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OncoGenex Pharmaceuticals (NASDAQ:OGXI)

Q4 2012 Earnings Call

March 07, 2013 4:30 pm ET

Executives

Susan Specht

Scott Daniel Cormack - Founder, Chief Executive Officer, President, Principal Financial Officer, Treasurer, Secretary and Director

Susan Wyrick - Principal Accounting Officer

Analysts

Chad J. Messer - Needham & Company, LLC, Research Division

Stephen D. Willey - Stifel, Nicolaus & Co., Inc., Research Division

Philippa Flint - Bloom Burton & Co., Research Division

Howard Liang - Leerink Swann LLC, Research Division

Operator

Good afternoon, ladies and gentlemen, and welcome to the OncoGenex update on Clinical Development Programs and discussion of fourth quarter and full year 2012 financial results conference call. My name is Jamie. At this time, I would like to turn the call over to Susan Specht, Director of Investor Relations with OncoGenex Pharmaceuticals. Please go ahead.

Susan Specht

Thank you, and thanks, everyone, for joining us. With me today from OncoGenex are Scott Cormack, Chief Executive Officer; and Susan Wyrick, Principal Accounting Officer. Also on the call are Cindy Jacobs, Chief Medical Officer; Michelle Burris, Executive VP of Operations; and Jaime Welch, VP of Marketing and Corporate Communications.

Before we begin, I'd like to remind everyone that today's conference call contains forward-looking statements based on current expectations. These statements are only predictions, and actual results may vary materially from those projected. Please refer to OncoGenex's documents filed with the SEC concerning factors that could affect the company, copies of which are available on the website.

I'll now turn the call over to Scott who will review key highlights from 2012 and provide an update on our 2 clinical-stage product candidates, custirsen and OGX-427.

Scott Daniel Cormack

Thanks, Susan. Good afternoon, and thank you for joining us. I'd like to begin today's call reviewing the progress we've made on the custirsen development program in 2012. In the fourth quarter, we announced the completion of patient enrollment in SYNERGY, our Phase III primary registration trial for custirsen. SYNERGY is designed to evaluate the survival benefit for custirsen when added to the first-line chemotherapy, docetaxel, in men with metastatic castrate-resistant prostate cancer, or CRPC. Over 1,000 men are now enrolled in the SYNERGY trial in approximately 142 cancer centers throughout North America and Europe. Custirsen has received Fast Track designation, and the SYNERGY trial is under an SPA agreement with the FDA. As we have previously discussed, the expected timing of results is based on a prespecified number of death events that we continue to project to occur in the fourth quarter of 2013. We expect data results to be announced in the first half of 2014.

In the third quarter of 2012, we initiated patient enrollment in 2 additional Phase III custirsen studies, AFFINITY and ENSPIRIT. AFFINITY is our Phase III clinical study evaluating an overall survival benefit of custirsen when combined with cabazitaxel or Jevtana, a second-line chemotherapy for patients with CRPC. The study is being conducted throughout North America, Europe, Russia and Australia with the target accrual of approximately 630 men. And finally, the ENSPIRIT trial continues to enroll patients with advanced or metastatic non-small cell lung cancer who has progressed after first-line chemotherapy has failed. ENSPIRIT is designed to evaluate the potential survival benefit of combining custirsen with docetaxel in approximately 1,100 patients. We are pleased to announce that custirsen has recently received Fast Track designation from the FDA in the patient population being evaluated in the ENSPIRIT trial.

Recently, there have been numerous changes and paradigm shifts across the prostate cancer treatment landscape. This means more options for physicians as the armamentarium to treat CRPC patients expands. As new studies are initiated and data emerge, the debate will continue on sequencing of new antiandrogens and the incorporation of radiopharmaceuticals into treatment practice. Regardless of this evolution, as patients become symptomatic, we believe chemotherapy will continue to be a mainstay in the treatment landscape. We're confident that custirsen is poised for success as a potential partner therapy to docetaxel and cabazitaxel.

