XOMA Corp CEO Discuses Q1 2013 Results - Earnings Call Transcript

| About: XOMA Corporation (XOMA)


Q1 2013 Earnings Callg

May 8, 2013 04:30 PM ET


Ashleigh Barreto - IR

John Varian - CEO

Paul Rubin - SVP, Research and Development and CMO

Fred Kurland - VP, Finance and CFO


Adnan Butt – RBC Capital Markets

Simos Simeonidis – Cowen & Company

Jason Kantor - Credit Suisse


Good afternoon, ladies and gentlemen and welcome to the XOMA Corporation’s First Quarter 2013 Financial Results Conference Call. (Operator Instructions). As a reminder today's conference is being recorded.

I will now like to turn the call over to your host for today, Ms. Ashleigh Barreto, Investor Relations at XOMA. You may begin.

Ashleigh Barreto

Thank you, Operator. Before we begin I must remind you that we’ll be making certain statements in this call limited to statements related to anticipated timing of initiation and completion of the clinical trials, proof-of-concept trials, anticipated size of clinical trials, continued sales of approved products, regulatory approval of unapproved product candidates, efficiency of our cash resources, and anticipated levels of cash utilization and statements that otherwise relate to future periods.

Certain statements are forward-looking statements within the meaning of Section 27a of the Securities Act of 1933 and Section 21e of the Security Exchange Act of 1934. These statements are based on assumptions that may not prove accurate. The actual future events may differ materially from those anticipated due to certain risks inherent in the biotechnology industry and for companies engaged in the development of new products in a regulated market. Potential risks to XOMA meeting these expectations are described in more detail in XOMA’s most recent filings on Form 10-K and other SEC filings. Consider such risks carefully when considering XOMA’s prospects.

Any forward-looking statements in this conference call represents XOMA’s view only as of the date of this call and should not be relied upon as representing its view on any subsequent date. XOMA disclaims any obligation to update forward-looking statements except where required by applicable laws.

Participating in today’s call are John Varian, Chief Executive Officer; Paul Rubin, Senior Vice President, Research and Development and Chief Medical Officer and Fred Kurland, Vice President, Finance, Chief Financial Officer and Secretary.

And with that I’d now like to turn the call over to John Varian. John?

John Varian

Thanks Ashleigh. Hello everyone and thanks for joining us. 2013 is a year of execution for us. In the first quarter we delivered very encouraging top line results from the first study in our proof of concept program. At this study, we evaluate gevokizumab for the treatment of moderate, severe and acclamatory acne.

We spent a great deal of time reviewing the data from the study and we have consulted with some of the preeminent leaders in acne including inclinations and regulatory experts. The goal of these conversations was to allow us to get their view of the data that we have generated.

We also want their opinions as to the role that gevokizumab could play in treating patients, who have failed or have become intolerant to antibiotic therapies but who have not yet been prescribed Accutane. Accutane is a drug that is distributed on a restricted basis due to its toxicities.

The feedback for receiving from these conversations is giving us greater confidence the gevokizumab would be well received by the clinical community and it potentially could be developed as the first non-antibiotic treatment for acne in over 15 years.

In addition to understanding the view of these experts, we have begun gathering additional information to help us judge the commercial potential of gevokizumab in acne. We recently launched field research with 100 dermatologists to determine their prescribing preferences for the moderate-to-severe acne population and patient satisfaction with these current therapies.

We presented these dermatologists with what we believe gevokizumab's product profile could in this indication and solicited their feedback. The dermatologists’ feedback indicate they clearly see a role for gevokizumab in treating their moderate-to-severe acne patients. We will continue to conduct research in this area. This information will be integrated into our internal discussion later this fall when we will determine the next phase III indications for gevokizumab.

Our 2013 milestone includes clinical data readout for gevokizumab, culminating the top line data at the end of year from the EYEGUARD-A study, the first of our three pivotal studies in patients with non-infectious uveitis. Paul will provide an update on our progress in a few moments.

I know that both you and we are anxious for the top five results from the second study in our proof of concept program where we’re testing gevokizumab in erosive osteoarthritis of the hand. We expect to be able to announce these results around Labor Day.

This first quarter call occurs only about seven weeks since we held our yearend call with you. Because of this we thought it would take sometime today to talk to you in more detail about erosive osteoarthritis of the hand and our study of gevokizumab in this indication.

Osteoarthritis is a chronic degenerative joint disease caused by wear and tear which most frequently affects the weightbearing joints including the knees, hips, and spine. It can also affect the hands resulting in hand osteoarthritis. Inflammatory erosive osteoarthritis of the hand or EOA is a distinct subset of osteoarthritis of the hand. It is not just a phase of classic hand osteoarthritis.

