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Endocyte, Inc. (NASDAQ:ECYT)

Cowen and Company 33rd Annual Health Care Conference

March 05, 2013 9:20 am ET

Executives

P. Ron Ellis - President and CEO

Analysts

Simos Simeonidis - Cowen and Company

Simos Simeonidis

We'll go ahead and get started. Hi everyone. Thank you for joining us for this session. My name is Simos Simeonidis. I'm one of the senior biotech analysts at Cowen, and it is my pleasure to introduce one of the companies that I cover, Endocyte. Endocyte is a company focusing in the oncology space. Their lead asset, vintafolide, is in Phase 3 trial PROCEED in ovarian cancer patients. So this drug has produced very impressive efficacy in two randomized Phase 2 trials, in ovarian cancer and non-small cell lung cancer, and is currently under European regulatory authority to review for approval with a decision expected around year end this year. So it's my pleasure to introduce the Company's President and CEO, Ron Ellis.

P. Ron Ellis

Thanks Cowen for the invitation to come and present. I'm told if I go short then I get lots of questions from Simos, so we may go a little long.

Okay, to just give you kind of an overview about the Company, we're in this space called small molecule drug conjugates, we have really the top researchers in this area and a very impressive patent portfolio. As Simos indicated, and I'll show you a little bit of this, we had some very promising data with our lead molecule called vintafolide, and that compound is under EU conditional marketing review now for early approval based on that very encouraging data.

One of the very unique parts about Endocyte technology is the way we personalize medicine using companion imaging agents. I'll talk a little bit about that, but it's a really very powerful way of selecting the right patients for the therapy and it does make a big difference in terms of patient outcomes. Last year, we announced a large partnership with Merck. I'll talk briefly about that. We've been very, very happy in working with Merck as both the companies get ready for our European launch and expand the number of indications that we're testing the lead molecule in. And at the end, I'll take just a couple of minutes and give you kind of a preview of some of the additional compounds that you can look forward to seeing data on that we're developing.

The idea of the technology is really very simple. We look for drugs that we know have activity but they are far too potent to be able to be dosed effectively. The more potent the drug is, really the more we like it. We make conjugates out of those by attaching them to small molecules. So, we'll talk about this later but these have very small molecular weights, which we think and seeing is very important in terms of being able to penetrate solid tumors.

Then the other key component of it is that we can take the red part off the drug, which is the warhead or the drug that we are delivering, and we could attach an imaging agent, and that gives us the ability to take a full body scan of the patient. As is shown here on the right, this is someone who has ovarian cancer and all the green and the yellow is where we're targeting the receptor at the small molecule drug conjugate. So we can really select patients using imaging agent which has a lot of advantages.

The imaging agent, which goes along with the vintafolide or the lead molecule, is called etarfolatide, and what you're seeing here is a picture of a woman again who has ovarian cancer. This is her pelvis, you see this bright spot. This is the receptor we're targeting there, it's called the folate receptor, and this imaging agent or imaging scan is telling us that that tumor is very positive. You can see it's lit up and so we know, it has a receptor and we're targeting that.

Since we can look at the entire body, we can stratify patient or categorise patients based on their level of positivity. This is important as I show you the clinical data, but there'll be patients in ovarian cancer, it's roughly 20%, who have none of their target lesions that are positive. So, if a woman may have four or five, up to 10 lesions, they are all negative, no uptake. Of course those patients are not going to respond to therapy because our therapy molecules are not going to hit those tumors.

There are another group of patients who are mixed. They have some positive and some negative, and then the most positive group we call the FR(100%), where all the lesions show uptake with the imaging agent just as if I made the correlation, but the imaging agent goes to the exact same place as the therapeutic. So, if the imaging agent doesn't go there, then the therapeutic is not going to reach there. It tells us exactly where the therapeutic agent is going to go.

So, in our Phase 2 study, when we treat with the small molecule drug conjugate, or vintafolide, this is a randomized study where we combine with PLD, which is doxo, versus doxo alone, but we're not selecting patients using the imaging agent, see the hazard ratio in this study and was the first randomized study in this patient population, which is platinum resistant ovarian cancer, to ever show a benefit in extending progression, and the benefit was statistically significant.

So, by just using the therapeutic, we're starting to see results in cancer types that we have never been able to see positive results in before. I think what was more interesting or more important is that we would expect that if we used the diagnostic to select the patients that are most positive, the FR(100%), then you can see that the improvement almost doubles, the hazard ratio goes from 0.626 down to 0.381 and the other measures were all more positive in this group. This FR(100%) group is the group that we're filing for approval in Europe, or conditional approval in Europe.

