Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Executives

Steven R. Deitcher - President and Chief Executive Officer

Craig W. Carlson - SVP and Chief Financial Officer

Analysts

Joe Shanela - Arena

Talon Therapeutics, Inc. (OTC:TLON) Q4 2012 Earnings Conference Call April 1, 2013 12:00 PM ET

Operator

Good day ladies and gentlemen and welcome to the Talon Therapeutics 2012 Earnings Call and Business Update. At this time, all lines are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions)

I would now like to turn the conference over to your host, Dr. Steven Deitcher, President, CEO and Board Member of Talon Therapeutics. Please begin.

Steven R. Deitcher

Welcome to the Talon Therapeutics 2012 year-end earnings call and investor update. On behalf of the entire Company, I appreciate your interest in and support of Talon. On this call with me today is Craig Carlson, Talon's Chief Financial Officer. Before we get started, I would like to remind everyone that Craig and I might make forward-looking statements. Please visit our Company website at www.talontx.com in order to review our most recent SEC filings, including our 2012 Form 10-K, in order to understand the risks associated with Talon Therapeutics.

2012 was a year rich in dedication, planning and accomplishment. Our primary mission in 2012 was to exempt Talon's lead compound, Marqibo, towards FDA accelerated approval. Key accomplishments for 2012 include the following. As a result of compelling data from the Phase 2 RALLY trial of single-agent Marqibo in adults with relapse and refractory Philadelphia chromosome-negative acute lymphoblastic leukemia, a high-quality new drug application submitted to the FDA in 2011 and over one year of intensive preparation and practice, Talon's management and key leukemia expert advisors were able to prevail at our Oncologic Drugs Advisory Committee Meeting in March.

The overall positive vote was highlighted by unanimous support from all hematologic malignancy expert members of the committee, including the then and current ODAC Chairman. The tall order and importance of continuous drug exposure, complete remission induction, successful bridging to transplant, treatment tolerability, outpatient delivery of therapy, and chance for cure afforded by Marqibo were each noted.

Following the affirmative vote by the ODAC, Talon successfully negotiated a favorable product label for an accelerated approval product. At ODAC, Talon specifically highlighted the second relapse adult ALL subpopulation of patients included in our studies and for which historical comparators exist. There are approximately 500 second relapse adult ALL patients in the U.S. per year. Based on the multiple relapse in refractory subpopulations included in our Marqibo development program, our labelled indication is for the treatment of adult patients with Philadelphia negative acute lymphoblastic leukemia in second or greater relapse or whose disease has progressed following two or more anti-leukemia therapies. This labelled indication actually addresses approximately 1,700 adult ALL patients per year in the U.S. Our label is designed to maximally support product safety and minimize the potential for product preparation error.

Because of careful planning and execution during label negotiation, Marqibo can be prepared in both inpatient and outpatient settings and by pharmacists, pharmacy technicians, nurses and others involved in chemotherapy preparation. There is no (indiscernible) for Marqibo. Hard work, confidence and tenacity were awarded in August of last year when Marqibo was granted accelerated approval.

Approval triggered several new activities and initiatives. Marqibo approval infused energy into the already ongoing and enrolling clinical trials. The Phase 3 German Cooperative Group trial in untreated aggressive non-Hodgkins lymphoma, known as the optimal greater than 60 study, completed activation of the initial 30 trial sites in 2012 and quickly achieved its target enrolment rate. An additional 40 sites were identified and quickly added to the trial as a means of accelerating enrolment and overall trial timelines. Because Talon's financial contribution is based on enrolment metrics, site expansion has not added any financial burden to the Company. Currently, even more sites are being added in Germany and expansion of the trial by the German High-Grade Lymphoma Study Group into another country is being explored.

The Phase 3 Marqibo confirmatory trial in adults with untreated Philadelphia chromosome-negative ALL, known as the hallmark study, enrolled its first patient in the United States shortly before product approval. This trial is under an SPA and continues to add spice in the U.S. ahead of ex-U.S. trial expansion.