Those who have EOA experienced frequent inflammatory episodes and progressive joint damage. In EOA, pain is typically worse and hand function is more compromised. Specific erosions in certain joints of the hand result in a typical radiologic picture. This can be diagnosed and documented by radiograph or MRI. These hallmarks together with pain and swelling in patients with EOA are features that distinguish it from other forms of osteoarthritis as well as rheumatoid arthritis or RA.

It is further distinguished from RA through tests for an RA specific antibody and rheumatoid factor as well as through other certain simple tests. According to a 2010 report from Johns Hopkins University School of Medicine, a typical patient with EOA will exhibit radiologic signs of both degeneration and the distal and proximal interphalangeal joints of the fingers, the DIP and PIP joints. These are the joints that are dip in middle of each finger. EOA also typically effects the joint at the base of the thumb.

SIF often appear at these joints as well as synovitis, which is characterized by swelling around the outer membrane of each joint. EOAs characteristic degradations carries descriptive names like sour tooth and gull wing and are easily indefinable by a radiologist. Unlike typical osteoarthritis EOA typically affects signs of the disease between the ages of 40 and 50.

Physicians currently began treating EOA patients with physical therapy to optimize finger flexibility strength and control. Over the counter or prescription pain medication is commonly recommended to lessen the pain of joint inflammation. Prescription products such as opioids, COX-2 inhibitors, corticosteroid injections, SNRIs or topical creams and gels are used in osteoarthritis but have been shown to have a suboptimal response when used in EOA. Based on the existing literature, EOA likely has a genetic link.

Pro-inflammatory cytokines such as IL-1 beta and to a lesser degree TNF-alpha play key roles in destruction of the cartilage matrix in osteoarthritis. Recent research has highlighted the role of IL-1 beta in the EOA disease progression. Some small studies have shown IL-1 beta is detectable in the synovial fluid of joints classified with EOA. Additionally several separate studies reported in tissue evidence of IL-1 beta involvement in EOA.

A 2009 study in three EOA patients treated with Anakinra demonstrated improvement in pain, reduction in handicap and end-set withdrawal in all patients. Mechanistically IL-1 beta in addition to interacting inflammatory cells such as neutrophils to the involved area is believed to activate the enzyme MMP, which causes the digestion of cartilage.

Our ongoing proof of concept study is designed to understand the role IL-1 beta plays in EOA and whether gevokizumab has an effect in this clinical setting. We are looking to improve pain, function and other symptoms and potentially the prevention of joint erosion in EOA patients.

A reduction in pain using the AUSCAN scale is our primary endpoint but improvement from baseline based on X-rays and MRI are key secondary endpoints. These secondary endpoints are being assessed after the patient has received six months of treatment.

We are extremely hopeful that gevokizumab is helpful to the patients in the EOA study. There are no therapeutic options available that work well for these patients, let alone a drug that can modify their disease.

While we work to generate this data, we are conducting research to determine gevokizumab's potential commercial opportunity in this patient population. During our investigator's meeting, we heard two messages loud and clear, the treatment options they have to treat EOA are not adequate and they see a lot of these patients.

Osteoarthritis is a hugely prevalent disease believed to effect over 27 million people in the U.S. Standard hand osteoarthritis affects a sizable portion of osteoarthritis sufferers but as we've discussed the inflammatory form or EOA is a distinct subset of that population. A review of the existing literature after EOA prevalence leads us to conclude that there are approximately 1.8 to 2.2 million people in the U.S. afflicted with this disease. Approximately 90% of these are women.

Each piece of literature we reviewed was fairly consistent in helping us form our conclusion as to EOA prevalence. Now the only paper that was quite different was the Framington Osteoarthritis study group paper. While Framington is one of the most respected population based clinical cohorts, its EOA numbers were quite a bit higher and ratio of men to women was more balanced, but based on the preponderance of evidence as well as input from our experts we are comfortable with an EOA U.S. prevalence estimate of $1.8 to $2.0 million.

Patients are diagnosed with EOA based on radiologic evidence but the symptoms of this disease are known to wax and wane. As Paul says there's likely a period of time when the disease is hot. During this inflammatory phase the pain is more intense in the sciatica IL-1 beta and C-reactive protein or CRP may be elevated and doing damage. When we designed our EOA study based upon the published literature, we assume nearly all the patients screened would have elevated CRP.

What we are finding is, of the patients screened who have all other signs of EOA, only about a quarter have elevated CRP. So, we have a sizeable number of patients who do in fact have EOA as documented by the enrolment criteria included in the typical x-ray findings, except their high sensitivity CRP level is not greater than or equal to 2.5mg/liter.

