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Executives

Rob Kloppenburg - VP, IR and Corporate Communications

Safi Bahcall - CEO

Keith Ehrlich - CFO

Vojo Vukovic - CMO

Analysts

Joel Sendek - Lazard Capital Markets

Brian Martin - Barclays Capital

Andrew Vaino - Roth Capital Partners

Joe Aguilera - BioRevolution Capital

Synta Pharmaceuticals Corp. (SNTA) Q3 2009 Earnings Call November 4, 2009 10:00 AM ET

Operator

Good day and welcome to the Synta Pharmaceuticals Third Quarter 2009 Financial Results Conference Call. (Operator Instructions).

At this time for opening remarks I would like to turn the call over to Rob Kloppenburg, Vice President of Investor Relations and Corporate Communications of Synta Pharmaceuticals. Please go ahead sir.

Rob Kloppenburg

With me are Dr. Safi Bahcall, our Chief Executive Officer, Keith Ehrlich, our Chief Financial Officer and Dr. Vojo Vukovic, Synta's Chief Medical Officer. This morning we issued a press release that reported results for the third quarter of 2009. This release can be found on our website at www.syntapharma.com. Before we begin I would like to point out that we will be making forward-looking statements based on our current intent, belief and expectations. They are subject to certain risks and uncertainties and I encourage everyone to look at the SEC filings for additional detail.

I will now turn the call over to Dr. Bahcall, after which we'll open the floor to questions. Safi?

Safi Bahcall

I would like to start by summarizing our strategy and priorities for the coming year. Our top two priorities are first to advance our Hsp90 inhibitor STA-9090 to clinical proof of concept. Our goal is to be in a position to initiate registration enabling studies as early as next year, should the data be supportive and second to secure one or more partnerships that will extend our cash runway into at least 2012 and potentially beyond.

On the first goal, advancing 9090, our strategy is driven by the preclinical and clinical results we have seen to date and is to create what we believe will be the most comprehensive and scientifically robust program for an Hsp90 inhibitor in the industry. We are targeting being in 12 or more trials for 9090 by mid-next year. We have been helped over the past several months in our progress towards this goal by the broad support we have received from investigators around the country and their interest in expansion trials with this compound.

Many of these investigators have worked with other Hsp90 inhibitors and their support for 9090 is encouraging for us and for the program. The majority of the new trials will be investigator sponsored. Meaning that they will cost as much less than a typical company sponsored trial. On the second goal, generating one or more partnerships to extend our cash runway, we are now in discussions with multiple companies on multiple programs 9090, Elesclomol and VDA and Apilimod with a variety of possible deal structures.

It is in the company's best interest to be flexible, to engage in multiple parallel discussions, generate competitive bids and weigh the different choices against each other. The best option maybe a smaller set of deals waiting for a larger deal down the road or maybe a larger deal more immediately.

Based on the pace of discussions and level of interest I can say we are optimistic we will be able to generate one or more partnerships in the first half of next year. We are fortunate to have multiple un-partnered programs, a strong discovery engine and a good cash position, all of which gives us flexibility and we intent to use that flexibility as an advantage to get the best choices on the table. Those are our top two priorities, 9090 and partnerships.

We have also been encouraged by the emerging data from Elesclomol both the emerging clinical results which show activity in the lower normal, LDH population in melanoma and the recent progress on the underlying find which will be presented in meetings in November and December. These results emphasize the unique mechanism of action of Elesclomol and point towards why we are seeing a different connectivity in melanoma between the high and low LDH patient groups.

I want to reiterate two points regarding the future of this program. First, we will not be making substantial investments in the program until we have made strong progress on our first two priorities, 9090 and partnerships. Should we restart Elesclomol in the clinic, we do not anticipate any major effort or expenses until later in 2010. Second, I want to emphasize that while it is encouraging to assume clinical activity in such a tough cancer as melanoma, this does not mean that we would immediately go back into melanoma should we restart. Investigators and other tumor types have expressed interest in exploratory trials based on a mechanism and the collected pre-clinical and clinical data. So we may chose to begin with indications other than melanoma.

Finally we are pleased with the progress on our CRACM program which is partnered with our Roche. Our scientists have made excellent progress in identifying some compounds that with a very promising potential as potent oral cytokine inhibitors and are looking forward to seeing the program advance into the clinic. As a reminder all costs for this program are paid by Roche.

I will now turn the call over to Vojo, who will discuss the 9090 program further.

Vojo Vukovic

I would like to begin by saying that we're seeing a great deal of excitement in the Oncology community about Hsp90 inhibition in general and 9090 in particular. The high level of interest in 9090 began with a preclinical results generated both in our labs and in external labs that showed that 9090 is up to a 100 times more potent than first generation Hsp90 inhibitors such as 17-AG and very importantly that 9090 does not appear to have many of the off target of 50's which have been the concern for the first generation Hsp90 inhibitors. This interest has grown as we have advanced the program in the clinic and seen safety data consistent with what has been seen pre-clinically.

