Neoleukin Therapeutics, Inc.
Q4 2015 Earnings Call Transcript

Published: 15 Mar 2016

[Operator:]

Good afternoon, ladies and gentlemen. Thank you for standing by and welcome to the Aquinox Pharmaceuticals Year End 2015 Conference Call. At this time, all participants are in a listen-only mode. Following the conclusion of the prepared remarks, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, today's conference call is being recorded. At this point, I would like to turn the call over to Mr. Brendan Payne, Senior Manager of Investor Relations.

[Brendan Payne:]

Good afternoon and thank you for joining us. On behalf of Aquinox, I would like to welcome everyone to our conference call to discuss financial and operational results for the year ended 2015. Joining me today are Mr. David Main, Chief Executive Officer; and Mr. Kamran Alam, Chief Financial Officer. During today's call, Mr. Main will begin with the business update based on events from 2015 and looking for a description or the opportunity we see for AQX-1125 in interstitial cystitis bladder pain syndrome from our successful leadership trial that is driving our advancement towards Phase 3 trials in 2016. Mr. Alam will then discuss our year end 2015 financial results. And we will conclude the call with a Q&A session. Today's conference call will include forward-looking statements under the Private Securities Litigation Reform Act of 1995, including statements regarding our research and development plans and financial outlook. Our actual results may differ from those indicated by these forward-looking statements due to numerous factors including those discussed in the Risk Factors section of our most recent 10-K and other SEC filings. Our expectations and assumptions could change, while we may elect to update these forward-looking statements in the future, we specifically disclaim any obligation to do so even if our views change. And with that, I'll now turn the call over to David.

[David Main:]