It is possible that what we are seeing should be expected. We may be enrolling patients during an acute, severe inflammatory episode which is reflected by their elevated CRP. The screen failures may be the EOA patients who presently are not experiencing the same degree of inflammation and as a result do not demonstrate elevations in C - reactive protein.

Paul and the clinical team have kept this study on schedule despite having to screen four times more patients than planned in order to meet our 90 patient target. This is difficult but we believe it is crucial to give gevokizumab its best chance to work.

We believe we are selecting the patient population most likely the benefit from an IO-1 beta modulator like gevokizumab. As you know, elevated CRP is believed to occur as a result of the IO-1 beta immune cascade.

While it's tough to exclude so many patients, we felt that it was the prudent decision. With that said, if a patient does not have elevated CRP but does have EOA as confirmed by the radiologic and other measurements, it’s also important for us to know if the drug works in these patients.

We are announcing on this call that we are launching a supplemental study, Study 162 which will enroll 90 patients who passed all the same enrolment criteria as our primary EOA study but they do not have a high sensitivity CRP level of 2.5 mg/liter or greater.

This study will tell us if gevokizumab works in the broader EOA population as estimated to be 1.8 to 2.2 than people in the U.S. or they may tell us gevokizumab only works in the patients who are in inflammatory stage of the disease which might approximate about 500,000 patients.

No matter of the outcome of the study, there is a significant value in conducting it. First, it will impact our phase III study design. It may either mirror our phase II study using the elevated CRP biomarker for inclusion or it may be extend to a broader population with significant medical need.

Second, we will be able to proactively answer any questions posed by the regulatory authorities as to the drug’s effects in either population, ultimately leading to better definition of the specific population that would benefit from this biologic therapy. My next few points make the assumption we are successful in Phase III, received regulatory approval. These come with all the necessary forward-looking statements.

So, third, our pricing will reflect using a specific four broader base population. Four -- we will be able to share this information with payers so they’re confident in reimbursing gevokizumab for use in the appropriate patient population.

Fifth, physicians will be more confident, they are treating the appropriate patient population. Ultimately we believe these two studies will show us the right UA patient population for gevokizumab therapy.

At this point we believe our targeted population is the half million UA patients who have elevated CRP. If we can get even a small percentage of this population at a biologic price, there is a huge potential market for XOMA. That’s also a population we can target with the small focus commercial team calling on the rheumatologist and surgeons who treat these patients.

Before I turn the call over to Paul, I want to clarify our intensions with respect to the proof of content program. As I believe there is a new onset that’s been overlooked. The data from the three POC studies is designed to lead us to our next Phase III indication. That does not mean the work we have done in the other two indications might now be pursued further.

At this point with the data we have already generated in acne and our belief that EOA is an excellent opportunity if the data from our current trial are positive, I would expect our next Phase III study would be in one of these two indications. Development of gevokizumab in inflammatory noninfectious scleritis which is an ongoing study being performed by the national eye institute likely will proceed as our non-infectious uveitis or NIU pivotal studies progress.

As you can imagine these two indications are closely linked from a treating physician standpoint. We may wait to take this indication to the pivotal phase but by watch it moving through development while we have the NIU results so we can advance this program quickly.

With that I will turn the call over to our Senior Vice President Research and Development Paul Rubin to update you on the progress we are making with our POC studies and our pivotal studies in our Phase II EYEGUARD program. Paul?

Paul Rubin

Thank you, John, and good afternoon to all. We already have covered a lot today, but there is a significant activity going on right now. I am pleased that I can finally share with you preliminary data from Servier’s Phase II study in Behçet's uveitis.

I will follow this with the discussion of scleritis study being performed by the National Eye Institute as well as the status update and NIU pivotal studies. Then I will get into the details about the ongoing EOA study and the non-elevated CRP EOA study, John just announced.

As you recall, Servier launched a Phase II study early last year to determine the gevokizumab dose it wanted to take into our joint Phase III Behcet’s uveitis study. The trial post non-controltrials.com was designed as an open label study to assess safety and pharmacokinetics, in addition to measuring clinical and biological activity, the study was conducted at three sites in Korea, four sites in Turkey and one site in Tunisia.

Patients who enrolled, if they had a history of Behcet’s disease had severe uveitis and we’re taking less than a equal to 20 milligrams per day of corticosteroids, as well as at least one pre-specified immunosuppressant.

Patients within acute exacerbation patients at the time they were selected were termed acute patients, and patients with an exacerbation in the past 18 months, who had evidence of vascular leakage and were presently stable on their medication we termed at-risk patients.

The study enrolled a total of 21 patients comprised of 17 acute and four at-risk patients. The patients replaced into the high dose group which was gevokizumab 60 milligrams dose subcutaneously every four weeks with the low dose group which was 30 milligrams of gevokizumab dose subcutaneously or via IV every four weeks. All patients also received an IV loading dose.

