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Curis, Inc. (NASDAQ:CRIS)

Robert W Baird and Co Health Care Conference Call

September 11, 2013 08:30 ET

Executives

Dan Passeri - Chief Executive Officer

Analysts

Jon Langenfeld - Robert W. Baird

Brian Skorney - Robert W. Baird

Jon Langenfeld - Robert W. Baird

Good morning. I am Jon Langenfeld, the Head of Equities here at Baird. Thank you for joining us for day 2 of our healthcare conference. Same setup today, well presentation and the two rooms down here and then up on the fourth floor, also apologize in advance for the construction next door to the other room. We do have headphones in there to help dull the noise if it gets on people’s nerves and allows you to concentrate a little bit more hopefully, but apologies on that front, and again, look forward to a great day 2 here.

Just a couple of thoughts on Baird in general, we are very proud of our platform and we have our customers to thank for that. I think 2013 is shaping up to be a year of a number of different milestones over $100 billion in client assets over $1 billion in revenue, 10 years on the Fortune 100 best places to work for, and all-in, it looks like we should be on track for a record year of both overall and the business as well as in our equity side. So again, we remain focused on our customers, focused on helping you in the investment side, and I think everything else will take care of itself. We continue to invest in the platform. We think the equities business for us is a core asset of our firms. It’s one of our five businesses of what we do.

And if you look at how we ranked on the Greenwich Associates Survey that they do annually, we have been number one on this for the past 11 years, and I think 2013 was our best separation from the group yet, as well as our banking platform side by side with what we do on the equity side, but a tremendous year here as well with transaction volume being up over two times where it was last year. So again, all-in, we are here to be focused on the clients, focused on your investment process and think this conference goes right at the heart of what we are looking at. So with that, have a great day and I will turn it over to Brian. Brian thanks.

Brian Skorney - Robert W. Baird

Thanks, Jon. Good morning everyone. I am one of the two biotech senior analysts here at Baird, and it’s really great pleasure had to have next to me here Dan Passeri, the CEO of Curis. Now, Curis is a biotech company currently focused on the discovery and development of novel biopharmaceuticals really targeting on oncology indications. They have a partnership with Roche for an approved dug, Erivedge for advanced basal cell carcinoma, and they have a number of proprietary programs that are ongoing that are very exciting. So Dan, it’s a pleasure as always. Perhaps if you could start us off with a brief overview of what’s currently going on at Curis before we dig a little deeper?

Dan Passeri - Chief Executive Officer

Good morning everyone. Just to remind you, Curis is a NASDAQ listed company, symbol CRIS. I am narrowing this down to two to three slides and yet I still have to have a forward-looking statement slide (indiscernible).

So, as just an overview of the company and its business model where we are presently, we are really very well positioned right now and this has been however continual evolution of Curis’ development. I am going to be focusing mostly today on our two proprietary programs, which is CUDC-427. This is a category of drug called the IAP antagonist, and I will elaborate on that in a moment. It’s a small molecule that we in-licensed from Genentech has an extremely attractive preclinical data package and Genentech took it through Phase 1 drug, it’s very well tolerated. Again, it’s a small molecule that’s orally available. It appears to be one of the more attractive drugs out there from a standpoint of this category based on its potency and how well tolerated it is. We have had two CRs in the Phase 1 that Genentech ran, one was in MALT lymphoma and other was in ovarian cancer.

Now, what’s interesting about those CRs is as a category of a drug target, one would not expect single agent activity with this type of drug, because what it’s meant to do is remove the protection buffer that cancer cells access to protect them from the apoptotic cascade that you typically induce with chemotherapies or other tumor necrosis factor inducing drugs. So that was how the drug was designed to be in combination with other drugs that induced TNF. So the C single agent monotherapy CR is actually is very encouraging and also intriguing and it may lend itself to a precession medicine approach with both or either MALT and ovarian. With MALT lymphoma it’s known to have about 30% to 40% of MALT lymphomas have an IAP translocation or amplification, so that would allow patient stratification. And then in the ovarian category, we had this patient happened to have BRCA1 mutation. So we are looking at both of those very carefully on an ongoing basis.

And we are also looking at launching a combination trial with Xeloda by the end of the year in breast cancer. And then with 907, this is a PI3 kinase HDAC inhibitor. The drug was specifically designed to hit both of those and the thesis and hypothesis were basing this on is blocking a kinase that’s involved in proliferation signaling for tumors biology. When you block it the tumor is able to access other bypass mechanisms is compensatory bypass mechanisms they are called because bear in mind unless it’s a driver mutation as the tumor is addicted to cancer cell is a very dynamic living thing and when you perturb it and block some aspect of its proliferation, it will find a way around that. So that’s reason we built in an HDAC moiety. It’s an epigenetic modification to make it more difficult for the tumor to adapt to the PI3 blockade with the objective of having durable response.

