Bioline RX's CEO Discusses Q4 2012 Results - Earnings Call Transcript

Mar.12.13 | About: BioLineRx Ltd. (BLRX)

Bioline RX Ltd. (NASDAQ:BLRX)

Q4 2012 Earnings Call

March 12, 2013 10:00 AM ET

Executives

Garth Russell – IR

Kinneret Savitsky – CEO

Phil Serlin – CFO and COO

Analysts

Bert Hazlett – Roth Capital Partners

Robin Davidson – Edison Investment Research

Steven Tepper – Harel Finance

Operator

Ladies and gentlemen, welcome to the BioLineRx 2012 Year End Conference Call. All lines have been placed on mute to prevent and background noise. After the speakers’ remarks, there will be a question and answer session.

If you would like to ask a question during this time, simply press star, then the number 1 on your telephone keypad. To withdraw your question, press star, and then number 2. Thank you. I would now like to turn the conference over to Mr. Garth Russell of KCSA’s strategic communication.

Sir, you may begin your conference.

Garth Russell

Thank you. Before turning the call over to management, I would like to make the following remarks concerning forward-looking statements. All statements in this conference call other than historical facts, are forward-looking statements. The words, anticipate, believe, estimate, expect, in time, guidance, confidence, target, project, and other similar expressions, typically are used to identify forward-looking statements.

These forward-looking statements are not guarantees of future performances that may involve risks and uncertainties and other factors that may affect BioLine’s business, financial conditions, and other operating results, which include, but not limited to the risk factors and other qualifications contained in BioLine’s annual report on form 20-F quarterly report that will be filled in a 6-K and other reports filed by BioLine with the SEC to which we’re attaching.

Therefore, actual outcomes and results may differ materially from what is expressed or implied by these forward-looking segments.

BioLine expressly disclaims any intent or obligation to update these forward-looking statements. At this time, it’s now my pleasure to return the call over to Dr. Kinneret Savitsky, Chief Executive Officer of BioLine. Kinneret, the floor is yours.

Kinneret Savitsky

Thank you, Garth. Welcome everyone, and thank you for joining our 2012 year end conference call. Joining me on today’s call is Phil Serlin, our Chief Financial and Operating Officer.

Today, we will give you an update of the progress of our therapeutic pipeline.

After our prepared remarks, Phil and I will be happy to answer any questions you may have. With that said, let’s get started.

If we take a look back, 2012 was a very productive year for the company which had carried through into 2013.

We have a strong pipeline of programs which continues to extend with promising new therapeutics that address large healthcare concerns and could greatly impact patient’s life.

We also have expanded our ability to fund the development of our deep portfolio through 2014 which doesn’t take into account potential out licensing agreements or milestone payments from our existing partner.

Today, I’m going to review some of the milestones over the last year, with the majority of my remarks focused on updates for just a select group of our programs.

While I’d love to get into each program, we have limited time on this call.

For those of you interested in hearing more about a particular program, I recommend visiting our website and listening to the audio from our first analyst day, in December, in New York, along with the slide presentations.

During the analyst day, we spend a lot of time covering the details of a number of our programs, and I think you will find it very informative.

I am sure you are all aware by now, that we are conducting an interim analysis on our ongoing Phase 2/3 CLARITY study for BL-1020, one of our lead programs for the treatment of schizophrenia.

This analysis is being performed on beta from approximately, 235 randomized patients from 27 sites in Romania and India.

The primary endpoint of the analysis will be the six weeks effect of drug on cognitive function which is a major deficit in schizophrenia patients. We are also looking at several secondary endpoint including cognition as longer time points.

The results of these analyses are to be delivered next week. And when I say results, this can be confusing for some people, and we have received a lot of questions on these. So let me offer some additional clarity as to what we expect to receive next week.

Since this is a double blind study, and we wanted to keep it that way throughout the trial in order to maintain the integrity of the results, nobody at BioLine, or those involved with conducting the trial will have access to the interim data or statistical results.

Instead, we have set up a fully independent external data monitoring committee or a DMC which is composed of two bio statisticians, and one psychiatrist.

The DMC will receive the unblended statistical information and will make a recommendation to management as to the number of additional patients that need to be recruited into the study in order to achieve statistical significance.

This is a very meaningful number for the company because this recommendation, while not as quantifiable at full interim result, still offers a relatively clear indication as to the strength of the cognition signal and what direction the trial is heading. It will also help us determine what our next steps are.

