Acceleron Pharma Inc.
Q3 2014 Earnings Call Transcript

Published: 8 Nov 2014

[Operator:]

Good morning and welcome to Acceleron's Third Quarter 2014 Conference Call. At this time, all participants are in a listen-only mode. There will be a question-and-answer session at the end. Please be advised that this call is being recorded at Acceleron's request. I would now like to turn the call over to Acceleron. Please proceed.

[Renee Leck:]

Good morning. This is Renee Leck with Stern Investor Relations and I would like to welcome you to Acceleron's third quarter 2014 conference call. You can listen to a live webcast or a replay of today's call by going to the Investors and Media section of the website acceleronpharma.com. A copy of today's prepared remarks can also be found on the website. For today's agenda, John Knopf, Acceleron's Chief Executive Officer will provide an update on the company's pipeline, clinical plans and R&D efforts. Then Kevin McLaughlin, Chief Financial Officer will review the company's financial results and we will open the call for Q&A. Matthew Sherman, Chief Medical Officer and Steven Ertel, Chief Business Officer will also be available for the Q&A session. Before we begin, I would like to remind you that today's discussion will include statements about the company's future expectations, plans and prospects that constitute forward-looking statements for purposes of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. I would now like to turn the call over to John Knopf.

[John L Knopf:]