The mechanism for using the imaging agent along with the therapeutic data is very strongly repeated in this and multiple clinical studies. We even showed at individual lesions. So each of these bars represent a tumor in multiple patients, and you can see the red are FR negative lesions, so they don’t have the receptor and you can see we treat them with the therapeutic, as indicated by the bar going down, there's really no effect. But when we treat these tumors that are positive, we see an effect. So clearly the mechanism supports what the imaging agent predicts, which patients are going to respond. This is another study which we did in lung cancer, those end-stage lung cancer, you see the exact same correlation, the FR(100%) grew for those that are all positive, both in PFS and OS had significantly different better results than you did if you were not fully positive.

The other evidence for the targeting of the compound is the safety profile. So the warhead that we're delivering here is – actually an old drug that Lilly had developed and taken into clinic back in the 90s, and it was just too toxic to deliver. It's off-patent and so we synthesized and attached it, and you can see, once we target that, that we see almost no toxicity or very little toxicity, there's no grade 4s, no grade 3s, the highest is fatigue at about 6% of the patients. So, it's a very well tolerated drug as evidenced by its specificity and targeted just to the tumor cells – to the cancer cells, not to normal cells.

The lead molecule targets, what we call the folate receptor, we don't spend a lot of time on that, we could maybe just sum it up on Q&A if you have questions, but the folate is required for cell division and so these rapidly dividing cancer cells up regulate this receptor to build the support growth, and there is a high number of cancers – many cancers that over express this receptor. At the end of this year, we'll have randomized studies going in ovarian, lung and breast cancer, and you'll see more as Merck progresses forward with the compound.

The Phase 3 study which Simos mentioned as ongoing is really the same design as our Phase 2 study of the same comparators. It will be double-blinded to primary endpoints on PFS. It's well powered to see a very significant hazard ratio on PFS with a 92% power. And we announced last week that Merck is going to be paying for what's called an extension of the study, so the ability to add additional patients, if the data warrants it, to increase the power for overall survival.

Now, it's important here is that we don't need these extra patients for PFS, we're well powered for that, but the extra patients would make it more robust OS analysis. Let me just show you how that works, there's been some questions about that and how that additional 100 patients would be added. So, when we complete enrolment of its roughly the 250 of patients, and these are only the FR(100%) patients, these are patients whose all tumors are positive, and the DSMB will look at the data and they have three choices. One, they can stop for futility, which means we miss the primary endpoint of studies done. They can also stop for efficacy. That would mean we met both PFS and OS and they just don't feel it's ethical to continue to enrol the study. The other option is to add an additional 100 patients. This is only the FR(100%) patients. They would not go to a PFS analysis, they would only go to OS, and that would extend the trial by about 9 to 10 months. This will give us 350 patients for the OS analysis which we think is important as the drug moves through this ovarian cancer study.

So let me just take a couple of minutes and then talk about the Merck-Endocyte development partnership. This was signed last year in April. We had a large $120 million upfront payment, goods over $1 billion in commercial, and development milestones. It's a double-digit royalty outside the U.S. and Endocyte has a co-promoter in the U.S. on U.S. approval. One of the really interesting or important parts of the partnership is that besides the ovarian study, where we pay the majority of the cost, Merck pays all other development costs. So, all our costs in lung and breast and any other indication are fully funded by Merck. We don't have to share in those costs, which is a little bit unusual given that we have a co-promoter in the U.S.

So we have with Merck filed for a conditional approval that was in November, and in November it was accepted. This is for FR(100%) patients and platinum resistant ovarian cancer. We're in full launch mode in the EU, we have done some research with physicians where the 85% of those physicians attempted to prescribe the molecule based on the Phase 2 data, so it was a very high acceptance rate. I think it largely indicates the real need in platinum resistant ovarian cancer plus the strength of the data.

We have people on the ground already in launch mode and by the end of 2013, we announced Merck is going to be expanding the indications from ovarian to lung which are ongoing right now to a third indication in triple negative breast cancer. They also have a study where they're looking at safety and combination of platinum and (indiscernible).

So, one of the reasons we did the Merck partnership was because we felt like Merck would be committed to the molecule and accelerate the development, and that has held true, as it expands in the multiple indications rapidly and supported both the launch and filings in Europe.

