James S. J. Manuso - Chairman of The Board and Chief Executive Officer
Astex Pharmaceuticals, Inc. (ASTX) UBS Global Healthcare Conference May 20, 2013 3:30 PM ET
Good afternoon, everyone, and thank you so much for coming to the 2013 UBS Global Healthcare Conference. My name is Terrence Hu, and I'm very happy to be your host for this session. It is my pleasure to introduce our next presenter, Dr. James Manuso, Chairman and CEO of Astex Pharmaceuticals. There will be a breakout session at Carnegie West [ph], just across the hall, immediately following this session. Thank you very much
James S. J. Manuso
Thank you very much, and thanks so much to the folks at UBS for inviting us, and thank you for joining us today. Looking forward to telling you about Astex and giving you an update. And in that regard, of course, I'll be making some forward-looking statements and recommend that you examine our SEC filings.
Just a quick snapshot of our company. We're very much a global company. Our focus is on small molecules. We have particular expertise in oncology and are indeed recognized world leader in fragment-based drug discovery, one of the most exciting advents in small molecule drug discovery in the last 10, 15 years.
We have entered 8 drugs into the clinic over the course of the last 8 years, and 2 of those are prioritized and are in 6 Phase II trials, and those are first, SGI-110. It's the third entry and indeed the most advanced of the novel hypomethylating agents, and I'll describe what I mean by that. And then also 13387. That's the next generation HSP90 inhibitor to be clearly differentiated from those that have come before.
We're a very well-funded company. We ended the first quarter with $137 million in cash, and we anticipate this year Dacogen, sold by Eisai in the U.S. and Janssen outside of North America to bring in $55 million in royalty revenues and a great deal of potential with respect to fairly extensive portfolio of partner drugs that I'll go over as well. And our relationships include Eisai and Janssen, of course, with regard to Dacogen, then also AstraZeneca, Novartis and GSK relative to a number of other drugs that are in our portfolio. Five partner-funded programs are in Phase I and moving into Phase II we expect next year, and therefore, a number of inflection points that we can discuss.
First, a bit of an update on Dacogen. The royalty guidance that we have given for this year is up to $55 million. And to remind you, the deal is 20% to us on the first $15 million of net sales, and then it goes up in 2.5% increments for each $50 million of net sales, and then it tops out at 30%, and that's worldwide, all indications, regardless of who makes the sale.
And then also important to recognize is a 20-year deal, 20 years from the point of which it is introduced in any given jurisdiction. So to be clear, if it's approved 5 years from now in Japan, that takes us out 25 years. All of which is to say that this is an important asset for our company and will be with us for some time, will be generating revenues for us for some time.
Now also keep in mind that the hypomethylator market, which was virtually unknown as recently as 6,7 years ago, today is the $1.1 billion -- or last year, a $1.1 billion market. The U.S. Orphan Drug exclusivity for Dacogen lapses -- is expected to lapse this month. We haven't heard anything as of yet. But the drug was most recently approved for elderly AML, the only drug in the world approved for elderly AML in the EU. And there are about 18,000 patients on an incidence-wise basis in the EU, 10,000 of those are over 65. And the European Orphan Drug exclusivity takes us through 2022. Then, also, there's the prospect of the drug beingn improved in Japan for elderly AML. So, again, a very important asset for us, one that has continued to perform and underwrites a lot of our expenses.
Now that being said, I'd like to go into our 2 prioritized pipeline programs. The first is SGI-110, and that's in an AML NDS Phase I/II trial. We expect to conclude the Phase II segment of that later this year and go into Phase III next year. And it's also in 2 solid tumor indications, ovarian and liver.
And first, a bit of an introduction on SGI-110. This is not the same as what has come before. It's a very different drug. It does have an active chemical moiety characteristic of all of the approved hypomethylators, and that's decitabine. And it's a well-characterized HMA. And unfortunately, it is very rapidly eliminated by cytidine deaminase, and that limits the exposure of the drug to cancer cells.
SGI-110, we set out to address those issues. And first, it's a dinucleotide that you see pictured at the top here. So via a phosphate bond, we've tethered decitabine to guanosine, and this enhances the in-vivo exposure, because keep in mind, for hypomethylator to work, you want to really hit the cancer cell in the S-phase. Unfortunately, both Dacogen and Vidaza are in-situ for only about half an hour. So we've been able to increase, by fourfold, the amount of time the drug is on board. The biologically effective dose is less than the MTD, which is exactly what you'd want to see with any drug for that matter.