There were eight patients in the high dose arm and 13 patients in the low-dose arm. We have preliminary results on 15 evaluable patients that were undergoing an acute exacerbation that responded to gevokizumab treatment with most responding within one week.

Eleven evaluable acute patients had a vitreous haze score greater than or equal to 2 plus of base line and theoretically would have qualified for EYEGUARD-A pivotal NIU study in patients with active disease. Eight of these patients showed almost two year reduction in the index side at about day 70 which was the prescribed study visit day by protocol.

All of the valuable acute patients have Behcet’s haze reduction of at least 1 unit. The 2 point reduction in vitreous haze score at day 56 is primary endpoint our EYEGUARD-A study. We’re very pleased to see the reductions demonstrated in Servier study.

Most patients were converted to asymptomatic state relatively soon after initiation of treatment. Although all some patients did show signs of occurrence, these recurrent ocular symptoms were observed with the lower incidence in the high-dose cohort occurred on or after three months and in two cases were due to the unplanned reductions in steroids.

The study continues to show gevokizumab is well tolerated with no serious adverse events related to study drug. The PK results were as predicted from prior trials and there is no evidence of neutralizing anti-drug antibodies. Although encouraging, to the small sample files and lack of control group, these preliminary results should be considered with caution. Servier is planning to publish and present this data and we would like to thank them for letting us share this level of detail with you.

On April 10th, we announced the National Eye Institute had opened enrollment in a gevokizumab open label study. The study is expected to enroll 10 patients experiencing noninfectious, active and osteoarthritis. With a scleral inflammatory grade of greater than or equal to one plus and at least one eye using the standardized photographic scleral (ph) screening system; that was developed at the NEI (ph).

All patients will receive 16 milligrams of gevokizumab doses, every four weeks for sixteen weeks. Responders are defined as patients who experienced a two separate option on the five point scale from zero to four or who reach great zeros with scleral information in this study eye.

Those patients who respond will have the option to continue treatment for an additional 20 weeks. The NEI (ph) will conduct secondary measurements including changes in visual equity, changes in acute pressure and changes in scleral grading. We will hit the data we need for the study by near end in order to select our next gevokizumab Phase 3 indication.

As we have previously outlined, the EYEGUARD program consists of three pivotal trials; EYEGUARD-A in patients with active disease, EYEGUARD-B which is enrolling only patients with non-infectious UVI this to the underlined Behcet’s and EYEGUARD-C which is studying the effects of gevokizumab; NIU patients controlled on protocol steroids.

Our partner Servier is managing the EYEGUARD-B trial enrolling patients in the number of countries outside of the United States. We are managing the EYEGUARD-A and C trials with Servier serving as our local representative in and countries outside the US. In both EYEGUARD-A and C, we initially targeted approximately 157 centers on a global basis with 60 of these located in the U.S.

Approximately 90% of these sites will be enrolling patients in both studies. Success is directly related to getting all centers up and running. As we said in our last call, this is a highly complex process as we must meet the needs of the FDA and the DMA and the regulatory agencies in 20 separate countries. Today, 51 centers are screening patients in the United States of the initial target of 60 U.S sites. Twenty four of these came online since we spoke with you last.

We spent this past weekend at the association for Research and Vision Ophthalmology or RVO meeting with some of our investigators in EYEGUARD studies. They are very excited to participate in our ongoing studies of gevokizumab. Extended level of interest in participation and to enhance our ability to complete the EYEGUARD A and C studies quickly, we’ve decided to add additional U.S. sites to the studies.

We now plan to open 140 sites total with 80 of these in the United States. As I have said, study sites are the key. With the site total we have chosen we need to average just over two patients per site in order to fully enroll. The majority of the remaining U.S. sites such as scheduled start act the patient recruitment within next few weeks.

In the U.S. active sites have been meeting their enrollment and recruitment objectives. Outside of the United States we are working in conjunction with our colleague at Servier. They are expecting to have nine of their 20 countries up and running in the next four weeks. Phase III studies are a huge effort we can start and the team is managing it well.

In our EYEGUARD program within the next few weeks, we will have nearly all of our final complement of approximately 140 active site enrolling patients on a worldwide basis. It is this effort that continues to make us comfortable in targeting top line results from EYEGUARD-A by yearend, EYEGUARD-C in the first quarter of 2014 and EYEGUARD-B in the second quarter of 2014.

Our erosive osteoarthritis of the hand or EOA study is enrolling as expected. We have 67 patients enrolled or qualified out of a total of 90. Three centers with sizable EOA populations are coming online in early May and we expect to hit our 90 patient target by end of this month.