So let me just touch real quickly on a couple of the other molecules to look forward to. The deal with Merck is a single compound deal, and so there are other molecules that we are developing and are on the same platform. Now this is a very modular platform, we can change out the drug payload and put different warheads on it, we can make those in the imaging agents, so we can predict which patients are going to respond, and one of the important elements of the SNDC platform is that these are very small molecules, molecular weight is usually less than 3000.

Just to illustrate why that's important, the graph on the right is a study where we took one of our ligands, a folate receptor ligand, and we attached a high molecular weight molecule to it, about 20,000 molecular weight, and antibody drug conjugates have molecular weight of about 150,000, just to give you kind of some sense, and we looked at tumor uptake and can see over 65 minutes, there was very little uptake. Then in the same manner, we injected a small molecule, to the size of the therapeutic molecules we have, and you see the significant increase. So, when you're trying to treat solid tumors, we think having these very small molecules would just deliver more drug into the tumor because they're better able to penetrate those very tight spaces in those very solid tumors.

So the next molecule you'll hear about is called folate tubulysin. Again it targets the same receptors. The molecule is licensed to Merck. We're excited about the compound. Tubulysin is a much more potent warhead than the vintafolide molecule, and this just shows that the blue line is the tubulysin [at Mtb] (ph) you can't dose this, the dose is so potent, so toxic that we can't dose it, you need to have any effect of molecules since there is no therapeutic index. But when we link it to a targeting ligand to make the small molecule, we see really great preclinical results in multiple models.

Right behind that is a different – so that changes the warhead, this one changes the targeting ligand. So, instead of targeting the folate receptor here, we're going to target PSMA which is on prostate cancer. The imaging agents are already in clinic right now and so we're validating targeting. This is an image from one of those patients and almost all those black spots are cancer that's expressing the PSMA. So we've validated that the targeting ligand delivers to the right place and then we'll put the tubulysin warhead on that and you can see on the right the animal data showing really nice preclinical response. So that will be in clinic early next year.

Then the last molecule, just to give you a flavor that we can move outside of oncology, this year we're targeting what's called an activated macrophages. These cells are very important in the inflammatory processes and we targeted a very potent anti-inflammatory agent to this cell. You can see this is an arthritis score we're comparing in the red to control the oral method (indiscernible) our molecules called 746.

Not only does it reduce the inflammation in the animals but it stops the bone erosion. This is really quite significant as you can see the pictures between the healthy untreated and treated animus that those who were treated have not nearly not a bone damage that had occurred in the untreated animals.

These macrophages are present in lots of different diseases, so there's many opportunities to expand this approach to knocking out these activated macrophages in a whole host of diseases, from rheumatoid arthritis to osteoarthritis and even transplant and some of the other diseases where these cells play a significant role in the disease progression.

We had a very strong financial position. We'll end the year just over $200 million in cash, plenty of money to fund the programs that we have, and given remember Merck is covering all the development expenses of vintafolide except for the ovarian study where they cover part but we cover the majority but they're picking up all the lung and all the breast cancer studies on the other indications. So that takes a significant burden off the company (indiscernible) free of cash to move those earlier molecules forward.

So I think just to wrap up with, we're very excited about these new molecules, this new approach to treating. Vintafolide and etarfolatide will be the first targeted drug in ovarian cancer if approved in the EU later this year, be the first approved targeted drug in ovarian cancer. In Merck partnership, we've been extremely pleased with it, it accelerates development, it's provided us the global commercial presence, and adds financial flexibility. There is some key milestones coming up in the next 12 to 18 months, one of probably the biggest is where we get conditional approval in the EU, we'll have randomized data for lung, a Phase 2 study, and then our Phase 3 ovarian study of data on, and then there'll be a couple of more compounds that would come in the clinic, and as I mentioned before, we ended this year with a very nice cash position.

So with that, we'll end and take some questions.

Question-and-Answer Session

Simos Simeonidis - Cowen and Company

Maybe I’ll open it up. What can you talk about your – what gave you comfort to file the European application (inaudible)

P. Ron Ellis

So the question was, really what gave us comfort to file for Europe conditional approval? There really was a process of multiple meetings with the EU regulatory authorities and there is actually a formal process you can go through to get the opinion from the EU on whether you can file for conditional approval. For those who aren't familiar, conditional approval is the same as accelerated approval in the U.S. And we went through that process with what's called the Scientific Advice Working Party, we submitted the briefing packet to them with all the data, and then asked the question, would this qualify as a conditional filing application, and they said, yes, it would qualify. Doesn't mean that we will get approval but it means they did want us to go ahead and file.