I would like to point out that this type of analysis is becoming more and more common in our industry, both with big pharma and smaller companies like ours called benefactive [ph] study design. Reopen indication of a strong cognition signal in the interim analogies will also accelerate partner and discussion that are currently taking place for the out-licensing of this product.

Just to close the loop here. We continue to recruit patients into the trial and we currently remain on schedule with our target of completing the CLARITY trial in the second half of 2013, assuming no significant change in the number of patients required as a result of the interim analogy.

Let’s now move to on to some of our new programs. In September, we added BL-8040 to our pipeline. BL-8040 is a phase 2 ready drug candidate being developed for the treatment of acute myeloid leukemia, or AML, as well as other types of hematological cancer. BL-8040 is a short peptide that functions as a high-affinity antagonist for CXCR4, a chemokine receptor directly involved in tumor progression and cell survival.

CXCR4 is over-expressed in more than 70% of human cancers and its over-expression often correlates with poor prognosis. We believe BL-8040 works by mobilizing cancer cells from the bone marrow, synthesizing them to anti-cancer therapies, and by inducing apoptosis of cancer cells.

Multiple tracked clinical studies have shown the safety and efficacy of BL-8040. These studies have shown that BL-8040 is effective both alone and in combination with various anti-cancer drugs. In a Phase 1/2 open-label dose escalation safety and efficacy clinical trial in a 10 multiple patients, BL-8040 demonstrated an excellent safety profile and was well tolerated at all doses tested. In addition, BL-8040 showed a robust mobilization capacity of white blood cells in hematopoietic stem cells.

On the basis of data seen from this study, the FDA approved an IMD application. We plan to start a phase 2 clinical trial for AML patients in the second quarter of this year. The interest in this program is high and we recently found an agreement with one of the leading cancer centers in the world, MD Anderson Cancer Center in Houston, Texas to be the lead site in the trial. We are currently in negotiations with two other US-based world-class facilities for their participation in the trial as well.

Given the low survival rate associated with AML, we intend to rapidly move this molecule for full clinical stage development. In addition, since AML is the recognized orphan indication both in the US and Europe, we plan to seek orphan designation status from the regulatory sources in order to accelerate its development plan.

I’m also excited to discuss our two oral, interferon-free, HCV program, both of which were licensed in 2012 from leading scientists in the HCV space. Our first HCV compound, BL-8020 offered a unique mechanism of action that targets the host cells rather than the virus.

Due to its unique MOA, it is pan-genotypic and we believe it will work in combination with a wide variety of other treatments. We also believe it is likely to create quite a few opportunities for corporations since there are many companies developing treatment for HCV.

In October, successful completion of pre-clinical development for the project and we have made all the submissions to start a phase 1/2 trial for BL-8020 [inaudible] in the second quarter of 2015. We expect to receive approval the regulatory authorities to start the trial very soon.

Our second HCV compound, BL-8030 is a second-generation NS3/4A protease inhibitor, which is currently in pre-clinical development. We have recently been engaged in advanced discussions with a potential regional core development partner, which we believe will give us the additional expertise and resources necessary to quickly develop this compound for future commercialization.

At this time, I just want to run through a few of the other key programs with significant events expected in 2013 and 2014. First, BL-1040 for the prevention of cardiac remodeling following an acute myocardial infarction. BL-1040 is currently in the midst of a large pivotal CE Mark registration trial, which has been carried out by our partner Ikaria.

The trial continues to progress on an accelerated basis. 15 sites are currently recruiting in Australia, Belgium, Canada, Israel and Spain, and results from the trial are expected in 2014.

Next, BL-7040, our oral treatment for inflammatory bowel disease, or IBD, is currently in the last stages of phase 2 proof of concept study. This is an open-label study to evaluate the efficacy pharmacodynamics, safety and tolerability of BL-7040 in up to 30 patients with moderately active ulcerative colitis, a type of IBD. The trial is being carried out at five sites in Israel and we are expecting to announce results of the trial in April 2013.

Lastly, BL-5010, our product for the non-surgical removal of skin lesions, has made significant development advances as well. We spent much of 2012 on the development of a unique applicator prototype for the product which should be completed in the second quarter of 2013. We have previously received confirmation from the European regulatory authorities for a medical device regulatory pathway for BL-5010. We are currently planning to commence a pivotal CE Mark registration trial for European approval in the second half of 2013.

I hope that these comments have painted a clear picture for you regarding all of the positive events we are looking forward to in 2013.

