Cell Therapeutics Management Discusses Q3 2013 Results - Earnings Call Transcript

Oct.30.13 | About: CTI BioPharma (CTIC)

Cell Therapeutics (NASDAQ:CTIC)

Q3 2013 Earnings Call

October 30, 2013 4:30 pm ET

Executives

Monique M. Greer - Senior Vice President of Corporate Communications and Investor Relations

James A. Bianco - Principal Founder, Chief Executive Officer, President and Executive Director

Matthew J. Plunkett - Executive Vice President of Corporate Development

Jack W. Singer - Co-Founder, Executive Vice President of Global Medical Affairs & Translational Medicine and Executive Director

Analysts

Kimberly Lee - Janney Montgomery Scott LLC, Research Division

Robert Cummins Hazlett - Roth Capital Partners, LLC, Research Division

Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Cell Therapeutics Third Quarter 2013 Financial Results Conference Call. [Operator Instructions] This call is being recorded today, October 30, 2013. I would now like to turn the conference over to Monique Greer, Senior Vice President of Corporate Communications and Investor Relations. Please go ahead, ma'am.

Monique M. Greer

Thank you, George. Good afternoon, everyone, and thank you for joining us today for our third quarter 2013 financial results conference call. Following formal remarks by management, the conference call will be open for questions.

With me today are Jim Bianco, President and Chief Executive Officer; Matt Plunkett, Executive VP of Corporate Development; and Lou Bianco, Executive VP of Finance and Administration.

A press release was issued after market close today, a copy of which can be found on our homepage and in the Investors section of our website at celltherapeutics.com.

Before we begin, please note that during the course of this call, we will be making forward-looking statements based on current expectations. Such forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that may cause actual results to differ materially from those anticipated by the forward-looking statements. Additional information concerning these risks and uncertainties is contained in the Risk Factors section of our quarterly report on Form 10-Q for the quarter ended September 30, 2013, and in the company's other periodic reports and filings with the Securities and Exchange Commission.

I will now turn the call over to Jim.

James A. Bianco

Thanks, Monique. Good afternoon, everyone. For those of you that may be new to CTI, we're a biopharmaceutical company with one marketed oncology drug and a promising late-stage pipeline. Our focus is to become a leader in the treatment of blood-related cancers.

Our foremost investigational agent in Phase III development is pacritinib, which is an oral JAK inhibitor that inhibits 2 important activating mutations, JAK2 and FLT3. As you may know, the JAK pathway is important in many biological processes, including the regulation of immune function and the formation and development of blood cells.

Activating mutations of JAK2 is implicated in a spectrum of blood-related cancers, such as myeloproliferative neoplasms, leukemia and surface solid tumors. FLT3 is a commonly mutated gene found in patients with acute myeloid leukemia. In myelofibrosis, myelosuppression, particularly thrombocytopenia or a relative decrease in platelets in blood, it's both a consequence of the disease and has emerged as a limiting treatment-related side effect of JAK1/JAK2 inhibitors.

While normal platelet counts in adults ranges from 150,000 to 450,000 platelets per microliter of blood, thrombocytopenia refers to a platelet count lower than 150,000. As myelofibrosis progresses, platelet production decreases and thrombocytopenia develops, thereby resulting in a high-risk population in patients with MF who have a normal platelet count. Approximately 37% of patients with myelofibrosis have thrombocytopenic, with platelet counts below 150,000.

Now although pacritinib has the potential to benefit all patients with myelofibrosis, we believe the benefit will also be clearly demonstrated in those patients with low platelet counts, a patient population that was not studied in randomized trials utilizing other JAK2 inhibitors.

At the recent European Hematology Association Congress held in June, an integrated safety analysis of the 4 completed Phase I and Phase II studies were presented, totaling 191 patients who were treated with pacritinib for myeloid, primarily myelofibrosis or lymphoid malignancies to quantify clinical toxicities with a specific focus on hematologic side effects.

Now other JAK2 inhibitors have been associated with treatment-related anemia and thrombocytopenia, and this was not observed in patients on pacritinib. The integrated safety data analysis suggested that regardless of initial platelet counts, pacritinib does not cause further myelosuppression. Even patients with initial platelet counts less than 50,000, a high-risk population, tolerated therapy and maintaining stable blood and platelet counts and did not require dose reduction for thrombocytopenia.

A Grade 1 or 2 gastrointestinal events, particularly diarrhea, were the most common adverse events and can be controlled by early administration of standard anti-motility agents.

We believe pacritinib could effectively address an unmet medical need, particularly for patients living with myelofibrosis who either face treatment-emergent thrombocytopenia on marketed JAK1 and JAK2 inhibitors, or who have disease-related thrombocytopenia that is being sub-optimally managed on low doses of a currently improved agent. As such, pacritinib may offer patients with myelofibrosis an effective therapy but a safety profile that could allow for longer term management of their disease than with currently approved agents or other agents in development.