Now SGI-110, it's validated mechanism. It's a novel subcu drug very different TK and PD profiles compared to Dacogen, very low volume, high concentration stable formulation, and as I said, fourfold longer the cytidine half life. So we're on board long enough to get the job done, and therefore, have the potential to move into solid tumor applications.
It also has a much lower decitabine C max, which we believe is a corporate, if you will, with respect to toxicity issue. So it has potential opportunities for better safety profile. And the HMA Line 1 demethylation, we've found, first time in history, actually correlates with dose up to 25% at the biologically effective dose. And I'll show you some data on that.
We've seen clinical responses in Phase I very sick AML and MDS patients, and very important CRs these were. And we found, moreover, that the response is associated with the degree of hypomethylation, and this also is something that had been hypothesized, but this is the first time that we've actually shown that.
And as a result of this unique profile, it has opportunities in solid tumors. So we've entered a randomized Phase II combination trial in platinum-resistant ovarian cancer, underway accruing patients at this point, and also in Phase II hepatocellular carcinoma liver trial in patients who failed on Nexavar. And I'll go over those as well.
This is the first part of the Phase I/II MDS/AML trial, and it's a dose escalation. Part A, we're looking at relapsed refractory intermediate to high risk MDS or AML, 2 different regimens. We determined that the daily subcu 5 days on and a 28-day cycle is superior to those who were randomized to the once weekly, 3x over the course of the 28-day course. And then having chosen the best regimen, we are moving on -- have moved on to the Phase II segment.
What we did indicate is that with respect to the Phase I clinical results, these were older patients, very poor performance status, secondary AML actually, in 41% of the AML patients. Very heavily pretreated, in some instances, the maximum number of prior regimens was 9. And all of the MDS patients had received decitabine or either or azacitidine. And that speaks to the fact that this drug was able to have an impact even though they were previously treated with one or both of these agents. And more than half of the AMLs had received decitabine and/or azacitidine. So a very interesting set of data.
Now I mentioned at the outset that the pharmacokinetics and pharmacodynamics are different, and this is intended to illustrate the fact -- in dotted line you see decitabine or Dacogen. Notice that there's a very rapid peak concentration in a very short area under the curve, and that refers really to the half life. So we've doubled the exposure window to decitabine. It's 8 hours now through 110 versus 3 hours or so on Dacogen and up to fourfold longer half life of decitabine as well. And C max is much less than half that of decitabine. So that relates we believe to the safety profile.
SGI-110 the Phase I clinical results the pharmacodynamics here to LINE-1 demethylation. What we found is that as you increase the dose up to 60 milligrams per meter squared, we're getting increasing degrees of hypomethylation, and then it kind of tops out, so that even if you go beyond that dose, you're still in that general range of 20% to 25%. This, by the way, distinguishes the drug from both Vidaza, which typically has less than 10% hypomethylation and from Dacogen, which is less than 20%. We've actually seen LINE-1 demethylation on the order of 35% with an outlier patient. So it's certainly doing the job of hypomethylation.
Now the responses in relapsed or refractory MDS are represented here. Out of 15 patients, we had 5, who were total MDS responders. And these are the patients, who were previously treated with azacitidine or decitabine. And some of them had multiple categories of response. So, again, small numbers but a very early on, and then if you take a look at the relapsed refractory responses versus demethylation in AML, what we discovered was that you really had to have greater than 10% demethylation in order to have a response. So this harkens back to the fact that you want to assure that the patients are dosed properly in order to get the degree of demethylation in order to have a response. And what we found here was that it's got to be greater than 10% demethylation. Keeping in mind that this was in the dose escalation stage of the trial.
Now if you take a look at the part B section of the Phase I/II trial in MDS and AML, we selected the best regimen at the BED, but we're also looking at the maximum tolerated dose in order to determine is there potentially an effect that is generated by the chemotherapeutic impact of this drug. And so therefore, we're looking at first line MDS or AML and relapsed refractory AML or MDS. So 4 subsets of populations here in addition to one group for relapsed refractory AML that's receiving 60 milligrams per meter squared on a 10-day regimen. Again, we're experimenting with that.
So the dose expansion phase, about 200 patients randomized. And we will have data at ASH later these year in the relapsed refractory AML population. We'll also know, on an early basis, what the data look like in the remaining 3 populations. And we'll make a decision as to where we're going to go in the Phase III. But we'll announce where we're going in the Phase III later this year.