Now, I would like to pass the call over to Phil.

Phil Serlin

Thank you, Kinneret. As Kinneret previously mentioned, I am also very excited by the positive momentum within our pipeline. I also wanted to comment on the fact that 2012 was the first full year of trading for our American depository shares on NASDAQ.

We have put in a lot of time and effort in increasing the awareness of BioLineRX among US investors over the last 18 months. In fact, we attend at least one investor conference per quarter. We have held well over 100 investor meetings. We also just held our first analyst and investor day in New York this past December.

As a result of these efforts, currently almost 50% of our share holdings are held by North American investors and we now have two US-based analysts covering the company from Roth Capital and Aegis Capital. We hope that as awareness of BioLineRX continues to increase in the US financial market, the valuation placed on our stock will more closely reflect the value we believe exists in our pipeline.

Now, turning to the financial for the year ended December 31st, 2012. I would first like to mention that although our primary reporting currency is the Israeli shekel, for the convenience of the listeners on this call, the analysis will be done on a dollar-basis only. The translation into dollar has been done at the representative rate of exchange as of December 31st, 2012 of ILS3.733 to the dollar.

Research and development expenses in 2012 were $17.2 million, an increase of $5.8 million or 51% compared to $11.4 million in 2011. The increase resulted primarily from significantly higher expenses in 2012 associated with the CLARITY clinical trial and respective BL-1020, which commenced at the end of June 2011 and was still in its initial ramp-up stages during the third and fourth quarters of 2011. In addition, the increase also stems from a ramp-up in spending on other clinical stage projects introduced during the second half of 2011 and in 2012.

Sales and marketing expenses in both 2012 and 2011 were $0.9 million. The company invested additional resources in its overall business development efforts in 2012, which were primarily opted by savings from efficiencies realized this year due to the reorganization of the company’s business development team.

In addition, the 2011 numeric includes professional services related to the reacquisition of rights to BL-1020 from Cypress Bioscience. We expect sales and marketing expenses to increase in the foreseeable future as the company continues to increase its business development efforts in the respective BL-1020 as well as a number of other assets.

General and administrative expenses in 2012 were $3.8 million, an increase of $0.4 million or 10% compared to $3.4 million in 2011. The increase resulted primarily from professional fees and other expenses associated with being a listed company on NASDAQ for a full year in 2012, compared to only five months in 2011, as well as an increase in excise taxes paid in 2012 in respect of certain non-deductible expenses for cap purposes.

As a result of the above differences, the company’s operating loss from 2012 amounted to $21.8 million compared with an operating loss of $15.7 million in 2011. Non-operating income net in 2012 consists of $2 million fair value adjustment of derivative liabilities on account of the warrants issued in the private placement carried out in February 2012. This gain was offset by issuance expenses in the amount of $0.3 million allocated to the warrants, as well as the initial commitment and finder’s fees and other one-time expenses in the aggregate amount of $0.5 million associated with the Lincoln Park Capital share purchase agreement entered into by the company in 2012.

The company recognized net financial income of $0.4 million in 2012, a decrease of $1.9 million compared to net financial income of $2.3 million in 2011. Net financial income for both years result primarily from changes in the average exchange rate of the dollar in relation to the shekel, which were much more pronounced in 2011 and in 2012, and had a positive effect on the company’s net assets denominated in dollars.

As a result of all of the above items, the company’s net loss in 2012 amounted to $20.4 million compared with a net loss of $13.4 million in 2011.

Now, on to the balance sheet. As of December 31st, 2012, BioLineRX had $21.4 million in cash, cash equivalents, and short-term bank deposits. In February of 2013, the company raised $8 million through an equity offering to the OrbiMed Group. The company also utilized its share purchase agreement with Lincoln Park Capital to raise an additional $2.9 million subsequent to yearend. The company’s current holdings of cash, cash equivalents, and short-term bank deposits amount to $28 million.

Net cash used in operating activities were $20.1 million in 2012 and $11.4 million in 2011. The increase in net cash used in operating activities during 2012 was primarily a result of increased research and development spending. Net cash provided by investing activities in 2012 was $13.8 million compared to net cash used in investing activities of $10 million in 2011. The changes in cash flows from investing activities relate primarily to investments in and maturities of short-term bank deposits and other investments during the respective period.

Net cash provided by financing activities in 2012 was $15.8 million compared to insignificant amounts of cash flows related to financing activities in 2011. The net cash provided by financing activities in 2012 relates primarily to the private placement completed by the company in February 2012.

