Merrimack Pharmaceuticals' CEO Discusses Q2 2013 Results - Earnings Call Transcript

Merrimack Pharmaceuticals Inc. (NASDAQ:MACK)

Q2 2013 Earnings Call

August 8, 2013 11:00 AM ET

Executives

Geoff Grande – IR

Bob Mulroy – President and CEO

Bill Sullivan – CFO and Treasurer

Bill McClements – SVP, Corporate Operations

Analysts

Anupam Rama – J.P. Morgan

Peter Lawson – Mizuho Securities

Rachel McMinn – Bank of America

Brett Holley – Guggenheim Securities

Eric Schmidt – Cowen & Company

Boris Peaker – Oppenheimer

Gene Mack – Brean Capital

Operator

Good day, ladies and gentlemen, and welcome to the Merrimack Pharmaceuticals’ Second Quarter 2013 Investor Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator instructions) As a reminder this conference is being recorded.

I’d now like to turn the conference over to Geoff Grande of Merrimack Pharmaceuticals. Sir, you may begin.

Geoff Grande

Thank you, Shannon. Good morning and thank you for joining us for Merrimack second quarter 2013 investor conference call. Today I’m joined by Bob Mulroy, our President and CEO, and Bill Sullivan, our Chief Financial Officer.

This morning we’ll focus on an update on our progress toward our upcoming milestones and the development progress we have made across the pipeline. We’ll end the formal portion of the call with an overview of our second quarter financials and then close for time for Q&A.

We issued a press release this morning announcing key recent events and our second quarter financials. That release can be found in the Investors section of our website. We’re broadcasting this call live and it will also be archived on our website for six weeks.

During this call, we will be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These may include statements about our future expectations and plans, clinical development timelines, the potential success of our product candidates and financial projections. These statements involve risks and uncertainties, which are described in the “Risk Factors” section of our most recent Form 10-Q and the other reports we file with the SEC, which are available online at www.sec.gov.

While these forward-looking statements represent our views as of today they should not be relied upon as representing our views in the future. We may update these statements in the future but we are not taking on an obligation to do so.

With that, I’d like to turn the call over to Bob.

Bob Mulroy

Well, thank you Geoff and good morning everyone. It’s a pleasure to update you today on our ongoing efforts at Merrimack. We are pleased to have had a very strong quarter of scientific and clinical progress. Our fundamentals are strong and we remain on track for top line data results in the upcoming months from five later stage trials. We have also recently strengthened our balance sheet to support pre-commercial work on 398 as well as the transition of several of our earlier stage programs into later stage clinical opportunities. It is an exciting time for the company and we hope a promising one for patients.

Let me begin with a brief overview of our value proposition. First we have built the fully integrated cancer focused biotech company operating at scale. We have six novel product candidates in the clinic under 20 different clinical indications and study in areas all with major unmet medical needs. We have two additional pre-IND programs and a robust discovery pipeline behind that and we are also developing companion diagnostics across our entire pipeline.

Second, we have achieved exceptional levels of discovery and development productivity founded on our systems biology scientific platform. System biology is an integrated engineering computing and biology big data approach to understanding the complex network interactions to drive cancer. Our platform has provided us with a broad set of unique insights into cancer cell survival and growth but it serve as the foundation for our pipeline.

And third, we have also developed the leading position in two highly differentiated drug technologies, multi-specific human antibodies and a third generation targeted nanotherapeutic technology. In the human antibody space, we have engineered and been the first to enter the clinic with several novel multi-specific antibody constructs. Our antibody capabilities give us the opportunity to address many of the more complex signaling issues that span targets and pathways in cancer.

In the nanotechnology space, we are advancing a next generation of antibody drug conjugate, antibody guided nanocarriers that are engineered to have a greater impact on tumor growth. Our technology is designed to achieve a product dynamic range delivered thousand full greater payload and provide a much longer duration of exposure of drug to the tumor tissue. And we believe our nanotechnology platform provides us with the potential to significantly improve the therapeutic impact on a broad range of therapeutics.

Now, let me turn to an update on each of our programs. Let me start with our Phase 3 asset MM-398. This is our nanotherapeutic engineered to overcome the physical challenges of delivering chemotherapy too hard to treat tumors. This drug consists of a lipid based nanocarriers that encapsulates the broadly used chemotherapy irinotecan. The 398 encapsulation technology has specifically been designed to accumulating tumors with poor vasculature and to be (trapped) within the tumor microenvironment by tumor associated macrophages that tend to accumulate around hypoxic tumors.

Hypoxia is a pervasive problem than cancer. It’s a say of low oxygen and poor blood supply and yet it has been shown that we associate with poor responses to traditional therapies and the poor prognosis for the patient overall. Based on our preclinical data, we believe 398 has best in class accumulation of drug and best in class duration of exposure two of the most sensitive variables for drug efficacy.

