Acceleron Pharma Inc.
Q1 2016 Earnings Call Transcript

Published: 5 May 2016

[Operator:]

Good day ladies and gentlemen, and welcome to the Acceleron First Quarter 2016 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Mr. Todd James, Senior Director of Investor Relations and Corporate Communication at Acceleron. Sir, please begin.

[Todd James:]

Great thanks Karen, we can begin the call. Thanks and welcome everyone to Acceleron's first quarter 2016 earnings conference call. The press release reporting our financial results in addition to the presentation for today's webcast are available on the Investors section of the corporate website at www.acceleronpharma.com. On the call today are John Knopf, Chief Executive Officer; Steven Ertel, Chief Operating Officer; Matthew Sherman, Chief Medical Officer; and Kevin McLaughlin, Chief Financial Officer. As a reminder, we will be making forward-looking statements regarding our financial outlook in addition to regulatory and product development plans and research activities. These statements are subject to risks and uncertainties that may cause actual results to differ from those forecasted. A description of these risks can be found in our most recent Form 10-Q on file with the SEC. I would now like to turn the call over to Steve Ertel, our Chief Operating Officer.

[Steven Ertel:]

Thank you Todd. Good morning everyone and thanks for joining us today. Acceleron is committed to building one of the leading biotechnology companies in the industry by striving to be best-in-class in all aspects of our business. Scientific leadership, expertise in clinical development, operational execution, financial discipline and capital efficiency, corporate strategy, exceptional partnerships and ultimately in delivering highly innovative products to treat patients. We are successfully building a multi-product company. We currently have four therapeutic candidates in clinical trials, one in Phase I, two in Phase II and one in Phase III being studied in two diseases. We intend to continue to grow our pipeline and our business with a goal to bring a new molecule into the clinic every 12 to 18-months. We are collaborating with the best partner in the industry Celgene on our luspatercept and sotatercept programs as we jointly advance these molecules across a range of diseases. While we focus on near-term operational execution, our company is designed and built for long-term value creation. Through the collaborations we’ve entered and the operational structure of our company, our highly productive and capital efficient organization remains on-track to achieve our ambitious 2020 goals. With this vision as our ultimate goal, I will now turn to the progress we’ve made this past quarter to realize this vision. During the quarter, we made strong progress advancing our entire clinical pipeline. Celgene is recruiting patients in the pivotal Phase III studies of luspatercept in MDS and beta-thalassemia. As previously described, patients enrolled in the MDS study are randomized to directly start treatment with either luspatercept or placebo. In the beta-thalassemia study, enrolled patients first enter a three-month observation period to collect data on their pre-treatment transfusion burden, before initiating treatment with either luspatercept or placebo. While these Phase III studies are underway, we continue to treat both MDS and beta-thalassemia patients in their respective long-term Phase II extension studies with luspatercept to gather valuable information on long-term safety and efficacy of luspatercept in these diseases. As part of Celgene and Acceleron’s commitment to fully exploring the clinical utility of luspatercept in patients with MDS, we are also studying the safety and efficacy of luspatercept in a distinct set of MDS patients who are not eligible to participate in the Phase III MEDALIST trial. Lower risk MDS patients who are ESA treatment naïve or ring sideroblast negative are now being enrolled and treated in a Phase II clinical trial. Success in either of these patient populations could broaden the significant market opportunity for luspatercept in MDS. Turning to the dalantercept program, we continue to enroll and treat patients in the Phase II DART study of dalantercept in combination with axitinib in patients with advanced renal cell carcinoma. If the results from this randomized double-blind placebo controlled study are positive, dalantercept could become the second Acceleron discovered molecule to enter Phase III development. For the sotatercept program, we and our partner Celgene continue to assess the opportunity in pre-dialysis chronic kidney disease patients and are expected to be able to communicate the plan for this program in the second half of 2016. Moving to ACE-083, our investigational therapeutic candidate designed to selectively increase muscle mass and strength in the target muscle in which it is administered. We have completed enrollment in treatment of all seven cohorts of our Phase I study. As you can see from our pipelines slide, we have an exciting mix of partnered late stage Phase III programs and wholly owned programs. The start of the two Phase III programs with luspatercept resulted in a $15 million milestone payment in the first quarter from Celgene. This capital adds to the $114 million in net proceeds raised in our equity follow-on offering in early January of 2016, further strengthening our ability to advance and expand our pipeline of wholly owned programs. With four programs currently in the clinic and a robust pipeline of pre-clinical programs advancing towards the clinic, we are on-track to achieve our objective of eight distinct therapeutic candidates and clinical trials by 2020 as part of our vision to build one of the biotech industry’s best company. I will now turn the call over to Kevin McLaughlin our Chief Financial Officer to run through the financial for the quarter.