In October, we reached agreement with the U.S. Food and Drug Administration on a Special Protocol Assessment or SPA, for the PERSIST-2 pivotal study. As you may know, a SPA is a written agreement between CTI and the FDA regarding the design, endpoints and planned statistical analysis approach of the trial to be used in support of a potential New Drug Application. We believe this is the only JAK2 inhibitor that is being studied under an SPA.

Now PERSIST-2 is a 300-patient randomized open-label multicenter pivotal study in patients with myelofibrosis whose platelet counts are equal to or less than 100,000. The trial will evaluate pacritinib as compared to best available therapy, including approved JAK2 inhibitors that are dosed according to the product label for myelofibrosis patients with thrombocytopenia.

For example, BAT [ph] may include patients on JAK2 inhibitors who develop treatment-emergent thrombocytopenia and are tapering their dose and experiencing increased symptoms and rebound splenomegaly, or it can be patients with thrombocytopenia on the recommended low-dose JAK2 inhibitor who continue to have splenomegaly and significant symptoms.

The agreed-upon co-primary endpoints of the percentage of patients achieving a 35% or greater reduction in spleen volume is measured by MRI or CT from baseline to 24 weeks of treatment, and the percentage of patients achieving a total symptom score reduction of 50% or greater using 6 key symptoms as measured by the Modified Myelofibrosis Symptom Assessment Form.

Interest in the study amongst U.S. investigators continues to be very encouraging. And the trial is expected to enroll patients at clinical sites in the U.S., Europe and Australia, and we remain on track to initiate this trial this quarter.

Our ongoing Phase III trial known as PERSIST-1 is a multicenter randomized controlled trial comparing the efficacy and safety of pacritinib with that of best available therapy excluding JAK inhibitors in patients with myelofibrosis. The primary endpoint will also be the percentage of patients who achieve a 35% or greater reduction in spleen volume at -- from baseline to 24 weeks. And this clinical trial began in January of this year. It's designed to enroll 270 patients at sites in Europe, Australia, Russia and the United States. We currently have 90% of the sites activated and screening patients. Enrollment is strong and certainly meeting expectations. Based on the current enrollment, we believe we are on track to fully enroll PERSIST-1 early -- in early 2014.

In addition to myelofibrosis, we have encouraging clinical data in lymphoma and preclinical data in FLT3-resistant AML. From an intellectual property perspective, pacritinib has composition and matter protected through 2026, and it is orphan-designated for myelofibrosis in both the United States and in Europe.

Now as we stated before, it's our goal to enter a partnership for pacritinib before year end. If we're able to enter into such an agreement, we believe it would potentially provide us with additional capital for our Phase III trials even while providing external validation for the program.

So let's move on to the commercial product, PIXUVRI. As you may recall, it's a first-in-class aza-anthracenedione with unique structural and physiochemical properties, and it's also the first approved therapy in the European Union for the treatment of patients with multiple relapsed or refractory-aggressive B-cell non-Hodgkin's lymphoma.

A recent presentation of the preclinical study results at the AACR meeting suggests that PIXUVRI is unique in its mechanism for inducing tumor cell death, thereby supporting the thesis that it is the first approved drug in a new class of anticancer agents. Prior to PIX, patients with aggressive B-cell lymphoma who failed 2 or 3 prior [indiscernible] therapy had no approved treatment options for this stage of the disease.

Now of course, reimbursement decisions by governmental authorities of each single EU country have an impact on our ability to sell PIXUVRI and ultimately on enterprise and market acceptance. The interest and receptivity of PIXUVRI by healthcare provider and key opinion leaders has greatly contributed to our ability to navigate the reimbursement process in each country, and we believe this level of support is really a testament to the unmet medical need and the value they place on PIXUVRI as important therapy for treating patients with aggressive B-cell non-Hodgkin's lymphoma.

During the third quarter, we continued to make progress -- good progress on PIXUVRI pricing and reimbursement in Europe. Specifically we achieved market access in Italy and in France and have reimbursement decisions underway in the U.K. and Germany. We believe the positive decision by NICE recommending PIXUVRI as being cost effective can influence other countries both in the European Union and around the world.

As we conclude the reimbursement process in each country, we're focused on educating physicians on the unmet medical need, building brand awareness for PIXUVRI as a third- and fourth-line treatment option for aggressive B-cell lymphoma among physicians in countries where PIXUVRI is currently available.