And then finally we have partnership with Genentech and Roche and this is an approved drug so this really gives us a nice continuity and balance of the business model where we have an increasing revenue source, protects investors that who are on the downside, so we have an increasing value of the floor. The upside potential is with our two proprietary programs and we also have the partnership with Debiopharm which is still in clinical development for an Hsp90 inhibitor that’s a small molecule non-geldanamycin. So I have already gave you kind of an overview of the IAP program 427. What’s important about this is that the drug targets several isoforms so that the cancer cell can’t adopt and bypass that’s a very important metric because we believe it differentiates our drug over some of the other IAP monomers. We hit CIP but also XIAP. And we think we are more potent and do that more effectively than some of our competitors. And that’s important because if you block CIP the cancer can access XIAP.

And then as I stated mechanistically the target is meant to basically when you block it protect – take the protection away from the cancer cell, so that if you are using a chemotherapy to induce extrinsic tumor necrosis factor. It allows caspase to basically be accessed and you see the induction of apoptosis by taking that protection away, it’s also part of the intrinsic apoptotic cascade when the cell is detecting DNA damage. So, as I stated in terms of development stance we had two complete responses and we have already initiated the ovarian single agent that was launched in July. We are in the process now of finalizing our development strategies for combination trial with Xeloda in breast cancer that will be by the end of the year and also in lymphoma where model will be a subset of that.

Then finally this is the last slide I will go over and then we will open it up to comments and questions, Brian. This is a dual inhibitor that hits two primary isoforms of PI3 kinase. Primarily it hits alpha and delta also some beta activity. Alpha and delta are quite important to you in hematological cancer where delta is the primary driver. It’s been shown by several third parties. In clinical studies for instance in mantle cell delta is the primary driver, but if you block the delta the cancer will become resistant, refractory to that drug if you have just a delta specific blockade, it will then access alpha as a bypass mechanism. So, we believe having both alpha and delta we will have strategic advantage in several tumor types. And also in solid tumors alpha is the primary driver particularly breast cancer.

And then we believe with HDAC moiety which hits its Class 1, 2. It hits primarily HDAC 1, 2, 3, and 6 and 10. We believe with that concurrent blockade it makes it a lot more difficult for the tumor to adapt to the PI3 blockade giving you a more durable response. So presently we are in dose escalation, drug has some very interesting PK activity, which I can elaborate on in a moment. But what we are seeing is already activity from the drug. We have out of six patients, we have first six treated, we have one patient that’s presently in the 10th cycle of drug, so that’s out of about eight, nine months. That’s a multiple myeloma patient with stable disease and we have a diffuse large B-cell lymphoma patient in the sixth cycle, so very encouraging but anecdotal. So with that, I will turn it over. Thanks Brian.

Question-and-Answer Session

Brian Skorney - Robert W. Baird

Great. Thanks so much for the overview Dan. A lot to talk about I guess maybe we could start with Erivedge, so it’s launched in the U.S. and off to a pretty good start, can you kind of give us an idea of how the launch numbers have looked relative to other oncology products, where you see the growth drivers in terms of the geographic expansion and potential label expansion and what sort of ongoing studies were you most excited about?

Dan Passeri

The important aspect of your question is compared with other oncology products this is not a typical oncology drug. Most oncology drugs in treating patients that are refractory metastatic, BCC is an unusual indication. It’s principally treated by dermatologists or most surgeons. The advanced setting is ideal disease of patients that don’t lend themselves to surgical excision. Basically, it’s either advanced to the point whether it can’t do surgery or it’s metastatic. The drug was launched in 2012 when we had a very slow ramp up, but it’s been an education progress. We have recently met with Genentech and are very impressed by their commitment and optimism about the current sales that they are seeing. They about 100 dedicated sales reps just focusing on Erivedge and educating the dermatologists in most surgeon end users. This is a very conservative group. They are not like oncologists that are typically much more aggressive looking for any novel new therapeutic approach to be able to provide their patients with. This is a conservative group that’s just trying to manage the disease.