9090 has been very well tolerated to date with a manageable, reversible adverse event profile and importantly without the serious safety issues that are concern for the 17-AG family. They are now treating patients at what we believe is the specific range and have indentified primary dosing scheduled we plan to take forward into Phase 2 programs. We will have a more full discussion of the safety profiling dose in considerations at future medical meetings.

Even more encouraging is that we are seeing preliminary evidence that 9090 is a clinical active compound. Activity profile suggests 9090 may have broad application across multiple tumor types. To-date, we have seen two concerned responses as the fibrosis criteria and the number of instances of tumor shrinkage and durable disease stabilization.

In many cases, these responses had been seen in patients whose disease has progressed on or after treatments with several approved standard of care therapies. Today, I will describe two cases, which we and our investigators believe are particularly strong, encouraging signals of clinical activity. Both these patients are on our Phase 1 once weekly dose in solid-tumor trial.

The first case is a patient with metastatic non-small cell lung cancer who has a medical history typical of advanced lung cancer. This is a very important point to consider as in Phase 1 clinical studies, we often see patients who may not fully represent the typical patient population. This patient was treated with a total of six prior regiments. Four of which are standard of care treatments and two of which are investigational agents. The best response achieved during those prior treatments was progressed into these.

In another words, the patient did not experience any benefit from any of the prior treatments. With 9090, this patient experience an approximately 35% reduction of tumor burden, not quite meeting with RECIST criteria for partial response but most importantly he has achieved prolonged disease control, not seen with any of the prior therapies. He's currently on his tenth month of treatment and remains on study.

The second case is a patient with an advance metastatic renal cell cancer. This patient also exhausted all center of are treatment options for his disease. He presented with metastasis to multiple organs including hip and shoulder and was unable to walk without pain. Practically he was confined to his home and visits to the hospital.

After two cycle of treatment, all of his target lesions shrunk and he was able to walk without pain. We have recently been informed that he hikes regularly for up to two miles, spends a lot of time at the golf course and has made vacation plans for trip to Hawaii. His total tumor burden has shrunk by about 10% to 15%. He's been on study for six months and continuous on treatments.

These two examples are particularly encouraging because the patients have typical real world complex advanced stage disease. They fail to respond or had progressed on multiple prior therapies and it showed a clear benefit from treatment with 9090.

Several additional patients, in other tumor types have shown similar degree of tumor shrinkage and a durable disease control. These collected safety and efficacy data have been very encouraging to us and to our many collaborators. These clinical results combined with strong preclinical data and scientific rationale have helped us make strong progress towards ambitious goals Safi mentioned.

I will now turn the call over to Keith who will provide the financial update. Keith?

Keith Ehrlich

Most striking aspect of our financial results is that Synta showed a profit in the third quarter. This is a result of termination of our Elesclomol partnership triggering an acceleration of $130 million we received from GSK gets recognized. Instead of being recognized over the remainder of the estimated 15 years of the agreement, the portion of payments not previously recognize this revenues, was recognized in third quarter.

This amounted to approximately $114.6 million resulting in our profitability. This is a one time event and we do not expect to see any further financial impact on the termination of the GSK agreement in the future earnings statements.

Payments on the Roche agreement are obviously not affected and we will continue to recognize these payments over the estimated performance period of the agreement.

Research and development expenses were $9.1 million for the third quarter of 2009, compared to $24.1 million for the same period in 2008. This decrease is due primarily to reduction in resources related to the Elesclomol program.

General and administrative expenses were $3.1 million for the third quarter of 2009 compared to $3.7 million for the same period in 2008. Net income was $118.1 million or $3.49 per basic share and $3.48 per diluted share for the third quarter of 2009 compared to a net loss of $26.3 million or $0.78 per basic and diluted share for the same period in 2008. As of September 30, 2009, the company had $51.7 million in cash, cash equivalents and marketable securities compared to $73.6 million as of December 31, 2008.

As a result of the implementation of cost saving measures and based upon our current operating plans, we expect to end 2009 with approximately $40 million of cash resources. This estimate assumes no additional funds from new partnership agreements or equity financing event. I will now turn the call back to Safi.

Question-And-Answer Session

Safi Bahcall

I will now open the call to questions and discussion. Operator?

Operator

(Operator Instructions). Our first question is from Joel Sendek of Lazard Capital Markets.