A key component of this effort is our focus on seeking to minimize infrastructure and to minimize cost and to increase potential demand until final reimbursement discussions are complete. And we currently have a sales presence in 8 countries, including the Nordic countries, Netherlands, Austria, Germany and the U.K. And through our medical education programs and field activity with our medical science liaisons, we're able to highlight the unmet medical need that PIXUVRI may potentially fulfill while sharing the results of clinical studies with healthcare providers.

Our medical peers organization continues to engage and build relationships with key hematology, lymphoma opinion leaders through one-on-one meetings, scientific advisory boards, medical symposia and investigative sponsored studies and publications.

As we've previously described, in connection with the approval and in agreement with the European Commission, we are conducting a post-market commitment trial known as the PIX-R or PIX306 study. As you may recall, this is a randomized trial of pixantrone rituximab versus gemcitabine rituximab for patients with aggressive B-cell NHL. The relapse after receiving CHOP rituximab therapy or an equivalent regimen and who are ineligible for stem cell transplantation.

The primary endpoint is overall survival with secondary endpoints of progression-free and survival and complete remission and overall response rate. And as we mentioned, we have filed a proposal with the EMA to change the primary endpoint to PFS. We are in the process of opening additional sites in the EU, which we expect will help increase patient enrollment and increase the visibility of pixantrone amongst EU thought leaders. This trial is intended to support the conversion of our conditional approval to full approval.

So before turning to our financials, I want to share with you that we have multiple abstracts accepted to the upcoming American Society of Hematology meeting, including updated analyses from our Phase II pacritinib studies. Specific information on the date and time of presentation of the accepted abstracts will be forthcoming in advance of the ASH meeting.

So let me briefly review our financials for the quarter and 9 months ended September 30. Net product sales for the third quarter and 9 months were $362,000 and $1.8 million, respectively, which was solely attributable to net product sales of PIXUVRI, primarily in Germany. Many future revenues are dependent in part obviously on reimbursement decisions made by governmental authorities in each country where PIXUVRI is available for sale.

Our loss from operations for the third quarter of 2013 was $15.6 million, which compared to $15.1 million for the same period in 2012. For the 9 months 2013, loss from operations was $51.9 million, which compared to $82.6 million for the same period in 2012.

Noncash share-based compensation expense for the third quarter and 9 months was $1.9 million and $6.3 million, respectively, which compared to $1 million and $6.1 million for the same periods last year.

We reported a net loss of $22.4 million for the third quarter or $0.20 per share, which compared to a net loss of $20.2 million or $0.38 per share for the same period in 2012. For the 9 months 2013, the net loss was $59.8 million or $0.55 per share compared to $96.2 million or $2.12 per share for the same period last year.

We are reaffirming our prior net financial guidance that for 2013, non-GAAP loss from operations excluding any noncash share-based compensation expense is expected to be approximately $60 million to $65 million. Year-to-date, in the 9-month period ending September 30, the non-GAAP loss from operations, excluding noncash share-based compensation expense, was $45.5 million or an average of $5.1 million per month.

A reconciliation of historical non-GAAP loss from operations to loss from operations prepared in accordance with U.S. GAAP is included in our earnings release for the third quarter of 2013.

Turning to our balance sheet. We ended the quarter with cash and cash equivalents of $27.2 million and currently have 129.9 million common shares outstanding.

As we look forward, we continue to execute on our 2013 operating plan. We have an important opportunity to serve patients and their caregivers and to ensure that patients with aggressive lymphoma have access to PIXUVRI. And we take this responsibility seriously, and we're committed to working diligently to make this happen.

In summary, we're really excited about the prospects for helping patients and building value for shareholders. We're on track to initiate the second Phase III trial of pacritinib before year end and plan a complete patient enrollment in the first Phase III trial in early 2014. We plan to support investigator-initiated trials of pacritinib in AML which are expected to start also before the end of this year.

And lastly, we're working diligently towards securing reimbursement in additional markets and believe, if successful, we'll be well positioned to drive use and adoption of PIXUVRI in aggressive B-cell lymphoma in those EU countries where we've completed the reimbursement process. Finally we're on track to enter into a partnership for pacritinib before the end of the year.

So with that, operator, we would like to open the call for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is from Kim Lee with Janney Capital.

Kimberly Lee - Janney Montgomery Scott LLC, Research Division

A couple of questions for you. First as far as PERSIST-1 goes, can you quantify the number of patients that currently are enrolled? I know you mentioned qualitatively that patient enrollment has been going very well. So if you could give us some additional clarity, that'd be helpful.

James A. Bianco

We typically don't tell what the enrollment is today. We can tell you that we are enrolling 30 to 40 patients a month.

Kimberly Lee - Janney Montgomery Scott LLC, Research Division

Okay, great. And as far as the partnership discussions go, I know you can't get into details about that, but qualitatively, how's talks been going, and what makes you confident that you can get something done by the end of this year?

