Acceleron Pharma Inc.
Q3 2016 Earnings Call Transcript

Published: 4 Nov 2016

[Operator:]

Good day ladies and gentlemen and welcome to the Acceleron third 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 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:]

Thanks and welcome everyone to Acceleron's third 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 page of the corporate website at www.acceleronpharma.com. Joining me on the call today are John Knopf, our Chief Executive Officer, Steven Ertel, our Chief Operating Officer, Matthew Sherman, our Chief Medical Officer and Kevin McLaughlin, our 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. Our goal this evening is to provide an overview of the quarter, review updated financial results and outline the key objectives for the remainder of 2016. After that, we look forward to answering your questions. I would now like to turn the call over to John Knopf, our Chief Executive Officer.

[John Knopf:]

Thanks Todd. Good afternoon everyone and thanks for joining us today. I would like to make a few comments before reviewing the quarter. Since the company was founded, our progress and growth have been extraordinary. We had a vision about TGF-beta biology and its role in disease. Today, we have four internally discovered drugs in the clinic being studied in two ongoing Phase 3 trials, multiple Phase 2 trials and a strong preclinical pipeline for further growth and value creation. We are very proud of our team and for everything that we have accomplished. From this position of strength, we were able to recruit a top pharmaceutical leader in Habib Dable as the new CEO of Acceleron. Habib has spent the last 22 years at various leadership and commercial roles throughout the Bayer organization and was most recently the Head of Bayer's U.S. pharmaceutical business. His track record at Bayer also includes managing multiple partnerships, including the one with Regeneron for Eylea. He led the collaboration from the Bayer side including the ex-US launch preparations, creating Bayer's business plan on ophthalmology and maintaining a productive relationship with Regeneron to turn Eylea into one of the most successful product launches over the last decade. I am very optimistic about the future for Acceleron under his leadership. I expect to work with Habib and the rest of the team as a scientific advisor to the company focused on preclinical research and to maintain a close productive relationship as we continue to build a great biopharmaceutical company I will now turn to the progress we have made in advancing our clinical pipeline this past quarter. While Celgene is recruiting patients in the pivotal Phase 3 studies of luspatercept in myelodysplastic syndromes or MDS and beta-thalassemia, we continue to treat patients with MDS and beta-thalassemia in the Phase 2 long-term extension studies. As Celgene mentioned during its earnings call last week, enrollment is going extremely well in both the Phase 3 MDS and beta-thalassemia studies. This strong operational execution along with Celgene's commitment to evaluate luspatercept's potential in additional patient statements and disease indications confirms our choice to work with the industry leader in hematology to maximize the value of the program. Turning to ACE-083. We are making final preparations for the initiation of the Phase 2 trial in FSHD patients. I hope you were able to join the Investor and Analyst FSHD Educational Webinar that we hosted last week with Dr. Jeffrey Statland, a leading researcher in neuromuscular diseases with specific expertise in FSHD. In case you missed it, you can access the replay on the Investor page of our website. I will now turn the call over to Matt Sherman, our Chief Medical Officer, to discuss our upcoming presentations at ASH and the ACE-083 Phase 2 trial design in FHSD.

[Matt Sherman:]