I'd now like to provide an update on our significant clinical development programs for our proprietary agent, OGX-427. As you may recall, in 2012, preliminary Phase II data on OGX-427 in chemotherapy-naive CRPC patients were presented. Investigator-sponsored study showed activity in CRPC by demonstrating promising results. There were fewer patients without disease progression, greater declines in PSA and circulating tumor cells in the group receiving OGX-427 plus prednisone treatment compared to those receiving prednisone alone.

Based on these findings and the potential role for OGX-427 in prostate cancer, in December, we announced the initiation of the Pacific study. Pacific is an investigator-sponsored randomized Phase II study evaluating OGX-427 in combination with abiraterone acetate, or Zytiga, with patients with CRPC. Approximately 80 men who are being treated with Zytiga and have evidence of rising PSA, who have no evidence of symptomatic or radiographic progression, will be randomized to either continued treatment with Zytiga and prednisone or have OGX-427 added. Patients can be enrolled to the study regardless if they have received prior chemotherapy or not and will continue on the study until symptomatic, radiographic or other documented disease progression occurs. The primary objective will be to determine whether the addition of OGX-427 can extend the benefit of Zytiga by delaying or reversing treatment resistance. The rationale for Pacific is based on the idea that cancer cells use adaptive pathways to escape and proliferate, resulting in resistance to treatment. OGX-427 and Zytiga are potentially synergistic because they disrupt androgen receptor signaling pathways in different ways. The study is being conducted in partnership with the Hoosier Oncology Group and is currently enrolling in the United States and Canada.

Moving on to bladder cancer. We continue to enroll patients to our randomized Phase II clinical trial of OGX-427 in combination with gemcitabine and cisplatin in patients with metastatic bladder cancer. The study, known as the Borealis-1, aims to enroll approximately 180 patients and is expected to complete patient accrual in the second half of 2013.

We also recently announced plans for the initiation of a second Phase II study of OGX-427 in advanced bladder cancer. Borealis-2 is an investigator-sponsored randomized study evaluating OGX-427 in patients with advanced to metastatic bladder cancer, who have disease progression following initial platinum-based chemotherapy. Approximately 200 patients will be enrolled to receive either OGX-427 plus docetaxel or docetaxel alone. Borealis-2 is expected to begin patient enrollment in the first half of this year.

Bladder cancer represents a significant opportunity for OGX-427 as limited treatment options exist for patients being treated with either first or second line therapies. Currently, first-line platinum-based chemotherapy regimens result in a median overall survival of approximately 12 to 15 months. Docetaxel is commonly used in second-line treatment with a reported median overall survival of approximately 6 months. Given acquired treatment resistance and these short survival times, there continues to be a high unmet need for additional therapeutic options for this patient population and unique opportunity for OGX-427 to demonstrate its potential to work synergistically with current standards of care.

Pacific Borealis-1 and Borealis-2 are part of our ORCA programs, which stands for Ongoing studies evaluating treatment resistance in cancer. ORCA encompasses clinical studies of OGX-427 across multiple cancer indications. We look forward to providing further updates on the progress of these trials throughout the year and expect to announce additional studies as part of the ORCA program in the coming months.

In conclusion, we have made significant progress in 2012, and we'll continue to drive both custirsen and OGX-427 forward over the course of this year. With SYNERGY now fully enrolled, our accrual risk for our primary registration study is now behind us. We also know have 2 additional Phase III custirsen studies enrolling patients, as well as a robust development plan for OGX-427. We are pleased with the momentum we have gained for both of these novel product candidates and look forward to an exciting year ahead. At this time, I'll turn the call over to Susan Wyrick, who will provide an overview of the fourth quarter financial results. Susan?

