Neoleukin Therapeutics, Inc.
Q4 2014 Earnings Call Transcript

Published: 17 Mar 2015

[Operator:]

Good afternoon, ladies and gentlemen. Thank you for standing by. And welcome to Aquinox Pharmaceuticals Year End 2014 Conference Call. This is our second financial results conference call and we plan to continue to hold these calls semiannually. At this time, all participants are in a listen-only mode. Following the conclusion of the prepared remarks, 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 2014. Joining me today are Mr. David Main, Chief Executive Officer, Mr. Kamran Alam, Chief Financial Officer; and Dr. Stephen Shrewsbury, Chief Medical Officer. During today's call, Mr. Main will begin with introductory remarks on our progress since our March 2014 IPO and in particular the last several months. Dr. Shrewsbury will then give you an update on our clinical programs and then Mr. Alam will discuss our financial results. We will conclude the call with the 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. Actual results may differ from those indicated by these forward-looking statements due to numerous factors including those discussed in the Risk Factor 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 changed. And with that, I will now turn the call over to David.

[David Main:]

Thank you, Brendan. Good afternoon, everyone, and thank you for joining us. As you know, since our IPO in March of 2014, we have successfully achieved a number of important milestones for Aquinox, including completed enrollment in our two lead Phase 2 trials for AQX-1125, our lead compound. We have also initiated a third Phase 2 trial. Our ongoing Phase 2 FLAGSHIP and LEADERSHIP clinical trials are now only a few months away from expected topline data and our third program with AQX-1125 the KINSHIP clinical trial in atopic dermatitis is progressing well, and Dr. Shrewsbury will speak more of this in a moment. You may recall that AQX-1125 is the first of a new class of small molecule compounds targeting inflammation with a novel mechanism of action, namely the activation of SHIP1 enzyme. Predominantly expressed in immune cells, SHIP1 is natures regulator of immune cell activation and migration to sites of inflammation via the PI3 kinase pathway. Our aim with AQX-1125 is to enhance the natural role of SHIP1 to speed the resolution of inflammation. We are developing AQX-1125 as a once-daily oral therapy with the potential to treat a host of diseases characterized by excessive acute or chronic inflammation at mucosal or epidermal services. Mucosal surfaces and the skin are the parts of the body that are in constant contact with the environment and enhance potential inflammatory stimuli or irritants. Our non-clinical and clinical evidence to-date points the ability of AQX-1125 to increase SHIP1 function and resolve inflammation of these surfaces. Worldwide prevalence of many inflammatory diseases are on the rise. For example, Chronic Obstructive Pulmonary Disease or COPD, one of our targeted clinical indications has become the third leading cause of death worldwide and acute exacerbations or sudden attack of COPD remains the leading cause of urgent hospitalization in the developed world. Compelling evidence from our non-clinical work together with our two proof-of-concept Phase 2a trials support the potential of AQX-1125 to provide a therapeutic benefit to patients with airway inflammation. Our FLAGSHIP Phase 2 trial of COPD patients with a history of exacerbations is targeting those patients with the greatest need for effective therapy. We announced just a few weeks ago complete enrollment of 400 subjects in FLAGSHIP and we anticipate topline data near mid-2015. The therapeutic potential and favorable pharmaceutical properties we have observed for AQX-1125 have also guided us toward exploring additional disease indications, including bladder pain syndrome or interstitial cystitis, which we refer to as BPS/IC. BPS/IC is a chronic inflammatory disease of the bladder. The prevalence of BPS/IC is not precisely known, but estimates range from approximately 5 million to in excess of 14 million patients in the United States alone. BPS/IC is primarily recognized as a disease suffered by women, but more reason report suggest the disease maybe both underreported or underdiagnosed in men. We are targeting BPSIC because it is a mucosal surface and an inflammatory condition and because the pharmacological properties of AQX-1125 may lend themselves to treating this bladder disorder but also because it is a disease with few effective, if any, therapeutic options. In non-clinical models, we have found that AQX-1125 is not significantly metabolized and reaches the bladder systemically through the bloodstream following oral administration but also by elimination through the urine. We therefore believe that AQX-1125 has the potential to target both sides of the bladder wall to exert a positive therapeutic effect. Recently, we announced that we had also completed enrollment in LEADERSHIP, our Phase 2 clinical trial for BPSIC with topline data also expected near midyear. With data anticipated from both FLAGSHIP and LEADERSHIP on the near-term horizon, we have two opportunities to potentially demonstrate the ability of AQX-1125 to benefit multiple large underserved markets. Finally, we're excited to have initiated our third Phase 2 clinical trial with AQX-1125 in atopic dermatitis, which I’ll refer to as AD. The skin represents an additional exposed barrier of the body where interaction with inflammatory stimuli and responsive immune cell activation recoupment may occur. An estimated 17.8 million Americans are affected by atopic dermatitis, which is considered underdiagnosed by many physicians. Approximately two-thirds of these Americans with AD suffer from the moderate-to-severe form of the disease, where existing therapies are ineffective or unsuitable for long-term treatment. With supportive nonclinical data, we believe there may be a role for AQX-1125 as a once daily oral therapy in treating excessive skin inflammations. And we've initiated the KINSHIP Phase 2 trial to explore the activity of 1125 in patients with AD. We're continuing to evaluate 1125 for further development in other indications. We previously announced our intention to start a chronic rhinosinusitis with nasal polyps trial and we are developing an appropriate trial design in this general area. However, we are not as yet forecasting initiation of this Phase 1, 2 trial as our clinical team is presently very focused on completing FLAGSHIP, LEADERSHIP and the ongoing KINSHIP trial. We’ll update shareholders once we have finalized our plans for expanded clinical development of AQX-1125. Now, I’d like to turn the call over to Dr. Stephen Shrewsbury, our Chief Medical Officer, who will review in more detail our progress and the status of our clinical trials, as well as provide some information to assist in interpreting our topline data, which we expect midyear. Steve?