Good morning, everyone and thanks for joining us today. Acceleron is pioneering the understanding of the powerful biology of the TGF-beta superfamily and is applying this knowledge to create a robust and growing pipeline of innovative drug candidates. When we founded Acceleron, we were dedicated to leveraging this under-appreciated area of biology. Now years later, we are proud of the scientific and clinical advancements that we've made in this field and the recognition of the potential of this approach. For example, there have been new discoveries in the biology of red cell formation, muscle growth, angiogenesis, fibrosis, and autoimmune and inflammatory disorders. The term SMAD 2/3 and SMAD 7, some of the intracellular signaling molecules in this TGF-beta superfamily, are becoming commonly used in the context of various exciting investigational treatments. We are just beginning to tap into this promising area of biology and Acceleron continues to maintain its leadership in the field. This leadership is exemplified by the progress we have made during the third quarter to advance each of our pipeline programs. There will be several data presentations at two major medical conferences during the next few weeks, the American Society of Nephrology meeting next week and the American Society of Hematology in mid-December. The ASH abstracts were just released online yesterday so I will begin my comments by providing an overview of the data that will be presented at this meeting. As we announced yesterday, we submitted luspatercept clinical abstracts for the beta-thalassemia and MDS and both were selected for oral presentations. The luspatercept beta-thalassemia Phase II data will be presented on Sunday, December 7 will report on data from higher dose levels noting clinically significant improvements across a range of endpoints. In the transfusion dependent patients, we have noted that all seven patients show a greater than 50% reduction in transfusion burden. We believe that a 25% to 40% reduction in transfusion burden would be an acceptable primary endpoint in transfusion dependent beta-thalassemia patients. Also, for the first time, we will present data showing reductions in liver iron concentration in both non-transfusion dependent as well as transfusion dependent patients. To put these results in context, the change in liver iron concentration was the primary endpoint in the approval of iron chelators such as Exjade. From an operational perspective, we have made significant progress and initiated the final stage, the expansion phase, of the luspatercept Phase II clinical trial in beta-thalassemia patients implementing an individual patient dose titration regimen that will likely be used in the Phase III trials. Additionally, we initiated a 12-month extension study of luspatercept in beta-thalassemia patients who participated or who are currently participating in the Phase II beta-thalassemia study. Between the encouraging data we presented to date and our continued clinical progress, we and Celgene are on track to initiate Phase III clinical trial in beta-thalassemia next year. We are also looking forward to presenting new data in MDS at American Society of Hematology Annual Meeting in December. Data will be presented for both sotatercept and luspatercept from their respective trials in MDS. There will be a poster presentation of the sotatercept data on Sunday, December 7 and there will be an oral presentation of the luspatercept data on Monday, December 8. We are very encouraged by the data in both abstracts. Both of the Phase II trials were designed to allow a heterogeneous mix of lower risk MDS patients, many of which were either resistant to or not expected to respond to other commonly used therapies. At ASH, we will discuss clinically significant improvements in low and high transfusion burden patients. In the luspatercept study, we have noted in the abstract that roughly 30% of patients had HI-E response and about 25% of patients achieved transfusion independence for at least eight weeks. This is particularly impressive in the luspatercept study as patient received treatment for just 12 weeks. We are very fortunate to be working with our collaboration partner Celgene on luspatercept and sotatercept, particularly in MDS where their knowledge and commitment to developing new treatments is uniquely valuable to these programs. In the luspatercept MDS study, we recently initiated the final stage, which is the expansion cohort, of the ongoing Phase II clinical trial. Additionally, we opened the 12-month extension study of luspatercept in MDS patients who participated or who are currently participating in the Phase II MDS study. Now let’s move to end-stage renal disease, the third indication in our comprehensive set of clinical trials with our partner Celgene. We are excited by our presence next week at the ASN Kidney Week meeting where Celgene will present new preliminary data from the ongoing Phase IIa clinical trial of sotatercept in patients on hemodialysis. Importantly this will be the first presentation with data on vascular calcification, which were not included in the abstract, and data on bone mass. We believe sotatercept has the potential to positively affect several clinical complications in end-stage renal disease including anemia, vascular calcification, and the bone disease known as renal osteodystrophy. This is a potentially fundamental distinct profile from a drug that only affects red cells. Our goal with sotatercept in this indication is to demonstrate clinical activity on bone and vascular calcification even more so than its effect on red cells. To that end, preliminary data will be presented next week at the ASN meeting showing the effects of sotatercept on renal osteodystrophy and vascular calcification. Importantly, although these data are early, they have the potential to define a clearly differentiated product that may address an enormous unmet medical need in these end-stage renal disease patients. So clearly, the next four weeks will be exciting as we present new Phase II data in beta thalassemia, MDS, and end-stage renal disease for our sotatercept and luspatercept programs. I would now like to describe the most recent addition to our pipeline of clinical assets, ACE-083. This is an innovative muscle protein therapeutic that is designed to selectively increase muscle mass and strength in the muscles in which the drug is administered. The drug has been engineered to remain primarily within the specific muscles and/or muscle groups into which it is administered and to be rapidly inactivated upon reaching the systemic circulation resulting in what is expected to be an advantageous safety profile. This would be particularly useful to treat patients with diseases that affect specific muscle groups such as inclusion body myositis and certain forms of muscular dystrophy such as facioscapulohumeral muscular dystrophy, which is also known as FSHD. We're excited about this program and look forward to sharing data from the Phase 1 clinical trial next year. We also continue to advance the dalantercept combination trials with approved VEGF receptor TKIs in renal cell carcinoma or RCC and hepatocellular carcinoma or HCC. In the RCC trial, we are enrolling patients in the randomized placebo-controlled Phase 2 trial comparing the combination of dalantercept and axitinib to placebo and axitinib. Patients must have received only one VEGF receptor TKI and may have also received immunotherapy. We'll be in a position sometime early next year to announce when we will next present new data from the dose escalation and expansion stage of this trial. In the HCC study, we recently initiated the Phase 1b combination trial of dalantercept plus sorafenib in first line advanced patients. These patients have significant need for approved therapies and we are hopeful that the combination will provide greater outcomes for these patients than sorafenib alone, which is the only approved therapy in advanced HCC. In summary, I'm proud of the progress we have made on many fronts. We're advancing two programs in multiple indications through a productive collaboration with Celgene. We're also advancing two wholly-owned programs in the cancer and muscle fields through early and mid-stage clinical trials. Our research activity and productivity remains very high and I'm excited about the opportunities we're pursuing on that side of the organization. Importantly, we look forward to sharing clinical data from our Phase 2 clinical trials over the next few weeks. Finally, our overall financial situation is very strong and for some more detail here, our CFO, Kevin McLaughlin will now provide you with this information.