Lastly, the Marqibo pediatric development program currently being run by the U.S. National Cancer Institute is nearing completion of Phase 1 and identification of the Phase 2 dose. As expected, internal and external enthusiasm for these label expansion programs has intensified post approval.

Because of our orphan designation in the EU, we were afforded formal scientific advice from the European Medicines Agency in 2012. This advice is an integral step towards submission of a marketing authorization application for Marqibo in Europe. As soon as the Phase 2 pediatric Marqibo dose has been determined and our pediatric investigative plan has been submitted and approved by the EMA Pediatric Committee, an MAA can be submitted.

Because of 100% focus on Marqibo approval and label negotiation efforts, all U.S. commercial preparation efforts began following approval. Preparation efforts included those related to advertising and promotion, pricing and reimbursement, distribution and logistics, as well as medical affairs and publication planning. An awareness campaign was initiated to coincide with the 2012 American Society of Hematology Annual Meeting in December in Atlanta, Georgia. This campaign included an exhibit booth, advertisements in major journals such as the Journal of Clinical Oncology and Blood, online rapid communication publication of the pivotal Phase 2 RALLY trial data in the Journal of Clinical Oncology, and a special event for key U.S. leukemia experts.

In September, following Marqibo approval, Talon started to respond to requests from other companies for initial informational meetings regarding Talon, Marqibo and Menadione Topical Lotion. Please keep in mind that Marqibo, based on its initial label, is a niche product with ongoing research and development activities focused on potential future label expansion opportunities and upside primarily linked to the optimal greater than 60 steady and a lymphoma indication. On our last investor call, I stated that it was more likely than not that Marqibo would be launched following a transaction. This Company stamp remains.

In early January of this year, Talon announced that the Board of Directors had authorized a review of strategic alternatives. Goldman Sachs was engaged to provide financial advisory services. The review of strategic alternatives may lead to a possible transaction including the merger, business combination, or sale of the company. No decision has been made to enter into a transaction at this time and there can be no assurance that Talon will enter into a transaction in the future. I must make clear that the Company does not plan to disclose or comment on developments regarding the strategic review process until further disclosure is deemed appropriate. I ask that you respect this corporate decision and acknowledge that any ongoing discussions and negotiations could be hampered by premature disclosure.

While 2012 was dominated by activities related to Marqibo, I would like to provide a brief update regarding our current lead protect candidate, Menadione Topical Lotion. A randomized multi-center Phase 2 study of Menadione Topical Lotion for epidermal growth factor receptor inhibitor related skin toxicity prevention, sponsored by the Mayo Clinic, has been ongoing and is projected to complete enrolment and undergo analysis this year. Because this proof of concept trial is double blinded, Talon is unable to provide any form of interim efficacy update. The results of this trial are intended to guide the design and sample size determination on a future pivotal Phase 3 registration trial.

At Talon, we continue to focus on our ongoing clinical development activities and on preparing Marqibo for commercialization. Marqibo components and kits have been successfully manufactured and released to support initial commercial efforts. Our publication strategy is concentrated on peer reviewed publication of Phase 2 relapsed and refractory as well as untreated lymphoma data in support of applications for compendium listing. Our workforce remains stable and is dedicated and intent on accomplishment this year just as it was leading up to Marqibo approval in 2012. I look forward to providing additional updates in the future.

I will now turn the call over to Craig to review our financials from 2012. Craig?

Craig W. Carlson

Thank you, Steven, and thanks to everyone listening into our call. We really do appreciate your interest in Talon. For the 12 months ended December 31, 2012, we reported a net loss of $43.7 million and deemed dividends on preferred stock of $21.1 million, which when combined, resulted in a net loss applicable to common stockholders of $64.8 million, or $2.95 per share. The change in fair value of our preferred stockholders' right to purchase additional shares contributed $18.1 million, or $0.82 a share, to the total net loss applicable to common shares for this period. For the twelve month period ending December 31, 2012, we reported a net loss of $18.8 million and deemed dividends on preferred stock of $3.9 million, which when combined, resulted in a net loss applicable to common stockholders of $22.8 million, or $1.06 per share.