[Dr. Stephen Shrewsbury:]

Thank you, David. Good afternoon everyone. I will start with an update on our Phase 2 FLAGSHIP trial in patients with COPD exacerbations. FLAGSHIP is a randomized multinational double-blind placebo-controlled Phase 2 trial designed to access AQX-1125's ability to reduce the effects of exacerbations of COPD in 400 patients with moderate-to-severe unstable COPD. These patients were enrolled in Europe, Australia, New Zealand and in the U.S. To effectively treat COPD overall as a disease, published research indicates that exacerbation of symptoms need to be better addressed. More specifically, the inflammation underlying exacerbations and disease progression needs to be resolved for any meaningful improvement across the disease population. We reached our target enrollment of 400 patients on January 30th of this year and we now anticipate topline results near midyear 2015. FLAGSHIP is unique among COPD trials and that we are exploring the therapeutic potential of AQX-1125 in a subpopulation of COPD patients that have largely and deliberately been excluded from previous COPD trials by other sponsors. These patients are those that have demonstrated high rates of COPD exacerbations and have recently experienced another despite receiving maximal medical therapy, including bronchodilators. The primary endpoint of this trial is the change in severity, duration and recurrence of daily symptoms related to exacerbations in patients treated with AQX-1125 versus placebo. To assess efficacy, we are using the exacerbations of chronic pulmonary disease tool, patient-reported outcome or EXACT-PRO, a validated FDA recognized patient reported outcome tool developed with the support from a consortium of large pharmaceutical companies. EXACT-PRO quantifies the daily symptoms of COPD and the severity and duration of these symptoms. Captured by an eDiary daily throughout the trial and translated into a numerical score. The daily EXACT score accurately reflects the severity of symptoms and the spike in the scores can be used to confirm and quantify exacerbations. The primary objective of the FLAGSHIP trial is to evaluate the treatment effect of once daily administrations of AQX-1125 compared to placebo over 12 weeks on recurrent exacerbations as measured by EXACT-PRO in subjects with COPD following a recent exacerbation. The FLAGSHIP trial is powered the 80% to dissect an approximate 20% improvement in overall EXACT score of 12 weeks with the p-value of 0.05. If we hit our primary objective, it will be a clear indication of AQX-1125 having a demonstrable effect on COPD symptoms and exacerbations. While we expect to report topline data as soon as it is available, both the EXACT scores and additional measures, such as the COPD assessment tool and FEV1 will provide important secondary information on the specific effect of AQX-1125 on COPD symptoms, lung function and exacerbations. This subsequent information will include the overall trends and the precise signal we saw in EXACT scores, a responder analysis to identify the proportional magnitude of effect of AQX-1125 as well as the frequency, duration and severity of exacerbations. This secondary analysis will likely be reported at a subsequent scientific conference. Let’s now turn our attention to the LEADERSHIP trial in BPS/IC. LEADERSHIP is a randomized, multicenter, double-blind, placebo-controlled, Phase 2 trial investigating AQX-1125’s ability to reduce bladder pain and urinary symptoms in patients with BPS/IC. The trial began enrolling in Canada in July 2013 and then in mid 2014, we proactively broadened patient access by opening clinical sites in the U.S. Our primary objective is to measure the difference in the change from baseline in the mean daily bladder pain score based on an 11 point numeric rating scale at six weeks, as recorded by patients using an eDiary. While we met our completed enrollment objective in the LEADERSHIP trial at the end of February, we did randomize one additional 69 patient that entered screening just before we closed enrollment. Ethically, we could not prevent this patient from participating in the LEADERSHIP trial despite having already achieved our enrollment goal. As with FLAGSHIP, we anticipate topline data from LEADERSHIP near mid 2015. Currently, patients who suffer from this painful condition, predominantly women, have no consistent