Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

ArQule (NASDAQ:ARQL)

Q3 2013 Earnings Call

November 07, 2013 9:00 am ET

Executives

William B. Boni - Vice President of Investor Relations & Corporate Communications

Paolo Pucci - Chief Executive Officer and Director

Robert J. Weiskopf - Principal Accounting Officer, Vice President of Finance, Corporate Controller and Treasurer

Brian Schwartz - Chief Medical Officer and Senior Vice President of Clinical & Regulatory Affairs

Analysts

Joel D. Sendek - Stifel, Nicolaus & Co., Inc., Research Division

Chad J. Messer - Needham & Company, LLC, Research Division

Jason Zhang - Edison Investment Research Limited

Jonathan Eckard - Citigroup Inc, Research Division

George B. Zavoico - MLV & Co LLC, Research Division

Operator

Good day, ladies and gentlemen, and welcome to the ArQule Q3 2013 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, Mr. Bill Boni. Please go ahead, sir.

William B. Boni

Good morning, everyone. Welcome to the ArQule investor conference call reviewing operational and financial results for the third quarter of fiscal year 2013. This is Bill Boni, the VP of Investor Relations at ArQule.

This morning, we issued a press release that reported results for the fiscal quarter and 9 months ended September 30, 2013. These release is available on our website at www.arqule.com.

Leading the call today will be Paolo Pucci, Chief Executive Officer of ArQule. Also present for the company are Peter Lawrence, President and Chief Operating Officer; Dr. Brian Schwartz, Chief Medical Officer; and Rob Weiskopf, Vice President of Finance.

Before we begin, please note that we will be making forward-looking statements as defined in the Private Securities Litigation Act of 1995. Actual results may differ materially from those projected in the forward-looking statements due to numerous risks and uncertainties that exist in ArQule's operations, development efforts and the business environment, including those factors discussed in our press release announcing this call and posted on our website as well as in our reports on Forms 10-Q and 10-K and subsequent documents filed with the SEC.

The forward-looking statements contained in this call represent the judgment of ArQule as of today. ArQule disclaims any intent or obligation to update any forward-looking statement except to the extent required by law. We will provide an opportunity for questions and answers at the end of this call.

I would now like to introduce the CEO of ArQule, Paolo Pucci.

Paolo Pucci

Thank you, Bill. Good morning, everybody, and thank you for joining us today on this call.

Let me begin the operational review giving a summary of the tivantinib related activities that have occurred during the last 3 months and for those of you who might be new following ArQule on this call, I shall remind you that tivantinib is our most advanced asset, it's a small molecule to c-MET inhibition. And has been and it is currently in a multiple Phase III trials.

So of those 3 trials, let me start to give an update on the so called METIV trial which is in hepatocellular carcinoma. This is a pivotal trial sponsored by both ArQule and Daiichi Sankyo. In Daiichi, executing Daiichi Sankyo defined territories as per contract. This testing tivantinib begins by supportive care in the very difficult setting of second line HCC. In a bio-market defined population, which is defined as c-MET high. The endpoint of this trial is overall survival. It is randomizing slightly more than 300 patients and randomizing with a ratio 2:1 for treatment versus control. As we previously disclosed, during the third quarter of 2013 in an 8-K, ArQule and Daiichi Sankyo received their recommendation from the trial Data Monitoring Committee, also referred as DMC, that the study dosage, which was originally 240 milligram, twice a day, at least twice a day in the form of a tablet be reduced to 120 milligram twice a day administered still as a form of a tablet.

In addition, the DMC recommended some ulterior patient monitoring procedures to be instituted to confirm speedily the safety profile of the lower dose of 120 milligram BID. Consequently, to this recommendation that ArQule and Daiichi Sankyo submitted to regulatory authorities at those reduction protocol amendment for this trial. Patients in the METIV-HCC trial are currently being treated at the reduced dose of 120 milligram BID tablet form. The DMC is reviewing data from defined cohort of patients on an ongoing basis to monitor the safety profile of this new dose.

ArQule and Daiichi Sankyo will also continue to review available data from this trial as well as from other trial that might provide insight to better understand the possible reasons for the higher incidence of neutropenia, the one of the -- in the very initial phase of the METIV trial, which did not compare favorably with the rate of neutropenia we had observed in the previous double-blind randomized Phase II trials in the same setting. This analysis will include those that related to the impact of a potential change in dosage form and in fact, I should remind you that we did use in the Phase II randomize HCC trial, the capsule form and we are using in this Phase III the tablet form for the METIV trial. We expect to provide additional details on the ongoing activities around the METIV trial as soon as they become available, if they rebate us [ph] or before then if necessary.

Before I move on, I'm providing an update for the rest of the tivantinib program, I would like to note that the incidence of neutropenia that we have observed in the very initial phase of the METIV trial, while not observed in other trials with tivantinib, which continue therefore those that are active to employ a dose of 360 milligram BID tablet form.

