MEI Pharma, Inc.
Q4 2018 Earnings Call Transcript

Published: 31 Aug 2018

[Operator:]

Good afternoon, and welcome to the MEI Pharma 2018 Fiscal Year-End Conference Call. Please be advised that this call is being recorded at the company's request. At this time, I would like to turn the call over to Mr. David Walsey, MEI's Vice President, Investor Relations and Corporate Communications. Please proceed.

[David Walsey:]

Thank you, Operator. Good afternoon, everyone, and thank you for joining us. After the market closed today, we filed our Form 10-K for the fiscal year ended June 30, 2018, with the Securities and Exchange Commission and issued our financial results and corporate highlights press release, both of which are available in the Investors section of our website at www.meipharma.com. On our call today, we will review corporate highlights and progress in the clinic over the last year as well as a summary of our financials from the fiscal year ended June 30, 2018. We will also review some potential upcoming milestones from the ongoing development of our four clinical-stage drug candidates. Before we get started, I want to call your attention to the fact that this conference call may contain certain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. You should be aware that our actual results could differ materially from those contained in its forward-looking statements, which are based on management's current expectations and are subject to a number of risks and uncertainties as discussed in our SEC filings, including our most recent annual report on Form 10-K filed earlier today. A replay of this call will be available on our website approximately an hour after its completion. With that said, I'd like to introduce you to our speakers for today. With me are Dan Gold, our President and Chief Executive Officer; Brian Drazba, our Chief Financial Officer. Additionally, David Urso, our Chief Operating Officer; Richard Ghalie, our Senior Vice President of Clinical Development; and Karen Potts, our Senior Vice President of Regulatory Affairs are also with us and available to answer questions. Brian will start with a summary of our financial results, after which Dan will provide an update on our clinical programs. Following the prepared remarks, we'll open the line to your questions. With that, I'll turn the call over to Brian.

[Brian Drazba:]

Thank you, David. Since we are excited to review the highlights in our development programs and our plans to build on the progress we've made over the last year, I'll keep my remarks brief. For more detailed information regarding our financial results, I invite you to review our 10-K filed earlier today. I am pleased to report that we finished fiscal year 2018 in our strongest financial position ever. As of June 30, we had $102.7 million in cash, cash equivalents, and short-term investments with no outstanding debt. The cash balance includes proceeds from the $75 million private placement we completed in May 2018. Additionally, our research and development expenses were $17.1 million for the year ended compared to $7.2 million for 2017. General and administrative expenses were $9.8 million compared to $8.6 million for 2017. Revenues were $1.6 million for the year ended June 30, 2018, which is comprised of reimbursable pass-through costs for services provided by third-party vendors. Cash expenditures from operations were $21.3 million for the year ended June 30, 2018 compared to $16.5 million for 2017. Cash expenditures were $3.8 million [ph] for the quarter ended June 30, 2018 compared to $3.1 million for the same period in 2017. Net loss was $40.1 million or $0.97 per share for the fiscal year ended June 30, 2018 compared to net income of $2.7 million or $0.07 per share for 2017. Our net loss includes a $9.7 million noncash expense related to the change in the fair value of the warrants issued in connection with the May 2018 financing and $2.4 million in transaction costs related to the May 2018 financing recorded as financing expense on the statement of operations. We are required to calculate the change in fair value of the warrants and record the noncash charge to the statement of operations at each reporting date. Lastly, I'll note that, excluding these two non-operational items, our net loss per share on that basis is approximately $0.67 per share. In summary, we'll start fiscal 2019 in a very strong position to continue aggressively advancing our programs. With that, I'll now turn the call over to Dan.

[Daniel Gold:]

Thanks, Brian, and thanks, everyone, for joining us today. On today's call, I'll provide a few introductory remarks and then I'll discuss the significant progress we've made on our portfolio over the last year while providing you with a road map of what to expect from MEI over the coming quarters before opening the call to questions. For those of you not familiar with us, at MEI, we strive to carry out a straightforward, purposeful strategy to build value in our oncology portfolio for our stakeholders, and importantly, to deliver patient benefit beyond what is currently achieved through existing therapies. We choose drug candidates deliberately to address a clear deficiency in current treatment paradigms, and our clinical programs are focused on effectively and efficiently validating therapeutic utility to address these deficiencies. We are also very mindful of how we deploy our resources so as to create a return on our investments, including decisions to advance and commercialize drug candidates independently or via partnership to strategically and optimally build value. This strategy has successfully guided the identification and development of the 4 clinical-stage candidates in our pipeline, each of which utilizes a different mechanism of action

[Operator:]

[Operator Instructions]. The first question in the queue comes from Yale Jen from Laidlaw & Company.

[Yale Jen:]

My first question is on the Phase II study design for 401. What kind consideration for the POD24 patient in the study? Was there any prospective analysis or grouping on the patient and how would you -- any colors on that front?