Now, I’d like to turn the call back over to Kinneret for some closing commentary.

Kinneret Savitsky

Thank you, Phil. We continue to execute our strategy, which remains focused on performing diligence and discipline testing to ensure the utmost success rate for each compound that enters clinical development. We also believe in being opportunistic in this very dynamic and risky industry.

For example, over the last two years, we unlicensed two clinical stage assets on an opportunistic basis and entered full force into the oncology scene. We believe that our staff’s diverse experience as well as expertise in the oncology space, among others, allowed us to proactively move on these opportunities and many others that may present themselves in the future.

2012 has been a year of substantial achievement for BioLine. We have made significant progress on multiple fronts, many of which are expected to come to key value inflection points in the near future. The next few weeks are expected to be eventful as we receive the interim analysis of the CLARITY trial for BL-1020, as well as the results of the phase 2 clinical study for BL-7040, our IBD treatment.

We also await the beginning of clinical trials for two of our more promising compound in the very near future, including BL-8020 for the treatment of HCV and BL-8040 for the treatment of leukemia.

Looking ahead, we will constantly evaluate our pipeline in order to develop the most cost-effective and markable therapeutics for the unmet medical needs that can make a real impact on global healthcare. Our expectation, our eye [ph] for 2013, is we expect certain material events to reach their targets.

In closing, we remain focused on building our pipeline and continuing to do our part to commercialize our therapeutic candidates.

Operator, we are now ready to open the call for questions.

Question-and-Answer Session

Operator

Thank you. Ladies and gentlemen, we will begin the question-and-answer session. (Operator instructions) The first question is from Bert Hazlett of Roth Capital. Please go ahead.

Bert Hazlett – Roth Capital Partners

Yes, Kinneret and Phil, thank you very much for the update and congratulations on all the progress during 2012. I have really two questions, first on BL-1020 and then, second, on the BL-8040, the CXCR4 program. First on BL-1020. Just quite frankly a little more clarity, no pun intended, with regard to the completion of that study.

You have mentioned if the program continues to its – that study continues to its end, you would finish that up in the second half of 2013. Can you be any more specific with regard to when you might expect to finish? Is it fourth quarter? Or a little bit more information in terms of when that final result for that study might be available if you run it to its full length.

Kinneret Savitsky

Yes. So regarding BL-1020, the study is expected to finish as long as we don’t need to recruit more than 450 patients in the fourth quarter of 2013. But as I mentioned before, it depends also on the number of patients that are needed. If we need to recruit less patients or more patients, that might change.

Bert Hazlett – Roth Capital Partners

Okay, so 4Q. And you would expect partnering discussions to ramp up in earnest once the analysis is complete, whether it’s either shorter term or longer term.

Kinneret Savitsky

We are already discussing this target with potential partners. We believe that even based on the interim results if the results will be clear and will show a nice – or a robust signal in cognition, and this is based on the number of patients that are needed to recruit for this study, this will probably accelerate the discussions with those partners.

Bert Hazlett – Roth Capital Partners

Thank you for that. I appreciate it. And then with regards to BL-8040, that’s quite an exciting program, the CXCR4 program, how large a trial are you contemplating in AML and can you give us a sense of timing of that trial, the start, and how long it might take?

Kinneret Savitsky

We didn’t disclose the information yet since we’re still in the process of building the protocol, doing all the submissions, and it’s a bit too early. I can just say that it’s going to be a Phase 2 study on several tens of patients, probably resistant patients.

I can mention that the first phase of the study will be an acceleration phase, and then second phase of the study will be the highest dose, a bigger number, or bigger group of patients if we continue the highest dose that was tested in the study, that will be tested in the study.

Bert Hazlett – Roth Capital Partners

Thank you for that as well. And I know it’s very early days with that program, but at this point, are you contemplating additional indications of beyond AML, or would that be something for a partner to consider with that compound?

Kinneret Savitsky

No, we are planning to start an additional study either one or two, it’s still under discussion, and I assume that we will start with the next study probably in the second half of 2013.

Bert Hazlett – Roth Capital Partners

Thank you. Very much looking forward to the results of both programs. Thanks very much.

Kinneret Savitsky

Thank you.

Operator

The next question is from Robin Davidson of Edison Investment Research. Please go ahead.