In these 90 patient proof-of- concept study, study 160, we’re assessing the role of 60 mg of gevokizumab given subcutaneously once monthly versus placebo. We are looking for significant improvement in the mean Australian, Canadian hand osteoarthritis or AUSCAN pain score from base line at three months.

For those of who, who are unfamiliar with AUSCAN scale is a 15-item scale that measures pain, stiffness and function during the preceding 48 hours. There are five questions assessing pain levels while at rest and during gripping, lifting, turning, and squeezing objects.

One question relates to the severity of joint stiffness immediately after awakening in the morning. The function assessment has nine times directed at the patients’ ability to conduct everyday tasks. Each of the items is rated on a five point scale with zero being no symptoms to four being extreme. Patients randomized two to one to 60 mg of gevokizumab or placebo.

Our primary endpoint is the improvement in the mean AUSCAN pain score from baseline at 90 days, patients who have received three doses when we assess the primary endpoint and we anticipate having top line data from this endpoint around Labor Day of this year.

We also have multiple secondary endpoints that will be assessed through day 168. These are radiographic MRI changes which were read by essential reader changes in c-reactive protean and could comment into acetaminophen use. Patients are not allowed to use any NGL-6 during this study and we are providing acetaminophen to patients for their use on an as needed basis.

These additional data will be available the first quarter of 2014. The secondary endpoint that we are very interested in seeing is the MRI imaging as this may tell us if gevokizumab can modify joint erosion which would be a significant finding for XOMA.

As John stated, we have had a significant number of screen failures from our EOA study the majority of these exclusions occurred for patients who did not have a high sensitivity CRP level of greater than or equal to 2.5 milligrams per liter at screening.

Using CRP as an inclusion criteria was important since it is the most easily obtained marker inflammation and gevokizumab reduces inflammation. In light of our screening data if we continue on our initial path we could be eliminating a significant portion of the patient population or we could be required to conduct further studies to understand potential restrictions based on varying CRP levels. Therefore we have decided to launch a parallel Phase 2 study in the patients who were considered screen failures due to lack of CRP elevation from the 160 trial.

The new study, study 162 is a three month efficacy and safety study. We will enroll 90 patients who meet all of the entrance criteria for study 160 but have an hs-CRP level of less than 2.5 milligrams per liter. These 90 patients will be randomized two to one to 60 milligram gevokizumab or placebo. The primary endpoint will be change in AUSCAN score and the target handed to 84. We will also measure changes in the Functional Index for Hand Osteoarthritis or FIHOA. We will determine improvement in joint palpitation assessment and assess the acetaminophen use.

With the results from these two studies we will be able determine if hs-CRP levels of screening are relevant to an EOA patient’s responsiveness to gevokizumab. We will know if gevokizumab is appropriate to pursue in the more limited elevated CRP population or the broader EOA population. Either way for the reasons John articulated, earlier there is a significant value in conducting this study.

My team and Servier's are intensely focused on managing these studies. I am very pleased with both team’s efforts and the dedication they have shown in going the extra mile when necessary in getting the right sites up and running.

On a side note, from time to time, we're presented with opportunities outside of the indications selected by us or Servier for either company's POC program or our joint EYEGUARD program. We will take advantage of opportunities in those indications we believe may have longer term value for gevokizumab.

To this end we'll engage in single site studies using our drug under rizoma IND. These single site studies will be performed by expert known to us in indications where we and they believe in IL-1 beta modulator may provide benefit. We won't issue press releases for these indications but you will see them on clinicaltrials.gov as they launch. With that I’ll turn the call to Fred.

Fred Kurland

Good afternoon everyone and thanks for attending our call. XOMA reported total revenues of $9.5 million and $9.9 million in the first quarters of 2013 and 2012 respectively. The small decrease in 2013 revenues reflects a reduction in contract and other revenue associated with NAID contracts.

Research and development expenses for the first quarter of 2013 were $16.6 million, compared with $15.8 million in the corresponding period of 2012. General and administrative expenses were $4.1 million in the first quarter of 2013, a 12% reduction from the $4.7 million incurred in the first quarter of 2012.

As a result of our streamlining activities during the first quarter of last year, we recorded a charge of $3.8 million. For the quarter ended March 31, 2013 we had a net loss of $24.9 million or $0.30 per share, compared with a net loss of $30.4 million or $0.69 per share for the corresponding quarter of 2012.

The net loss for the first quarters of 2013 and 2012 included a non-cash charge of $12.8 million or $0.16 per share and $14.4 million or $0.33 per share respectively. Both were related to the revaluation of contingent warrant liabilities which resulted primarily from the appreciation of XOMA's stock price during each of the quarters.