[Daniel Gold:]

Right. So if I understand correctly, you're asking on the accelerated approval study, did we consider the POD24s as well, is that correct, Yale?

[Yale Jen:]

Yes. And is there any kind of prospective analysis about that subgroup and how would that potentially then impact the total data going forward?

[Daniel Gold:]

Yes. Right. So I mean, we certainly expect that there will be some POD24 patients enrolled since the trial requires both progression following chemotherapy and CD20. These would be POD24s that have had at least two independent rounds of therapy. We think that this is a very important population, and we think that there is certainly an unmet medical need and an opportunity to address this. Internally, our plans would be to further investigate this population more in a Phase II study or setting in order to get a better sense of the response, either alone or in combination with perhaps other agents to see if we can maximize a response. And then that could be the subject of a further study down the road, either for a fuller approval or a label expansion. But currently, if these patients are enrolled, we certainly will look at them and as supportive evidence for addressing this population and for ascertaining what the true single-agent activity is on intermittent versus continuous dosing. I mean, I should say, I probably didn't explain adequately on the call. Our current treatment paradigm has been continuous dosing, and that has generated the data that we're very, very excited about. As we've discussed previously, we have a strategy for mitigating the toxicities that we have seen, and that was switching to this intermittent dosing. The aspect that we're going to address in the accelerated approval trial with the two dosing arms is if we can even mitigate the toxicities further without losing any of the response, so we know we can get very strong, very deep responses in the continuous dosing that are maintained when we switch to intermittent dosing. Now the question is, can we even get better toxicity without losing that response? And we felt that the best way of addressing that was actually doing it in a randomized study. And that is what we are setting out to do.

[Yale Jen:]

Maybe quick follow-up on that in terms of the additional data to be reported from the Phase I study in the fourth quarter. Should we get a deeper look in terms of the intermittent outcome from duration for obviously a tox profile as well, maybe some sort of a duration-related endpoint, for example, six months progression-free or something of that nature this winter?

[Daniel Gold:]

Yes. Yes. I think that's absolutely our intention, Yale. We are continuing to follow all the patients that we reported on at ASCO as they are all continuing to be treated on the intermittent schedule. And also, again, for clarity, the patients that we alluded to that have received Rituxan, all those patients received the continuous for two months and then switched to intermittent thereafter schedule with Rituxan. So that will add additional information, both from a safety perspective as well as a durability prospective. So it is our intention to update you on all that information, both from the original patients as well as the subsequent patients later this year.

[Yale Jen:]

And maybe the last question here is, in terms of the next year, so fiscal '19, the operating expenses, could you guys give any kind of directional guidance? The last quarter, the fourth quarter '18, fiscal fourth quarter '18 would be a proxy for the things to anticipate over the next four quarters?

[Daniel Gold:]

I think the most specific I can get, Yale, is that probably need more. We're initiating -- the voruciclib study is now up. We're in the planning phases. And we will be initiating the Phase III -- the randomized accelerated approval study. And with those, obviously, will be increase in clinical costs. So I think that whereas we're not going to provide guidance, but I think that the anticipation is that our spending would probably increase in the coming quarters.

[Operator:]

The next question in the queue comes from Peter Lawson with SunTrust.

[Peter Lawson:]

Just as we think about the initial plans for commercialization for 401, what kind of an investment or size of salesforce would you be thinking about? Kind of how should we think of SG&A over the next couple of years?

[Daniel Gold:]

I'm going to let David Urso, our COO, answer that for you, Peter. It's a very good question. I mean, we're obviously early days right now, but we are clearly thinking about and as we roll out some pre-commercialization plans, but I think I'll let David give you a little more color.

[David Urso:]

Yes. I mean, it's in the hundreds of thousands of dollars over the next -- in the short term. And obviously, will be ramping up between now and through the next three years as we get toward launch. I mean, I don't think we want to get any more specific on a year-by-year basis, but that is the plan. And we have a road map to create commercial function. It's obviously going to be focused on the U.S. market. I think our intention would be to look for a partner to commercialize ex U.S.

[Peter Lawson:]

What's the kind of scale of the sales force we should be thinking about for a product like that in the U.S.?

[David Urso:]

I mean, I think it's something between 25 and 50, but we haven't done a lot of work. Really, it's very early days for us to really hone in on that. That's probably even one of the last pieces of the puzzle that we need to put in, and it will also depend on what other indications, I think, are quickly following. We're interested in other B-cell malignancies and so that will also depend on the approach that we're going to take. But I'd say, it's something like that given the size of the indication in follicular that would be totally manageable with that kind of a sales detail.

[Peter Lawson:]

Got you. And then as we think about the next update for 401, how many patients or what kind of readouts do you think we should expect to see?

[Daniel Gold:]

Sorry, Peter. I guess in the near term, we've said that we've completed -- we enrolled like 15 patients with Rituxan. We do have an expansion arm open for follicular and SLL/CLL at the 60-milligram dose with the intermittent schedule. So I would say by the end of this year, we'll probably have data on roughly 50 to 60 patients in total. And that will sort of set the stage for -- right at the time we're initiating the accelerated approval study.

