEC filings also available through our website. I will now turn the call over to Dr. Bahcall. Safi?

[Safi R. Bahcall:]

Thanks, George, and thank you, all, for joining us this morning. I'll start with a few high-level comments about our development program, turn it over to Vojo for some additional details, after which Keith will discuss our financials, and we'll open the call for questions. Let me start with lung cancer. The track record of our industry in Phase III development, particularly in lung cancer, has not been very good. There have been over 40 failed Phase III trials in lung cancer in the past 10 years, involving over 20,000 patients and only 3 new drugs approved that have shown a survival advantage. In our GALAXY program, we're taking a different approach in order to improve these odds. First, we're heading into a global randomized Phase III trial, having already treated nearly 400 patients in a global randomized lead-in trial of exactly the same design. To our knowledge, there has never been a drug entering its first pivotal trial in oncology with this much data in the same setting, essentially doing the same trial twice. The purpose of having such a large lead-in trial, the dress rehearsal GALAXY-1 study as a lead into our pivotal GALAXY-2 study is to overcome the problems of historical Phase III failures. These include 2 main things

[Vojo Vukovic:]

Thank you, Safi. I'd like to touch on a number of topics that Safi mentioned and provide some feedback from the field from our GALAXY-2 program. First, it's clear that Hsp90 inhibition is making a comeback. Based both on our GALAXY results in the randomized setting and the single agent already [ph] seen both with our drug and the Novartis AUY drug. Hsp90 inhibition in lung cancer was the only featured workshop devoted to a single therapeutic class at the recent Huntington Beach lung cancer meeting, with presentations from a number of the most well-known lung investigators. And we're receiving almost weekly now new proposals for funded studies from investigators and cooperative groups. Most recently, the Southwest Oncology Group, 1 of the 2 largest oncology networks in the U.S., has indicated plans for a randomized trial evaluating Tarceva and ganetespib in the second and third line lung cancer setting. Another large cancer network submitted a fully funded proposal for a trial evaluating the combination of ganetespib with a well-known anti-angiogenic agent. And we have trials in ovarian cancer, pancreatic cancer, bladder cancer, prostate cancer and other cancers either in active initiation or planned for the coming year. Secondly, I've been very pleased with the progress and enthusiasm for GALAXY-2. We have over 70 sites now activated. The input of recent results and advisory boards has been very positive. In addition to the obvious advantages of entering Phase III with strong clinical results in hand, including positive survival data, one of the things that has most resonated with our investigators is the impact of ganetespib on reducing the spread of tumors, which was seen both in pre-clinical data, but more strikingly in the clinical results from GALAXY-1 because it's the spread of the disease that kills cancer patients, not as much the primary tumor. Safi?

[Safi R. Bahcall:]

Thank you, Vojo. I'll briefly discuss our strategy in breast cancer and how the recently announced results might impact that strategy. Over the past year, we've indicated that our top 3 priorities following second-line lung cancer were

[Keith S. Ehrlich:]

Thank you, Safi, and good morning, everyone. There are no revenues in the second quarter 2013 or 2012. In the second quarter 2013, our research and development expenses were $17.9 million as compared to $11.3 million for the same period of 2012. Our second quarter general and administrative expenses were $4.2 million as compared to $2.9 million for the comparable period in 2012. Net loss in the second quarter of 2013 was $22.8 million or $0.33 per basic and diluted share, as compared to a net loss of $14.6 million or $0.25 per basic and diluted share in the same period of 2012. As of June 30, 2013, we had approximately $70.2 million of cash resources on hand. Based on our current operating levels, we expect our cash resources will be sufficient to fund operations into the second quarter of 2014. Certain new activities contemplated for 2013 and 2014 will be conducted subject to the availability of sufficient financial resources. I will now turn the call back over to Safi for concluding remarks. Safi?

[Safi R. Bahcall:]

Thanks, Keith. This concludes our prepared remarks. Operator, we'll now open the call to questions.

[Operator:]

[Operator Instructions] Our first question comes from Thomas Wei with Jefferies.

