Acceleron Pharma Inc.
Q4 2015 Earnings Call Transcript

Published: 25 Feb 2016

[Operator:]

Good day, ladies and gentlemen, and welcome to the Acceleron Q4 and Year End 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. [Operator Instructions]. As a reminder, this conference is being recorded. I’d like to introduce your host for today's conference, Mr. Todd James. Sir, please begin.

[Todd James:]

Thanks, and welcome everyone to Acceleron's fourth quarter and year-end 2015 earnings conference call. The press release reporting our financial results in addition to the presentation for today's webcast can be accessed by going to the Investors and Media section of the corporate Web site at www.acceleronpharma.com. On the call today with prepared remarks 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-K 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 achieved several major accomplishments during the year, which demonstrate the accelerating growth trajectory of the company and I’m excited to say that as we look to the milestones ahead of us, our teams fully intend to keep up this pace of solid performance in 2016. Starting with luspatercept, we recently initiated two Phase 3 trials with our collaboration partner Celgene. The MEDALIST study in myelodysplastic syndromes or MDS and the BELIEVE study in beta-thalassemia are now underway. This is an exciting achievement for the collaboration and a proud moment for Acceleron as luspatercept is our first internally discovered product candidate to enter pivotal studies. We are thrilled to have two distinct Phase 3 programs underway, to have both of these programs ongoing and parallel establishes a clear path for Acceleron to become a fully integrated research development and commercialization organization consistent with our stated corporate vision. As reported in late 2015, we and Celgene have broadened our ongoing Phase 2 studies in MDS and are enrolling additional cohorts to evaluate luspatercept’s efficacy in both ESA treatment naïve or ring sideroblast negative lower risk MDS patients. Success in either of these patient populations would open the pathway for further expansion of a significant market opportunity for luspatercept in MDS. Turning to the dalantercept program, we continue to enroll patients in Part 2 of the Phase 2 DART study of dalantercept in combination with axitinib in patients with advanced renal cell carcinoma. Data from Part 1 of the study showed encouraging median progression free survival of 8.3 months across all three-dose levels tested. We expect to report top line results from the randomized, double-blind, placebo-controlled Part 2 stage of the study by the end of 2016. If we are successful in this study, this represents an opportunity for another Acceleron discovered molecule to enter Phase 3 clinical trials in 2017. For the sotatercept program, we and our partner Celgene are assessing the opportunity in pre-dialysis chronic kidney disease patients. We expect to have an update on our plans with this program in the latter half of this year. For our fourth clinical program, ACE-083, our locally acting muscle agent, we completed enrollment in the Phase 1 study. We’re proud to report on the advancement and expansion of our diversified pipeline ranging from the luspatercept Phase 3 program to the encouraging ACE-083 Phase 1 muscle program. We continue to treat both MDS and beta-thalassemia patients in their respective long-term Phase 2 extension studies with luspatercept. We are pleased that data presented at ASH in December confirmed and extended previously presented results by showing encouraging responses for longer treatment durations. These results were well received at the conference building momentum for our pivotal Phase 3 studies. For ACE-083, our investigational therapeutic candidate designed to selectively increase muscle mass and strength in the muscles into which it’s administered, we reported exciting Phase 1 data. These results led to a late breaking clinical trial session oral presentation at the International Conference on Cachexia, Sarcopenia, and Muscle Wasting in Paris. We anticipate presenting new Phase 1 data later this year as well as initiating a Phase 2 trial in facioscapulohumeral muscular dystrophy or FSHD in the second half of 2016. On the regulatory front, we received Fast Track Designation from FDA for luspatercept in both MDS and beta-thalassemia, and for dalantercept in renal cell carcinoma. Our discovery team at Acceleron also made huge strides in 2015 in its efforts to expand our pipeline of internally discovered wholly owned clinical stage programs. We presented preclinical data at ASH in myelofibrosis with ACE-1332. Our research teams’ work also led to the introduction of a new discovery platform called IntelliTrap capable of creating an innovative portfolio of targeted product candidates. From the IntelliTrap platform, we have already characterized several therapeutic candidates with the potential of moving into the clinic. We expect to submit an investigational new drug application for ACE-2494, a systemic muscle therapeutic derived from the IntelliTrap platform by the end of 2016. We will continue to expand the number of preclinical research programs in development with plans to bring a new internally discovered therapeutic candidate into the clinic every 12 to 18 months. John will discuss our preclinical pipeline and the IntelliTrap platform in more detail later in the call. We continue to leverage our manufacturing expertise to support our expanding development pipeline. We have successfully transferred the luspatercept drug substance and drug product processes to contract manufacturing organizations in support of Phase 3 and commercial supply. As you can see from this slide, we are building a robust pipeline comprised of partnered late-stage Phase 3 programs and fully owned preclinical Phase 1 and Phase 2 programs. We expect to have a steady flow of news to report across these programs in the coming year. With four programs currently in the clinic and the anticipated filing of an IND for our fifth candidate by year-end, we are on track to achieve our objective of eight distinct therapeutic candidates in clinical trials by 2020. With that, I will turn the call over to Matt Sherman, our Chief Medical Officer, to provide an update on our clinical programs.