For the year ended December 31, 2012, we had total operating expenses of $20.8 million compared to $18.5 million for the year ended December 31, 2011. R&D expenses for the year ended December 31, 2012 were $12.9 million compared to $13.4 million for the prior year. Included in the $12.9 million in R&D expenses for 2012 were $3.5 million in milestone payments triggered by Marqibo's approval by the FDA.

G&A expenses for the year ended December 31, 2012 were $7.9 million compared to $5.1 million for the prior year. The $2.8 million increase in expenses was largely the result of commercialization readiness efforts that included hiring of employees, outside vendors and other commercialization related expenses.

We continue to be efficient in our cash expenditures as illustrated by our cash used in operations of $20.2 million for the year ended December 31, 2012.

Okay, let's move on to a discussion of the balance sheets. As of December 31, 2012, we had current assets of $3.5 million including cash and cash equivalents of $3 million compared to total current assets of $1.7 million as of December 31, 2011. Please note that in January 2013, we brought in additional gross proceeds of $6 million from the sale of Series A-3 preferred stock.

Our total current liabilities as of December 31, 2012 were $17.8 million compared to $4.6 million as of December 31, 2011. The primary source of the differential is a liability of $14.3 million reflecting the investors' rights to purchase shares of Series A-3 preferred stock as of December 31, 2012. Should the preferred stockholders continue to purchase shares of Series A-3, this liability should decrease.

As of December 31, 2012, we had total long-term liabilities of $25.4 million, of which $24.8 million was for the notes payable compared to December 31, 2011 of $24 million in long term liabilities. As a reminder, the principal of our debt is $27.5 million but we have to account for it net of discount and so that's why it shows up as $24.8 million on the balance sheet.

As of December 31, 2012, the line called redeemable convertible preferred stock was $47.9 million compared to $30.9 million as of December 31, 2011. This reflects the value assigned to the various preferred share purchases since mid-2010. You will note the state of liquidation value as of December 31, 2012 of $77.9 million for the preferred shareholders in a liquidation scenario.

As of December 31, 2012, Talon had total stockholders' deficit of $87 million. We anticipate our current cash lasting through May 2013. To continue as a going concern, we will need to raise additional capital either by a strategic transaction, by selling stock, or by incurring debt.

Now our capitalization at the end of January, which includes this $6 million in preferred shares purchased in January 2013, totaled approximately 206 million shares on an as-converted and fully diluted basis. This total includes approximately 171.6 million shares held by preferred shareholders and 34.8 million shares held by current common shareholders, stock options, warrants and other items. Please note that on as-diluted basis and fully converted basis, this includes all shares, including shares that are currently out-of-the-money.

Now looking forward, if we were able to raise additional capital, we anticipate potential cash usage during 2013 of approximately $20 million to $25 million, which is consistent with our cash usage in prior years. That includes the review of our 2012 financial performance. I'll hand it back to Steven to address questions that may come up. Thank you.

Steven R. Deitcher

We would now be happy to entertain some questions.

Question-and-Answer Session

Operator

Thank you, ladies and gentlemen. (Operator Instructions) I have a question from [Bob Matra] (ph), a private investor. Please go ahead with your question.

Unidentified Analyst

Had a quick question about the uveal melanoma Phase 2 trial, is that still ongoing, and if so, the status please?

Steven R. Deitcher

The Phase 2 trial where we are evaluating Marqibo in patients with metastatic uveal melanoma is continuing to enrol. It serves more than one function. One is to, yes, evaluate Marqibo in this population of patients that has basically little else to be offered to them, but that trial has also been useful for us in evaluating pharmacokinetics as well as demonstrating the fact that Marqibo has minimal to no adverse effects on normal bone marrow function. So that trial is wrapping up the last group of patients, so that we can then evaluate next steps in this potential indication.