Thanks John. I will start with a discussion of the American Society of Hematology Annual Meeting to be held in San Diego in early December. We issued a press release this morning outlining our upcoming presentations at ASH and we are once again excited to be presenting new data at this major medical meeting. There will be important information provided for both the luspatercept and sotatercept programs across five presentations. For the luspatercept long-term extension studies and MDS and beta-thalassemia, we will report on an additional six months of data since our last update at the EHA in June that will further define the long-term safety and efficacy of luspatercept in each of these diseases. As part of our joint commitment with Celgene to fully explore the clinical utility of luspatercept in patients with MDS, we want to assess the safety and efficacy of luspatercept in first line lower risk MDS patients. As we discussed previously, we expanded the ongoing Phase 2 trial to enroll more of these patients and this will be our first look at data from such patients. Should luspatercept ultimately prove to be safe and effective in the first line setting, it could broaden the significant market opportunity for luspatercept in segments of the MDS population beyond those eligible to participate in the ongoing Phase 3 MEDALIST trial. We and Celgene are committed to fully exploring the potential to treat anemias across a variety of diseases. Beyond MDS and beta-thalassemia, we look forward to the first presentation from a study on myelofibrosis. Data from an ongoing investigator initiated trials with sotatercept being conducted at the M.D. Anderson Cancer Center in patients with myelofibrosis will also be provided in an oral presentation at ASH. We do not expect sotatercept to be developed in this indication, but we and Celgene are using these results to inform our thinking regarding potential study of myelofibrosis with luspatercept. As JK mentioned, we recently hosted an FSH dystrophy educational webinar. For those of you that missed it, let's briefly review two part Phase 2 trial design for the upcoming study in FSHD. Part one of the Phase 2 trial is the open label dose escalation stage of the study to evaluate safety and tolerability as well as increases in muscle volume in the tibialis interior and biceps muscles determined by MRI over a three moths treatment period in up to 36 patients. Dosing levels will start at 150 milligrams per muscle and escalate up to a dose of 250 milligrams per muscle if necessary. Part two is the randomized, double-blind, placebo-controlled stage of the study to evaluate the efficacy and safety of ACE-083 in FSHD patients over a three-month treatment period in 20 patients per muscle group. Thus enrollment will be 40 patients if both the TA and bicep muscles are included. We will also be evaluating muscle strength, muscle function and patient reported outcome assessments. Patients in each muscle cohort of part two will the randomized 3

[Kevin McLaughlin:]

Thanks Matt. Our cash, cash equivalents and investments as of September 30, 2016 were $251 million. This compares to December 31, 2015 cash, cash equivalents and investments of $136 million. As a reminder, 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 third quarter was $3 million. Cost sharing reimbursement revenue from our Celgene partnership was $2.9 million and is related to expenses incurred by the company in support of our partnered programs. Total costs and expenses for the third quarter were $23.5 million. This includes R&D expenses of $17.1 million and G&A expenses of $6.4 million. Other expense for the third quarter was $300,000 and included $800,000 non-cash loss on the marking of our common stock warrant liability to market. The company's net loss for the third quarter ended September 30, 2016 was $20.8 million. I will now turn the presentation over to Steve Ertel, our COO.

[Steve Ertel:]

Thanks Kevin. I will discuss a few of our important events anticipated to occur before the end of the year. As Matt mentioned, we will present preliminary data from the luspatercept Phase 2 study in first line lower risk MDS patients. This is just one part of a comprehensive program that we and Celgene are planning to maximize the value of the program in additional patient segments and disease indications beyond those being studied in the ongoing Phase 3 trials. Beyond luspatercept, we continue to make good progress with our muscle program, AVE-083. We are on track to initiate a Phase 2 study in patients with FSHD, one of the most common forms of muscular dystrophy before the end of the year. For sotatercept, we are planning to provide an update on the program later this year. For dalantercept, we expect to report topline results in renal cell carcinoma in the first half of 2017. For this study, the primary endpoint, progression free survival, is an event driven assessment and we anticipate reaching a predetermined number of events in the first half of next year. Expansion of the pipeline should continue, as we expect to initiate and ACE-2494 Phase 1 healthy volunteer clinical trial in mid-2017. This would be our fifth internally discovered therapy candidate in clinical trials. Before we move on to Q&A, I would like to acknowledge John's many contributions to Acceleron since he co-founded the company. John envisioned building a company that discovers and develops innovative therapeutics and by every measure he has been enormously successful achieving this vision. We are thrilled with the prospect that John will continue to help guide Acceleron through his expertise in drug discovery, while we benefit from the commercial expertise that Habib brings to Acceleron. I want to thank everyone for their attention and I would now like to open the call to questions.

[Todd James:]

Hi operator. Could you please open the call for questions?

[Operator:]

[Operator Instructions]. Our first question comes from the line of Geoffrey Porges with Leerink Partners. Your line is open.

[Geoffrey Porges:]

Thank you very much and of course much congratulations to JK on all that he has accomplished and hopefully you will still be involved, John, behind the scene.

[John Knopf:]

Yes.