[Peter Lawson:]

Got you. And then just switching gears and final question just on pracinostat, where should we think about getting that data? Are you kind of targeting ASH for that and would that be both AML and MDS data as best you could see?

[Daniel Gold:]

Yes. No, I think, well, certainly for the AML study, since it's a blinded, randomized study, I don't think that there will be a lot to report at ASH this year. For the MDS study, we had initially reported that we've, as I mentioned on my script, that we'd treated the first 20 patients in the threshold. We exceeded the threshold for discontinuation. We expect by ASH that we will have significantly more patients, very close to that 60-patient number. And so we'll be able to update what the true discon rate is amongst a larger number of patients and the initial response of those patients who have gone through at least six months of treatment or not. So I would say, we won't be able to report the complete dataset at ASH, but we will certainly be able to give a much larger update than we did previously. And then certainly, by ASCO, we will have complete response data on all 60 patients. So I think within the next 6 to 9 months, we'll be able to give a lot more color on that study. And then as I mentioned, we, of course, want to look at the one year survival because this high and very high risk patient population survival horizon is not that extended beyond a year. So survival is certainly something we're keeping an eye on, and that's going to take a little bit longer time.

[Operator:]

[Operator Instructions]. The next question comes from Jim Birchenough from Wells Fargo Securities.

[Nicholas Abbott:]

It's Nick on for Jim this afternoon. Just wondered, Dan, can you give us some idea on, some guidance on the number of patients that would be enrolled in each of the two arms and the time line of conducting the study? This is the 401 follicular.

[Daniel Gold:]

Yes. Yes. So we're targeting about a total of 150 patients plus or minus, which equally distributed between the two arms. We think we can enroll that study in about 18 months. Of course, we're going to strive to do it more quickly, but that's kind of the target. This is going to be an international study, both North America, Europe and a few countries outside of those territories, but it'll be in that ballpark.

[Nicholas Abbott:]

And then you mentioned that some of these patients might be blind plus POD24. Do you tend to stratify patients coming into this Phase II trial between the two arms?

[Daniel Gold:]

I'm going to let Richard Ghalie, our Head of Clinical, here in San Diego answer that question.

[Richard Ghalie:]

Nick, we're going to stratify the patients based on tumor bulk because that's certainly an important prognostic factor. And that's going to be the key stratification factor for the study. And we will do that in the -- POD24 as a subset analysis. But since we don't know how many will enroll who are POD24, we didn't want to prespecify this as a stratification factor. So it's going to be in the subset analysis.

[Nicholas Abbott:]

And then, Dan, you noted in your prepared comments that the FDA will review the 401 data in the context of what is available. Do you expect the competitor landscape to change significantly between now and then beyond perhaps duvelisib?

[Daniel Gold:]

Well, no. But we always have to be mindful that there could be things that we're not aware of. And certainly, duvelisib is being reviewed as far as we understand now. And we do know that copanlisib is in under study in large, very large Phase III studies with Rituxan and Rituxan chemotherapy. And so when those studies actually read out and how that could impact the landscape is a little unclear. Those studies, I believe, are being done more in second line, not in the relapsed and refractory populations. So again, in our conversation with the agency, it will be based on the risk, the benefit and the currently available treatment. So those are the ones that we're aware of and those are the ones -- but it's always possible those could pop up.

[Nicholas Abbott:]

And maybe last one for me on voruciclib. So once you've demonstrated the safety -- hopefully, demonstrated safety with venetoclax, what type of patients would you then enroll in this area, faster market opportunity here, say, for patients who are progressing on venetoclax?

[Daniel Gold:]

Yes. So that's a great question, Nick. And I think we clearly have thought about that. And we see multiple different opportunities. One, as you mentioned, is patients who have progressed on venetoclax or even not responded and who can now enter into a response or return into response with a combination. AML is certainly an indication that we are considering. We know that the BCL-2 does play a role. Certainly, venetoclax is being tested actively in that setting, in the relapsed setting. So that is another opportunity to us. And another one that I think we always are interested in is in these more difficult to treat diffuse large patients because these double hit patients who express both BCL-2 overexpression and a MYC activation would seem to be interesting candidates to evaluate. We haven't looked at those patients yet, but that is another opportunity for us with BCL-2 inhibition. And then certainly, there are other opportunities, perhaps outside of the BCL-2, that could be explored down the road.

[Operator:]

Thank you, sir. There are no further questions in the queue at this time.

[Daniel Gold:]

Well then, I'd like to thank you again for joining us today. We begin our new fiscal year stronger than ever, and we look forward to reporting our progress to you across our entire portfolio in the coming quarters. Have a great long weekend, and we look forward to speaking to you soon. Thank you.

[Operator:]

Thank you, ladies and gentlemen. This concludes today's teleconference. Thank you for participating. You may now disconnect.