[Matthew L. Sherman:]

Thanks, Steve. In my discussion today, I’ll review the important advances we’re making across all of our clinical programs. Starting with the late-stage luspatercept studies, Celgene initiated Phase 3 trials in both MDS and beta-thalassemia at the end of 2015. This is a landmark event for Acceleron bringing us closer to realizing our goal of becoming a fully integrated biopharmaceutical company. First, let me quickly review the study designs of each of these programs. In MDS, the Phase 3 MEDALIST study has begun enrolling 210 patients with very low to intermediate risk ring sideroblasts positive MDS who require regular red blood cell transfusions. Patients are being randomized 2 to 1 to luspatercept versus placebo. Patients will either have previously failed treatment with an erythropoiesis-stimulating agent often referred to as an ESA or are considered ineligible to receiving ESA since they are unlikely to respond. The primary efficacy analysis, which is consistent with previous registration studies, is red blood cell transfusion independence of six months with a secondary analysis evaluating the duration of response. In beta-thalassemia, the Phase 3 BELIEVE study, which will enroll 300 patients who require regular red blood cell transfusions has been initiated. The study is a randomized, double-blind, placebo-controlled design. The randomization will be 2 to 1 in favor of luspatercept. The endpoints used in the Phase 3 BELIEVE study are based on positive Phase 2 results with the primary efficacy endpoint being the proportion of patients who have reduction of red blood cell transfusions of at least 33% at the end of six months. As a secondary endpoint, patients will also be analyzed at 12 months to establish their durability of the effect. As Steve mentioned, we and Celgene presented positive data from our ongoing luspatercept Phase 2 base and long-term extension studies in both beta-thalassemia and MDS at ASH in December. This slide covers just a few of the highlights from ASH. In MDS, we reported that 42% of patients with high-transfusion burden achieved transfusion independence for eight or more weeks. 69% of patients with low-transfusion burden achieved hemoglobin increases greater than or equal to 1.5 grams per deciliter for at least eight weeks. If we look at both the high and low transfusion burden patients valuable for transfusion independence, 50% of patients achieved transfusion independence. The longest-treated patient remains transfusion independence out past 50 weeks. In beta-thalassemia, 75% of transfusion dependent patients experienced the reduction of transfusion burden of 33% or greater after treatment with luspatercept. 47% of non-transfusion dependent patients achieved increased hemoglobin levels. The longest-treated patients showed their hemoglobin increases were maintained for nearly six months and we continue to follow these patients as part of the extension study. Data also showed improved health-related quality of life measures and beneficial effects on liver iron concentration. Now let’s turn to ACE-083, our locally acting muscle agent developed by Acceleron scientists to increase muscle mass and strength. We recently reported data on a Phase 1 study in healthy volunteers. This study is a double-blind, randomized, placebo-controlled, dose-escalating trial that evaluated the safety and tolerability of a single dose or two doses of ACE-083 as a local muscle injection. An initial five cohorts of subjects received either ACE-083 or placebo injected into the right rectus femoris muscle of the quadriceps. As we previously announced, administration of ACE-083 generated dose-dependent increases up to a 14.5% mean increase in muscle volume in treated subjects. This far exceeds increases in muscle volume 2% to 8% achieved with other investigational therapeutic agents. As a result, we expanded our Phase 1 study to explore its effects in other muscle groups and we plan to advance ACE-083 into a Phase 2 study in facioscapulohumeral muscular dystrophy or FSHD in the second half of this year. FSHD is a form of muscular dystrophy that affects approximately 19,000 people in the U.S. Nearly all individuals become symptomatic as adults. These patients have a high-unmet medical need with no approved therapies. FSHD is characterized by focal muscle loss. As such, administration of a locally acting agent like ACE-083 may be desirable. Beyond FSHD, there’s a wide range of diseases and disorders for which a locally acting muscle agent maybe beneficial. I’ll now turn the presentation over to Kevin McLaughlin, our CFO, to discuss our financials.