Excluding these non-cash charges the net loss in the first quarters of 2013 and 2012 were $12 million or $0.15 a share and $16 million or $0.36 per share respectively. On March 31, 2013, XOMA had cash, cash equivalence and short term investments of $70.4 million. We ended December 31, 2012 with cash, cash equivalents and short term investments of $85.3 million.

You may recall that about a year ago, when we initiated a phase III clinical trial evaluating the fixed dose combination product of Perindopril Arginine and Amlodipine Besylate for the treatment of hypertension, we had arranged for the roughly $9 million in study cost to be paid for through a combination of grants from Servier and from the cash proceeds of Aceon sales. I am pleased to say that as of now this liability has been just about fully paid. You will notice this when you see the significant reduction in our accrued liabilities at the end of the quarter.

Today, we reconfirmed our financial guidance that anticipated cash used in ongoing operating activities during 2013 will be approximately $50 million. This reflects the cost associated with conducting our EYEGUARD-A, EYEGUARD-B and EYEGUARD-C phase III clinical trials. We continue to believe this capital will fund existing operations to the end of fiscal 2014.

I’ll turn the call back to John for few final comments before we take your questions. John?

John Varian

Thanks, Fred. Just before we turn the call over for your questions, I wanted to remind this all of something. We here at XOMA running as fast as we can to meet all the aggressive timelines we set for ourselves. We are managing multiple clinical trials of gevokizumab and some very different indications across many centers in the U.S. and in some cases in numerous countries around the world.

From much of this, we have to coordinate what we do with our partners, Servier and with our contract manufacturer Boehringer Ingelheim. I just want to stop for a moment and thanks the entire cross functional team here at XOMA for their incredible efforts to keep all of this under control and on schedule. The difficulty of their jobs can be overstated and I am proud of the XOMA team and the team at Servier for their successes to date.

The complexities of these efforts will not lessen and we will continue to perform at a high level since what we are trying to accomplish is important to us, our shareholders and the patients who are trying to help. But with all the day-to-day urgency, I just wanted to remember the bigger picture. We have a great drug in gevokizumab. We have great team here and Servier developing it. We are doing what we believe are the right studies in indications where modulating IO1 data has a chance to impact the disease.

I believe strongly that we are making great strive down in the important path. One they will build XOMA into a strong company built on gevokizumab. With the success and at least one of the indication we are studying and a commercial launch here in the U.S., we have the opportunity to make XOMA the success we collectively envision. We appreciate your participation to this effort. We are up to good start 2013, and we look forward to sharing the top line results from the EOA study with you around Labor Day.

Operator we would like to open up the call for questions now.

Question-and-Answer Session


(Operator Instructions) Our first question comes from the Adnan Butt with RBC Capital Markets

Adnan Butt – RBC Capital Markets

First on the EOA study, I am under the impression that CRP levels are elevated with EOA, to begin with. So how was the cutoff level determined via the 2.5 number?

Paul Rubin

Yes, the 2.5 number was taken from the literature based on the study that was done in Italy, and in that study all patients reported that qualified for the disease from a radiographer perspective, had a CRP of 2.5 or higher. So we took it out from a literature based analysis of patients with EOA. So that was our initial assumption and then when we actually measured in our trial, we found that it’s only a minority, at least in the sites the United States. Even though they had otherwise met criteria for EOA, the elevations with that cut off of CRP were not as high.

John Varian

And just to follow on that, I mean, it was a tough decision for us because by putting this criteria in place we know the patients who don’t have the elevated CRP do in fact have EOA, because it’s measured based upon the other signs. But we feel that we have the best chance of gevokizumab working in those patients where they have this elevated CRP. So we stuck to our guns and made sure that we complete this trial just in the patients where they have EOA and have elevated CRP.

Adnan Butt – RBC Capital Markets

And just a follow up, what gives the company confidence that gevokizumab would work as well or better with higher CRP levels. Is that product data that gives the company confidence?

Paul Rubin

Yes, it’s just based upon the fact that, and as John suggested, this disease is periodic episodes of very profound inflammation and IL-1 beta has been attributed to that. So we are trying to capture patients during the time when they have the highest level of inflammation and we then concluded blocking the inflammation with hepatitis chance of effect that that point in time.

Adnan Butt – RBC Capital Markets

And the second study, has it started already or will it be starting some time later?

Paul Rubin

It will start in the next few weeks. As a result of the screening process from our first study we have actually accumulated quite a large cohort of patients that will immediately qualify for the second study. So, we’ll roll all those patients into their trials as soon as we possibly can.


Our next question comes from Simos Simeonidis with Cowen & Company.

Simos Simeonidis – Cowen & Company

My questions are about the Servier study, UV (ph) data study that you talked about and I was wondering, first of all are we going to see the data at some point before they’re published by Servier? That’s my first question.