I guess the other thing Simos is, we've had I think last year probably over a dozen meetings with the repertoires on the filing just going through the data and getting the application prepared, making sure we covered everything that they wanted. So there's been a lot of back and forth during the whole process of getting the application ready.

Simos Simeonidis - Cowen and Company

There is no (inaudible) between the US and the European regulators on accepting applications (inaudible)? We know Europe is a lot more open to it given the specific disease and the US we don’t know; [Ovarian] [ph] is one of the areas where (inaudible.

P. Ron Ellis

Yeah, that's very true. When you look at, just as an example of what's happened in the past three for four years, there was this drug called the (indiscernible) that was licensed to J&J and they had positive PFS data in platinum sensitive, and there's other drugs approved for that. So there wasn't nearly as high a need and it didn't have an OS benefit. They were approved in Europe, they were not approved in the U.S. We know in the U.S. that OS will be more important and that's what's driven the additional 100 patients, is to have OS data, and we've always provided guidance that the study can get approved based on a PFS benefit only, but it would probably in the US be an accelerated approval, and we would need to do a second study to confirm that or we would need to show an OS benefit. So this study, PROCEED study with the extra 100 patients if done, could get us a full approval because we have a lot more patients for OS, but if it doesn't, we still have the opportunity for an accelerated approval.

Unidentified Analyst

(Inaudible)

P. Ron Ellis

Well, the first one took a long time, it took years, and the trouble was the real challenge was the linker. An imaging agent is not a problem because you don't want the imaging agent to come off. With the therapeutic, you want it to come off but only when it goes inside the cell. And so, we have lots of IP around this designing linkers that will stay stable in the serum or blood, and once entered that cell, into the [endocell] [ph], and they'll release that drug, and that took years of work to figure that out. Once we have – since we have now all these modules of different warheads and different linker systems, we can generate within 12 months probably a dozen or more different variations to optimize it, and then we can go into preclinical in about nine months after that.

Unidentified Analyst

Is there a strategy to work with other – there are a lot of (inaudible)small molecules where they have lots of data, are you pursuing that as a strategy as well?

P. Ron Ellis

It's a great question. I think the way to answer that is, when it makes sense. Of course then you're sharing economics because they have the warhead and we have – yes, so we have – there's enough of those compounds out there off patent and generic that we tend to stay with those, but as we move further along, we may entertain looking at targeting some other person's compound. But right now, all of them are fully owned by Endocyte. It was a good question to answer. Thanks.

Simos Simeonidis - Cowen and Company

Ron, can you go back to the (inaudible) slide and you showed (inaudible) the way you look at the (inaudible) 100 patients (inaudible) and you showed three outcomes; one of them is (inaudible) and the other two the trial is successful (inaudible) and the middle one I guess (inaudible). Can you distinguish between the two and tell us what’s different between these two successful outcomes (inaudible)?

P. Ron Ellis

Yes, that's a great question, and I'll give you an average answer. First off, both of those will only occur if PFS is positive, and the PFS analysis stands at 250. So we have a positive PFS study. Then the question is, do you add the 100 or not? I think probably – it's not exactly like this but what I think about it is, OS would need to be positive. You need to have both PFS and OS hitting or OS has such a strong signal that it really just ethically don't think adding patients is going to help it. Probably a safer way to think about it is, if both are positive, they just stop the study and say you're done. The extra 100 would really be there to get you a better P value on OS. There's some flexibility with the DSMB to look at data and of course that's what you have them for, is to look at that and make the right decision, but we’ve said– the guidelines for that is that we need to be very strong in OS.

Simos Simeonidis - Cowen and Company

(Inaudible)less than 0.5 for OS and that would give you (inaudible)?

P. Ron Ellis

That'll give us the full approval, yes, right, the full approval. We wouldn't have to do a confirmatory study.

Simos Simeonidis - Cowen and Company

So PROCEED would be sufficient for approval with a single trial?

P. Ron Ellis

Yes. And we know that in Europe we can get full approval just on PFS. We don't have to have a positive OS benefit for Europe to go from a conditional to a full approval.

Simos Simeonidis - Cowen and Company

You may not be able to disclose this but one of the milestones (inaudible)?

P. Ron Ellis

I can't disclose that. It's a good question. Yes, we did get – I think we announced a $5 million milestone payment for the filing in Europe. So, that was last quarter and then the milestone you'll see when it gets paid, but of course Big Pharma is very careful about milestone disclosures for a reason.

Okay. So thank you very much.

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