Thank you, Brendan, and good afternoon everyone and thanks for joining us. As described in our press release earlier today, 2015 was a defining year for Aquinox. We completed three Phase 2 clinical trials with AQX-1125, with one of those our successful leadership trial interstitial cystitis bladder pain syndrome paving a path forward towards Phase 3 trials and ultimately our plan for independent commercialization in the United States. Our Phase 2 results in interstitial cystitis bladder pain syndrome or what I would call, ICBPS for short now on, demonstrated consistent therapeutic benefit with AQX-1125 across a broad range of end points that included both pain and urinary symptoms to two greatest complaints of ICBPS sufferers. Our market research indicates that this is a compelling and potentially a multibillion dollar opportunity for the company. We believe AQX-1125 has the potential to become frontline therapy for this debilitating, largely under recognized disease affecting both men and women. In the interest of time and for those of you new to Aquinox, I would encourage you to view our website for a comprehensive review of the data generated from the leadership trial, as well as supporting information discussed at our research day held last October in New York. Both are accessible through the Investor Relations and Events page of our website at aqxpharma.com where you can also find additional information on ICBPS and a detailed history of our lead program with AQX-1125. But very quickly though just to recap, ICBPS is a chronic inflammatory disease of the bladder, characterized by pelvic pain and increased urinary urgency and/or frequency. While the underlying cause is unknown, the disease is a result of degradation of the interim protective lining of the bladder that then allows contents of the urine to irritate the underlying muscle layer causing inflammation and pain. Epidemiology Study suggests that ICBPS is a disease that inflicts both men and women almost equally, but in clinical practice it is diagnosed much more frequently in women. Although recorded diagnosis rates are low, the prevalence of ICBPS is estimated to be between 5 million and 12 million people in the United States alone. In other developed countries it is expected to be of similar incidence but comprehensive epidemiology studies have not yet been undertaken. There is no known fear for ICBPS and there has been no new oral treatment approved by the FDA in the last 20 years. Many drugs that have analgesic effects are prescribed off label but none has been shown to be consistently effective. The only approved oral drug for ICBPS goes by the name Elmiron and is thought to work by helping to restore the bladder lining. It requires three to four capsules throughout the day and for anyone reporting benefit, it typically takes three to six months for onset of actions. However, several recent clinical trials have demonstrated Elmiron to be similar to placebo. In addition to oral treatments, some patients resort to the invasive procedure of direct installation of drugs via catheter into the bladder to achieve temporary benefit. We believe AQX-1125 has the potential to address the significant unmet medical need for a novel oral therapeutic that not only reduces symptoms by treating the underlying chronic information but also may mortify the underlying disease process. Our clinical trials to-date have demonstrated AQX-1125 to be a well tolerated therapy that is easy and convenient for patients to take with a high degree of compliance. With an effective oral once daily therapy, our market research supports ICBPS diagnosis and treatment rates could escalate translating into a product opportunity that could exceed $1 billion in the U.S. alone. AQX-1125 is the first of the new class of small molecule compounds targeting information through a mechanism of action by activating an enzyme called SHIP1. Predominantly expressed in immune cells, SHIP1 is nature's regulator of immune cell activation and migration to sites of inflammation. Our aim was 1125 to enhance the natural role of SHIP1 to slow immune cell activation and migration and thereby accelerating the resolution of inflammation. Preclinical studies with 1125 have demonstrated it to be well distributed to tissues through the plasma but also excreted in the urine and feces as intact un-metabolized active drug. Indeed the 200 milligram once daily dose studied in the Phase 2 leadership for trial, we achieved high urine concentration of the active drug that we believe may significantly contribute to the improvements in localized pain in urinary symptom control observed. Clearly our strategy of targeting in inflammatory condition of the bladder is well matched about the mechanism and bio distribution profile for the drug. The primary endpoint results from the Phase 2 leadership trial with 1125 were released in June of 2015 demonstrating a reduction in average daily pain at six weeks for patients on 1125 versus placebo. This result narrowly missed statistical significance with the p value of 0.6. And later we released analysis of all secondary endpoints demonstrating statistically significant reductions in maximum daily pain measurements and also in urinary frequency for patients treated with 1125 compared to placebo. Combined pain in urinary symptom scores captured by questionnaires on eDiary's were also statistically significant in favor of 1125. We believe that this totality of data is a strong body of evidence that 1125 in ICBPS has provided the justification to necessary data to design and begin a Phase 3 program in 2016, initiation of which is expected in the next several months. To support this next stage of development, our investors supported us in raising net proceeds of $91.8 million in September 2015, through an oversold public offering. The public offerings are strong participation from existing investors, as well as several new institutional investors. In the months since the completion of leadership trial we've been fully engaged in