[Kevin F. McLaughlin:]

Thank you, John, and good morning, everyone. The company closed the third quarter ended September 30, 2014 with $189.3 million of cash and cash equivalents. This compares to $204.3 million at June 30, 2014. We expect that our cash and cash equivalents will be sufficient to fund the company into the second half of 2017. As we have discussed in the past, our partner Celgene is responsible for 100% of all the financial costs associated with the sotatercept and luspatercept programs. Our net cash operating burn supports company operations and the ongoing and planned clinical trials for the company's fully owned programs. Thanks. And now, we can now open the call to any questions.

[Operator:]

Thank you. (Operator Instructions) Our first question is from Yaron Werber of Citi. You may begin.

[Yaron Werber:]

Great. Thanks for taking my question and congrats on the progress, it looks like there's going to be a lot of data coming up. So my first question had to do with give us a little bit of understanding, I mean it looks that both luspatercept and sotatercept are showing activity in beta-thal and in MDS and it looks like we're still waiting for some doses. How are you guys thinking about and it looks like you've actually moved luspatercept into the expanded dosing now. I'm just trying to get a sense at what point will you guys communicate to us sort of your decision and is sotatercept going to be principally developed for CKD and luspatercept is going to be for the hem conditions or kind of how do we think about the strategy ahead? And then what else are you waiting to get in terms of MDS data before you officially can let us know that you're going to do Phase III next year? Thank you.

[John L Knopf:]

Steve, why don't you take that question?

[Steven D. Ertel:]

Sure. Hi, Yaron. This is Steve Ertel. So, we and Celgene are processing a lot of data now that we're looking forward to presenting at ASH in the next few weeks. Ultimately the decision on which molecule is taken forward will be a data-driven decision. We're thrilled to have two opportunities to compare and take the best one forward into Phase III. In terms of timing, our goal with Celgene is to make that decision as soon as possible ideally by the end of the year and then hopefully communicate soon thereafter.

[John L Knopf:]

I believe there was a second part of your question, Yaron. I wonder if you could just repeat that because I'm not sure I remember it exactly.

[Yaron Werber:]

Yes. And I think you sort of answered both of them. But for MDS, what other data are you guys looking to get before officially letting us know that you're going to move Phase III? Is the thought and I guess maybe to tag on another question to that, is the thought in MDS that this is going to get used and be tested sort of ahead of EPO or is it going to be tested in EPO failure or in Revlimid failure in low risk MDS? Thank you.

[John L Knopf:]

Steve, why don't you just continue with that?

[Steven D. Ertel:]

Sure. So as John mentioned, our current studies for both sotatercept and luspatercept in MDS involve a broad heterogeneous mix of patients in the low intermediate one risk category. As you may know, the drugs that are used today in MDS are often indicated for select subsets of these patient populations based on underlying genetics or cytogenetics. Our goal is to make a decision based on the subsequent study in MDS. I think it’ll be clear to you after we present data at the American Society of Hematology. We’ll then be in a better position to communicate what the subsequent study looks like and the specific patient population. I think we have indicated to you and others that our goal here, we envision this product moving earlier in the treatment algorithm as opposed to later in the treatment algorithm, which I think is the second part of your question.

[Yaron Werber:]

So, it looks like the Phase III potentially will be head-to-head against EPO or in an EPO naive against placebo, I don’t know how you guys are thinking about that.

[Steven D. Ertel:]

So, there’s a lot of internal discussions with Celgene. We’re just not yet in a position to describe the exact study. We hope to be able to do that soon.

[Yaron Werber:]

Okay, terrific. Thank you.

[Operator:]

Thank you. Our next question is from Ted Tenthoff of Piper Jaffray. You may begin.

[Ted Tenthoff:]

Thank you and thanks for the update. Can you hear me, okay.

[John L Knopf:]

Yes, Ted.

[Ted Tenthoff:]

So maybe a little bit off base, but can you tell us sort of how things are starting out with the muscle program and ultimately how you could see that drug developed?

[John L Knopf:]

Matt, do you want to talk about the program that’s underway and the healthy volunteer study and then we can.

[Matthew L Sherman:]

Hi, Ted this is Matt.

[Ted Tenthoff:]

Hi, Matt.