And then I think it was Paul that separated data in acute and at-risk patients and talked about the 15 evaluable acute patients 11 of which had vitreous haze of 2 plus and you said eight out of 12 had reduction 2 points.

First of all can you tell us about the other 3 patients Secondly, from the ones that seemed where the drug worked on the eight of the 11 where was the breakdown between high and low dose? And finally how did the drug do in the four at-risk patients if you have that data. Thank you.

Paul Rubin

So, in fact the way this study was designed, patients were given a dose and then after two weeks we evaluated. If they did not have an improvement in the disease they weren’t allowed to continue in the trial. So, in fact all patients that received a first dose essentially did improve over the first two weeks. So, everyone responded. Remember, only 11 had two plus or greater. The other four all had active disease but it wasn’t reflected by 2 plus vitreous haze. So all four of those depended on what their signs were did respond as well. I can’t talk about vitreous haze response because they didn’t have to be given.

Simos Simeonidis – Cowen & Company

And then for the eight of the 12, what was the breakdown between high-dose and low-dose?

Paul Rubin

Yes. I think it was about 2 to 1 lower to high but I don’t have those exact numbers in front of me.

John Varian

I think the most important piece of this is as Paul said, the vitreous haze is the input in our NIU study, the EYEGUARD-A study and so this was really a good group of patients who had exactly the end point that would qualify them for the study and as you heard in a high percentage they actually responded in a way that would have made them as responders in the study.

In the study itself, when we sized the EYEGUARD-A study, we made an assumption that we would have a 40% response rate on drug in the EYEGUARD-A study and so we had a very high percentage in this small study; this small Phase 2 study but we sized the EYEGUARD-A study based upon a 40% response.

Paul Rubin

Yes, so unfortunately this are kind of the data we can share with you right now and the more details, we have to wait till Servier allows us to provide one information.

Simos Simeonidis – Cowen & Company

And do you have an idea; are these being reserved for a publication or for the?

Paul Rubin

They are both presented at a meeting and I can't tell you which one but their intent is to both present it in a meeting as well as publish.

Simos Simeonidis- Cowen & Company

Okay finally, I wanted to ask you about the EOA second study. Just to be clear, the study 160, all the patients will meet the initial requirement of above 2.5 grams per liter right or milligrams per liter? Correct?

Paul Rubin

That was an entry criteria for the trial. So unless you had an hs-CRP value of 2.5 or greater, you didn’t qualify for the study.

Simos Simeonidis- Cowen & Company

And then the second study would be; so there is no overlap between the patient groups?

Paul Rubin

That's correct. There is zero overlap between the two. So at the end of the day, what we want to do is two things. We want to determine whether or not local information is also IL-1 beta modulation dependent without evidence of systemic inflammation, but we also want to because this is a biologic; we want to have no question what the definition of the population that would benefit from this is. We think that's really important as we go forward from a regulatory perspective.

Simos Simeonidis- Cowen & Company

And given this two and a half milligram per liter value that have their; it seems to me kind of arbitrary from;

Paul Rubin

It wasn’t arbitrary. It was taken directly from literature.

Simos Simeonidis- Cowen & Company

Sorry what I meant to say is that; it doesn't mean that you are not going to have a response if you have let's say the 10.2 (ph). I was going to ask whether in 162 whether you strive to fine patients according to between 2 and 2.5 or 1.5 -2? In order to find the real let's say cut off that you might use in Phase 3 for example.

Paul Rubin

That's a good question Simos; I don't think we have an out patients to do that level stratification for this trail. So really it’s more of a proof-of-concept as we mentioned. So we will be able to get as, pretty much selecting a 2.5 mg cutoff which was chosen by literature. So we’ll be able to look at patients above and below that and see if there is a difference in response.

Simos Simeonidis- Cowen & Company

Final question, Paul, from a single transduction pattern perspective as it says, would you expect an IL-1 beta inhibitor to work the quote low CRP population. Again the question of rating comes into play, might work between 2.2 and 2.5 for example but how do you think about study I…

Paul Rubin

That’s also related question Simos but really what we felt was if there was circulating level or an evidence of systemic CRP that would be patients with highest level of inflammation and would have the best chance of responding. Having said that, the real important aspect is what’s going on local in the tissue. So it is possible that there are patients that have significant inflammation occurring at a local level that doesn’t manifest as a systemic single signal as CRP but we initially chose the CRP because we felt that in a proof-of-concept trial, this will have the best chance of showing the benefit of the drug.