preparing and adding the resources necessary to undertake all the enabling work to advance in the Phase 3 trials as quickly as possible. We met with the FDA in December of last year to discuss our development program and have incorporated feedback from that meeting into our trial design. We are now anticipating FDA submission of our Phase 3 trial protocol in this next quarter and initiating patient enrollment in the third quarter. This is the same timeline that we released and discussed during our financing. The proposed trial design for the first pivotal trial is at three arm randomized double-blind placebo controlled trial to assess the efficacy and safety of 1125 in ICBPS patients at one of two potential doses once daily over 12 weeks of treatment. Following the treatment period, patients will then be offered to continue in a 40 week or a 14 week open label extension during which we will continue to collect long-term safety data. The open label extension is beneficial for both making the trial more appealing to volunteers so that they know if they were randomized to the placebo arm during the open label extension they'll get active drug. As well as it allows us to collect more safety data to meet our requirements under international standards for drug development. Upon completion of the first Phase 3 study and assuming a favorable outcome, we will select the dose we believe most beneficial for the patients, considering both safety and efficacy and initiate a second confirmatory two-arm randomized double-blind placebo controlled Phase 3 trial. At that point, the goal will be to have topline data from our first Phase 3 study by the end of 2017 so we can make that dose decision to start second Phase 3 trial in 2018. This of course will be affected by the actual enrollment rate that can only be determined once the trial has been initiated. We'll provide a more accurate estimate for topline data once the trial has been rolling for a period of time. The second Phase 3 trial is planned to be initiated within a few months after topline data from the first. The second trial was presently designed to be a two- arm trial and therefore will require fewer patients. We also plan for to only have a 14-week open label extension and therefore between potential for a faster enrollment period and the 14-week open label extension, we would anticipate that the second Phase 3 trial would complete, not long after the first. Now among other initiatives we've been undertaking to strengthen the commercial attractiveness of 1125, is the recently completed bioequivalent study demonstrating the tablets our suitable product format. To assist in all our required development and product planning, we are also extending our operational infrastructure. We've been adding personnel in our corporate head office in Vancouver and we have recently opened an office in San Bruno, California near the San Francisco airport. We are currently at approximately 30 employees and we expect to be approaching 50 by year end. As part of our expansion, we recently announced the hiring of Ms. Shelley McCloskey as Vice President, Human Resources & Administration. And today I'm also pleased to announce the appointment of Dr. David Green as Vice President, Clinical Operations. Dr. Green has joined us in our San Bruno office and will guide the strategic direction in oversight of Aquinox's clinical operations and our interactions with clinical research partners. Dr. Green has over 21 years of clinical trial operations experience in academic, biopharmaceutical and CRO settings. He brings depth of experience in the development, implementation, execution and management of Phase 3 clinical trials and ultimately their inclusion in successful new drug applications. He has held numerous leadership positions of increasing scope and responsibility within the biopharmaceutical industry. He has a diverse set of global clinical operations experience across multiple therapeutic areas. Most recently, Dr. Green was Executive Director at United Therapeutics leading global clinical operations for developmental drug candidates targeting orphan disease and prior to that he was Vice President of Global Clinical Operations & Biometrics at ReSearch Pharmaceutical Services. And before that he was Executive Director of Clinical Operations at Amgen and Clinical Program Manager at Abbott Laboratories. So all together, Dr. Green brings a tremendous amount of experience to our clinical team. Of course it merits in reviewing 2015 that we also announced the topline results from our FLAGSHIP and KINSHIP trials with 1125 in COPD and atopic dermatitis respectively. Unfortunately, neither trials demonstrated therapeutic benefit with AQX-1125 and we have since seized further development in those disease areas. However, these trials provide important information on the overall tolerability of the drug. We now have a combined database of more than 380 patients exposed to 1125 demonstrating as with LEADERSHIP 1125 to be well tolerated with adverse events comparable to placebo. This tolerability data will also contribute significantly to the overall safety database for 1125 required for potential registration and commercial approval by the FDA and other regulatory agencies. Based on the bio distribution and efficacy data from the LEADERSHIP trial, we will continue to explore potential additional therapeutic areas where 1125 could prove beneficial. Prominent disease candidates include other urinary and GI diseases where pain and inflammation are known to be key contributing factors. And some examples that we are currently evaluating, but are not limit to are diseases such as prostatitis and ulcerative colitis. In summary, we are continuing to add necessary resources to capitalize upon the positive results from the LEADERSHIP trial and to initiate a comprehensive development program towards commercialization of AQX-1125 and IC/BPS. With that, I'll turn the call over to Kam Alam, our Chief Financial Officer to discuss our yearend financial results. Kam?