[Matthew L. Sherman:]

What we’ve initiated is a study of ACE-083 in healthy volunteer patients. As you know, this is a drug that’s induced directly into the muscle and so as a first in human study, it’s a dose escalating study where we’re testing a range of doses and also the number of injections into a muscle in successive cohorts of patients. So we initiated that study back in October. We got to be monitoring them on the routine safety information, but importantly muscle function as well as muscle mass by very sophisticated MRI imaging of muscle mass. So, I think sometime next year we’ll able to start to talk about the data from this healthy volunteer study and that will inform us whether to move forward into other diseases. The areas that we’re interested in of course are muscular dystrophy, inclusion body myositis, particularly sporadic form as well as facioscapulohumeral dystrophy, another very serious muscular dystrophy that affects individual muscles in an asymmetric fashion.

[John L Knopf:]

Hi, Ted. This is John Knopf. So in addition to those studies, I think if we look out sort of more in the long-term, I think that certainly the way for us to go initially is to address these very high unmet needs where some of these ligands are very much known to affect these particular muscles and provide us with a good rapid regulatory path. But I'm particularly excited about the potential in other areas such as patients that more elderly patients that are beginning to lose muscle mass, all those opportunities. I think if you look at Botox, Botox is also restricted to the particular muscle that it's injected into and it's been particularly successful because of that because of basically the tolerability and the safety of that particular product. And I think you can imagine a wide variety of uses for an agent such as this, again whether it's just the aging population to provide greater stability for those patients so they don't have falls, fractures, as well as other situations where there's localized loss of muscle mass again after a hip fracture, again which has a very high mortality rate for these patients. So I see a really tremendous potential for this drug and I'm for one very excited about it. And also, based on the fact that there's all this genetic validation of this particular pathway and its effect on muscle.

[Ted Tenthoff:]

That's great. That's a really helpful update.

[Operator:]

(Operator Instructions) Our next question is from Mike King of JMP Securities. You may begin.

[Mike King:]

Hi, guys thanks for taking the question. And congrats on all the progress. I wanted to chat a little bit about the MDS studies if we could. Can we start – let's first start with sotatercept results and I'm just hoping you can put them into context, very impressive on efficacy. I got some inbound calls about the dropout rate, which seems to me to not be cognizant of the severity of the patient population, but I don't want to ask a leading question. But if you could just perhaps put the results into context for us?

[John L Knopf:]

Yes, hi this is – Mike, this is John Knopf. So, this study was started by analyst as initially as an investigator initiated study and then it was taken over as a sponsored study. And his rationale initially was he wanted to go and see if the product had activity in its most recalcitrant patients that had been heavily pre-treated with a variety of agents. And if we could see good activity there and certainly it had a promise either to treat these particular patients or certainly those patients earlier in the treatment cycle. So I think it's worthwhile to take note in this particular patient population that we are again almost all of them had been previously treated with erythropoietin, about half of them had been treated with Revlimid, half had been treated with hypomethylating agents, and then half had been treated yet again with a variety of other sorts of treatments, many of which are chemotherapeutic in nature and generate cumulative negative effects on these patients. So, that was this very tough group of patients. And I think importantly, still the overall response rate according to IWG criteria was quite high in the nearly 40% range or something like that. So, we feel particularly good about that.

[Mike King:]

Right.

[John L Knopf:]

Now certainly if you look at the patients that went on then to be transfusion independent over that eight-week period, that moved down from 42% to 11% and again, you shouldn't be so surprised and these are absolutely last ditch effort patients. Now if you compare this patient population to the patient population we used on the luspatercept study, there you have a situation where again in large part these patients who have failed ESAs or had very high endogenous EPO levels and there we had about a 33% IWG criteria response rate. And then in terms of the percent of patients that showed transfusion independence, that was about 25% something like that. So, I think you can certainly see a difference there with the number of prior therapies the patient has been treated with and as you go forward with more and more therapies, certainly some of the responses would be more difficult to achieve. So, we feel very good about the responses in both cases. And as Steve mentioned, we'll discuss these particular patients who have responded and who haven't responded to get better insight into how might move forward. Indeed that was the approach taken by others. So, hopefully that kind of lays things out a little.