Robin Davidson – Edison Investment Research

Hello there. Greetings from London. I just wanted, because I can’t remember the exact details, but can you remind me what’s the number of patients, the interim analysis in the CLARITY study will be based upon?

Kinneret Savitsky

Yes, it’s going to be on 235 patients.

Robin Davidson – Edison Investment Research

Right. Okay. What I was wondering, I’m looking at the inclusion criteria, I mean, these patients, are they likely to have been treated for a long period of time on Risperidone at the point of enrolment in the study? Is that correct?

Kinneret Savitsky

Sorry. Can you repeat the question?

Robin Davidson – Edison Investment Research

Yes. Are these patients likely to have been treated with Risperidone for a long period of time? Did they have to have the symptoms for at least a year? And possibly for more? That’s right, isn’t it?

Kinneret Savitsky

Prior to the study?

Robin Davidson – Edison Investment Research

Prior the study, as one entry.

Kinneret Savitsky

These are acoustic reservation [ph] patients, so they are actually either after a washout period, but they will start getting both, either Risperidone or a BL-1020 for six months.

Robin Davidson – Edison Investment Research

Right. Okay, I think that helps. The other thing as well, just on the – subscribe to the study, it’s a relatively small study and it’s a single arm. What we’ll see the sort of success in that trial for you?

Kinneret Savitsky

So all together it’s, right now, plan to be a 450 patient study. I’m sorry, 7040, sorry, yes. Because proof-of-concept study, before we enter a bigger study, up to 30 patients, it’s an open label study, and what we would like to see is whether we can see signs of activity, and this is based on sigmoidoscopy. So it’s not just a subjective parameter, but also – not histology, but you get some samples of the inflammation in the Mayo score, based on the endoscopy that we are using in the study. And this is after five weeks of treatment.

Robin Davidson – Edison Investment Research

Right. You haven’t set a particular target in your mind of the level of benefit or the number of patients...

Kinneret Savitsky

We would like to see a reduction of three points in the Mayo score.

Robin Davidson – Edison Investment Research

I see, all right. Okay, excellent. Thank you very much.

Kinneret Savitsky

You’re welcome.

Operator

The next question is from Steven Tepper of Harel Finance. Please go ahead.

Steven Tepper – Harel Finance

Hi Phil and Kinneret. Just a small question on the BL-1020. I understand next week will be the week where you reveal the interim analysis but [inaudible], trying to think of what kind of figures we could see there.

What would be the amount of patients that the interim analysis lets you do in large, the sample group? Like what would be the figure where you would have to say this is too large of a sample group, and therefore I have to terminate the project?

Kinneret Savitsky

So if I understand correctly, you’re asking what is the number of patients that we want to consider to continue with the study? And this is the more complex answer since the data that we will receive, the number of patients is not just on six weeks. We will also get the information on the three month and the six month.

So we cannot decide a threshold at this point. We would like to see the full picture because if in six weeks, the signal won’t be as strong as in three months, or six months, it is still something that we would like to consider looking at since we would like to see the cognition effect is stable, and we expect the regulatory authorities to look at this longer time plot as well.

Steven Tepper – Harel Finance

Okay. One additional question. In the past, of course you discussed the psychotic effects of the drug, so are we looking on a drug that will be used standalone and to treat cognition while we have also the anti-psychotic effect, or for some reason, the drug will have to be combined with other anti-psychotic drugs?

Kinneret Savitsky

Yes. So it’s going to be a standalone drug. It’s not going to be combined with additional anti-psychotic. This is why we’re starting the study with acoustic reservation [ph] patient. The first phase of the study is six weeks in which we’re stabilizing the patient either on BL-1020, or Risperidone.

And once the patients are stabilized, we can continue measuring the cognition at longer time points, three months, and six months. So we have all the information on the patients. The study also – the PANSS data, so we can know about the psychotic level of the patient.

Steven Tepper – Harel Finance

Thank you.

Kinneret Savitsky

You’re welcome.

Operator

(Operator instructions) To go ahead after closing statement, I would like to remind participants, that a replay of this call 774560009, in Israel, please call, 039255927, internationally, please call 97239255927.

Dr. Savitsky, would you like to make your concluding statement?

Kinneret Savitsky

Thank you all for joining us today. We are excited about the continued development of the company’s program. We appreciate your support and commitment to BioLineRx.

And we will continue to update you of our progress. Thank you very much.

Operator

Thank you. This concludes the BioLineRx fourth quarter 2012 conference call. Thank you for your participation. You may go ahead and disconnect.

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