[Geoffrey Porges:]

A couple of questions, if I may, one on dalantercept. There is a lot going on in renal cell cancer and could you perhaps give us a sense of what confidence you have that you won't run into any drug-drug interaction problems or at least combination drug toxicities in the axitinib combination? And then secondly, how might you anticipate dalantercept sitting into an increasingly complex treatment landscape in the renal cell? And then just on luspatercept, it's somewhat related question which is, as you look at expanded trial opportunities, do you envisage that there are combinations that might make sense as you look at other lines of therapy in MDS, possibly MF and, I guess MDS is the primary indication there. Thank you.

[Matt Sherman:]

Geoff, this is Matt Sherman. So let me start with your question about dalantercept. The first question you asked was related to potential drug-drug interactions. So our Phase 2 study, there are two parts to it.

[Todd James:]

Geoff, could you -- I think we are getting background noise from you. Can you mute your line?

[Geoffrey Porges:]

Yes. I will do that.

[Todd James:]

Thanks.

[Matt Sherman:]

Okay. I will just continue answering your questions. So the Phase 3 study we are doing has two parts to it. The first part that we completed and we presented it several times was an open label dose escalating part of the study where we combined dalantercept with axitinib and we tested three different dose levels of dalantercept and we were able to demonstrate safety of the combination with the 0.9 milligram per kilogram dose level in combination with the standard dose of axitinib. So feel very comfortable that this combination is safe and well tolerated from patients from the part one of that study. It was also in the part one study we were able to demonstrate 25% response rate in the 20 evaluated patients. So that allowed us to move forward into the randomized placebo control part two of the study, which is ongoing. As we noted, we expect to have the topline results from that in the first half of next year since this an event driven study so we have to obviously look for the events of progression free survival. In terms of the complexity of the landscape of treatment of renal cell carcinoma, there has been a number of products approved, but they are just in addition still remains the mainstay for first line drug therapy. And our goal here is to be able to combine with VEGF tyrosine kinase inhibitor. So we are excited about the study and we will see the data in the first half of next year.

[Steve Ertel:]

Hi Geoff. This is Steve Ertel. I will handle by the third piece of your question regarding luspatercept in future opportunities. So we are initially thinking about opportunities with Celgene. We think there's opportunities in across a variety of these settings where monotherapy could be very beneficial to these patients, but there is certainly some settings and diseases for that matter where combination therapy would also be appropriate to rule nothing out as we think about a broad comprehensive plan, both as monotherapy and potentially as combination therapy.

[Geoffrey Porges:]

Thanks very much guys.

[Todd James:]

Thanks Geoff.

[Operator:]

Thank you. And our next question comes from the line of Robyn Karnauskas with Citigroup. Your line is open.

[Unidentified Analyst:]

Hi. This is Kripa, on for Robin. I was wondering if you have any status update beyond initiation of the Phase 1 trial on the ACE-2494? Have you given any thought to indications you might be focusing on and when we can hear more details? And the second question I had was, this is probably a question Celgene, but we were wondering when we can hear about Celgene's decision on CKD?

[Steve Ertel:]

Sure. Hi Kripa, this is Steve Ertel.

[Unidentified Analyst:]

Hi Steve.

[Steve Ertel:]

Okay. So ACE-2494 is a systemic muscle therapy and we are thinking about opportunities in the rare muscle disease space as the highest priority opportunities for us. Our initial study, Phase 1 study, will likely be in healthy volunteers, but as we approach the start of that study, we would expect to have additional preclinical data and be able to provide a little bit more narrowing of our focus among rare muscle diseases as potential target indications for us.

[Unidentified Analyst:]

Great. Very helpful. Thank you. And if I can ask one more question, in terms of the first line MDS data that we expect to see at ASH in the ESA-naïve patients, we have been receiving questions about what is the bar? What do you expect to see? So can you give some idea on what might be considered good data?

[Steve Ertel:]

Sure. Hi Kripa, this is Steve Ertel. So I will take that as well. So we have certainly been encouraged by our response rates in patients who are refractory to ESAs. There have also been patients that we presented data for those patients who may be ESA-naïve but have high endogenous EPO levels. Both categories of patients are somewhat difficult to treat seeing as they have already either progressed through ESAs or their EPO levels would render them so unlikely to respond they are considered ESA ineligible. So in terms of response rates in a first line setting, an ESA-naïve setting, I don't want to get ahead of the data that we will present at the American Society of Hematology in just about a month from now, but you may want to reference data that was presented at the EHA from epoetin alfa and that was a randomized, double-blind, placebo-controlled study in ESA-naïve patients with EPO levels less than 500 and that is a relatively similar patient population to how we think about this first line setting and the response rates that they reported. I think, maybe helpful context for you.