[Kevin McLaughlin:]

Thanks Steve. During the quarter, we completed a common stock offering which provided net proceeds for the company of $140.3 million. As Steve mentioned, we also received a $15 million milestone from our partner Celgene in relation to the Phase III studies for luspatercept. As a result, cash and cash equivalents and investments as of March 31, 2016 were $278.7 million. This compares to December 31, 2015 cash, cash equivalents and investments of a $136 million. We believe that our existing cash, cash equivalents and investments will be sufficient to fund our projected operating requirements into the second half of 2019. Collaboration revenue for the first quarter was $18.2 million; license and milestone revenue was $15.1 million and includes the $15 million milestone. Cost sharing reimbursement revenue from our Celgene partnership was $3.1 million and is related to expenses incurred by the company in support of our partnered program. Total cost and expense for the first quarter were $22.1 million this includes R&D expenses of $16.2 million and G&A expenses of $5.9 million. Other income for the first quarter was $9 million and includes an $8.7 million non-cash gain on marking of our common stock warrant liability to market. The company’s net income for the first quarter ended March 31, 2016 was $5.1 million. I’ll now turn the presentation over to John Knopf our Chief Executive Officer.

[John Knopf:]

Thanks Kevin. Our discovery team continues to drive development of innovative programs focused on disease areas with high unmet medical needs. Our research and discovery plans includes a further advancement of ACE-083 in the clinic are novel locally delivered muscle agents. We are also conduction IND enabling studies of ACE-2494 our systemically acting muscle agent. Our larger research goals to continue to leverage the powerful biology behind the party’s ability to rebuild and repair its own cells and tissues for their ligand traps, antibodies and the new IntelliTrap discovery platform. We believe IntelliTrap provided Acceleron with a rich and productive path to discover unique and valuable molecules for a wide range of disease. This platform is one of the company’s unique strength and it would be the driving force behind our next generation of therapies. As you can see on Slide 12, our platform has led to the discovery of a number of therapeutic candidates designed to treat a range of diseases including those involving the musculoskeletal system or a cause by fibrosis. Our team continues to be highly productive and focused on a goal file IND every 12 to 18-months for a total of eight unique and valuable candidates in clinical studies by the year 2020. Looking ahead for the year, we expect to present additional results of studies in MDS and beta-thalassemia with luspatercept at EHA and other medical conferences. This will include due MDS results in ESA naïve and RS-negative cohorts, which will significantly expand the market size for this indication. We also expect to report top-line results on the dalantercept in combination with axitinib in renal cell carcinoma. For this study, the primary endpoint regression free survival is in a event driven data point that we currently anticipate reaching around year’s end. We will also have more clinical data from the Phase I study of ACE-083 in healthy volunteers in 2016 and in the second half of the year, we expect to launch Phase II study in patients with FSHD. As we expand our muscle franchise, we expect to submit and IND for ACE-2494 a systemic muscle agent by the end of the year and initiate at a clinical trial in the first half of 2017. Finally, we are planning to provide an update on the development plan for sotatercept in the second half of the year. So as you can see, we expect 2016 to be another exciting and productive year for Acceleron. I’ll conclude today by looking ahead. As you have heard, we have significant product claims that build on our successes to-date. Our goals over the next four-years include approvals and up to five indications, multiple ongoing Phase III studies, eight candidates in the clinic and an established Acceleron sales and marketing organization. And with all of that, we aim to become cash flow positive. These are ambitious goals that we believe we have the team, strategies and the momentum to achieve. I want to thank you very much for your attention and I would now like to open the call for questions.

[Operator:]

[Operator Instructions] Our first question comes from the line of Seamus Fernandez from Leerink Partners.

[Richard Goss:]

Hi this is Richard Goss calling in for Seamus. Thanks for taking my question. Just on dalantercept, you mentioned that you are still enrolling patients into the study. Any guidance on when you’ll complete enrollment and approximately how many patients worth of data might we see when the results are reported? Thanks.

[Matthew Sherman:]

Hi Rich, this is Matt Sherman. So as we’ve indicated previously, we’re on-track to provide the top-line news for dalantercept Phase II, as we remember this is a randomized study of dalantercept plus - axitinib versus placebo plus axitinib and the total enrolment for this study is a 130 patients randomized in the one-to-one fashion between those two arms. So as we’ve indicated we’ll be on-track to provide those results by the end of this year.

[Richard Goss:]

Okay, great and also on dalantercept, what are your current plans for initiating combo studies with other anti-angiogenesis agents other than axitinib?

[Matthew Sherman:]

Yes, as you can imagine it would be a wide opportunity for combining dalantercept to other anti-angiogenesis agents particularly those in the VEGF receptor class. We will be able to talk more about our development plans after we have the results from the ongoing Phase II study in renal cell cancer patients.