Unidentified Analyst

And a follow-up question is the EMA approval process for Marqibo and its current indication?

Steven R. Deitcher

So if we were to submit a marketing authorization application to the EMA for Marqibo, it would be in the similar indication to what we were granted in the United States this past year, so it's adults with acute lymphoblastic leukemia.

Unidentified Analyst

And is the timing still on track, is that still a first half of 2013?

Steven R. Deitcher

Right now, it's really predicated more on the pediatric investigative plan process which is somewhat out of the Company's control. You get into a queue and the EMA reviews those proposals. So we will move that forward as quickly as we possibly can but I really am hesitant to pinpoint a timeline for that.

Unidentified Analyst

So in essence, are you saying, am I understanding it correctly that the pediatric could happen prior or before the current Marqibo indication?

Steven R. Deitcher

No. In Europe, in order to submit a marketing authorization application for the adult relapse refractory ALL label that we would be seeking, a prerequisite to submission is having a pediatric investigative plan for our drug evaluated and approved by the EMA. So, in Europe, you must have an approved process for developing your drug in pediatrics before they will even evaluate an application for your drug in adults.

Unidentified Analyst

Oh okay, thank you.

Operator

Our next question comes from [Ronald O'Connor] (ph), private investor. Please go ahead with your question.

Unidentified Analyst

Can you give me an update on the status of Menadione trial?

Steven R. Deitcher

So, as I noted in my presentation, that trial which is being conducted and sponsored by the Mayo Clinic, is now active at four sites in the United States, so the Mayo Clinic decided to not only open it in Rochester and at their facility in Scottsdale, Arizona but also had requests for participation by two other locations in the U.S. From an enrolment standpoint, we have enrolled 24 out of the desired 40 patients up to this point and I expect enrolment to complete this year and an analysis to take place. Because it's a blinded trial, I have no way of providing any kind of insights into the comparative efficacy, it is a randomized trial. I can tell you though that because Talon does also monitor the safety and the reporting of any safety issues that there have been no toxicity issues of note, and that's a very positive finding for us. So again, we look forward to getting results from that proof of concept trial so that we can make appropriate plans for next steps.

Unidentified Analyst

Yeah, thank you. I got on late, so I'm sorry, I didn't hear you mention that information earlier. With the indications for this current trial, it's limited to indications for use with certain chemo agents, is that correct?

Steven R. Deitcher

So the current Phase 2 MTL trial is being conducted, and looking at the prevention of skin toxicity related to anti-cancer drugs which target the epidermal growth factor receptor, and patients in this trial are able to be enrolled regardless of whether they were receiving small molecule or antibody-based therapies that target the epidermal growth factor receptor, so which has not been a trial restricted to usage with only one or another of the currently marketed EGFR inhibitors.

Unidentified Analyst

Would that include monoclonal antibodies which have adverse skin effects?

Steven R. Deitcher

Antibodies targeted against epidermal growth factor receptor which are affiliated with these cutaneous toxicities, yes.

Unidentified Analyst

Would you happen to off-hand if a product called Vectibix which has a huge, like 80% plus, adverse skin reaction, if that's included in this mix?

Steven R. Deitcher

Patients are able to go onto this trial if their EGFR inhibitor is Vectibix, yes.

Unidentified Analyst

Okay, great. Thank you very much.

Operator

(Operator Instructions) Our next question comes from Joe Shanela with Arena. Please go ahead with your question.

Joe Shanela - Arena

I have a quick question about the outstanding shares. What would be the number of outstanding shares in a change of control scenario?

Craig W. Carlson

There are a lot, there are a variety of different scenarios but it could go as high as 450 million shares.

Joe Shanela - Arena

Okay. And a second question that I have is, in terms of – I saw an SEC filing probably last February that went over the change of control payment plans, and either Steve or Craig clarify that, in terms of the percentages for the senior directors?