398’s most advanced indication is in the Phase 3 study, in second line pancreatic cancer. The study is testing 398 as a monotherapy versus 5-FU and Leucovorin and as a combination with 5-FU and Leucovorin. The three arm study is targeting the enrollment of 405 patients. With respect to study execution, we remain on track to complete enrollment in Q3 this current quarter. We’re very near the end of our enrolment effort and expect to be announcing the achievement of our enrollment target in the weeks ahead.

With respect to data, we expect to report top line data later this fall in the fourth quarter of 2013 or potentially the first quarter of 2014 depending on event range. We continue to preserve our wide range. We are reporting top line data given that this is the first large trial in the second line patient population in pancreatic cancer so there are few well controlled benchmarks to rollout (inaudible) study duration.

Last on 398, since our last update the data safety monitoring board that is overseeing the trial has met once more and the board is recommending continuing the study. There were no expected safety signals noted by the data safety monitoring board. We were excited with the potential of 398 to address the big need for better therapies in the second line treatment of pancreatic cancer. I look forward to discussing top line data in the months ahead.

Let me turn now to MM-121, where we remain on track for four Phase 2 top line data readouts in the balance of 2013 and one more in the first half of 2014. MM-121 is our monoclonal antibody targeting tumors that are addicted to HER3 signaling as both in means of growth and the resistance mechanism. MM-121 is partnering with a team at Sanofi oncology and we are jointly exploring the potential of 121 in both the early and later stages of treatment in a wide variety of indications including breast cancer, ovarian cancer and non-small cell lung cancer.

As we have emphasized in the past, we are conducting the 121 study with a strong translational component, where we are analyzing historical and fresh biopsies from patients that enter the studies for a pre-specified set of markets identified by Merrimack as part of our Dx-121 that we believe has the potential to identify patients, who will most likely benefit.

We believe this translational program can add significant value to the 121 program and later stage effort and it’s particularly important to indications were based on a preclinical research in which we expect the minority of patients to benefit from 121 based on the utilization of our V3. These indications include ovarian and wild type non-small lung cancer.

With respect to the news on 121, we have now completed enrollment across the entire program with the exception of one study that’s the neoadjuvant triple negative breast cancer study, which we expect to complete enrollment on very shortly. Also during the last quarter, the monitoring boards overseeing the various safety studies have met to conduct interim analysis. Based on their reviews of the data, the monitoring board recommended that the three breast cancer studies continuous plan therefore we continue to expect to see the second line ER positive and the neoadjuvant ER positive breast cancer studies report their top line data in the coming months.

We also continue to expect to see the triple negative breast cancer neoadjuvant study report top line data in the first half of 2014. The ovarian study was also reviewed by our monitoring board that recommended continuation beyond the interim analysis. The interim review of this ovarian trial and our wild type non-small lung cancer trial suggested it was likely that the overall populations would not meet the primary study endpoints. This is in line with our expectations and our objectives to validate our diagnostic through the translational effort and the identification of subgroups who respond to MM-121 in those studies.

In the final group, group B of the non-small cell lung cancer study, our first line combination with Tarceva and patients with the mutant EGFR status. As we have previously anticipated we did not pass the interim analysis and given that it’s been decided not to enroll patients beyond the 43 that are currently in study. It’s our intent to present those results in part of the non-small cell lung cancer study in 2014.

We are excited for the 121 program to pass through multiple completion of enrollment goals as well as the several interim analyses particularly in breast and ovarian cancer and we look forward to reviewing the top line data from the full studies in the balance of 2013 and discuss the next stage of development opportunities with 121 in collaboration with our partners and Sanofi.

Moving to 111 in the past quarter, we have announced the initiation of enrollment in the 111 gastric study. MM-111 is a novel inhibitor of a signaling complex that involve HER2, ErbB3 and reglan that our research suggest plays a role in HER2 positive tumors escape from traditional therapy as well as being an important driver of tumor survival for cancers with moderately over expressed HER2. Levels that are still above normal but well below the levels needed for traditional therapies to benefit.

To-date we have seen encouraging signs of activity 40% response rate in the Phase 1 trial using multiple combinations in patients with late stage and few options. The gastric study is a global study that involve the assessment of two different indications one we’re looking at patients with a traditional high levels of HER2 status for the opportunity to restore sensitivity to first line therapies. The second indication is looking at patients, who have a non-traditional HER2 status or moderate over expression, who cannot respond to traditional HER2 therapies. We are testing 111 in combination with the standard of care in both indications and we hope to generate strong proof of concept data in both settings.