effective treatment options. Many have received multiple courses of antibiotics and various painkillers, even narcotics and often undergo multiple cystoscopies and local installation of therapies. There is only one approved oral treatment for this condition and it appears to have limited efficacy. Urologists report that BPS/IC causes significant impact on quality of life and that it is challenging to manage. We believe LEADERSHIP is unique amongst BPS/IC trials and that we are specifically selecting patients that have clear cystoscopic evidence of bladder inflammation. BPS/IC is often a diagnosis of exclusion once all other potential causes, such as urinary tract infection, have been eliminated. Given what we know about the mechanism of action and the favorable pharmaceutical properties of AQX-1125, we believe it is as important that we specifically focus our investigations on those patients where inflammation is present. Another important aspect of LEADERSHIP design is the requirement for a minimum of five out of 10 on the 11 point numerical rating scale. This high pain threshold is important to allow us to effectively detect the effect AQX-1125 may have on patient’s overall average pain score across six weeks of treatment. Finally, we have designed the LEADERSHIP trial to extend treatment past the typical period in which the placebo effect has been seen in similar trials. We believe that if the underlying inflammation is a significant contributor to pain, six weeks should be a suitable period to demonstrate the potential positive beneficial effect. LEADERSHIP is powered the 80% to detect a 1.5 point difference between active and placebo groups and average pain score of six weeks with the p-value of 0.05. As with FLAGSHIP, there will be a number of secondary analysis performed on data collected, such as several additional BPS/IC quality of life measures, as well as examining variables such as urinary frequency, voiding volume etcetera. These symptoms are known to seriously affect patient’s quality of life. This secondary analysis will also follow sometime after the reporting of topline data and will be presented most likely at a scientific conference. Finally, in December of last year, we initiated our KINSHIP Phase 2 clinical trial with AQX-1125 in atopic dermatitis or AD. The skin, as David mentioned is another barrier, which is very active immunologically and thus share similar cell types to mucosal surfaces. Atopic dermatitis also known as eczema is inflammation of the skin or dermis, which results in dryness and thickening, often with severe itching resulting in scratching. Sometimes, the inflammation is so severe as to cause weeping or oozing from the rough thick areas, often worst in the bend of joints such as the neck, knees, ankles, elbows and wrists. With severe flare ups of the disease, oral steroids may sometimes be used for short courses. Other systemic treatments, specifically some biologics are in development but these are expensive and require injections. Some immunosuppressive drugs and even cytotoxic agents have been used to treat the severe form of AD. The KINSHIP clinical trial is a randomized multi-centered, double-blind, placebo-controlled Phase 2 trial evaluating the efficacy and safety of AQX-1125 in approximately 50 adult patients with mild to moderate AD. The primary endpoint of the KINSHIP trial is change from baseline in Total Lesion Symptom Score or TLSS, after 12 weeks of treatment. The TLSS is a comprehensive assessment of AD symptoms where AQX-1125 may have a beneficial effect. Secondary endpoints include safety, pharmacokinetics and additional parameters for assessing AD. KINSHIP will be investigating the effects of AQX-1125 in mild to moderate AD patients. The results of this trial may lead to further development for more severe AD patients. We anticipate topline data in the first quarter of 2016. Overall, it is an exciting time in our clinical programs for AQX-1125. Our clinical programs are aimed at helping patients in desperate need of improved therapy. With near-term data, should one or more of these trials prove positive and generate positive results, we are already actively preparing ourselves for subsequent trials to generate the data necessary to seek approval for AQX-1125. At this point, I'll turn the call over to Kam Alam, our Chief Financial Officer to discuss our financials.