Matthew J. Plunkett

Kim, Matt Plunkett here. What we can say at this point is it's our goal to enter a partnership for pacritinib before year end and don't really have any further comments at this time.

Kimberly Lee - Janney Montgomery Scott LLC, Research Division

Okay. Maybe if you can give us some clarity on kind of what kind of partnership would be ideal for you, what you're looking for?

James A. Bianco

Matt, it's your domain.

Matthew J. Plunkett

Yes. Kim, we're looking for a partnership that would potentially provide us with additional capital for our Phase III trials, the typical upfronts and milestone structures that one might expect and provide validation for the program.

Operator

[Operator Instructions] Our next question is from Bert Hazlett with Roth Capital.

Robert Cummins Hazlett - Roth Capital Partners, LLC, Research Division

My apologies. I've had to jump on and off the call. I believe you folks have discussed this. And Jim, maybe if you could elaborate on the potential for infrastructure build as the -- as -- in 1 of 2 scenarios, either as the reimbursement occurs, which hopefully will occur, how do you think about the infrastructure build throughout Europe? And if that weren't the case -- I'm talking specifically with NICE and Germany. But then if that's not the case, how should we think about the infrastructure build in terms of commercialization in France and Italy for PIXUVRI obviously?

James A. Bianco

So as you may recall, we are working through a contract sales force which is specifically dedicated to the sole product, PIXUVRI. With Quintiles, we currently have 15 key account managers and 3 MSLs in the field. And what we plan on doing is to phase in as we essentially get reimbursement decisions made in the U.K., for example. If NICE comes back in this quarter with a favorable recommendation, we would then phase in the U.K. component to the selling effort and educational effort. With regards to Italy and France, as most oncology drugs now are going out to the hospitals, we would begin contracting with the purchasing groups that represent the government's statutory health funds. And as -- so you'd have one account manager and one what we call market development manager in Italy and one in France. And you wouldn't have sales people in those 2 territories until you have completed the so-called contracting phase of the reimbursement process for those 2 territories. So if everything were to work out the way we expect it to, by the end of 2014, you would have a field complement of approximately 35 people in Italy, France, United Kingdom, Germany, which also covers Austria, Denmark, Finland, Sweden and the Netherlands. What we mentioned on our prior calls was that we were pleased to see that the lymphoma guidelines in the Netherlands, the Hovon group has recommended PIXUVRI for inclusion in their guidelines. So -- and that the European Society for Medical Oncology is recommending it for inclusion in their guidelines. So we've made a lot of good ground effort, if you will, on kind of building the support. And as we said in the call, that is critical in front of these reimbursement panels and committees to have the thought leaders in the various countries talk about why this drug is important for them to have on the market.

Robert Cummins Hazlett - Roth Capital Partners, LLC, Research Division

And just one other quick one. I know that some of the FLT3 characteristics of pacritinib are being examined in investigator-sponsored studies. Is there any update in terms of the status of those studies? Or when might we be able to expect, at least, the first snippets of data out of that type of work?

James A. Bianco

So I'm going to ask Jack because he's managing that effort.

Jack W. Singer

Thanks for the question. We expect to start a study in the U.K. with the Medical Research Council before the end of the year. And this would be a study in patients with AML who have relapsed, who have a FLT mutation. It will be a signal-searching study, in the order of 60 to 100 patients and would tell us whether or not this could move to a frontline study within the MRC. We also expect early next year to start a study with one of the major cancer hospitals in the U.S. looking also at relapsed but also frontline patients with FLT3. And the point of these studies is to see whether the dual inhibitor, because I think JAK is an extremely important way that cells can escape from FLT3 inhibition, would have the expected profile of much longer and deeper remissions that have been seen with the specific FLT3 inhibitors. And this is what the AML experts are quite excited by. So we would expect by mid-next year, we'll have a really good indication of how effective this drug will be in relapsed AML, particularly with FLT mutations.

Operator

And I'm showing there are no further questions. I'll turn the call back to Dr. Bianco for closing comments.

James A. Bianco

Thank you. We're focused this year and going forward on delivering our commitment to patients through the acquisition development commercialization of less-toxic, more-effective ways to treat and cure cancer. We look forward to seeing many of you at the upcoming ASH meeting in December. And on that note, have a good evening. Thank you.

Operator

Ladies and gentlemen, if you'd like to listen to a replay of today's call, you can dial (303) 590-3030 or 1 (800) 406-7325 with the access code of 4647208. This concludes our conference for today. Thank you for your participation. You may now disconnect.

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Cell Therapeutics (CTIC): Q3 EPS of -$0.20 misses by $0.03. Revenue of $362K. (PR)