Moving to 302, we continue to be excited about the prospects for MM-302, an HER2 positive breast cancer. We have generated additional positive activity data in our Phase 1 monotherapy study and we’re preparing to launch Phase 2 in the third line HER2 positive breast cancer following therapy TDM1 or currently there is no approved therapy. MM-302 is our HER2 targeted nanotherapeutic delivering doxorubicin. As we have mentioned in the past, we have seen positive activity from the ongoing Phase 1 treating late stage HER2 positive patients as a monotherapy. We have seen a 17% partial response rate so far. We have seen TSS to approximated six months and very encouraging data in TDM1 refractory patients with many patients still on therapy. The Phase 1 monotherapy data continues to mature and we expect to make a full update on the presentation of our data at this fall in San Antonio Breast Cancer Conference.

Moving to 151 since our last update, 151 has advanced to later dose groups in the Phase 1 monotherapy trial and then 151 is our oligoclonal EGFR inhibitor that we built to address wild type EGFR patients, which represent the majority of patients with long colon, head and neck cancers and they currently have relatively poor treatment options. MM-151 is our oligoclonal antibody targeting wild type EGFR and it is engineered to be the first agent that fully exhibits EGFR. We believe that this is essential in order to address the 20 fold identification that occurs downstream with the wild type EGFR receptor and that we believe limits the efficacy of its current agents.

When you progress 151 in its monotherapy dose escalation into the higher dose groups of our study design and are operating now at doses, we feel represent the likely dosing range. We feel this is a major progress for 151. We believe that the primary hurdle of 151 had faced in this development was potential toxicities given that other EGFR agents are limited by specific toxicities and given the significant order of magnitude increase in potency of 151 the first other approved agents are those in development we are pleased to see at least in this early stages of development, we cannot see any unexpected safety or toxicity signals.

Given our increased confidence in the profile of 151, we are now preparing to launch a Phase 2 study in wild type KRAS positive colorectal cancer in combination with irinotecan and again the standard of care (inaudible). We expect to have more news on the anticipated space in the months ahead.

And lastly in terms of pipeline update with respect to our six clinical entry MM-141. MM-141 is a dual pathway inhibitor targeting the pathway connections between the (inaudible) signaling pathway. We continue to make strong progress in advancing this through its Phase 1 study. There have been no issues to-date and we look forward to updating you in the future on 151’s progress in our next steps and development.

Let me turn now to our business development efforts. We initiated this year with the objective of completing at least one business development deal in 2013 and we believe we remain on track for at least one deal to be completed and announced this year. As we also discussed, we have been actively engaged in a broad range of business development transactions of (inaudible) favors. The first off of potential platform deals that leverage our technology and know-how to generate revenues to fund our R&D. The second type of deals we are discussing are licensing agreements to secure partners to gain a global commercial reach for our products. These discussions are complex given, we’re considering both single product and multi product deals across single and multiple territories. We believe, we are making strong progress on multiple fronts and continue to target the announcement of at least one deal in the months ahead.

Last and as Bill will discuss in a moment, we completed a financing in July. We (inaudible) note that financing was important to allows us to execute and realize the full potential of the pipeline we have built. The clinical progress we have made over the past quarter has created some very clinical opportunities for our early stage assets and believe that we have strong value propositions with those assets that are unique and can drive significant patient and shareholder value. The timing of the funds will support the critical pre-commercial work (inaudible) and importantly focus on supporting three more products into late stage clinical development areas with high unmet needs and large patient populations. The plus from the financing at the day without any additional milestones from our 121 deal with Sanofi or new business development efforts take us into 2015. The net result we will be a company with unique value proposition, financing thought (inaudible) product candidates and late stage registration efforts.

With that, let me turn it over to Bill to discuss our financials.

Bill Sullivan

Thanks, Bob and good morning to everyone. Our second quarter 2013 financials were included in the press release, which was distributed earlier this morning. I’m going to direct my comments to two areas today. First, I’ll discuss highlights from our Q2, 2013 financial results and second I’ll discuss the details of our July financings and provide financial guidance.

Regarding our second quarter financial results, we reported a net loss of $38.3 million for the second quarter of 2013. Collaborations revenue totaled $18.5 million for the second quarter of 2013. This revenue related to our license and collaboration agreement with Sanofi for the development and commercialization of MM-121.

Research and development expenses totaled $42.5 million for the second quarter of 2013 and as expected were driven largely by the development of our six clinical stage drug candidates. These six programs accounted for 71% of total operating expenses for the quarter.

MM-121 R&D expenses were $14.8 million for Q2, 2013 and primarily consisted of costs associated with executing our MM-121 clinical trials specifically Phase II trials in seven indications as well as expenses associated with running three Phase 1 trials. As a reminder, these expenses are reimbursed by Sanofi under our license and collaboration agreement and therefore do not impact of our cash runway.

MM-398 R&D expenses were $8.2 million for Q2, 2013 and primarily consisted of costs associated with executing our NAPOLI-I trial in Phase 3 clinical trial in second line pancreatic cancer. R&D expenses for our four other clinical programs, MM-111, MM-302, MM-151, and MM-141 totaled $10.8 million for Q2, 2013. General and administrative expenses totaled $5.1 million for the second quarter of 2013 or approximately 11% of total operating expenses for the quarter. And lastly the decrease in our cash and cash equivalents and available-for-sale securities was $24.5million for the second quarter.