[Thomas Wei:]

I had a couple of questions. First, just on ENCHANT. I was curious if you could give us any additional details on whether or not the positive responses that you saw in breast cancer were confirmed with the second scan, maybe any details on the depth of response that was seen or durability?

[Safi R. Bahcall:]

I'll turn that over to Dr. Iman El-Hariry to answer.

[Iman El-Hariry:]

Yes, sure. In fact, all of the Rs [ph] were confirmed at week 12 scan. So the first initial scan was done at week 6. For the complete response patient, the first scan at week 6 was a little ambiguous given the extensive necrotic -- evidence of necrotic disease seen on the skin. And the final scan at week 12 is currently being confirmed by an independent radiologist. But it's important to know that this patient has been restaged and went into surgery with total mastectomy and currently receiving a definitive treatment. In terms of the durability of the response, all patients have gone through a case of fourth or the fifth cycle. And at this moment, it's hard to say as patients are still ongoing on their treatment. And this was really exciting, our treating in this case [ph] given the short durability of response seen with chemotherapy in triple negative breast cancer.

[Thomas Wei:]

And just to clarify, there were comments made at ASCO about a near complete response in triple negative breast. Is that a different patient from the one that was described in the press release as going on -- having a clinical complete response and going on to surgery? Or basically the 2 responses in triple negative breast complete or near complete responses?

[Iman El-Hariry:]

It is indeed a different patient. So the first patient that we alluded to at ASCO was a different patient from one of the sites. This patient has achieved nearly a complete response. And that response was confirmed at week 12. So the second patient with a complete response, this is the one that we have just announced last week at our press release.

[Thomas Wei:]

And with that set of data and this ENCHANT-2 and 3 design that you have, are you planning on focusing just on triple negative breast? Or is it going to be a broader subset or very broadly just metastatic breast cancer?

[Safi R. Bahcall:]

Tom, this is Safi. That's a great question. We've been in pretty extensive discussion with breast cancer investigators as well as looking at our data. The scientific rationale is very strong in HER2-negative disease broadly. And there has been quite a lot of interest in treating hormone-refractory. Once patients in hormone positive disease have exhausted endocrine therapy into hormonal therapy, they switch to chemo, and treatment looks very similar. It's the same agents, and often the same paradigm in hormone positive hormone refractory disease as it is in triple negative. Given the high unmet medical need, though, in triple negative, we're currently thinking about focusing on triple negative with both the metastatic and neo-adjuvant settings. I think even as far back as a year ago, many of the investigators in the program came to us with the view that given the ganetespib safety profile, compared to the more cytotoxic regimens or the regimens with more problematic toxicities, they really wanted to see, as their first priority, neo-adjuvant and triple negative. But I think collectively, triple negative, both neo-adjuvant and metastatic, would be our highest priorities and then expanding into the hormone positive group, either with the taxane or in combination with other agents is the next priority.

[Operator:]

Next question comes from Brian Klein.

[Brian Klein:]

First, on ganetespib in breast cancer, it seems, based on your prior development, that you had been moving away from monotherapy with ganetespib. In your planned registrational studies for breast cancer, triple negative, are you again moving back towards a combination with that agent or you're going to pursue a monotherapy program?

[Iman El-Hariry:]

I think this is really a great question. And let me just tell you about breast cancer. There is -- what we need to -- in terms of moving into an indication, we have to demonstrate first a single-agent activity. And if you look at all drugs have been approved in breast cancer -- in any subtype, there is no single drug that has been approved without demonstration of such single-agent activity. So it's very important for us to see that ganetespib has a clinical activity in breast cancer in the subtypes that we are interested at and the investigators are also interested at. And that will enable us to move into the combination treatment. And if you look for an instance at drugs like -- and then give just some examples, you can say, trastuzumab or pertuzumab or other active [ph] agents, they have all been tested as a single agent. And what's really exciting, particularly to us, is the level of activity that we are seeing is far exceeding the single-agent activity that has been seen with these agents before they moved into a combination setting.