Joel Sendek - Lazard Capital Markets

It appears to me that the biggest risk of the company is that, you might not get the value that 9090 deserves to get and I'm wondering what your plan is to maximize the value of the drug, especially given the responses that we've seen and I guess related to that is, are you doing anything to maybe reduce expenses further until you have one or more of these partnerships in place?

Safi Bahcall

Joel, this is Safi. Yeah, so we're doing both of those things. One is, we've gone through a company wide cost saving initiative where we're really focusing essentially all of our resources on 9090. We're also active with the crack program but that's fully reimbursed by Roche. So essentially all of our, all of the substantial R&D research of the company are focused on advancing 9090 just based on the level of excitement we've seen around that program. That makes a lot of sense for us.

The first part of your question, what are we doing to retain as much value from that program for shareholders, that's something that's absolutely on all of our minds and what we're doing is, we have, as I mentioned we have put ourselves in a fortunate position of having four un-partnered assets. That's just the legacy of the company that we've had generated a number of these drugs and we've seen interest from partners around all four of those programs.

So as I mentioned, we may, it is possible we'll do a large deal around 9090 sooner rather than later but an alternative option, which I think is what you're getting at is we could do some smaller deals sooner and that buys some time to create more value in the 9090 program, advance it further in the clinic and then potentially do a larger deal down the road. So what we're doing is putting all the un-partnered assets of the company in plain discussion with different partners and creating a number of options that could potentially buy us some time with the 9090 to advance it further in the clinic.

Joel Sendek - Lazard Capital Markets

And are you giving yourselves a -- you mentioned mid-2010. Is that a hard deadline or is that just kind of a general goal as to when we might see a deal or two?

Safi Bahcall

It's a reasonable estimate based on where we are in discussions. We've done -- we've been partnering these types of partnering discussions for different programs for years now and so lots of stuff can happen. And at this stage, it is probably too early to say. But I would say that that is reasonable guidance given the pace of discussions and the number of partners that have come to the table around a number of different programs. They're some of the positive signals that we're seeing.

Operator

Our next question is from Brian Martin of Barclays Capital. Please go ahead sir.

Brian Martin - Barclays Capital

It was great to hear the case studies of the patients on 9090 end trials. You guys have mentioned that you'll have had two 50 hours confirmed by these test. Is that something you could provide more information in terms of the duration of the response or what kind of prior therapies these patients were on or is that something you would like to keep for medical meeting?

Vojo Vukovic

This is Vojo Vukovic. I think your question was about some more details about the patients with partial responses as per [reset]. Is that correct?

Brian Martin - Barclays Capital

Yeah partial and I guess complete responses also.

Vojo Vukovic

I don't know. We mentioned partial. Yeah, I think these are patients. We'll certainly provide all of the details at upcoming medical conferences in the first half of 2010. What you can say right now is really the patients are also heavily pretreated patients who have failed in monkeys I think seven lines of prior treatments and in the other case it was two lines of treatment. So I think it represents the typical patients with advanced disease and we have seen these partial responses in the range that we're targeting.

Brian Martin - Barclays Capital

But 9090 clearly you all have shown pre-clinical data that's shown to be superior during the first generation 17 AAG and analogues. But how do you see yourselves positioned versus other earlier stage synthetic compounds like in Pfizer Serenex 5422 or the Astex compound or the Novartis compounds.

Vojo Vukovic

I think that's a great question. Let me begin by answering the question that we have synthesized in our labs really all of the claimed Hsp90 inhibitors that we are aware of for which the structures under public premise, we're able to do extensive testing in our labs and by our experiments as well as the experienced results from our collaborators we see that 9090 is far superior to 17-AG family of inhibitors that a number of companies are developing. Now specifically within the second generation class, we think that the 9090 is at least as potent as any compound we have tested and we see a lot of characteristics of the drug from a [ecological] properties that we feel are unique and create important advantages for the compound in the clinic.

Brian Martin - Barclays Capital

One final question, along the CRACM program with Roche, when do you all expect to file an IND for this program and is there a specific milestone associated with the IND filing of the program?

Safi Bahcall

Ryan this is Safi. We've been targeting an IND next year towards the end 2010 and for our contract we can't disclose details of milestone payments.

Operator

Our next question is from Andrew Vaino of Roth Capital Partners. Please go ahead sir.

Andrew Vaino - Roth Capital Partners

Just a quick question on the 9090. You mentioned you would start registrational studies next year. Give a guess as to how many that would be and what the indications would be? I assume lung cancer and RCC?