[Mike King:]

Yes, it does. Thank you for clarifying that. I guess the key question would be you alluded to it in your comment about just kind of narrowing the patient population. Is it fair to say that that's probably one end of sotatercept abstract is probably not representative of a population that you would investigate immediately or is that possible?

[John L Knopf:]

Yes. I think as Steve pointed out earlier, we would likely be earlier in the treatment cycle than later in the treatment cycle. Yes.

[Mike King:]

Okay, okay. And then also wanted to perhaps get a little more granular on the definition of high versus low transfusion burden. And because it seem is it fairly well agreed to about what the appropriate definition of high versus low should be? Seems somewhat arbitrary, but maybe it's not. And then is a follow-up to that is also do some patients go from being high to low and back and is there any kind of clinical endpoint to determine whether patients are sort of toggling from high to low transfusion burden?

[John L Knopf:]

Matt, why don't you take that?

[Matthew L. Sherman:]

Hi Mike, this is Matt. So let me answer the second question first because it's pretty clear help understand the disease. So most of the patients who are transfusion dependent or in a high transfusion burden with MDS remain so and they are just coming in for regularly scheduled transfusions not unlike the thalassemic patients. I mean they have exacerbations in disease and require more or less, but they do require transfusions on a somewhat regular basis. So, the distinction that's made is some varies between studies, but generally it's four units over the previous eight weeks is defined as someone who has a high transfusion burden.

[Mike King:]

Okay. And is that I mean who – is it an ASH protocol, an ASCO protocol, or any formal society that clarifies that or is it sort of generally accepted in medicine?

[John L Knopf:]

It's generally accepted, but it also feeds into the IWG,

[Mike King:]

Okay.

[John L Knopf:]

Definitions for response and requiring at least a four unit reduction in transfusion over eight weeks while on treatment and that's considered to be HI-E response by the International Working Group, the IWG.

[Mike King:]

Perfect. Okay. And if I could just quickly switch gears from sotatercept to I guess next week for ESRD. When you guys think about let's for argument sake say sotatercept is developed only for its affect on bone. What should we be thinking about as far as the endpoints are concerned and what would be some of the challenges the drug might face in uptake in the nephrology community? Thanks.

[John L Knopf:]

Yes. Maybe I can take the first part of this and then maybe Steve talk about more from the commercial perspective. But again, when you talk about only developing it for bone, you're referring to both the effects on bone and vascular calcification or just if there was only activity on bone alone?

[Mike King:]

Well, I guess the way to look at it would be yes, those are fair. Just apart from its effect on red blood cell then.

[John L Knopf:]

Okay, yes. Again, we're excited about its potential for the effect on bone because we've seen very robust increases in bone mass in all the studies we've done, in particular a number of pre-clinical studies even in rodents as well as primates. And then again, robust activity in humans where we saw about a 3% increase in bone mineral density over a short period of four months. Now as pointed out in the data presented in the abstract, we've seen basically a net 3% increase in cortical bone density over the seven month period. So, that's I think consistent with what we've seen in healthy volunteers and particularly in this highly diseased population. So, we feel very good about the potential to correct bone based on all the studies we’ve done so far. And then sort of by inference, we feel good about the potential to influence vascular calcification because of the very close correlation of bone loss and the development of vascular calcification in diseases even outside of CKD. So for example, just in osteoporosis, again very close correlation with the rate of bone loss and the rate of development of vascular calcification. So on that side, we feel very good about the potential here. It may take a bit for us to be able to demonstrate this clearly and acquire enough patients treated over a long period of time to provide really compelling data, but we and Celgene are certainly excited about it, hence our plan to initiate this 240-patient study. Now the second part of your question, in terms of how this would be adopted by the community and some of those issues, I’d certainly encourage you all to listen to Ravi Thadhani’s call that we had about a week ago. Ravi is the Head of Nephrology at Mass General Hospital and he discusses this in some detail. We also plan to put the transcript on our website as well. Let me turn it over to Steve and he can talk to you a little about the commercial aspects here.