Susan Wyrick

Thanks, Scott. We ended 2012 with approximately $75 million in cash, cash equivalents and short-term investments, which is above our guidance of $68 million to $73 million, largely due to timing differences related to clinical trial costs. We continue to expect that these funds, combined with reimbursements due from Teva under our Collaboration Agreement will be sufficient to fund our operations into 2015. As part of the Teva agreement, we received an advance reimbursement of $30 million for funding of certain custirsen clinical development activities. As of the end of the year, our commitment was fulfilled. Going forward, costs associated with custirsen's development will be reimbursed by Teva on a quarterly basis.

Revenue for the fourth quarter of 2012 increased to $9.8 million compared with $1.2 million for the prior year quarter. Revenue for the year ended December 31, 2012, increased to $20.1 million compared with $5.5 million for the same period in 2011. The increase in both periods was due to revenue earned through our collaboration with Teva, largely resulting from the initiation of the AFFINITY trial in August of 2012.

Total operating expenses for the fourth quarter increased to $16 million compared with $9.2 million in 2011. Total operating expenses for 2012 increased to $46 million compared with $27.8 million for 2011. The increase in both periods was primarily due to higher clinical study expenses associated with the startup of the AFFINITY trial, patient enrollment in Borealis 1, OGX-427 manufacturing costs, increased headcount to support our clinical development activities and stock-based compensation expense. Operating expenses in 2012 included a noncash gain on our excess lease liability of $1.7 million.

Net loss for the fourth quarter of 2012 was $4.1 million or $0.28 per diluted common share compared with $9.6 million or $0.98 per diluted common share for the prior year quarter. Net loss for the year ended December 31, 2012, was $21.1 million or $1.56 per diluted common share compared with $14.7 million or $1.51 per diluted common share for the same period in 2011. Net losses in 2012 and 2011 included a noncash gain on revaluation of our warrant liability of $4.5 million and $7.4 million, respectively.

Before completing our financial review, I'd like to provide guidance for 2013. Net cash requirements are expected to be in the range of $40 million to $50 million, reflecting AFFINITY costs, which is reimbursed by Teva quarterly in arrears, and completion of patient enrollment in Borealis 1. Year-end cash, cash equivalents and investments are expected to be in the range of $25 million to $35 million. This guidance reflects our continued development of custirsen under our Teva agreement, as well as our development activities for our proprietary asset, OGX-427, soon to be in 4 randomized Phase II studies.

Thank you again for joining us, and I will now turn the call back over to the operator to open the line for questions. Operator?

Question-and-Answer Session

Operator

[Operator Instructions] The first question comes from Chad Messer from Needham & Company.

Chad J. Messer - Needham & Company, LLC, Research Division

Scott, we've talked about this before, but the winds keep blowing and this is in regards to 427 and your strategy in prostate cancer. In favor of XTANDI, especially in the larger pre-chemo market, can you just review with us what your thoughts are on that and how you plan to address that relative to Zytiga?

Scott Daniel Cormack

Right now, as you know, and we've reviewed briefly in the statements previous to your question, the strategy for 427 in prostate cancer now is in combination with Zytiga and evaluating the ability for 472 to augment the activity of 427 and really delay treatment resistance. The reason we really didn't do anything with XTANDI is primarily because we want to basically have patients that were both chemo-naive and chemo-treated and the data for XTANDI didn't go into the pre-chemo setting at the time this trial was designed. So we want to obviously get experience with one of the new agents that is directed towards the AR pathways. So we will be evaluating the combination with Zytiga first. If there's opportunity and that data looks good, then other development plans would be discussed thereafter. But at this point, I think we're looking for proof of concept of augmenting AR-directed pathway drugs for now.

Chad J. Messer - Needham & Company, LLC, Research Division

All right, great. Understood. And then just one quick one on the financials, if I may. The cash climates [ph] for this year and the cash balance at the end of the year, along with the statement that you believe your cash will last into 2015, just it kind of implies a lot lower clinical trial expense in 2014, and I'm just wondering if you could help me think through the timing of ongoing and potential future trials, how that scenario plays out that way?