[Kamran Alam:]

Thanks, David. As we reported in our press release, cash, cash equivalents, short-term and long-term investments totaled $112.9 million as of December 31, 2015, compared to $41.1 million as of December 31, 2014. This increase was primarily driven by the completion in September, 2015 of our public offerings from net proceeds of $91.8 million. Aquinox expects its cash, cash equivalents, short term and long-term investments to be sufficient to complete the first of two planned Phase 3 clinical trials in IC/BPS with AQX-1125 as well as supportive activities related to manufacturing, toxicology and additional clinical development. Research and development expenses were $15.8 million for 2015 compared to $18.1 million for 2014. This decrease was primarily due to the reduction in expenditures as we completed final activities related to the LEADERSHIP and FLAGSHIP clinical trials. General and administrative expenses for 2015 increased to $5.5 million compared to $4.3 million for 2014. This increase was primarily due to higher personnel related costs, legal and consulting expenses. In 2015, Aquinox had a net loss of $21.9 million compared to a net loss of $24 million for 2014. The decrease in net loss was primarily due to the reduction in research and development expenditures for the second half of 2015. And with that, I'll turn the call back over to David.

[David Main:]

Thanks, Kam. So in closing everyone, we remained committed to delivering on our upcoming milestones for 2016 and into 2017, all the while adding value for our investors. We view 2015 as a successful year in the clinical development of 1125 and we are pleased to now have a focused effort towards Phase 3 trial in IC/BPS. Thank you all again for joining us today. I want to conclude by in particular extending my appreciation to our employees, which is a relatively small team who have worked exceptionally hard to bring Aquinox to where it is today embarking on its first Phase 3 trial that could be a truly transformational event for Aquinox. This would also not be possible with the continued support of our investors and another partners. We of course look forward to updating our progress in the months ahead. And operator, we can now open the call up for questions.

[Operator:]

[Operator Instructions] Our first question comes from Alan Carr from Needham. Your line is now open.

[Alan Carr:]

Hi, thanks for taking my questions. Earlier this year you mentioned after discussions with the FDA that maximum daily paying might be a suitable endpoint but the FDA wanted to consult with or the division you were talking to one of the consult with another division. So I just wonder if you can comment if there is any changes to that. And then also in any other can you go over any other supportive preclinical or clinical work that you’ll need to do with 1125 for the syndication? Thanks.

[David Main:]

Great. Well thanks to being on the call today Alan. As I think we announced when we had our post-FDA meeting. The FDA said that they will consult the division of Anesthesia, Analgesia and Addiction Products ones we submit our protocol for the Phase 3 trial. So I think we will get that feedback in the next couple of months as we submit that protocol. So there hasn’t been any further discussion with them on that. They’re really waiting for us to submit the protocol. And in terms of additional preclinical work, there is additional work that we will be doing to complete the [indiscernible] study that's probably the largest thing that still is outstanding and we’ll be doing that just most companies do in parallel to Phase 3. So we expect it to be completed well in advance before we file an NDA as well as from other clinical work we’ll undertake. There’s no other additional clinical work beyond the Phase 2 - sorry the Phase 3 studies that I’ve outlined that we absolutely must conclude forward this indication specifically. But again as we outlined after our FDA meeting that we know that we much meet all of the requirements from a safety database perspective and a reminder for everybody that means that total of 1500 patients total exposures of which between 3 and 600 must be for six months and at least 100 for one year. We’ll be certainly achieving all of the requirements for the one and the six months, but we would likely need to undertake some additional Phase 2 work to get up to the total 1500 patient exposures. Of course it also depends upon how many men are enrolled in our Phase 3 studies. I think that our last estimation were sitting at around 12 to 1300 total exposure with the plan studies, so we would take – undertake some additional Phase 2 work in parallel to get those extra safety numbers, that does not have to be in ICBPS.

[Alan Carr:]

And I supposed that's what the other indications for - that you’re considering might come in?

[David Main:]

Yes. Though there are some additional ICBPS studies that we’ll be interested in pursuing even just from a pure publication strategy, so all – any patients enrolled with any Phase 2 studies would count towards that total exposure number.

[Alan Carr:]

Okay, great. Thanks very much.

[Operator:]

And our next question comes from Paul Matteis from Leerink. Your line is now open.

[Unidentified Speaker:]

Hi, this is Jeff on for Paul. Thanks for taking my questions. I have two, the first one could you give us a little bit more color around the Phase 3 study such as you know what are the rate limiting steps and what are the assumptions that you made in designing trial?

[David Main:]

When you say, rate limiting steps, rate limiting steps to start the study?

[Unidentified Speaker:]

Yes. To start and like enroll the study.

[David Main:]

Sure. Whether the rate limiting steps are again nothing unique to us what every company faces. We had to write up all of our completed clinical studies that have a consolidated safety data base, that has to be included in the investigator's Brochure. We had to sign up a CRO which we’ve now done. We had to write the protocol which is nearing completion. We needed to complete some additional toxicology work namely reproductive toxicology that's now been completed and being written up. And we also needed to manufacture drug to be use in the clinical study which we start at the beginning of the year, once we knew we had bioequivalence with tablets and that's also nearing completion. So, most of the things that are necessary for us to submit our protocol we are belting down on completing, beyond that of course there is regulatory considerations. Once we submit our protocol model into the FDA but to other jurisdictions where we want to run the study, we not only have to wait for any comments on the protocol and inform consent and other documentation required, we also typically will need to submit to ethics committees to cover off the sites that we had selected to participate. So those are all very standard and typical things that we will be undertaking to move this towards the patient’s enrollment.