[Richard Goss:]

Okay, great. Thank you.

[Operator:]

Thank you. And our next question comes from the line of Michael King from JMP Securities.

[Michael King:]

Hey guys good morning and thanks for taking the questions and congrats on your profitable quarter. Just maybe starting from that financials, Kevin can you just tell us your thoughts on sort of the go forward spend rates and given what is going to be going on especially with luspatercept, do you think that the revenues from Celgene relationship are going to continue or increase at this rate?

[Kevin McLaughlin:]

Thanks Mike. So you know that the only guidance we have out right now and we’re going to stay with that is the cash we have on board will get us into the second half of 2019 and that funds all of our internal programs that we’ve talked about and the future ones that we will put into the clinic as well. As far as the reimbursement from Celgene goes on the program, obviously that continues. We continue to run some Phase II extension trials with Celgene and the amount of that we really don’t get it forecasted. It is really a wash in our P&L as you know on the revenue line as collaboration revenue and then it is offset by the expenses down in the R&D area. So it’s the net so we really don’t get into the exact number there, because its...

[Michael King:]

Alright, well I can back into it and thanks for that. I also wanted to ask a couple of things. On luspatercept as you got data EHA, I guess the question there is going to be I assume we have data at ASH and you know the other appropriate conferences throughout 2016.

[Steven Ertel:]

Hey Mike, this is Steve Ertel. So yes, we will be at EHA, we expect to be at ASH, the EHA abstract will become available in just a couple of week. At that time we can respond exactly to what abstracts and what presentations will be given, but as you’re probably familiar at Acceleron we typically present data at these conferences that is newer and fresher than what was available at the time of abstract submission. So should - yes that will be this year.

[Michael King:]

Okay. I don’t know if you can care to comment about enrolment for beta-thal, but just curious given there are lot of different modalities that are being trialed for various populations in some of the gene therapy approaches, but others as well. I’m just wondering about your thoughts on sort of how you look at the patient recruitment landscape in beta-thal.

[Steven Ertel:]

Hey Mike, this is Steve again. I’ll take that question. So Celgene is conducting a very comprehensive multi-national Phase III study and we don’t expect any other drugs that are in development or therapeutic approaches I should say that are in development to have any meaningful effect on our enrolment rate.

[Michael King:]

Okay great and then one other and I’ll get off. I don’t know if you can talk about the approach for sotatercept in CKD. Maybe I’m over simplifying, but it seems relatively straight forward to think about what clinical endpoints one might use to develop a molecule such as that. I don’t know if you can illuminate any sort of insights into what you guys are thinking about or sort of what are the gaiting factors to kick off the more advanced trials there. Thank you.

[John Knopf:]

Hi Mike, this is John Knopf. At this point all what we can say is we remain on-track as we’ve indicated that we would be meeting with regulatory authorities to better understand the types of endpoints that they would like to see and that we would update you on our joint plans with Celgene in the second half of the year.

[Michael King:]

Thank you.

[Operator:]

Thank you. And our next questions comes from the line of Kennen MacKay from Credit Suisse.

[Kennen MacKay:]

Hi, thanks for taking my questions. Maybe just moving back to dalantercept you talked a little bit about potentially partnering that asset out after we feed the data in our RCC. Could you maybe talk a little bit about sort of what you’ve been looking for a partner there. Would that be focused more on someone who brings additional VEGF potential combinations to the table or international sales force. Thank you.

[Steven Ertel:]

Hey Kennen. This is Steve Ertel. So, we generally don’t give any guidance or information on the deal structures or the types of partners or terms anything along those lines until the deal is finalized, but you can imagine part of our criteria for selecting the ideal partner would be a company that would cheer Acceleron’s interest in maximizing the value of dalantercept and the way we are developing this program is to actually leverage existing therapies rather than compete with them through a combination therapy approach. So that does certainly expand the number of potential partners that we could consider. But that’s probably is detailed as I could give you at this point in terms of partnering discussions.

[Kennen MacKay:]

Got you. That is fair and then just regarding sotatercept development. Could you maybe talk a little bit about how that would be communicated with the street and then just for housekeeping when you do decide how to advance that into Phase III, could you maybe help us understand what kind of milestone will be associated with bringing your second drug into Phase III trials. Thank you.

[Steven Ertel:]

Hey Kennen and this is Steve. So I’ll take that again. So, once we and Celgene finalize our plans and are ready to communicate those, we’ll certainly coordinate our communication efforts around that program. We have not yet finalized a sort of a forum by which we’ll do that and it is our expectation just to clarify that the next study that we would do with sotatercept would be a Phase II study not a Phase III study.