[Steven D. Ertel:]

Mike, it’s Steve. So in terms of the commercial uptake, as John described, we and Celgene are looking to create a differentiated product which affects on bone and vascular calcification not simply to replace a pure anemia product. And we think that can create some opportunities for differentiated treatment in terms of how it would be reimbursed within the bundle. Of course, it’s a little premature to talk about that. But it should be noted that a bill passed just this year, specifically requires CMS to come up with guidelines for new innovative therapies to reflect the incorporation of such products within the bundle. Of course, that wouldn’t be the case for any new product that is approved that is considered to just be a replacement or a better version of an existing product within the treatment algorithm; be it a new way to treat anemia, a new way to treat hypophosphatemia, what have you. That wouldn’t likely lead to CMS to require any change to the prospective payment system, but something that does something clinically distinct could require that re-evaluation of the prospective payment system to reflect the incorporation of new product.

[Unidentified Analyst:]

Great. Thanks for the comprehensive answer.

[Operator:]

Thank you. Our next question is from Andrew Berens of FBR Capital Markets. You may begin.

[Andrew Berens:]

Hey guys, thanks for taking the question. Sorry, if somebody asked this. But I just when I look at the MDS data for Revlimid and then also the MDS data that you guys are presenting, what stands out I guess is that Revlimid has a pretty good effect, but it doesn't seem durable potentially. And I guess what I'm asking is, and we had talked to Celgene about this, is there a possibility that we could see a trial done where it's that therapy with Revlimid plus TGF-beta?

[Steven D. Ertel:]

Hi Andy, it's Steve Ertel. Again, if folks could bear with us just a few weeks until we get to ASH, I think it will become more apparent when we present a lot of this data in terms of where we intend to go next. We are of course thrilled to be working with Celgene. They know more about the MDS treatment algorithm, the opportunity and unmet need for new therapies here than anyone in the world. We are in active discussions with them in terms of what the next study will look like, but we're just not yet ready to share with you what that study design will be. But again, we hope to do that relatively soon.

[Andrew Berens:]

Okay. And then in the 5q deletion patients that Revlimid is used in, EPO is still used ahead of Revlimid or what is the dynamic in that subgroup?

[Steven D. Ertel:]

Yes. That's right. So in both 5q and non-5q, many hematology oncologists do start treating their patient within ESA even before Revlimid in 5q-minus patients to see if they can get a response before moving them on to Revlimid, which is clearly shown to be a highly active agent in del-5q and where it's currently approved. So, presumably that is because of the safety profile of ESAs make it appropriate to slot in as a first line treatment to see if there is a response. Admittedly, the response rate is somewhere around the 43% range. But nonetheless, they do try it even before Revlimid in many cases in the 5q-minus patients.

[Andrew Berens:]

And then what happens when they start Revlimid, do they discontinue the EPO or do they keep going?

[Steven D. Ertel:]

In many cases they discontinue the IPO, in some cases they may continue to use both.

[Andrew Berens:]

Okay. So your hope is I guess that the TGF-beta compounds will be at least as effective and have a similar or better safety profile for EPO and then you could slot that in ahead and then possibly use the same, is that kind of the where we should think about those.

[John L Knopf:]

That's one of the options we're talking about.

[Andrew Berens:]

Okay. Thanks for the questions, appreciate it.

[Operator:]

Thank you. We have a follow-up from Mike King of JMP Securities. You may begin.

[Mike King:]

Thanks for obviously keep it quick. On the extension study, have you guys thought about the frequency with which you will provide data readouts from that or is it just going to be when it's done?

[John L Knopf:]

Steve you want to take that please.

[Steven D. Ertel:]

Yes, we haven't yet developed the disclosure plan in terms of when we could share data from the ongoing safety extension studies, but we generally like to disclose those results at major medical meetings. So, that’s a reasonable place to expect us to disclose data in the future.

[Operator:]

Thank you. I’m sure no further questions at this time. I would like to turn the conference back over to John Knopf for closing remarks.

[John L Knopf:]

I’ll thank you everyone for participating this morning and we look forward to updating you in the future.

[Operator:]

Ladies and gentlemen, this concludes today’s conference. Thank you for your participation. Have a wonderful day.