Now I mentioned earlier that because of the profile of the drug, we have opportunities in solid tumor indications, and the first that we're going after is ovarian. Specifically, we're looking at patients who've relapsed on platinum but less than 6 months ago, then they're placed back on carboplatin the eighth day after the daily 5 SGI-110 subcu in a 28-day cycle. We're looking at safety, the maximum tolerated dose, tumor hypomethylation, and then we'll randomize to the MTD of 110 plus carboplatin versus physician's choice. And the endpoints, as listed here, include progression-free survival response, overall survival and safety.
It's our hope because of the differentiated profile of 110 that hypomethylators will finally find a place in the treatment of solid tumors. If, in fact, that is the case, we have a great opportunity for making a difference for patients' lives in the solid tumor area.
The hepatocellular carcinoma trial is outlined here, and Part A, we're in the process of accruing patients. And we're looking at patients who failed Nexavar. And they'll be placed on 110 subcu on the daily times 5 regimen, then we'll look at the disease control to include CRs, PRs or stable disease. It's got to be greater than or equal to 30% in order for us to really have an impact here. And we'll be looking at a whole number of markers, including methylation status and tumor suppressor gene re-expression and response PFS and OS as well.
So what I have attempted to convey to you here is that SGI-110 is not Dacogen, it's not azacytidine, it's a very different drug. The clinical activity I think speaks for itself in MDS and AML. We've seen responses in very sick patients frankly, and pretreated significantly. And it's the only new hypomethylating agent that is in advanced clinical development at this point in time.
The fact that there are some other drugs that are going after AML is fine, because we believe that a hypomethylator is going to be an important drug to introduce in the context of any variety of these diseases in combination with any number of agents, so it's certainly going to have a home.
We think we've de-risked this drug's profile. It's subcu superior PK and PD versus Dacogen. And again the solid tumor indication's very important. So also, I want to point out that this has exclusivity through 2025. It's full substance of matter IT, and composition in both U.S. and Japan has been issued.
I'll move on now to a discussion of AT13387. That's our next generation HSP90 inhibitor. We've worked in gastrointestinal stromal tumors in a Phase II, and we're active now in prostate and lung.
To be clear, this is very much a second-generation HSP90 inhibitor. It's not the earlier ansamycin-based natural product. HSP90's very potent, probably most like or similar to the Novartis compound and differentiated from the Synta comp. What we found is it's a much safer drug in terms of the profile over the first generation. There's no liver talks there. Tolerability is good. We're seeing very minor visual changes, which we believe are really a class effect. And HSP90, I think everyone accepts it's a validated oncology target. And the data have shown a variety of objective clinical responses in chest, breast non-small cell lung cancer. I think the Novartis drug has been indicated in that area, and we think this has potential for very broad-spectrum activity. Also, again, intellectual property-wise, it's exclusive through 2025 and beyond, composition of matter U.S., EU and Japan.
Now the status of this drug is we've completed a Phase I program in GIST. We established an MPD, we've seen responses there. And that encouraged us to go on to a Phase II in GIST, in combination with Gleevec. And then randomized Phase II in castration-resistant prostate cancer, both with single agent and in combination with abiraterone and also in a randomized Phase II and ALK-positive non-small cell lung, both as single agent and as combination with crizotinib.
Now the NCI-CRADA collaboration is ongoing. That's a Phase I trial. We're looking at alternate dosing schedules with the potential for new combination studies that we're planning. Now this is the first randomized Phase II trial in castration-resistant prostate cancer. It has -- with this next generation of HSP90s, we elected to go after castration-resistant prostate cancer for the following reasons. It's driven by androgen stimulation. The androgen receptor is, of course, a very sensitive client protein of HSP90. And, also, finally, we've seen objective partial responses in earlier HSP90 inhibitors in this disease.
And the reason for combining it with abiraterone are manifold. First, you can use abiraterone pre- or post-chemo failure, unlike some of the other drugs out there. And you can continue after progression unlike the antiandrogens, which become agonists, actually, after a point. So it's got a double hit here on the tumor signaling pathway. The abiraterone suppresses the androgen ligand synthesis, and 387 degrades the androgen receptors. So again a double hit in that regard.
This is an outline of the prostate cancer trial. We're looking at progressing patients on abiraterone. We'll look into Part A at those on 387 once weekly plus abiraterone, and then we'll also a try a twice weekly dosage of 387 plus abiraterone. We'll figure out what's the best regimen in that regard. And then in the Part B, we'll randomize to single agent or 387 plus abiraterone for progressing patients, and so we'll have 2 regimens that we study here in this combination.
Now the rationale for the ALK-positive non-small cell lung is that we know from -- primarily from the trials of Novartis that you're seeing -- and earlier your stage drugs that you're seeing clinical activity on non-small cell lung to the tune of 25% to 50% response rates. So the design is going to answer a few questions. What's the best regimen? What's the best strategy? Do you go in early or treat after progression? And then, which population do you want to focus on, the naïve or post failure on ALK inhibitors?