Steven R. Deitcher

Yes, the change of control calls up to a maximum of 9% of proceeds. Now, the thing to keep in mind is that there are a number of exclusions related to that. So, that 9% does not take effect – and again that's a maximum of 9%, it could be less, depends on the scenario – so, prior to that 9% being applied, the exclusions would include the various transaction related costs, they would include the payment of the debt which is $27.5 million, and it would exclude all of the equity invested since June of 2010 which totals today approximately $69 million. Director, all of that has been excluded then a maximum of 9% could be applied to a variety of executives within the Company.

Operator

Our next question comes from [Brian Testa] (ph), a private investor. Please go ahead with your question.

Unidentified Analyst

I'm just having a quick question. You said there is no way sure in sight you're going to get a part-owner or sell the company, and if that doesn't happen, what are your plans to market Marqibo on your own?

Steven R. Deitcher

As we have been consistent, we are considering all of these options on a continuous basis. It is clear that we need to provide a clear discussion in this call that we can make no assurances of anything, Brian, and exact timing is something that we cannot provide that information at this point in time.

Unidentified Analyst

Okay, alright. And do you know what possible Marqibo sales would be if you were to get European approval?

Steven R. Deitcher

It would depend on what the label would be, it would depend on results of pricing, research, and it would depend on timing. So, because of those variables, I cannot make a prognostication of that amount right now.

Unidentified Analyst

Okay, alright. And you said that you do have a price on Marqibo?

Steven R. Deitcher

No, I have not said that.

Unidentified Analyst

No, okay. Alright, thank you very much.

Operator

We do have one more question coming in the queue. I have [Larry Lee] (ph). Please go ahead with your question.

Unidentified Analyst

What will (indiscernible) do for [all companies] (ph)?

Steven R. Deitcher

Could you please repeat the question? It was breaking up a bit on the phone line.

Unidentified Analyst

What will (indiscernible) do for the company (indiscernible)?

Steven R. Deitcher

I must apologize but I really, I do not understand.

Unidentified Analyst

Regarding (indiscernible) do something for the company, I don't know what they do for the company.

Steven R. Deitcher

I apologize, all I can suggest is if you would like to send that question to Craig or to me via e-mail, we'd be happy to try to address your question. I apologize.

Operator

Our next question comes from Joe Shanela with Arena, it's a follow-up. Please go ahead.

Joe Shanela - Arena

Just regarding a question earlier, given the indication, how many doses do you expect of Marqibo per year, given the approved indication?

Steven R. Deitcher

So based on the labels indication, and extrapolating from the average number of doses that were used in our Phase 2 trial, we would expect that the average patient would receive seven to eight total doses of Marqibo. I do remind you though that in our Phase 2 trial, there were patients that received up to 18 total doses of Marqibo as part of their treatment.

Operator

Our next question comes from [Marty Platky] (ph), a private investor. Please go ahead with your question.

Unidentified Analyst

What additional revenue did you say after May that would be part of funds, what's the plan for the Company after that?

Steven R. Deitcher

Well, what we said was that in order for us to continue operating after May, that we would need to bring in additional and the different approaches that are typical sources of funding would include a strategic transaction, would include potential equity purchases, or potential debt. So those are the different typical options we have in front of us regarding that.

Operator

Alright, I am not showing any other questions in the queue. I would like to turn it back over to Dr. Deitcher for closing comments.

Steven R. Deitcher

Well, we appreciate everyone's excellent questions and your participation and interest in this call this morning, and on behalf of the Company and the particular management and employees, we are continuing to work very hard and I think our past track record of this Company is clear that our goal is to have accomplishments, not just activity, and we're going to continue to try to live up to that standard. We thank you very much and look forward to interacting with you in the future.

Operator

Thank you. Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the conference. You may now disconnect. Good day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Talon Therapeutics' CEO Discusses Q4 2012 Results - Earnings Call Transcript
This Transcript
All Transcripts