[Brian Klein:]

Okay. Also, given that you're continuing to expand enrollment in ENCHANT-1, do you anticipate that you will present that data before you initiate the registrational programs that you discussed?

[Safi R. Bahcall:]

It's hard to say since we haven't made any final decision on when the larger ENCHANT-2 or ENCHANT-3 trials will start. I think what we have said in the past is that we're hopeful we'll be presenting ENCHANT at San Antonio this year.

[Brian Klein:]

Okay. Briefly, on non-small cell lung cancer. We're now a little bit over 2.5 months into the enrollment of GALAXY-2. Can you give us a bit of an update there?

[Safi R. Bahcall:]

We don't consistently give guidance for enrollment of ongoing studies. But what we have really said is that we will have some data from the GALAXY-2 in the first half of next year, the first interim analysis. And the second interim analysis, as well as final data, it's targeted to come for second half next year.

[Brian Klein:]

Great. And then one last question. Safi, in your prepared remarks, you mentioned 2 problems that have occurred in the past with drug development in non-small cell lung cancer. In particular, regarding the first one, which was insufficient power, just wondering that, since we haven't seen the final data from GALAXY-1, what gives you the confidence that you have inappropriate power assumptions for GALAXY-2?

[Safi R. Bahcall:]

Sure. I think we have -- I mean, there are 2 parts to that question. One is the choice of patient population, and then the other is the choice of overall powering. I think the choice of patient population focusing on the chemo-sensitive group and not the chemo-refractory group was achieved to a very high statistical significance using the standard statistical interaction test. It passes all the biological rationale and plausibility. And it's consistent with patterns in prior trials. So it's an extremely strong case that we've achieved the main objective of the GALAXY-1 trial, which is to identify the right patient population. I think based on the totality of the data, obviously, we have access to a lot of data and have analyzed it internally and independent groups that have come in and analyzed it with us and external groups in industry that have analyzed the data. We feel very comfortable with where we are. If anything, if we get any further data, we can always revisit, but we're comfortable with the assumptions where we are today.

[Operator:]

Our next question comes from Gene Mack with Brean Capital.

[Gene Mack:]

I'm wondering if, Safi, maybe you could talk about -- is there any effort you have enough data actually even yet to -- or is it just too early to tell if there's any potential to enrich for better responders in the breast cancer population that you're going to be looking at for ganetespib?

[Safi R. Bahcall:]

Yes, Gene, that's a great question. In fact, I can tell you some of the feedback that we've gotten in the investment community as we shared -- and especially in the -- sorry investigative community as Iman and Vojo had shared this data, I would say, unanimously, everyone wants to understand what is the genetic profile of these dramatic single-agent responses that we're seeing. I mean, a week 6 response with a well-tolerated agent, but especially a complete clinical response of the type that's been seen. Is there a biomarker? Is there something like the ALK where you can see -- or the EGFR mutation? But a new one, which in triple negative -- and that is -- very fortunately, we have biopsies from these patients so we're looking into it. What I think that means for our strategy is that, as Iman said, we have an enormous amount of experience with the taxane program coming from the lung cancer. And we've seen very clearly that our drug is sensitizing tumors to chemo and especially to taxanes. So that means we have the standard plan that we've had all along, which is to simply take what we've done in lung cancer and the taxane combination, all the operational experience and all the insights and poured it over into breast cancer. And there, in breast cancer, because of treatment in adjuvant and neo-adjuvant, you kind of automatically have the same sort of thing that we're seeing in lung. There's always been in breast cancer essentially a chemo-sensitive versus chemo-refractory, in that in most breast cancer trials in the metastatic setting, you have a provision for time off of chemotherapy, 6 months or 12 months. Pertuzumab was approved with 12 months off of chemotherapy, so the equivalent of the chemo-sensitive. So to answer your question, in breast cancer, there is already a certain type of selection for more chemo-sensitive patients, which is essentially what we've found in the GALAXY program that says these are the patients where the sensitizing effects of ganetespib will help improve the chemo. But then the second part comes back to, is there a biomarker? And that's something we're going to look into and be analyzing over the course of this year. And if we identify that there's a certain gene mutation, for example, in triple negative, which drives extremely high sensitivity, that's the thing that would cause us to revisit. Maybe there is a parallel path as a monotherapy within some genetic biomarker. Does that answer your question?