Now discuss our recent financings and provide financial guidance. On July 17, 2013, we closed concurrent underwritten public offerings of 5.75 million shares of common stock and a public offering price at $5 per share and $125 million aggregate principal of 4.5% convertible senior notes. Combined net proceeds, after deducting underwriting fees, commissions and other expenses, were approximately $147.4 million. We now expect our cash and cash equivalents and available-for-sale securities was $62.1million as of June 30, interest income, Sanofi reimbursements and net proceeds of $147.4million from a July financing to be sufficient to fund operations into 2015.

Additional cash inflows during this time, which are not included in the projected runway could include potential business development transactions as mentioned by Bob earlier. Cash from warrant and stock option exercises and potential milestone payments from our partnership with Sanofi.

At this point, I’ll turn it back over to Geoff.

Geoff Grande

Thank you, Bill. Before closing, I would like to alert everyone that we’ll be presenting at a few investor conferences over the next couple of months. We’ll be presenting at the Morgan Stanley Global Healthcare Conference September 9-11, 2013 in New York and the Brean Capital 2013 Life Sciences Summit on October 7th also in New York. And with that, we like to open the line to questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Our first question is from Geoff Meacham of J.P. Morgan. You may begin.

Anupam Rama – J.P. Morgan

Hi. This is Anupam Rama in for Geoff Meacham and Michael. I think, you mentioned that some of the proceeds from the most recent financing will be used for some pre-commercial activities for 398. Can you just give us a sense of where you are in terms of pre-commercial activities and what the plans are there going forward over the next several months? Thanks.

Bill Sullivan

Sure and thanks for the question. So, I think pre-commercial work there is considerable amount of work in terms of getting marketing plans together in terms of getting (inaudible) together in terms of getting CMC GMP work together in order to submit that have relatively long lead times versus and in addition to that some of the planning in terms of what’s your sales force will look like and beginning into put on the core hires in place. So, I would say that we’re in pretty good shape that we have built a core team here of seasoned executives from marketing the brand from the reimbursement spectrum from some of the leading companies around who are beginning to put the plans in place will hold on investing sort of further leaving that group until we see the final data. We’re also making a lot of progress in terms of the pre-commercial work on the manufacturing side, where we’re doing a major facility renovation to make sure that the renovation the facility meets all the standards to be ready to produce commercial great material and we’re investing in all the quality systems that are necessary to support all that. And those given the relatively long lead times are things that we want to make sure we check the box and get out of the way.

Anupam Rama – J.P. Morgan

Thanks for taking that question.

Operator

Thank you. Our next question is from Peter Lawson of Mizuho Securities. You may begin.

Peter Lawson – Mizuho Securities

Bob just on the MM-398 you mentioned you had you are expecting to complete enrollment in the coming weeks, which arms do you think you have data presented on this year and where do you think that data could be presented?

Bob Mulroy

So, thanks Peter for the question. So, with 398 we do expect to complete enrollment in the weeks ahead here in the short term. With respect to this year what I would expect is only top line data from us in the fourth quarter or potentially the first quarter depending on the bed rates and given that timing if it’s very early in the fourth quarter it is the potential that it could be presented at ASCO GI but I would say mostly likely full day could be at ASCO given you have the gap between ASCO GI in January and ASCO in terms of presentation conferences. But we’ll be putting on top line data which we hope to be fully describe the result the top line result from the study and then have a full presentation at the earliest conference depending on the way it comes out.

Peter Lawson – Mizuho Securities

And will you breaking up the mono therapy cum relation therapy into kind of two press releases or two presentations?

Bob Mulroy

No the study will all wrap up at one time and so you’ll see top line data from all three arms the control the mono therapy and the and the combination therapy at one time. So when we refer to top line results on the study we’re referring to result on the entire three arms. So we’ll have the top line results first in the press release and then a presentation at a conference to follow us depending the date that we get the top line data.

Peter Lawson – Mizuho Securities

Thank you. And then just an update on the (inaudible) 398 the emerging agent study lung and breast cancer. Do we get data on that in the second half?

Bob Mulroy

So we haven’t updated an expected date for that the study is making strong progress it’s actually passed to sort of first stage one testing the feasibility of doing any imaging and getting imaging in the set of patients and that’s progressed into the second stage where we’re specifically focused on looking at patients with colorectal cancer, breast cancer and lung cancer and so pending the pace that which that moves or depend on the pace that which we present those results.

Peter Lawson – Mizuho Securities

And then what do you need to see to expand 398 into whatever lung, breast or colorectal cancer, what kind of metrics do you need to see?