[Unidentified Analyst:]

Okay. Great. That's very helpful. Thank you so much.

[Operator:]

Thank you. And our next question comes from the line of Mike King with JMP Securities. Your line is open.

[Mike King:]

Good afternoon guys. Thanks for taking the question. Let me add to the sentiment of bittersweet period for JK. I know you are not going to -- I don't think we will see you on the golf course anytime soon. So your influence will still be felt. I just wanted to ask a little bit further actually about sotatercept. Matt, I heard you talk about myelofibrosis, but I recall back to your R&D day a while back that we are in the period of time here where more definitive decision was going to be made about the path forward for sotatercept. So I don't know if you can talk about it now but I thought I would ask.

[Steve Ertel:]

Sure. Hi Mike, it's Steve Ertel. Why don't I take that as well. So we do plan to keep with our guidance that we just mentioned of giving an update on the status of the program, sotatercept by the end of the year. So I know that gives us two months to hit that goal but we are working with Celgene to be able to meet that deadline.

[Mike King:]

Okay. Great. And I also wanted to ask about, you have put out the longer-term luspatercept data for ASH and it all looks consistent. I didn't know. I thought maybe I would give you the opportunity to perhaps comment about any key takeaways from either the MDS or the beta-thal studies? And also in conjunction with that, I know we have talked about this many times, but it seems like it's always the elephant in the room, which is the bluebird's LentiGlobin in the non-beta, zero-beta, zero-population, they had pretty much 100% transfusion free duration for their patients with reasonable follow-up. So we get asked about that a lot. So again I thought I would just ask you if you would care to comment, compare or contrast?

[Steve Ertel:]

Okay. Hi Mike, this is Steve Ertel here. So just to clarify, so the abstract that became available this morning, the data into, as is often the case with us, the abstract submission follows shortly after EHA. So the data there is effectively the same data that was at the EHA. The data that we will present at ASH will be updated data not reflected in the abstracts for MDS for beta-thalassemia.

[Mike King:]

Okay.

[Steve Ertel:]

So there will be newer longer-term exposures and so forth that will be presented at ASH. And then relative to question on bluebird, yes, our view here is the same as it always has been. We think the thalassemia landscape where there is no effective therapy to treat these patients can easily accommodate multiple approaches to manage patients' disease. Of course our approach, as once every three weeks subcu injection, is fundamentally different than stem cell transplant with full bone marrow ablation. So we think there are very different patients who could be candidates and willing and interested to utilize each therapy and we think there is a place for both of them.

[Mike King:]

Okay. Great. Thanks. I will get back in queue.

[Operator:]

[Operator Instructions]. Our next question comes from the line of Kennen Mackay with Credit Suisse. Your line is open.

[Kennen Mackay:]

Thanks for taking my question. Maybe one for Matt. Just wanted to get your perspective on whether there is any kind of difference in biology between ESA-naïve patients versus ESA-experienced and ESA-resistant patients? And how we should be thinking about that as we think about luspatercept in this trial population?

[Matt Sherman:]

Hi Kennen. This is Matt. So a good question and there is probably very distinct differences in the disease in terms of the patients' biology, depending on where block in red cell differentiation is with the different forms of myelodysplastic syndromes. If there is very early blocks where patients might be sensitive to EPO where later stage blocks they are no longer. This is clear from those patients who are generating their own high-levels of erythropoietin. So despite those high endogenous levels, they are still not effectively making red blood cells. So we feel luspatercept has the unique mechanism and it certainly works from stages of differentiation downstream from where erythropoietin works.

[Kennen Mackay:]

Okay. Got you. Thanks Matt.

[Operator:]

Thank you. And I am showing no further questions at this time. I would like to turn the call back to Mr. James for closing remarks.

[Todd James:]

Great. Thanks operator. Thanks everyone for your time this evening. We look forward to interacting with everybody at the upcoming investor conferences in November, December and then also at the ASH meeting in San Diego. If you need any follow-up, please feel to reach out and happy to our touch base with you. Have a great night and talk you all soon.

[Operator:]

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a wonderful day.