[Gene Mack:]

Yes, yes, yes, thanks so much. And then just one other thing. I wonder if you'd just give us any update you might be able to provide on partnering. In talks, there have been a couple of allusions to it in the press release, and then I think you may have mentioned something in the call. But I was just wondering, if you can elaborate on what the effort is there. And maybe do you have any sense of timelines?

[Safi R. Bahcall:]

We have an ongoing partnership process. We've been very pleased by the level of interest. We found that it doesn't help negotiations if we publicly announce timelines. So we don't plan to publicly announce timelines.

[Gene Mack:]

And is the data from the breast cancer trial, has that been part of the discussions now? Or is that still too early?

[Safi R. Bahcall:]

That's an active part of the discussions. I think there are some companies who are as interested or as excited in the breast opportunity as they are in the lung opportunity. I think the lung opportunity is the most immediate. And obviously, there's a very large data set to answer. But breast cancer is an enormous patient number and has the opportunity of a very extensive and very well-developed paradigm for neo-adjuvant and adjuvant treatment. And I think people recognize that the safety profile of ganetespib is key, and it is a big competitive advantage for neo-adjuvant and adjuvant usage. And I think equally important, what you're trying to achieve in breast cancer, in the neo-adjuvant or adjuvant setting is prevent metastases. And that's what people are seeing, and that's how people are thinking about this drug in the field as it's preventing metastases. And therefore, breast cancer is a particularly interesting place to go because of the extensive adjuvant and neo-adjuvant usage.

[Operator:]

Our next question comes from Joe Pantginis with Roth Capital Partners.

[Joseph Pantginis:]

I did want to focus on the one patient who achieved the CR and was able to get restaged to being operable. I was just curious, if I read it correctly, what were the factors why this woman did not seek prior chemotherapy?

[Iman El-Hariry:]

Thank you for the question. The patient actually, when I came on the trial, she was inoperable and the investigator did not actually see much of a hope for her to get into chemotherapy, and he felt that maybe her choice should be a form of clinical trial. So he wanted to give this a chance, especially that the protocol is set up as a wonderful opportunity where you just give to start with a finite period of time and then assess subsequently. I think to his extreme surprise and to my also extreme surprise as a breast cancer oncologist to see that patient, after 3 targets of treatment, completely restaged. And as the investigator said word for word, "This is -- I could not feel anything at all when I examined her." For him, that was very, very surprising results for him. So that's what's really made the disease restage and from being completely inoperable with a G4 stage to an operable disease. And at this point, she had her surgery only last week. So really, the patient there, she's on diet, she did not get chemotherapy or a surgeon at the beginning because again, of her extensive local advantages [ph], this was a very large tumor mass in her breast as well as extensive spread to lymph nodes.

[Operator:]

Our next question comes from Robin Davison with Edison Group.

[Robin Davison:]

Just a few quick ones. First of all, actually I wondered, with regard to the GALAXY-1 study, whether you had anymore further analysis done that might be informative from the 15th of May data or whether that was complete at the time of ASCO?

[Safi R. Bahcall:]

Yes, we've had a number of independent data review meetings, committees. And one of the things that has been of high interest is essentially, is there anything else that could explain the survival advantage? Was there somehow post-study therapy or was there any kind of imbalances with -- or healthier patients on the ganetespib arm versus the control arm? And so there has been some further requests by some independent groups that we've been working with. And they've found the same thing that was found in the May analysis, which is post-study therapy was well balanced. It's extremely unlikely that anything with post-study therapy, particularly in lung cancer and particularly because nothing really works in third or fourth month. And it's also extremely unlikely that imbalances could explain the observed advantage because consistently, essentially, every analysis, got [ph] analysis looking -- including any known prognostic variable has always found in the opposite direction that if there were any imbalances in this trial, they favor the control arm. And so those have been repeated and those have been done quite extensively. Those give us a lot of confidence that essentially no matter how you kick the tires, you have a very robust survival advantage.