Bob Mulroy

Well I think seizure of 398 is any than very important Phase III study underway that is going to be a high contributor to whether we continue to invest. And then I think the second thing is really the degree of the diagnostic to really differentiate patients in a very, very strong way. We’ve seen pre-clinically – pretty perfect correlation between the diagnostic imaging in animals and the ability to predict efficacy in those animals that we put out recently with 398. If we see that kind of really strong binary yes, no and it’s a strong response versus a non-response or weak response then I think the decision gets much easier to invest into those larger indications. And I think as I think as we have said in the past getting into some of those larger indications we’re hesitant to do without a diagnostic given there is a big diversity of the vasculars or other physical components in those broader tumors pancreatic is a great indication because the hypoxia and the vascular (inaudible) are issues that are pervasive across the majority of patients in that indication making it really a great test case for 398 so. I think you need to see both pieces of data obviously 398 being critical but it will be a proof of concept for the technology and the imaging agent will allow us to do future studies depending that data with a much more precise shot.

Peter Lawson – Mizuho Securities

Great thanks so much.

Operator

Thank you our next question is from Rachel McMinn of Bank of America. You may begin.

Rachel McMinn – Bank of America

Yeah I wanted to talk about your comments on 121 and I guess specifically about arm B that fail to meet the primary end points and ovarian as well I just I wanted you to clarify the comments and you basically were saying what we kind of expected this and well helpful that’s a population for work. Can you go into a little bit more detail on like for R&D for example is the PFS also a 40% four months like it was with our (inaudible) like what we should be looking for, for both of those studies given the interim recommendation?

Bob Mulroy

Sure thanks for the question Rachel. So if you go back to sort of a lot of our preclinical and modeling work what we saw with ErbB3 was the highest prevalence of (inaudible) by tumors as a survival mechanism was in breast cancer. And in particular in breast cancer when you’ve treated with a chemotherapy it seems to come up as a path of resistance. What we saw in looking at other indications was it was for instance in ovarian it was between third and a half of the patient samples we looked at had high levels of ErbB3 and it was very important to those patients and it was our sense and our sense from other studies that – have been out there since that high ErbB3 in that third to a half was normally a poor prognosis for those patients but that those are the patients we’d be looking forward to get the benefit from 121.

And so in a sense going into ovarian is that for the whole it was unlikely the whole study would meet its end points given that you’re looking at a third to a half of the patients are actually the once that have ErbB reactive and whatever but that’s where the diagnostic technology that we’re testing across all the patients study would really be critical to identifying the subgroup and hopefully it does some group will be positive for the end points of the study in terms of means the doubling of PFS group that we had. And then the same is true in the wild-type non-small cell lung cancer studying but for different reasons. As we’ve talked about in the past we see that easier far in ErbB3 join together they (inaudible) and that combined signaling seems to be the big problem in wild-type EGFR patients.

That while we see ErbB3 reactive lot of the settings the current EGFR agents that you can combine with are very ineffective (inaudible) from the wild-type EGFR side of that had doubled. And so there is a subset of patients that we think pre-clinically would respond to a Tarceva ErbB3 or 121 combination more driven by the EGFR side of what’s going on than the ErbB3 side.

So in ovarian case we’re trying to sort out based on utilization of ErbB3 in the wild-type non-small lung cancer case we’re trying to sort out based on really the EGFR because that is so much going on signaling there so but for different reasons we think there is a subtype our belief is that we’re building 151 and then a long run will may combine that in that setting we have the potential to hopefully provide a benefit across so much of our patients. So…

Rachel McMinn – Bank of America

I am sorry – just go back to ovarian and so you have this interim analysis that didn’t need the primary end point but do you have, did you, be given your knowledge of ErbB3 I guess that whether the over expression or whatever marker you’re using have you then gone into the pre-specified that particular subgroup and do you have to read into how those patients are behaving?

Bob Mulroy

So I think what the monitoring board saw on the study was encouraging for them to continue to study and I can’t comment specifically on their observation of that but our sense is that it’s consistent with what we were hoping to see our expectations around what we talked about earlier with the identification of subgroups and the potential for the subgroups to be benefiting from 121.

Rachel McMinn – Bank of America

I am sorry even though you can’t speak to the details was the subgroup pre-specified for the DSMB to look at?

Bob Mulroy

So there are secondary end points in the studies relating to the pre-specified markers that we set up for 121 that are these percussive high biomarker snaps that we’re doing for the study yes.

Rachel McMinn – Bank of America

Okay and then in the lung cancer I think you were talking about wild-type and your rationale for 151 but isn’t I’m sorry is – is there – this the part that say – the part B that failed I guess maybe you could go into a little bit more detail about group B versus group A and what you actually know about that database point?