Scott Daniel Cormack

Sure. Not a problem. I'm going to go ahead and pass it on to Susan who can address your question for you.

Susan Wyrick

Chad, yes, so the costs for the Borealis-1 trial wound down significantly in 2014 as the trial will be fully enrolled by the second half of this year. Also, the timing of the manufacturing for OGX-427 may move a bit into 2014, but the majority of those costs are currently slated for 2013. And also, as you know, the AFFINITY trial reimbursements are done in a quarterly basis in arrears such that the cash at the end of 2013 will not include the reimbursement that Teva will pay us for the fourth quarter of 2013. Does that answer your question?

Operator

[Operator Instructions] The next question comes from Stephen Willey from Stifel.

Stephen D. Willey - Stifel, Nicolaus & Co., Inc., Research Division

I know you mentioned 427 manufacturing cost, I guess, as part of the cash requirements going to '13, but I guess I'm just kind of wondering where you guys are in terms of 011 manufacturing and whether or not that process has been transferred to Teva in its entirety?

Scott Daniel Cormack

Yes, the manufacturing that we do, as we've discussed previously, we do a lot of the work with Teva principally through CROs. And as we start to plan and prep for NDA filings and so on, obviously you're doing the prep work in anticipation of doing the manufacturing submission. Neither party is doing the direct manufacturing, but they are working cooperatively together with CROs at this time for the filing and for the initial launch, providing, obviously, the custirsen programs are successful.

Stephen D. Willey - Stifel, Nicolaus & Co., Inc., Research Division

Okay. And then I guess if you kind of fast-forward a little bit maybe towards the end of this year or early next, you guys still have an opt-in decision that you'll need to exercise at some point. Can you just remind us kind of how logistically that decision gets made? And I guess when would we expect the timing of that?

Scott Daniel Cormack

Right. So the opt-in option, for those that are less familiar with that option, is a right that we have to opt-in to participate in the commercialization portion of custirsen development. The way that works is Teva will deliver to us a commercialization plan. That would be reviewed and then we will decide whether we wanted to opt-in or -- really, it's a North American right to participate in commercialization. We would take a look at plan, take a look at what Teva is contributing and then have more discussions and make that call. We wouldn't expect that, that would happen in the next couple of months, but shortly thereafter, as we start to get closer to the SYNERGY data in particular, we would review that and obviously come back to the market with expectation. I think it's important to note that in regards to that and particularly related to costs, Teva is the group that is picking up the cost of the effort that we have once sales begin. So our exposure from the cost perspective is really only in that first part of the buildout before you have for sale. And so the concept is that our cost is really quite well contained. It's really the only element that we will pick up is in that free commercialization aspect. So it's not super large amount to do the opt-in.

Stephen D. Willey - Stifel, Nicolaus & Co., Inc., Research Division

Okay. So it sounds like that you'll be getting some kind of commercial plan back from Teva here within the next few months? Is that correct or...

Scott Daniel Cormack

Yes, we don't have a specific timing on when we would receive the commercial plan, but we would expect -- especially given where we are in proximity in the SYNERGY data, that we would expect to see that in the not-too-distant future.

Stephen D. Willey - Stifel, Nicolaus & Co., Inc., Research Division

Okay. And I guess just given the fact that it doesn't appear to be much emerging on the pipeline front kind of between now and then, is it kind of safe to say that you guys are definitively leaning one way or another in terms of wanting to opt in or not wanting to opt in?

Scott Daniel Cormack

No, I don't think there's a definitive lean in it that way. I think a lot of it will be revealed in the commercial plan, particularly when you think about marketing a product like this into the sort of branded oncology space. I think we would have to see what their plans are overall and that strategy before we can make an informed call.

Stephen D. Willey - Stifel, Nicolaus & Co., Inc., Research Division

Okay. And then I know you guys can't disclose anything ahead of medical meetings, but should we be expecting anything at ASCO? It's a really broad question...

Scott Daniel Cormack

At ASCO AGM?