John Varian

Sure, it is important to say that the fact that we’re having this discussion asking each other these questions, we need to have the answers to these questions as we see the regulators and ultimately with the payers et cetera, right. So, we need to understand which is the right patient population for gevokizumab within EOA and we’re fine with it either way it comes out. It’s a great opportunity either way but having the answer to this question is really important.


Our next comes from the Jason Kantor with Credit Suisse.

Jason Kantor - Credit Suisse

Couple of questions for you, so do you have to rescreen the people that is screened out because couldn’t CRP the something that’s not constant overtime and that you just catching like you said 25% of people who happen to be in a flaring situation and the people who screened out may screen out again from this trial because they start to flare?

Paul Rubin

That’s a really good question Jason. We will get another baseline CRP prior to entering and that’s above 2.5 will put them in above 2.5 group, if it below we will keep them in the below. So otherwise they qualified because in addition to having CRP from the first trial, they also have to have radiographic evidence or erosive osteoarthritis. So that wouldn’t get changed and they have to have an underlying baseline of pain that qualifies, which I think was a 50 out of 100 point scale.

John Varian

Either way it certainly have those things.

Jason Kantor - Credit Suisse

It sounds like you guys need to do sort of a time core study with patients just to see where hs-CRP goes overtime without treatment.

John Varian

That is a great comment and I think that it probably does wax and wane. I think that is probably right as it correlates with the disease but what we are trying to do in the first trial is give the drug its best chance of response. That doesn’t necessarily mean that patients without the CRP wouldn’t respond because we are only doing a small number in a POC trial. So that was the rationale for the initial design.

Jason Kantor - Credit Suisse

Got it and then you mentioned that that were some people who relapsed or had symptoms come back. Could you explain were those patients who had relapsed while still on therapy, was this after therapy? Did they get back to…?

Paul Rubin

Are talking about the NIU trial?

Jason Kantor - Credit Suisse

Yes that is what I was talking about, yes.

Paul Rubin

Yes there were patients, they were observed over a six month period. So some of these patients did have recurrent symptoms but in general the symptoms were not as severe as what they had when they presented at baseline and the ones that did recur, there was a higher rate of recurrence in the low dose group compared to the high dose. So for example we do not believe that this drug is going to cure every patient but it is clear that there was a beneficial effect, at least if you interpret the small trial. It appeared as if there was benefit.

Jason Kantor - Credit Suisse

And just so I am clear on sort of the apples to apples numbers for the Behcet’s study, you say you powered your study for 40% but in the relevant population in the study that you just reported on you had eight out of 11 responders by the criteria but the time point they looked out it was a little bit later than the time point you are going to look at but you are saying that the responses come quickly so you do not think that that time difference…

Paul Rubin

Yes, we don’t think they are too weak really. That is also good. I mean obviously it is not complete apples to apples comparison for a number of reasons. One this is strictly Behcet’s uveitis where the EYEGUARD-A is all uveitis independent of underlying uveology but what we saw was of the active patients that were evaluated 15, surprisingly 11 of these had at least two plus vitreous haze and historically we were told that that was not quite as common in Behcet’s uveitis.

So that was also interesting for us to see that it actually was higher. So of those patients, the 11 that had at least the two plus or greater eight out of the 11 had at least a two point improvement and the way the study was designed, they got their intravenous loading dose and two weeks after the intravenous loading dose if they improved they received their sub q dose. So that's how it ended up 70 days as opposed to 56 days. So it was the time from the intravenous loading dose coupled with the 56 days that occurred subsequently. So it was essentially two additional…..

Jason Kantor - Credit Suisse

And are you doing intravenous loading dose in the EYEGUARD studies.

Paul Rubin

No when we look at kinetics we don't believe there is any real advantage to it.

John Varian

And Servier concluded that too because they're also not doing it in the Behcet’s uveitis study that they will bring.

Paul Rubin

And when they do recur symptomatically it was generally months after the received the loading dose. So in fact the loading dose had very little to do with it.

Jason Kantor - Credit Suisse

And when do think, did you say already, but when do you think that that data could come out is that like AAO (ph) or something like that?

Paul Rubin

It will be sometime next year but they haven't officially picked the time.

John Varian

We were really happy to be able to disclose this bunch and they were gracious enough to allow us to do that because we've been getting asking and wanted to disclose this.


I'm not showing any further questions at this time. I'd like to turn the conference back over to CEO John Varian for closing remarks.

John Varian

That's great. Thank you everyone again for joining our call, and it did give us an opportunity since this first quarter call and our year-end call were close enough together to dive a little deeper into some of the indications that we're chasing. So we appreciate you listening to us as we discussed that. 2013, we're off to a great start and we look forward to sharing the remainder of the year with you. So, thanks again.


Ladies and gentlemen that concludes today's presentation. You may now disconnect and have a wonderful day.

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