Bob Mulroy

Right group A is the wild-type non-small lung cancer group and that group monitoring board look at that study and its continuing again based on our expectations of the potential for subgroup benefit relative to the diagnostic work we’ve done there. Group B is a mutant, patients with mutated EGFR status in the first line setting tend to get placebo they tends to be a very high response rate of 70% or so in those patient settings and we were combining with 121 to look at if there was an additional benefit there. What we saw in the interim analysis with the monitoring board saw the interim analysis is that we were unlikely to be mainly the endpoints there in that RMB of the increasing PFS and so we’re going to leave this patients on plenty that there are they will continue based on their performance and based on their continuing a few of their physicians and be able to analyze those patients relative to our diagnostics and the rest as the study progresses.

Rachel McMinn – Bank of America

I’m sorry, just last question on then are you surprised to that you weren’t able to have more (inaudible) and then mutant population?

Bob Mulroy

I think our look in the mutant EGFR population was probably the most speculative I think we hope we might see some benefit there but I think again we haven’t really seen the full results in terms of how the diagnostic plays out these patient populations the monitoring board at that point was looking at the overall. So, I think it’s to be determined whether the diagnostic plays something out in that patient population, but I’d also say of the various indications we’re looking at it was the highest translational on those speculative set looking at that mutant EGFR patients given we know that mutation tend to rewire our secondly networks and as in the group see that was sort of our research day we learned a lot about how those mutations and the patients were subsequently become resistant to Tarceva how signaling progresses in those hopefully from this. Second group will learn some things about that as well whether they applied to future opportunities for 121 and not we don’t know yet.

Rachel McMinn – Bank of America

Thank you.

Operator

Thank you. Our next question is from Brett Holley of Guggenheim. You may begin.

Brett Holley – Guggenheim Securities

Yeah, thanks for taking the questions. Couple of follow-ups on what you were just talking about. I just want to understand recently varying cancer trial is, are the secondary endpoints yearend records specifically how it pressures and you’re looking for PFS or response what are the majors, what are the outcome majors you’re looking for and that subgroups?

Bob Mulroy

So directly from the patients who are were testing on the biomarker subgroups right, so those secondary and prior PFS for the whole is the primary endpoint and then you have (inaudible) secondary endpoint and then another secondary endpoint is both PFS, NOS for patients who are our biomarker positive to our biomarker profile. So that’s essentially the structure on those trials and that comparably the structure as all of them with the exception of the new regimens that is looking for obviously part of the pathologic of complete response.

Brett Holley – Guggenheim Securities

And I guess do you have carrying assumptions for the secondary endpoints in those highest pressures I mean; are we able to see this to be robust data when you finally give us with that?

Bob Mulroy

That is what designed with the hope that they would validate the diagnostics and so the Zitex and the size of the patient populations were fully designed with the hope that we would see that.

Brett Holley – Guggenheim Securities

Okay. And so I guess the secondary of the important secondary goal here was to actually validate the diagnosis. So I guess what level of confidence you have coming out of the crowd what even if the overall PFS is not positive that you’ve grounded diagnostic in the subgroup because that’s always been and the key for future success?

Bob Mulroy

Yeah and I think we’ve been trying to emphasize all lung the big translational component of this and that we end of the study with hypothesis around some markers that can identify responders and we’re testing that once that across the broad range of studies and their most important in the lung cancer and in the ovarian setting. So yes I mean, the goal of those and doing those studies is ideally we’re going to validate that 121 provide benefit to we’re going to validate that the biomarkers can identify patients who respond and that’s the combination of those things provide a lot of power towards the Phase 3 program and so those are the absolute two primary goals of this study and spread the line of pursuit the indications we went after and so we’re looking forward to the results and we’re pleased so far that at least on the interim basis things in the (inaudible) setting in the ovarian and then in the breast cancer indications are at least shaping up towards our expectations.

Brett Holley – Guggenheim Securities

And my final question is in the top-line data of this will you give good details on the specific subgroups with interest or is that going to be something like wait until we give the full data at the medical conference?

Bob Mulroy

So it’s our intent and we have to obviously get the final data and work through with Sanofi or the final release but it’s our objective and goal to report not just on the top-line but on the performance of patients who are positive on a diagnostic given that is a major goal for some of these studies.

Brett Holley – Guggenheim Securities

Okay. Thank you.

Operator

Thank you. Our next question is from Eric Schmidt of Cowen & Company. You may begin.

Eric Schmidt – Cowen & Company

I apologize I’m going to ask a few more questions on the 121 interim datasets. Bob, did all three of the breast cancer studies also go through this interim review?

Bob Mulroy

They did and they met the interim analysis for the monitoring board.

Eric Schmidt – Cowen & Company

And can you say what those hurdles were?

Bob Mulroy

I can’t be specific about their reviews but they were pre-designated safety and efficacy objectives. And, we’re pleased to move past them.

Eric Schmidt – Cowen & Company

And no changes to any of those three protocols in breast because of the review. Yeah, okay. and then I apologize, what are, what exactly did you say on ovarian and Group A lung, did you say that the interim was taken and it looks likely that for exactly what kind of communication were you given about the likelihood of success at the final?