[Robin Davison:]

Just secondly as well, I'm just slightly -- still a little confused. I think you may not have made the decision yet, but the planned ENCHANT-3 study in the neo-adjuvant setting, is that as a monotherapy for ganetespib? Or will it be in combination with chemotherapy?

[Iman El-Hariry:]

The trial in the neo-adjuvant setting, it would be in combination with chemotherapy. Chemotherapy has shown great activity in inducing external responses in that setting, and so that will be the path to go.

[Operator:]

Our next question comes from Ryan Martins with Lazard Capital Markets.

[Ryan Martins:]

On ENCHANT-1, I just wanted to confirm, is 15 the total number of patients that you've enrolled so far? Or is that the number of patients that you've reported on? Also, you've, I think, added a second arm in combination with paclitaxel earlier this year. And have you been enrolling patients into that arm?

[Iman El-Hariry:]

We have completed enrollment in Stage 1 for the TNBC cohort; the HER2 cohort is still enrolling in Stage 1.

[Safi R. Bahcall:]

Sorry, we missed the second part of the question. Could you repeat that?

[Ryan Martins:]

Yes, I was just asking, you added on a second arm in combination with paclitaxel earlier this year into ENCHANT-1. Are you enrolling patients into that arm?

[Safi R. Bahcall:]

Yes. The way that's going to work is that after patients complete standard or complete the monotherapy lead in, patients and investigators have the option to elect into continue with a combination to adding standard care.

[Ryan Martins:]

Okay. And so far, there have been just 15 patients enrolled on HER2-positive or triple negative?

[Safi R. Bahcall:]

No. We completed the Stage 1 enrollment in the triple negative group and are now in Stage 2 enrollment. In the HER2-positive group, we're still in the Stage 1 enrollment, Stage 1 is 15 evaluable and Stage 2 will be up to 18 evaluable.

[Ryan Martins:]

Okay. And then in terms of the dosing in breast cancer or the schedule, is that different in breast cancer versus lung?

[Safi R. Bahcall:]

When we go into combination studies, it'll be the same in this proof-of-concept study in the monotherapy. It's twice-weekly, 3 weeks on, 1 week off of a 4-week cycle.

[Ryan Martins:]

Okay. And do you have any data that's been generated so far in combination with paclitaxel in breast cancer?

[Iman El-Hariry:]

These would be the plan in ENCHANT-1. So patients will have the option to moving to standard of care in combination with paclitaxel, so that will be added.

[Operator:]

We have a follow-up question from Thomas Wei with Jefferies.

[Thomas Wei:]

I just wanted to clarify in ENCHANT-1, the patient with the clinical complete response who went on to get surgery, was that an objective complete response? Or a clinical assessment of a complete response?

[Iman El-Hariry:]

We have the clinical complete response, and we're still waiting to get the final surgery report. We do not know yet.

[Thomas Wei:]

And for GALAXY-1, I'm curious what your latest thinking is on timing of the final overall survival analysis and what your expectations or how we should frame our expectations when you look at the data? Should we expect it to look pretty much the same as what had been presented at ASCO?

[Vojo Vukovic:]

Sure. The timing of the final analysis is, as we guided, the fourth quarter of this year. So we are on track on that. Our projection is on track for that. With respect to guiding how the data looks like, I'm not sure we can do that, right?

[Safi R. Bahcall:]

If your question is, what would be presented at the meeting, it would be probably pretty similar to all your standard medical meeting presentation.

[Thomas Wei:]

I guess, it was more of a question of, would you expect the data to look better with more maturity?

[Safi R. Bahcall:]

I don't think we could speculate on what future clinical data might look like at this time.

[Operator:]

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

[Safi R. Bahcall:]

Thank you, all, for joining us today, and thank you for your time and attention. This ends the call.

[Operator:]

Ladies and gentlemen, this concludes today's call. You may disconnect at this time. Thank you, and have a great day.