[Kamran Alam:]

Thanks, Steve. As we reported in our press release, cash, cash equivalents, short-term and long-term investments as at December 31, 2014 were $41.1 million, compared to $13.8 million on December 31, 2013. This increase was primarily driven by the proceeds from Aquinox's initial public offering. Research and development expenses were $18.1 million for 2014, compared to $7.6 million for 2013. This increase was primarily due to the ongoing advancement of AQX-1125 through the FLAGSHIP and LEADERSHIP trials and the initiation of the KINSHIP trial. General and administrative expenses for 2014 increased to $4.3 million, compared to $1.8 million in 2013. This increase was primarily due to costs associated with operating as a public company. In 2014, Aquinox had a net loss of $24 million, compared to a net loss of $8.7 million for 2013. The increase in net loss was primarily due to the ongoing advancement of AQX-1125 through the FLAGSHIP and LEADERSHIP trials, the initiation of the KINSHIP trial and costs associated with operating as a public company. Overall, we ended 2014 with cash resources anticipated to see us through to mid-2015, which we expect to be sufficient to complete our three ongoing Phase 2 trials, including topline data from both the FLAGSHIP and LEADERSHIP trials expected near mid-year 2015. Existing cash is expected to be sufficient for one additional Phase 1 or 2 clinical trials and also to select the lead second generation SHIP-1activator. With that, I'll turn the call back over to David.

[David Main:]

As stated at the outset, 2014 through to the beginning in 2015 was a successful period for the company going public and then significantly advancing our clinical programs. We are pleased about the progress we're making in our three ongoing Phase 2 clinical trials of AQX-1125 and are keen to receive and share the results from those trials with our shareholders in the very near future. Individually and taking together, these trials will provide valuable insight into the therapeutic potential for AQX-1125, and will guide our further development of this exciting drug candidate, as well as form our strategy for partnering this compound in the future. We remain committed to delivering on our upcoming milestones and adding value for our shareholders. Thank you all, again for joining us today. We appreciate your continued support and look forward to updating you on our next call. Operator, we can now open the call for our questions.

[Operator:]

Thank you. [Operator Instructions] Our first question comes from the line of Ritu Baral from Cowen. Your line is now open.

[Ritu Baral:]

Hi, guys. Thanks for taking the question. I apologize for any background noise. Can you remind us what -- if any short-term follow-up periods, FLAGSHIP and LEADERSHIP have before the data based is locked?

[Dr. Stephen Shrewsbury:]

Following completion of treatment, both trials have a 28-day follow-up period.

[David Main:]

So just to be clear for that, so when we announced that FLAGSHIP was fully enrolled from that last patient enrolled, that patient than has 12-weeks of treatment duration and then a four additional weeks of follow-up, so a total of 16-weeks. And then beyond that is the time required for cleaning and locking the database. In the case of LEADERSHIP, it’s a six-week treatment, plus 4-weeks follow-up and then time to lock the database.

[Ritu Baral:]

Got it. And are there any pre-specified stratification in either trials that you’ll be looking at?

[Dr. Stephen Shrewsbury:]

So the FLAGSHIP trial, we had initially anticipated enrolling at least a 100 hospitalized subjects and at least, a 100 outpatient subjects. We haven't quite hit the 100 hospitalized subjects, but we will still be looking at those two different strata. In the LEADERSHIP trial, we have no preset stratification criteria.

[Ritu Baral:]

Got it. And how is -- I am sorry, go ahead. Is there another answer?

[David Main:]

No.

[Dr. Stephen Shrewsbury:]

No.

[Ritu Baral:]

And how is enrollment in the atopic dermatitis trial going and study conduct there?

[David Main:]

Well, as mentioned, we are pleased with progress and we are definitely on track for generating data in the first quarter of 2016.

[Ritu Baral:]

Got it. All right. Thanks so much for taking the questions.

[Operator:]

Thank you. Our next question comes from the line of Corey Davis from Canaccord. Your line is now open.

[Corey Davis:]

Thanks very much. First question is how definitive are these both FLAGSHIP and LEADERSHIP are going to be in order to make a decision going to Phase 3? Are they designed to be yes or no with hitting on the primary endpoint? Or could there be some sort of ambiguity with the outcomes where you need to do more Phase 2 working -- before going into Phase 3?

[David Main:]

Yes. It’s a great question, but it’s a very difficult one to answer, because the simple answer is it depends. From our perspective, clearly we will be putting out a press release on both trials as to whether we hit the statistical significance of the topline primary endpoint. But as you are well aware, Phase 3 trials are very exploratory in nature and there’s a number of other things that are very important for us to look at within the content of those trials. So even if we don't see 0.05 on the primary endpoint, it really doesn’t for us mean that it wouldn’t be worthwhile moving the drug forward. In the case of FLAGSHIP, we’ll be looking at things such as severity of symptoms on a daily basis, how many disease-free days there are. In the case of LEADERSHIP, we’re looking to see what proportion of patients has significant drops in pain relative to placebo. So those are all secondary analysis that could be very informative to trial designs going forward and could still allow us to move forward into Phase 3 development. So we really just have to wait and see until we unwind it, and it really depends upon how much spread there is from drug to placebo to make a really informed decision as to how clear signal we think we have and the degree of risk would be in terms of initiating pivotal studies following this data.