Bob Mulroy

So, the communication we had was that it was unlikely that the studies that meet their primary endpoint for the entire population in the study but that the studies were continuing on deal of the full dataset including the data of the diagnostic positive patients.

Eric Schmidt – Cowen & Company

Okay. And do you know roughly what percent of the patients had been analyzed at the time of the interim relative to fully enrolled ovarian and Group A lung?

Bob Mulroy

Even I can check on that Eric but I believe we got to serve the patients in general. But I think some may vary by study.

Eric Schmidt – Cowen & Company

Okay. And okay. So that’s where you are. And you’ve also on Group D lung made the decision to number forward at all?

Bob Mulroy

Well we’ve decided we had 43 patients enrolled and we decided to just leave at 43 and not to continue to enroll additional patients. So those patients will go forward and we’ll report the full results when we see how those patients progress. But I guess the decision on Group B was based on the interim and that was unlikely to meet the full analysis that it would not beneficial to put additional patients on therapy at this point.

Eric Schmidt – Cowen & Company

So relative to Group A were you made the decision to continue or the DSMB advice you to continue to enroll full cohort Group B you paused and didn’t fully enroll, should we assume that there are subset in biomarker populations within Group A that are trending well that’s just we’re not observed to be trending well on Group A?

Bob Mulroy

Yeah what I would say about the Group B and Group C in general is just reports were set earlier in that those are probably the most speculative areas where the mutations to EGFR lead to changes in how the settling networks are wired and functioned and so it was most speculative for us on how things will play out in this indications. But we are very happy with what ;we’re seeing with the rest of the studies ovarian and the wild type lung cancer non-small cell lung cancer indications where Pfizer continuing based on the data over the data and then in line with our expectations that hopefully we’re going to identify subgroups with the diagnostic that to our positive and meet the endpoints for the study.

Eric Schmidt – Cowen & Company

Okay and then in terms of timing for that two breast cancers are going to report in the second half ovarian cancer and the Group A lung, do you have better sense of what will be in Q3 versus Q4?

Bob Mulroy

I don’t have a great sense for well I think we know the order or these have a sense of the order and then we were referring to that in our last call that it’s like most likely and again I’ll carry out this with patient end rates drive these more than any of our wonderful models and estimates but the our estimates are that the ERP are positive second line study with Exemestane in breast cancer will report first it’s likely that the wild type non-small cell lung cancer we’ll report second the ovarian cancer third and then the neoadjuvant ERP are positive breast cancer fourth. So how they startle the third and fourth quarter remains to be same.

Eric Schmidt – Cowen & Company

Alright and last question moving over to 398 you also mentioned another DSMD review that’s taken places in the last quarter I think the DSMB review prior this one included of an interim futility analysis to this latest review also include such an analysis?

Bob Mulroy

They continue to look at futility and safety in each of their reviews and they having done that they have, have the study continue forward.

Eric Schmidt – Cowen & Company

Okay, do you know or can you provide what the futility hurdle might have been?

Bob Mulroy

I can’t provide that this time, no.

Eric Schmidt – Cowen & Company

Do you have it?

Bob Mulroy

I do now, yeah.

Eric Schmidt – Cowen & Company

Okay. Thanks for the answers.

Bob Mulroy

All right.

Operator

Thank you. Our next question comes from the line of Boris Peaker of Oppenheimer. You may begin.

Boris Peaker – Oppenheimer

Yeah thanks for taking my questions. The remaining question I have is in capital allocation and specifically I just wanted to get a sense in terms of the expense runway guidance that you gave into 2015. How much 398 launch expense is built into that or assume in that model? And if the outcome of the study is now successful how would that change your burn or any other kind of capital allocation decisions across other programs?

Bill McClements

Hey Boris its Bill here. As far as capital allocation in 2014 we haven’t itemized this sort of break down. What I can mention is that in Q2 of this year we spent about a little over $8 million related to MM398 the majority of that spending related to our Phase III NAPOLI trial and second like think we had a cancer. Given on our normal curve we’re completing our enrollment curve we’re completing our enrollment in Q3 of this year. Our cost for MM398 will probably peak in the Q3 time period and then will gradually decrease in Q4 through Q1 and the first half of next year. Certainly how much we invest in MM398 in 2014 will be highly dependent upon how the data rebuilt. But it’s safe to say until we see that data spending will naturally decrease for MM398. As it relates to our investment in our commercial activities again we’re not breaking that out but we have a very focused small core team right now that’s working on our launch plans for MM398 but we’re not going to commit heavily until again we have the data.

Boris Peaker – Oppenheimer

Great thanks for taking for taking my question.

Operator

Thank you. Our next question is from Gene Mack of Brean Capital. You may begin.

Gene Mack – Brean Capital

Thanks can you guys hear me?

Bob Mulroy

Yeah we can.