[Kennen MacKay:]

Apologies, right. Thank you and then one final one if I may. With ACE-083, thinking about the top-line data from the bimagrumab that we saw on [SIBM] (Ph). Is there anything that can sort of be learned from that or do we have to see the data first and is there any sort of thinking about that in the design of the FSHD trial for ACE-083? Thank you.

[Steven Ertel:]

There is really not much we can take away from the bimagrumab study at this point in time we just saw that the comments on the time walk test. So, I don’t think it really influences our studies in any way. However, we do look forward to a more complete disclosure of that study.

[Kennen MacKay:]

Okay. Thanks so much for taking my questions.

[Steven Ertel:]

Thanks Ken.

[Operator:]

Thank you. Our next question comes from the line of Carter Gould from Barclays.

[Carter Gould:]

Hey guys good morning. Thanks for taking the question. Just a follow-up on Kennen’s question on the bimagrumab failure. Any sense that this may change sort of the regulatory hurdles in the space, given that drug did have breakthrough designation and I guess just the next quick follow-up on ACE-083, any sense on what potential regulatory endpoint for that drug in FSHD might look like? Thank you.

[Matthew Sherman:]

Hey Carter this is Matt Sherman. So I think everyone is thinking about this, but I think it’s really too early to project forward about changes in regulatory endpoints and until the bimagrumab data is fully released. It’s very premature to make any assumptions about changes in the regulatory evaluation of these drugs. We are very excited about the effects that we’ve seen with ACE-083, the data we’ve presented at the beginning our R&D presentation last October and then presented a few times since that. It’s very striking that we were able to show 14% increase in muscle volume after local injection of ACE-083 into the rectus femoris muscle. So, with that as the background, we continue to pursue development and we’ll be initiating our first Phase II study and Facioscapulohumeral dystrophy this year.

[Carter Gould:]

Thank you.

[Operator:]

Thank you [Operator Instructions] Our next question comes from the line of Roy Buchanan from Janney Montgomery Scott.

[Roy Buchanan:]

Hi, thanks for taking the questions. Most of them has been answered. I guess I don’t think you’ve answered this, but have you got met with the regulators about the FSHD trial design for ACE-083 yet or it that going to be a second half event as well? Thanks.

[Matthew Sherman:]

Yes. So hi Roy this is Matt again. So again as with all development programs, we’re continually in contact with health agencies and regulatory agencies about the design and our intent. So as we’ve indicated, we are on-track to initiate that Phase II study.

[Roy Buchanan:]

Okay. Thank you.

[Operator:]

Thank you. And our next question comes from Michael King from JMP Securities.

[Michael King:]

Thanks for taking the follow-up guys. Carter reminded me that I wanted to also ask about bimagrumab question or just make a statement. I know that on the more closest call they said that Novartis continues to develop the molecule outside of - sorry I’m just blinking on the indication that they failed in, but they have not just continued the entire program if my memory is correct.

[Matthew Sherman:]

Yes. That’s correct Mike.

[Michael King:]

Okay. And then just on ACE-2494, I don’t have the slide in front of me again, but you said IND this year, will we have data from Phase I and will that be enormous?

[Matthew Sherman:]

Yes. So our timing is to submit the IND this year and to initiate the Phase I study in the first half of 2017 and our expectation that would be in healthy volunteers as we have studies these agents previously in that population and been able to see the clinical effects even in healthy volunteer population.

[Michael King:]

Okay. Right. Okay, sorry long as I got you Matt remind me on ACE-083. Again, I think you said you had data this year. What should we be looking for anything beyond what you haven’t shown already?

[Matthew Sherman:]

Yes. So as we also previously indicated based on the robust data that we saw in the rectus femoris muscle the quadriceps group. We extended the study to include two additional cohorts of patients injecting and evaluating the tibialis anterior muscle on the lower leg that’s particularly important for controlling foot drop a devastating symptom in the neurological and neuromuscular diseases and so the data from those two additional cohorts will be available in the middle of this year.

[Michael King:]

Okay. And when that data is available what would it look like. Are you going to be looking at just the incidence of foot drop or will we be looking at power of any kind and will you also look at any kind of laboratory markers like any of the large muscle enzymes?

[Matthew Sherman:]

So primarily the study is focused on safety as is on healthy volunteer population, but as we showed in the rectus femoris muscle, we have an increase in muscle volume as measured by MRI imaging. So that will be also available with these two additional cohorts as well we are testing muscle strength and that relates to that muscle group.

[Michael King:]

Okay. Great thanks for taking the follow-up.

[Operator:]

Thank you and that concludes our question-and-answer session for today. I would like to turn the conference back over to John Knopf for any closing comments.

[John Knopf:]

We would to just thank everyone for their participation on the call today.

[Operator:]

Thank you. Ladies and gentlemen thank you for your participation in today’s conference. This does conclude the program and you may now disconnect.