So this is the trial. In the Part A with 30 patients, we're looking at the ALK-positive non-small cell lung patients, who've been treated for 8 weeks on crizotinib, and then we'll do a safety lead in, increase the dose from 180 mgs to 260 mgs per meter squared, IV on a weekly times 3, then we'll figure what's the best dose to go with in that combination. We'll be looking at the AMTD and ALK knockdown.
And then finally, once we determine these -- we'll put patients on either -- if they're stable disease or a PR, they'll continue crizotinib or go into the combination, that'll be 128 patients. And if they progress, we'll put them on 387 single agent or the combination in the Part C. So we'll answer a whole variety of questions in connection with this particular trial.
So our Phase II strategy is it's tiered. We're looking at proof-of-concept trials. We only want to advance drugs that are de-risked significantly. In the Part A, we established safety and MTD of the combination. And then we also look at the biological activity against the targeted client protein with clinical dosing, figure out where, in fact, are we getting the clinical activity, then in Parts B and C, we establish the clinical activity of 387 as either single agent or in combination. And this randomized design allows for a very significant clinical proof-of-concept.
Now many of the drugs in our portfolio emanate from what we refer to as the pyramid approach. We are, in fact, the world leaders in fragment-based drug discovery. And we start with a very advanced library of very small chemistries. We then determine where they fit in soaking with select proteins of the target, and then that gives us the opportunity of starting with the smallest unit that fits into the pocket, and then we can build on the fragment to the candidate.
In fact, this has been indicated by Gleeson and Sangale [ph], Nature reviews, giving rise to molecular properties that are more drug-like in our compounds compared to all of the compounds that were patented previously by the large pharmaceutical companies. So there are more drugs from whence these earlier ones came from.
To give you a sense also of our partners and what they're working on, LEE011 is the CDK4/6. And as you know, Pfizer has recently demonstrated some very significant data with their CDK inhibitor. It's in a Phase I trial and is advancing. Than we have a PKB/Akt inhibitor also in oncology in AstraZeneca's hands also in a Phase I. J&J recently announced, and last year, we received a milestone payment for the advancement of the FGFR inhibitor in a Phase I trial, likewise, a base inhibitor for Alzheimer's under AstraZeneca's wing. And then we own an AGC kinase inhibitor that's being worked on by the ICR and CRT.
Our balance sheet, I think, speaks for itself. As I said at the outset, we're very strong financially for a small company. We have ended the first quarter with about $137 million in cash, total assets of about $266 million. We have a little bit of debt from the acquisition of Astex Therapeutics Limited, $14 million on an NPV basis. So shareholders' equity about $233 million. Our capital structure is very straightforward, $94 million issued now at options about $16 million, handful of warrants and so on a fully diluted basis about $110 million.
The annual operating guidance that we recently gave includes revenues of $55 million. Notice that we leave blank the development and license revenue, that's because we don't announce that until it is received. Operating expenses -- and last year, by the way, we received about $12.5 million of development and license revenue. So it's not as if we don't expect something. We just don't give guidance on that.
Operating expenses. R&D about $67 million. Amortization on noncash item, $8 million; G&A, $15 million; for operating expense, $90 million, so a loss from operations of $35 million. However, we're going to receive an income tax benefit of $5 million. That brings us down to a net loss of $30 million. But, again, keep in mind from a cash flow perspective, about $12 million of noncash items are integrated into OpEx here. And then we have the opportunity for earning a variety of development and license revenues. So we could be near or at cash flow neutrality.
And that really brings us to the tail end, milestones and events for this year. I've been over the trials. We had 13 data presentations at AACR. We will give a Phase I MDS response data update, primarily with respect to durability at the EHA. We're going to file a new IND this year, and we'll tell you more about that going forward. And then, of course, with regard to 110, we'll have the first clinical results from the Phase II AML trial at ASH. We'll also tell you at ASH where we're going to go and as far as the disease indication in the Phase III.
So a number of value drivers here. We own everything in the portfolio. We have a number of important Phase IIs under way. We have 4 partnered pipeline products in clinical development, a very much of a world-class, indeed world leadership in fragment-based drug discovery in Cambridge. Again, 8 products in the clinic over 8 years, and Dacogen is very much with us for a very long period of time. It's here to stay and a strong cash position.
So on that note, I will end, and thank you very much for your time and consideration, and we have a breakout session across the hall momentarily. Thank you.
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: email@example.com. Thank you!