Gene Mack – Brean Capital

Couple of questions on 121, 398. First question on 398 I think I recall last time you guys updated us Bob you mentioned that the enrollment would probably finish up sometime in Q3 and that the end point would probably be hit relatively quickly beyond that just simply because of the overall prognosis of the disease.

And just thinking on based on the (towering) assumptions where you are looking at a pretty high event total in order to read out the primary end point and since two of the arms are essentially getting 398 can we read anything into the fact that you are now looking at may be having read the end point out early next year in other words – just logically since two of the arms are getting their study drug assuming its working probably would be delaying that read out?

Bob Mulroy

Hey Gene thanks for the question. So I think the most difficult part of predicting (inaudible) data is that in terms of building the assumptions for the trial. There is not a great set of benchmarks of large studies done on this patient population if you give sense for how long they’re going to go on and try a few of the door and what not and those drive a lot of the variance in terms of when you expect data.

You point along those data goes on that is clearly the better for us. Also to your point that we could reach our triggering event 305th event in the study relatively soon after enrollment if completed and then time for data clean up and stuff like that so it could happen relatively quickly and then later the better in terms of where we sit right now with enrollment is right point. But I think it’s hard to read anything into any of the data or updates we’ve made based on the dynamics of patients around the study just given that we were dealing upfront with a pretty broad range and we’re keeping that broad range because we still have just uncertainties on how far the control is going to go and what not so.

I would say later is better and hopefully that’s the case but our update probably more focused on just the patient dynamics and the real data we’ve been able to put in versus some of the assumptions we made up front in area without a lot of great benchmarks.

Gene Mack – Brean Capital

Okay. And then on 121 a times ago based on your comments there are a lot of the studies that are kind of tracking even it’s announced with different subgroup and different biomarkers that is not yet really been surprised by anything in terms of how the study that are kind of unfolding and I am just curious was it not possible to may be enrich the patient population so that more of the biomarkers you might have been looking for and might have been suspecting with driven more positive interim analysis or I mean is that all part of validating a diagnostic can you start to incorporate that in some of the enrollment that you’re doing since there is, well I guess all the enrollment is finished but I wonder if you just comment then maybe on just what you, what sort of thought you had on maybe enriching the patient population sort of drive more positive interim analysis?

Bob Mulroy

Well one of the tricks of having diagnostics in phase, before you get in the Phase II if you wanted to validate them you’ve got a test entry for patients who are negative on the diagnostic in order to have the data to show (inaudible) you can actually identify the patients who respond that there is not benefit and the patients who are not positive on the diagnostic. So especially the word is on with that very broad objective of saying we have hypothesis it had never been tested in a clinic about these biomarkers but we also do need to see its effect and these biomarker physicians across the whole patient population given the drive from mathematical model and then the tested animals but not in humans and that translation haven’t been done.

So at that end in the design of the studies we did need to look at the full population then understand it and there are multiple results if you just take the ovarian it’s the, may be everyone benefited and you need a diagnostics that would have surprised us that may be no one is going to benefit and I think that would surprise us and I think the middle case where at least basing interim we’re hopefully headed towards in the case in which the diagnostic biomarkers are pointing in a way to a population who are utilizing ErbB3 and that hopefully that they will meet the end point of the study or provide the evidence we need to move forward. You know the diagnostic and lots of other indications and so (inaudible) designed with the intent to validate the diagnostic which I mean in the whole population and understanding that they may not meet their whole end point but that in the process we may still have a very positive study result. And we’ve tried to mention that on I think everyone of our call in every meeting that for the those indications positive result isn’t that for the overall it’s what happens in the biomarker positive populations.

Gene Mack – Brean Capital

Okay. And then just finally may be just to summarize on the fourth read out you have coming near term on 121 is it likely that every single one of those could reach to a registrational study or do you already know right now that there is a little likelihood that part of that there is a likelihood that one or more of those will not read to the registrational study or will – give, offer the opportunity of the labeling study?

Bob Mulroy

So we obviously are going to make decisions about where to go forward until we’ve seen a data which we haven’t so we need to see the final data and to an extent of you have to look at the final data now like to the extent there is benefit but what the size of that benefit is relative to current landscape oncology and what are the drugs that are out there. We have with our partners Sanofi mapped out sort of a set of trials pending various results in various studies that are priorities and with the final data in hand we’ll be able to make decisions on which pass to execute and we’re seeing. So, we’ve sort of laid out our course of preferred action based on everything hitting it or subset of studies getting the goals that we have for the either overall and also group and we’ve been planning those things and we’re just going to be in a position, where we’re ready to act once we have the data.

Gene Mack – Brean Capital

Okay. Thank you.

Operator

Thank you. I would now like to turn the conference back over to Geoff Grande for closing remarks.

Geoff Grande

Very well. Thank you everyone for joining us today. We look forward to updating you again next quarter.

Operator

Ladies and gentlemen, this concludes today’s conference. Thanks for your participation and have a wonderful day.

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