Unidentified Company Representative

Andrew, this is [Dr. Lamy]. First we are going to talk about future indications as we initiate those trials. So we haven't committed publically to any specific question and secondly the point about registrational studies, it's an aspirational goal that's really connected to the fact that we are doing, that we're integrating Biomarker and Molecular Profiling data very closely into each of the programs that we are either conducting now or are planning over the next several months and that puts us in a position to identify and target certain sub-population that could be particularly responsive for 9090, and so what I said is, shouldn't we be able to generate data that its sufficiently supportive. The goal is to put us in a position where we could initiate registration enabling studies in the targeted sub-population which as you know, can proceed very quickly.

Andrew Vaino - Roth Capital Partners

Okay and you mentioned Biomarkers for the 9090. Are there any specific ones you are looking at?

Unidentified Company Representative

There is a number of standard biomarkers and then there is a number of ones that are proprietary that we've been developing in our labs that we think are actually superior to some of the traditional biomarkers for the Hsp90 class but we regard that right now as a competitive advantage for the program so we are not going to be publicly disclosing it.

Andrew Vaino - Roth Capital Partners

Just quick question on the Elesclomol, have you folks actually identified a discrete molecular receptor that it interacts with?

Unidentified Company Representative

Actually, the question was, have we identified the binding side of Elesclomol?

Andrew Vaino - Roth Capital Partners

Yes.

Unidentified Company Representative

What it defines to?

Andrew Vaino - Roth Capital Partners

Yes.

Unidentified Company Representative

The answer is yes, we have identified what Elesclomol binds to and we will be presenting that at, the mechanism results would be presented at the November [triple] meeting.

Andrew Vaino - Roth Capital Partners

Then finally, I know, unfortunately you guys had some cost cutting earlier. How many employees do you currently have? What percentages are in research? And what percentage is in development?

Unidentified Company Representative

I think we are between a 125% and 130%, and certainly the majority are in R&D.

Andrew Vaino - Roth Capital Partners

Okay, great. Thank you.

Operator

(Operator Instructions) Our next question is from Joe Aguilera of BioRevolution Capital. Please go ahead.

Joe Aguilera - BioRevolution Capital

This one is for you and for Voja. On your VDA program, when do we expect to file an IND there? What's the intent?

Safi Bahcall

Joe, this is Safi. We haven't made any final decisions about the timing of the IND. As I had mentioned in one of the earlier questions, we're really focusing our resources right now on the 9090 program based on how close that is to generating very compelling proof of concept. So that has fallen to a somewhat lower priority behind that effort.

Joe Aguilera - BioRevolution Capital

Being that Antisoma is obviously leading that arena, being that they're going to go on a combination basis, do we intend to go on a stand alone basis in the beginning or you can't comment on that VDA?

Safi Bahcall

For that type of compound, your initial study would typically be a single agent.

Joe Aguilera - BioRevolution Capital

And on the Hsp90 all these patients I'm assuming will fill Gleevec and Tarceva. Is that where we'll get a lot of the patients from, Safi?

Safi Bahcall

Well I can start it and Voja can answer more. It depends on the indication. If you're in indications where Gleevec is approved or Sutent is approved or Tarceva is approved, you may well go after that because that's what the pre clinical data has shown, that that's very strong and that's also where we're seeing responses in our Phase 1 trial. However we won’t just necessarily just be in the indications where Gleevec, Sutent or Tarceva are approved. We're looking at several other indications. Maybe Vojo, you would like to comment some more.

Vojo Vukovic

Sure, as Safi has mentioned before, we have a pretty ambitious plan to cover a number of indications. We'll be launching a wave of Phase 2 proof of concept studies and a vast majority of that primarily the studies would be single agent studies because we have seen single agent activity in a number of different tumor types. And in that situation you obviously are going to refractory patients that have exhausted all standards of care treatments.

Joe Aguilera - BioRevolution Capital

Vojo, what's the mechanism of action being one of the (inaudible) the Biogen, the Biotica, the Astec, Infinity drugs have failed on some of the Hsp90. What's the differentiation and the mechanisms of action for Hsp90 you feel has the advantage over the other existing developmental Hsp90's out there?

Vojo Vukovic

The mechanism of action, the underlying mechanism of action is always the same. It's inhibition of the Hsp chaperone complex. But different drugs do that differently. The bite the different domains of the protein and we have in the protein structural, what we have determined that we clearly differentiate from other compounds in the respect and that could potentially explain some of the differences in activity and potency and the other thing which is important in the clinic, we have seen a very good safety profile which I think further differentiates our compound from other compounds and that it enables us to have a very effective therapeutic range and have a optimal risk benefit ratio for the patients.

Operator

That concludes the question and answer session. I will now turn the conference over back to Dr. Bahcall for closing remarks.

Safi Bahcall

Thank you all for your time today and that ends our call.

Operator

Ladies and gentlemen this concludes today's call. You may now disconnect your lines.

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Source: Synta Pharmaceuticals Corp. Q3 2009 Earnings Call Transcript
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