[Corey Davis:]

Okay. And then the second question is specific to FLAGSHIP and do we know that 12 weeks are long enough to be able to catch a meaningful drug effect with say drugs that have already approved in COPD using the EXACT-PRO tool because I think most of the pivotal studies have done in COPD a carry that are much longer than 12 weeks?

[David Main:]

Sure. I’ll start that question and then I’ll get Steve to add more. I guess the bottomline is as Steve mentioned in his remarks, the reason why we believe the 12 weeks is a long enough duration to see an effect in a FLAGSHIP trial is because we have intentionally enriched this trial for a population that is expected to be the most symptomatic and the most likely to re-exacerbate following a recent exacerbation. So there is very good data in the literature to support the exacerbation rates, but also the daily symptoms in this population are much greater than you see in stable COPD patients that have been largely the patients that have been studied in bronchodilator trials.

[Dr. Stephen Shrewsbury:]

And perhaps any additional comment I would make that is that you are right, the historical trials with COPD tended to look at FEV1 as the endpoint and/or exacerbations as events and because neither of those were very good at measuring potential benefit in symptomatic unstable patients. As you know, the FDA a few years ago, encouraged a consortium of pharmaceutical companies to support the initiative that led to the development of the EXACT-PRO. So it really was because there was no tool suitable for looking at these patients, the EXACT-PRO was developed. And we’ve been lucky that our drug and the EXACT-PRO have come together at exactly the right time for us to be able to use this noble tool, which the FDA has commented is valid and reliable and is reproducible for looking at this particular undeserved population.

[Corey Davis:]

And the last question and I know I have asked you this before and Steve has already answered this but I still don’t completely understand. In FLAGSHIP, the primary endpoint is at some sort of cumulative score over every day period comparing drug to placebo. Is that correct because I think, I also heard you say, there is some sort of measure of a spike in activity as somewhat of a surrogate for an exacerbation in like events?

[David Main:]

The primary endpoint will be the daily scores and so, if you will, a curve starting on day 0 to 12 weeks or there will be a mean score for drug-treated patients versus placebo treated patients. And we’ll compare those two curves and the trial is designed to detect a 20% improvement in those overall scores on drug versus placebo. But as Steve was talking about, once we get beyond that topline data then we will start doing individual patient analyses, looking at different responder criteria and in the EXACT-PRO validation work and the guidance by the FDA, they talk about that a increase of nine points for three consecutive days or 12 points for two consecutive days can be considered in exacerbation of the disease. So this is the way we will start doing individual patient responder analyses to start counting those kinds of events. But those will be secondary analyses. So we’ll be able to see were there more spikes in the data on those on placebo versus drug but the topline data is really those two mean curves between the two populations.

[Corey Davis:]

Perfect. That’s exactly what I was looking for. Thank you.

[Operator:]

Thank you. Our next question comes from Biren Amin from Jefferies. Your line is now open.

[Biren Amin:]

Yes. Thanks for taking my questions. Maybe a question on LEADERSHIP, can you maybe characterize for us the baseline, values and the trial and whether on NRS score? The baseline NRS was according to what you had estimated when you design the setting?

[David Main:]

Yes. So to get into the trial to be randomized, patient have to have a mean score of at least 5 out of 10, so that's 5 out of 10 for the previous week. So that’s been a fairly high threshold and we believe that a 1.5 unit difference between the change from baseline on active versus the change from baseline on placebo will give us a good result.

[Biren Amin:]

So maybe just a follow-up on that, so should we assume that when you report the data that the baseline NRS score would be around that mean of 5?

[David Main:]

5 or above, probably, somewhere north of 5.

[Biren Amin:]

Okay. Great. Thanks.

[Dr. Stephen Shrewsbury:]

And maybe just the one thing that we’ll add to that Biren is that, part of the reasons that we selected that as a cutoff. And we wanted patients with moderate to severe pain, because I think that that would then give us the increase confidence that really regardless of whatever their therapies they've been trying have not been effective. So we really are looking for women that have not responded to prior therapies or no longer control on prior therapies. Also from our reviewed literature, we believe that the women that have more moderate to severe pain have less reaction from a placebo effect. The strongest placebo effect tends to be in mild pain.

[Biren Amin:]

Okay. Thank you.

[Operator:]

Thank you. [Operator Instructions] And I’m not showing any further questions at this time. Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect. Everyone have a great day.

[David Main:]

Thanks, everyone.

[Kamran Alam:]

Thank you.