Stephen D. Willey - Stifel, Nicolaus & Co., Inc., Research Division

Yes, the general meeting in June.

Scott Daniel Cormack

Yes, right. No, I think that's probably a bit early on anything from our side certainly on the custirsen program.

Operator

[Operator Instructions] The next question comes from Philippa Flint from Bloom Burton.

Philippa Flint - Bloom Burton & Co., Research Division

Just a question on the 427. The monotherapy study, you had previously indicated, I believe, that you would have final data, I know you had previously announced some data, but final data on all patients in the first quarter. Are you still on track for that? And will you do it in a conference? Or will you put out a press release? Can you give any information?

Scott Daniel Cormack

Yes. So what we've done with that study, as you know, it was presented in 3 different conferences as preliminary data. I believe it was ASCO GU, ASCO and then ESMO. At ESMO, which is the last one we did in the fall of last year, we had reported the data on all the 10 patients, I believe it was. And so when we considered this and specifically spoke to the investigators, we decided to rather than trying to put another conference together and present the data in that form, we would go straight to publication. The publication manuscript is being developed now. Obviously, the study is completed. The accrual was completed some time ago. So it would go into publication next.

Susan Wyrick

And just to let you know, we still have a few patients, 5 or 6, that were on the control arm that crossed over. So we still do have some treatment to those patients before we can really say that all treatment is completed and then report the data.

Operator

Next question comes from Howard Liang from Leerink Swann.

Howard Liang - Leerink Swann LLC, Research Division

Regarding the SYNERGY trial, I'm not sure if the timeline is somewhat different than the previous projection, but just in terms of the event rate, can you talk about whether that's being consistent with your previous projections?

Scott Daniel Cormack

Right. Yes, the timing is pretty much the same as we've been talking about for some time with respect to the event rate. As you know, the analysis that we are required to do for this trial is event driven. We continue to watch that, and it's still tracking towards the back end of this year. The timing then -- so once you get the results, obviously, you're going to do the QA on those results and then do the analytics. And so it's really sort of -- there's 2 things that drive timing for us. One is when we actually do receive and cross the number of events to drive the analysis. And the second is the timing to do the analytics. So as far as the timing to get to the events, I think that's more or less the same as it has been, but we'll continue to watch it and will do so for the balance of the year.

Howard Liang - Leerink Swann LLC, Research Division

The difference between the time of -- the fourth quarter, the time to reach the projected number of events and the data results as the process of locking the database and clean up the database and then also doing the analysis?

Scott Daniel Cormack

Right.

Howard Liang - Leerink Swann LLC, Research Division

Okay. Are there any additional analysis? I don't think there's an interim, but are there any additional decision points we should know and done either by the DSMB or by the company?

Scott Daniel Cormack

Right. So there are -- in the study, there are 2 futilities and 1 interim analysis. We haven't given specifics on whether we have crossed and conducted and finalized those analysis in neither the futility or the interim nor the number of events that will drive those analysis. What we have said though is obviously, if the futilities ended up being negative such that you stopped the trial, that would be material event. We would obviously disclose that. If we went past it and you continued the trial as you normally would expect, that would basically be a nonevent and we wouldn't necessarily disclose that, obviously. With respect to interim, if we had an interim analysis that was sufficient to proceed with filing, that would be a material event and we would disclose that. But if the trial goes to fruition, then that would part of the normal course of the trial and we wouldn't disclose going forward. That's probably the extent of kind of information that I can give you at this point. Obviously, we haven't disclosed an early stop to the trial, so everything continues as it would be expected.

Operator

At this time, I show no further questions. I would now like to turn the call back over to Scott Cormack.

Scott Daniel Cormack

Thank you, operator. I want to thank everybody for participating on the call, and we look forward to providing you further updates as our year progresses. Thank you.

Operator

Ladies and gentlemen, that does conclude the conference for today. Again, thank you for your participation. You may all disconnect. Have a good day.

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