The data that’s resulted in approval was a pivotal Phase 2, that’s relevant, because the drug was approved on a very small number of patients. So 2012 was more of an education process. We are very encouraged by what we are seeing in 2013. Each quarter we have seeing slightly more than 20% growth. So we are starting to see a nice incremental increase in revenue. The results from this drug have been actually quite profound patients that had metastatic BCC were not faring well, had a life expectancy of several months on drug for up to two years plus. Genentech stated to us that the barrier is educating the end user and having them write that for a script. Once they write that for a script, the effects that they see visually from the patient are quite profound and then they are writing the second, third, fourth script. So we are very encouraged that over time as they have experience with the drug, publish on the drug, speak about the drug’s activity at conferences, we will see a continual expansion of the market penetration.

Brian Skorney - Robert W. Baird

And then in terms of just what other clinical data could potentially drive in the long-term Erivedge cells, I know there has been a mixed bag certainly in the mutually driven Hedgehog paradigm we have seen very, very profound results a little bit of a disappointment in sort of just tumors where Hedgehog has just over expressed?

Dan Passeri

Right.

Brian Skorney - Robert W. Baird

What can we look at in terms that there is lot of studies when you go to ClinicalTrials.org ongoing with this drug, where do you think is the most exciting (stories) to look?

Dan Passeri

Well, first just sticking for a moment to the mutation driven with BCC. So this is the category of precision medicine almost all BCCs have Hedgehog mutation, it’s a driver mutation. We are expecting continued growth in that from both U.S. sales, but also global penetration. Roche has been very aggressive and effective at launching the drug in various markets. They have EU approval among others. And then they have been conducting a survey inoperable BCC. We believe that is a strategic attempt for generating a body of data where you could use the drug not just inoperable and metastatic, but in those patients that although categorized as operable, we have suboptimal results rather than amputate someone’s earlobe or some disfiguring surgery in a cosmetically sensitive region of the face. You may be able to use the drug as adjuvant therapy and new adjuvant where they would have a much better outcome, because you are going to shrink the tumor possibly even completely eradicated. So we believe that is very promising from a market expansion standpoint.

And then the non-mutation area as Brian was alluding to it just demonstrates the complexity of tumor biology. Hedgehog has been shown to be involved in a significant number of solid tumors where you see over expression and it has some role where it’s the tumor interfacing with stromal cells and influencing behavior, and up-to-date the results have not shown the path forward. That being said we are encouraged in a couple of avenues, so Genentech and ClinicalTrials.gov has just recently posted a trial in AML and I think that’s a very exciting opportunity from the standpoint of Hedgehog playing a role in the progenitor cells that results in AML. So this is going to be a combination trial and we’re really encouraged that this is going to be Roche-Genentech sponsored trial. And we are hopeful that there will be other indications presenting themselves as more data emerges.

Brian Skorney - Robert W. Baird

So moving on to the IAP inhibitor, I mean, being at ASCO over the last several months ago talk about checkpoint inhibitors and these inhibitors that are so profoundly expressed across tumor indications real hop out in topic. How do you think of IAP fitting and kind of the checkpoint inhibitor space? And kind of can you go through the mechanism of IAP and why you think this could have such a profound effect across numerous histologists?

Dan Passeri

Yeah, historically over the past decade most of the attention has been on kinase blockade, proliferation signaling, etcetera and that’s been very important, but we can’t took lose focus of complexity of tumor biology and cancer cells access. A number of mechanisms to bypass therapeutic response for survival advantages, IAP fits in that that category it’s part of this cell cycle checkpoint biology, IAPs are inhibitors of apoptosis proteins. And what they do naturally anomaly under normal conditions is when you have a situation where you are trying to and do say apoptosis in a certain region adjacent cells will protect themselves with these IAPs and they protect themselves from either intrinsic signals and trying to induce a apoptosis or extrinsic through something like tumor necrosis factor.

So, it’s a protection mechanism that and it’s a hallmark of cancer to elude apoptosis, So it’s a protection mechanism that tumor cells have access to and basically it protects them and buffers them from the apoptotic cascade. And this is a primary reason why a number of chemotherapies do not have more profound efficacy. They are meant to induce DNA damage, they are meant to induce tumor necrosis factor and yet you don’t see profound cell cycle arrest and apoptosis and it’s principally because of IAP is protecting the cancer cell. So this is a small molecule that takes that protection mechanism away and allows the tumor cell to undergo that apoptotic cascade and Genentech as one would expect from a Genentech data package has an elegant body of data pre-clinically showing this mechanism and showing synergy when you use it in combination with TNF inducing chemotherapies such as Xeloda. So we think this is going to be a very important class of target and drug and we are now launching for 2013, three trials to survey activity both as monotherapy where we believe they are aberrations in the cellular machinery where if we take IAP protection off it will induce apoptosis in combination therapy with Xeloda in breast cancer.