[Kevin McLaughlin:]

Thanks, Matt. Before discussing year-end numbers, I would like to highlight the equity financing that we completed at the start of 2016. The common stock offering for $150 million provided net proceeds to the company of $140.4 million. The financing was oversubscribed and we were able to place the shares with new and existing institutional shareholders. These proceeds, in addition to our year-end cash position of $136 million, put us in a strong financial position of having sufficient cash to fund the company’s operations into the second half of 2019. As a clinical stage biopharmaceutical company, we remain focused on how we invest shareholder capital. We plan to maintain our financial discipline of being a highly capital efficient organization. Even with four therapeutic candidates in clinical development and a robust and productive research and manufacturing organization, our 2015 net cash used in operating activities was just $44.2 million. Our collaboration with Celgene fully funds all costs that are associated with our luspatercept and sotatercept programs. For dalantercept in RCC, we plan to establish a strategic collaboration to fund this continued development after we analyze the Phase 2 results. Collaboration revenue for the fiscal year ended December 31, 2015 was $18.1 million including license and milestone revenue and cost sharing reimbursement derived from the Celgene agreement. Total cost and expenses for the year were $79 million including R&D expenses of $58.4 million and G&A expenses of $20.6 million. The company’s net loss for the year was $63.9 million. I’ll now turn the presentation over to John Knopf, our CEO.

[John Knopf:]

Thanks, Kevin. As you just heard, 2015 was a productive and important year for Acceleron. We advanced luspatercept into the final stages of clinical trials in two indications and have a growing pipeline of innovative, wholly owned product candidates. As Kevin mentioned, the January financing puts us in a strong position to invest in our future with a long-term view. Our luspatercept and sotatercept programs being fully funded by our partner Celgene enables us to focus our financial resources on advancing our wholly owned pipeline. This includes advanced ACE-083 into Phase 2 studies moving ACE-2494 into the clinic and continuing to leverage our IntelliTrap platform to identify new candidates for development. Further, our productive research and development teams expect to have one new compound to enter the clinic every 12 to 18 months with a goal of having eight unique therapeutic candidates in clinical development by 2020. This is an ambitious goal, yet one that we are optimistic we will achieve and in the process create enormous value for Acceleron. We continue to follow the science within our research organization to identify molecules for lead candidate prioritization and clinical advancement. Beyond our current lead candidate, ACE-2494, we already have several additional preclinical programs targeting high-unmet medical need areas involving muscle diseases and fibrosis. We view muscle disease as a high-unmet medical need with a large market opportunity across multiple rare and common muscle wasting disorders. As you heard from Matt earlier, ACE-083 is a therapeutic candidate for treating diseases of focal muscle loss. It is the first molecule within a differentiated muscle portfolio that we are developing at Acceleron. ACE-2494 and ACE-3891 are our lead candidates for systemic treatment of muscle wasting. We are excited about the potential for ACE-2494 and it’s just the first molecule from our IntelliTrap platform. ACE-2494 selectively binds myostatin and other regulators of muscle mass. Preclinical data in mice were presented at the World Muscle Society Congress in the fall showing that after four weeks of treatment, ACE-2494 generated substantial increases in muscle mass of 53% in the gastrocnemius, 41% in the rectus femoris and 87% in the pectoralis. We are currently conducting IND-enabling work and remain on track for IND submission by year-end. We are building a spectrum of agents that target diseases with a fibrotic component. These diseases occur in a variety of tissue types including the bone marrow with myelofibrosis, in the lungs with IPF and PAH and in the liver with NASH. We have already presented initial promising data from animal models of fibrotic disorders from the bone marrow and lungs. Similar to our approach in muscle, we are screening a full diversity of our TGF-beta ligand and receptor antagonist and we’ve identified multiple biologic agents that are showing activity across animal models of fibrosis. At ASH, we presented data from our lead fibrosis candidate ACE-1332. In a mirroring model of myelofibrosis, ACE-1332 ameliorated many of the effects of the disease. ACE-1332 treated mice, displayed a 29% reduction in spleen weight and a marked reduction in fibrosis in bone marrow and spleen sections compared to vehicle. Consistent with this reduction of fibrosis, ACE-1332 treated mice, displayed Interleukin-6 levels reduced by about 50% compared to vehicle treatment. Turning to near-term news flow, 2016 is shaping up as another productive and exciting year for the company. We plan to report Phase 2 trial results in MDS including results from new patient cohorts who are RS negative and ESA treatment naïve later in 2016. We’ll report additional long-term data in beta-thalassemia with luspatercept. We also plan to report data for dalantercept in combination with axitinib in renal cell carcinoma by year-end. For ACE-083, we plan to report additional Phase 1 study results and initiate a Phase 2 trial in FSHD, our initial indication with this local muscle agent. We also look forward to moving ACE-2494 into the clinic with an IND submission planned by the end of 2016. As we mentioned earlier, this will be the first compound to enter the clinic from a new IntelliTrap platform. Finally, we are looking forward to updating you on our plans for sotatercept in the second half of the year. I’ll conclude today by looking ahead. As you have heard, we have significant product plans that build on our successes to-date. Our goals over the next four years include approvals in up to five indications, multiple ongoing Phase 3 studies, eight candidates in the clinic and established Acceleron sales and marketing organization, and with all of that we aim to become cash flow positive. These are ambitious goals but we believe we have the team, the strategies and the momentum to achieve this. I want to thank you very much for your attention, and I would now like to open the call to questions.