[Unidentified Analyst:]

And about the assumptions made into designing the trials such as you know what is the enrollment rate like how would you compare it relative there to Phase 2 trial?

[David Main:]

Yes, the Phase 2 study was not a really a great example because we started with a very, very few centers in that trial. We started with only five centers in Canada and slowly add them. So in this case we have kind of looked at what was our peak enrollment in that trial. We’ve also looked at some historical trials and we’ve estimated approximately 100 sites will be required for the entire study. And as I mentioned in my remarks right now the goal is that we are hoping that the enrollment rate with those 100 sites should put us on track to have data from the treatment period, not from the open label extension but from the treatment period right towards the end of 2017, but to know if that’s achievable, we’ll have to wait until we see a few months of enrollment and if our early assumptions are correct.

[Unidentified Analyst:]

Okay. And my last question is, for I know you’ve mentioned that you are also looking into other indications. How much of these other indications are a priority and what steps would you take to explore these new indications?

[Kamran Alam:]

Any additional clinical indications that we would explore at this point would all be Phase 2 studies, so we can go into them very quickly once we have the resources. So right now the rate limiting step to pursuing additional indications is really all hands are on deck to get the first Phase 3 study up in running, once that well underway and we feel the critical activities there are now well into the hands of our CRO. We will then look to see about planning some other additional Phase 2 work.

[Unidentified Analyst:]

All right, excellent. Thank you for answering my questions.

[Operator:]

And our next question comes from Biren Amin from Jefferies. Your line is now open.

[Biren Amin:]

Hi guys, thanks for taking my question. So just wanted to ask on the scientific advice, have you guys met with the Europeans and received feedback on the Phase 3 trial design.

[David Main:]

Our team is meeting with them this week. But the process there is very different. There is no sort of official minute, so we will just take their advice and take into consideration I think as we’ve guided before we want to hear what they have to say, to know whether or not our studies would be equally as applicable in the U.S. as they would be in other jurisdictions but our number one priority is making sure that they are suitable for the FDA. So depending upon what advice we give we may or may not make changes to the program, but we are getting that this week.

[Biren Amin:]

Got it. And then on the Phase 3 trial design how are you handling patients on background therapy. For example Elmiron are those patients allowed to remain on Elmiron or they are discontinued or washed out or they will have rescue therapy?

[David Main:]

It will be exactly the same as what was in the leadership studies, so we - anybody who was on stable doses of background meds can continue to be on those meds. So Elmiron, amitriptyline again but it has to be on stable meds, stable background doses they can’t change the dose coming into the study or while on study, but importantly if they are on those medications they still have to have the minimum of five out of ten on the average daily pain score to be eligible and they have to hit certain number of the screening questionnaires only resent in BPIC-SS. And so basically our assumption is regardless of what background meds they are on, they are not adequately addressing their symptoms. Now one exclusion though is we do not allow patients on study that are on chronic opiod use.

[Biren Amin:]

Got it. Okay, all right. Thanks.

[Operator:]

[Operator Instructions] And our next question comes from Bill Tanner from Guggenheim Securities. Your line is now open.

[Bill Tanner:]

Thanks for taking the question. David I know you guys have certainly got your hand forward with 1125 for BPIC-SS but just curios if the company - what the company's thoughts are on any kind of BP activity anything you’re seeing out there that might be complementary to that indication?

[David Main:]

It's certainly on our mind we are looking but there has been certainly nothing at this point that we would talk about but if there were products, our programs that are complimentary its certainly something that we would be interested in.

[Bill Tanner:]

Okay, great. Thanks.

[Operator:]

And I’m showing no further questions at this time. I would like to turn the call over to Mr. Brendan Payne for closing remarks.

[Brendan Payne:]

So just in closing want to thank everyone for taking the time to be with us today. We look forward to an existing year ahead and to our continued investor support. Thank you.

[Operator:]

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may all disconnect. Everyone have a great day.