Brian Skorney - Robert W. Baird

Great, so there has been several other IAP inhibitors put into the clinic and I think efficacy or activities looks pretty good, but there has been about a mixed bag in terms of safety, what are some of the safety issues that we have seen with other IAP inhibitors and how do you think this molecule is structured (indiscernible)?

Dan Passeri

So the two categories of IAP inhibitors that are presently being developed are called dimers and there are two components and monomers this is a small molecule of monomer, again Genentech put a very significant investment into the development of this molecule. The behavior of those are the drugs in the clinic are mix with the dimer they are come more potent at inhibiting IAPs, but there is a toxicity associated within that you only see with the dimers and that is facial palsy, Bell’s palsy. In fact they had patients at the MTD, you ended up with I think 3 out of 3 patients having Bell’s palsy. They had dropped the dose down. So that’s a significant concern and no one truly understands the mechanism, it’s not clear why the dimers inducing Bell’s palsy. In the monomers, no other drug has shown single agent activity, so we haven’t seen monotherapy activity the way you have the 427 and we believe it’s a potency issue. We have done internal work verifying genetics preclinical data package. And what we saw was 427 appears to be the most potent monomer presently being developed. So, to-date it’s the only monomer that has shown single agent activity, so we are very encourage by its positioning.

Brian Skorney - Robert W. Baird

Great and then just moving on to 907 as we talk a little bit about dual PI3 kinase HDAC inhibitor, I guess these are two validated mechanisms and we don’t have an approved PI3 kinase, but certainly I think Gilead data is pretty compelling that there is great activity. How is this molecule differentiated both in terms of PI3 kinase activity and HDAC activity from the approved HDACs and some of those development stage PI3 kinases?

Dan Passeri

It’s a complicated question because it’s difficult to compare to a single agent such as the PI3 or an HDAC. This is a novel chemical structure. Intellectual property, it’s novel and it’s activities it’s novel and that is its hitting both PI3 kinase alpha, delta very potently, but concurrently it’s suppressing HDAC which is an epigenetic modification. And what we believe is the advantage of this is that when the drug is administered first of all it’s orally available and we are seeing in the lowest doses that we have administered the drug where we are seeing activities. We believe that we are altering the acetylation, deacetylation profile of both transcriptional access and proteins through HDAC6. And that setting is the sell-up for what we believe is a more robust blockade of PI3 kinase signaling in AKT phosphorylation.

So in hematological cancers, the primary objective is to block delta which one achieves with a number of PI3 kinase inhibitors that are being developed clinically. But with the alpha component we believe it has the advantage of blocking bypass mechanisms. This is a study that was done out of the UK they compared CAL-101, the Gilead drug with Genentech’s PI3 kinase inhibitor with mantle cell patients and what they showed was both sets of patients were responding very well to the drug. The delta specific became refractory and what the physicians showed with biopsies is that those tumors were now expressing alpha and they continued to be responsive to the Genentech alpha-delta inhibitor. So we believe there is clear mechanistic advantages just having those two isoforms and that we believe with the HDAC moiety we should have a more robust response, so we are also looking forward to launching a solid tumor trial by the end of the year and that will address breast cancer where a significant percentage have mutations in alpha.

Brian Skorney - Robert W. Baird

So you are in an early starting in hematologic cancer with those molecules, what are you seeing so far in terms of activity say if the – are we starting to get durable remissions or has the drug been administered at safe doses so far?

Dan Passeri

So, we just amended the protocol because we wanted to do – we remind this is a single agent with two activities. So, one of the constraints we have often asked in terms of how we address this issue is some times physicians like to try different doses with patients. So what we are doing is using this drug in different dosing schedules. And one of the things that has manifested early on in the trial is a very interesting PK property. The requirements for PI3 kinase blockade where it is a cell membrane associated kinase signaling is competitive on a saturation blockade. You are competing with ATP from donating phosphate so that’s what the drug is meant to do is go on the ATP binding site and prevent that form occurring and that’s a competitive binding so you need to have enough of your drug that you are preventing ATP from accomplishing that.