[Operator:]

Thank you. [Operator Instructions]. Our first question is from Mike King of JMP Securities. Your line is open.

[Michael King:]

Good morning, guys. Thanks for take the question and congrats on all progress in 2015. I had a couple of quick questions but let me just focus first on cash, the guidance for second half of '19 includes all of those named molecules in the pipeline or just how many of those does that account for?

[Steven Ertel:]

Hi, Mike. This is Steve Ertel. First of all, thanks for your first question. Yes, our cash flow guidance into the second half of 2019 assumes that we fully fund all new programs coming into the clinic on that 12 to 18 months IND introduction schedule that we mentioned.

[Michael King:]

Okay, thanks for that. And then on sotatercept, I guess there’s been about a phase shift there for one half from first half of '16 that you had mentioned at your R&D day in October, this second half. Is that just because of prioritization of other things in the pipeline or is this because of whatever, discussions between you and Celgene, you and the agency, all three of you put together?

[John Knopf:]

Hi, Mike. This is JK. I don’t really think there’s been any shift. I think we maybe said we would expect to update you on our discussions with the regulators this summer. And I think now we’re just saying that we would come out with distinct plans sometime in the second half of the year, so I think no real inconsistency there.

[Michael King:]

Okay, all right. Thanks for clarifying. And finally, I just wanted to ask you on both the Phase 3 trials, will you be able to provide us with your thoughts on completion – the timing of the completion and enrollment or if you’re not willing to do that, will you at least inform the investment community at the time that those respective trials have reached full enrollment? Thank you.

[Steven Ertel:]

Hi, Mike. This is Steve Ertel. I’ll take that one. So as you probably know, Acceleron has been and continues to run luspatercept Phase 2 trials in MDS and beta-thal. And I think we developed a reputation, which we’re proud of, that we are among the most forthcoming and transparent with both data on the progress of the trials as well as the data that’s been generated from these studies. And essentially every post and oral presentation we’ve given in its entirety is available on our Web site for everyone to see. Regarding the Phase 3 studies, Celgene is running both the MEDALIST study in MDS and the BELIEVE study in beta-thal. And Celgene generally does not give updates on the enrollment status of its ongoing studies. We do have a great relationship with Celgene, in part because we respect and understand each other’s approach to communicating with investors. So bottom line is at this time, we can’t give you any more information beyond what we’ve already said. It is our goal to work with Celgene over the course of the year to provide you with some additional insight into the expected enrollment timelines, just can’t do so at this time. So I hope you understand that.

[Michael King:]

Thanks very much.

[Operator:]

Thank you. Our next question is from Seamus Fernandez of Leerink Partners. Your line is open.

[Richard Goss:]

Hi. This is Rich Goss calling in for Seamus. Thanks for taking my question. Just with dalantercept, can you remind us where you are in HCC and when we should expect new data? Thanks.

[Matthew L. Sherman:]

Hi, Rich. This is Matt Sherman. So regarding HCC, we’ve concluded the trial and the activity that we have seen has not reached our level of activity that has warrant further development of the drug. Unlike RCC where we saw very robust activity in the open label part of that trial, so allowed us to move on to the randomized Part 2 of the RCC study, which we hope to update folks at the end of this year.

[Richard Goss:]

Okay, great. Thank you.

[Operator:]

Thank you. Our next question is from Ed White of FBR and Company. Your line is open.

[Ed White:]

Hi, guys. Thanks for taking my question. Just with the Celgene collaboration, I think many of us were expecting a milestone payment in the fourth quarter. Should we expect to see that payment in the first quarter of this year with the initiation of enrollment?

[Kevin McLaughlin:]

Hi. This is Kevin McLaughlin. So as you know, we don’t give quarterly guidance. We certainly have that in our long-term cash guidance though.

[Ed White:]

Okay, thanks. That’s the only question I had.