With HDAC, it has a different requirement where you don’t want a chronic constant suppression of HDAC, because toxicities will overwrite it. You want more of a pulsatile short-term and it has a prolonged PD effect. And it turns out this drug actually has PK attributes that achieve that with the parent, which has both activities very potently. We see HDAC suppression very early on that’s durable, it’s a prolonged PD. The parent is metabolized relatively quickly. We have a several hour T half on the parent and what has emerged from the clinical data is we have a metabolite that retains almost all of the PI3 activity and its stable. So it’s metabolized much less efficiently, so what happens is every day dosing that we are seeing a build up of M2, which is a build up of the kinase component, which is what one would want, because now you are able to saturate the target was sort of a more subtle pulsatile inhibition of HDAC. So we have amended the protocol to do a survey of several dosing schedules so that we can really learn how best to utilize these properties.

So what we have seen today Brian to get to your question is even at the lowest doses we are seeing HDAC and PI3 associated adverse events principally thrombocytopenia, which resolves and GI types principally diarrhea, but what’s very encouraging even at the lowest starting dose we are seeing what appears to be clinical benefit. We have a patient with multiple myeloma that’s in 10 cycles of the other drug and we have a diffuse large B-cell lymphoma patient. And remember, these are refractory patients having already gone through multiple trials. The diffuse large B-cell lymphoma patient is in sixth cycle. And that patient stable showed about 10%, 15% regression from a scan and that’s stable disease. This is still anecdotal. We have a lot to learn about the drugs PK and how to dose it to maximize clinical benefit, but we are really encouraged by what we are seeing today.

Brian Skorney - Robert W. Baird

Great. I don’t want to hop out the Q&A, so if there is a question please raise your hand and we are happy to answer it. I guess, moving on just to think about the financial position of the company. What’s the current cash balance and how far will that take the company through development at this point?

Dan Passeri

Yes, we are in a really good position from our cash access position. We presently have over two years of cash. We have a very conservative burn. As you know we have been very prudent about cash management and a capital access, so we are just in a very good position right now to execute and continue to build out our clinical development capabilities.

Brian Skorney - Robert W. Baird

Great. So I want to go back to the IAP inhibitor, I mean, I think at this point this is probably what’s getting the most excitement in terms of the investment community? Well, let’s talk a little bit more deeply about the patients that you are seeing these responses, can you give us any background on the prior therapies, what other therapies can we get generate these responsibilities, are these true relapsed/refractory patients, but otherwise we wouldn’t expect this kind of spontaneous activity?

Dan Passeri

These are just to remind everyone, I mean in Phase 1 these are patients that are allowing themselves to be exposed to an experimental drug, because it basically exhausted alternatives. So all patients going into the Phase 1 have typically been in several other trials and have become refractory with resistant tumors. Certainly, the case with the ovarian patient that came in, so we had two complete responses confirmed, excuse me, the MALT lymphoma patient was intriguing about that is MALT lymphoma, it’s between 40% and 50% of all MALT lymphomas have a CIP involvement with a translocation or an amplification and this patient fit one of those categories. And we had a single agent activity. So it’s very encouraging also both CRs were below the MTD, where actually there is no MTD. They dosed up to 600 milligrams, still did not achieve an MTD dosing. One patient responded at 300 milligrams, the other at 450 milligrams. So that’s also relevant and very encouraging.

And then the other CR was an ovarian patient who responded extremely rapidly and Dr. Anthony Tolcher down at San Antonio is a PI on this patient. What’s intriguing and could be quite relevant about this patient is the patient was a BRCA1 mutated, germ-line mutated ovarian patient. And the reason germ-line is relevant is this patient had AEs that weren’t seen in any other patient, namely they had cynical rash very rapidly upon administering the drug and that’s because the BRCA1 mutate, we think because the BRCA1 mutation is present in all of the patient cells. So Dr. Tolcher is continuing to do some preclinical work for us to elucidate mechanistic correlation between BRCA1 and IAP. And remember the IAPs protect intrinsic apoptotic cascade and these hypothetically we think the nexus could be that BRCA1 is part of a DNA proofreading induction of apoptosis cascade and IAP maybe preventing that. So that’s a very intriguing potential correlation, so both of those may lend themselves for precision medicine patient stratification approaches. And just to remind everyone the ovarian single agent has already started that trial. Tony Tolcher is conducting that and lymphoma with MALT being the subset trial as well as monotherapy.

Brian Skorney - Robert W. Baird

Okay. Well, I think we are just out of time, but very exciting story as always a great opportunity to speak with you Dan.

Dan Passeri - Chief Executive Officer

Thanks Brian. Really appreciate it. Thanks everyone for your attention.

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