[Operator:]

Thank you. Our next question is from Kennen MacKay of Credit Suisse. Your line is open.

[Kennen MacKay:]

Hi. Thanks so much for taking my question. First, I guess one for Matt. I was wondering in the ACE-083 update later this year if we’d see functional muscle assessments or if this would just additionally be sort of increases in muscle size?

[Matthew L. Sherman:]

Hi, Kennen. It’s our plan for 083. As you know from the site design that we reported very robust data in the first five cohorts in the rectus femoris muscle and we have moved on to muscle in the lower leg, the gastrocnemius [ph], which we also expect to have data this year showing changes in muscle volume as we’ve measured by a MRI scan.

[Kennen MacKay:]

Okay, got it. And then additionally just on dalantercept quickly. It sounded like on the call you had mentioned starting a Phase 3 if the DART 2 data sort of warrants that. And I was wondering sort of what the communication has been with the FDA to-date given that you guys have Fast Track there? And if there was still any sort of potential for an accelerated approval pathway there?

[Matthew L. Sherman:]

Yes, I think here we really would expect that the standard development plan would be once we have the data from the blinded Phase 2 study, and we will have that data this year. Then we’ll use that data to plan, size and initiate a Phase 3 study.

[Kennen MacKay:]

Okay, got it. And then maybe just one for Kevin. I was wondering if you could just help us think about expenses a little bit moving forward given that the Phase 3s are going to be fully funded by Celgene. So just in terms of thinking about what sort of the base R&D is for you guys, could we sort of think about removing the reimbursement from Celgene from your R&D to maybe get to sort of a base level of around 40 million, or how should we be thinking about that moving forward?

[Kevin McLaughlin:]

Thanks, Kennen. As you know, we continue to run extension studies with Celgene, so the cost of those studies that we are responsible for and the reimbursement of those studies at 100% will continue. So I can’t give you specifics on our baseline R&D spending. What I can say, however is, is that obviously we’re very efficient with our cash used in this year. We expect that to continue as we go forward. But our burn rate will grow a bit as we continue to put more of our programs into the clinic, develop more programs with our IntelliTrap platform, and obviously as we push forward as a company that’s growing and making progress on all fronts. So, I think that you’ll see that our – I think that our cash guidance of the second half of '19 given our pro forma at the end of the year with those [indiscernible] of about 270. I think that’s pretty efficient and we’ll continue to operate in that fashion.

[Kennen MacKay:]

Okay, terrific. That’s it from me. Thanks so much for taking the question and congrats on the progress.

[Kevin McLaughlin:]

Thanks.

[Operator:]

Thank you. [Operator Instructions]. Our next question is from Roy Buchanan of Janney Montgomery. Your line is open.

[Roy Buchanan:]

Hi. Thanks for taking the questions. I had a couple on luspatercept. I’m trying to get a good handle on the proportion of MDS patients that could be ring sideroblasts positive and we’re coming almost slight of variability in the number. Can you guys give us a sense of what you’re seeing internally for that patient population? And then is there any evidence that the ring sideroblasts play a role in progression to AML or is it more of a biomarker?

[Steven Ertel:]

Hi, Roy. This is Steve Ertel. So those MDS patients that are ring sideroblasts positive, if we look at lower risk MDS patients and there’s roughly 100,000 lower risk MDS patients in the U.S. and Europe, according to the literature we believe there’s roughly 50% of those patients of the lower risk patients who are RS positive. There’s also data in the literature that being ring sideroblasts positive is a positive prognostic marker for a reduced risk of progression to AML.

[Roy Buchanan:]

Okay. Do you think that’s mechanistic or is it biomarker or you don’t know?

[Steven Ertel:]

I don’t know the underlying cause, just know what’s been reported with patients who are RS positive and the risk of progression to AML.

[Roy Buchanan:]

Okay. And then I had a quick question on sotatercept in CKD. Might be a little early, but wonder if there’s any concern of raising the hemoglobin too much if they are on EPO already, is it an issue of titration and do you guys have any insights on that? Thanks.

[Matthew L. Sherman:]

Hi, Roy. It’s Matt. So in our studies that we’ve had that is an ongoing in the end-stage renal disease patients, we’ve been able to titrate the dose appropriately so that the changes in hemoglobin have been appropriate for those patients and we expect that we fully understand the pharmacodynamics of the drug that that would not be a problem in CKD patients.

[Roy Buchanan:]

Okay, great. Thank you.

[Operator:]

Thank you. At this time, I see no other questions in queue. I’d like to turn it back to Mr. Knopf for any closing remarks.

[John Knopf:]

I would just like to thank everyone for their participation today and their support.

[Operator:]

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