Then let me move to the MARQUEE trial, where we add a substantial update versus the last time we spoke on the Q2 conference call. This trial, let me remind you, was a drug trial sponsored by ArQule and Daiichi Sankyo in Daiichi's executing, Daiichi Sankyo's contractually defined territories and while testing tivantinib plus erlotinib against erlotinib plus placebo in second-line and third-line of non-small cell lung cancer patients defined by non-squamous histology. The endpoint of this trial was overall survival.

We have been working at the ASCO presentation and today we can discuss that presentation which has occurred. You can recall going further back that the Data Monitoring Committee for this trial recommended discontinuation for this trial in the fall of 2012. This occur as a preplanned interim analysis and on that analysis, the overall survival for the intent-to-treat population across different boundary, in other words, the DMC determined that the trial would not achieve its ultimate endpoint, which was overall survival. However at that time, 2 additional observations were taken. One that there was a clear PFS advantage favoring the treatment arm versus the control arm. And the second lead [ph] , the side effect profile of the drug at the time was consistent with what would have been expected based on the Phase II randomized work that had been done in non-small cell lung cancer. So due to the fact that there were no unexpected safety findings, it was and viewed that at least on the PFS basis, some patients would be benefiting. Then the trial was continued and continued until December 2015. So that we could obtain the most comprehensive possible data factor and then consequently enable the best possible, most thorough analysis including analysis of pre-specified subgroups.

Very recently, as I mentioned, the Phase III MARQUEE data was presented at the European Cancer Congress in Amsterdam on September 30, by the PRI for this trial, Professional Scagliotti of the University of Turin. The ASCO presentation included findings that include among others, demonstrating the potential therapeutic value of tivantinib plus erlotinib in the treatment of the prespecified subgroup of patients defined by MET-high tumors. In this subgroup, significant improvements in OS, PFS and overall response rate were observed in favor of the treatment arm. More specifically, median overall survival for patients in the MET-high group in the treatment arm was 9.3 months versus 5.9 months in the control arm, with a hazard ratio of 0.70 and a p-value of 0.03. Medium PFS for the treatment arm was 3.6 months compared with 1.9 months for the control arm. With the hazard ratio of 0.72 and the p-value of 0.01. Overall response rate was 10.6% for patients with MET-high non-small cell in the treatment arm versus 6.5% for patients in the control arm.

C-MET probing inspection was carefully measured using immunohistochemistry. The patients that were classified ultimately as being c-MET high had to comply with the following protocol guidance: 50% more or more of the tumor tissue had to be stained with an intensity of 2 plus and/or 3 plus. And the c-MET analysis of the tissue must have taken place within a stability window of 90 days following tissue sectioning. So as you can see, quite strict criterias to analyze the c-MET status. Of the 1,048 patients that were ultimately recruited in the trial, 445 were available for MET status at the third protocol, which I just described. Patients are classified as MET-high within that group with number 211 and patients are classified as MET-low, as per protocol, number 234.

For completeness, let me also offer some key statistics related to the ITT population, that is the 1,048 patients that was totally recruited. For patients in the treatment -- ITT treatment arm overall survival was 8.5 months in the treatment arm compared to 7.8 months in the control arm with a hazard ratio of 0.98 and a p-value of 0.81. Medium PFS for the treatment arm was 3.6 months compared to 1.9 months for the control arm with a hazard ratio of 0.74 and a p-value of 0.001. So you could see that the benefit for the treatment arm, ITT observed by the interim analysis for PFS once confirmed in the final interim analysis, as it was the overall response rate benefit in favor of the treatment arm where we had a 10.3% response overall response rate in the treatment arm versus just 6.5% in the control arm. For the totality of the MARQUEE trial speaking of safety, the safety profile among patients receiving tivantinib plus erlotinib was consistent with the findings that have been observed at the interim analysis in the fall of 2012.

So in summary, we are encouraged, strongly encouraged by the results of the final analysis of the MARQUEE trial. We believe that from the analysis of the full MARQUEE data set has emerged an important signal of clinical benefit among the prespecified, molecularly-defined, I would say rigorously molecularly defined subgroup of patients with MET-high tumors. Based on the totality of the MARQUEE findings and pending completion of the ATTENTION trial, which is being conducted in Asia in non-small cell lung cancer, we are assessing with our partner Daiichi Sankyo the options that might be available to us in the fast-changing, non-small cell therapeutic landscape. Those options are varied and are not necessarily restricted to a repeat of the trial -- the trial that we have just executed with MARQUEE, albeit in a more focused fashion and in a more defined patient subset.

The landscape for non-small cell lung cancer is changing really fast, and it's opening and closing opportunities all the way from frontline to third-line. We will say more or once we will have deliberated what to do.

Let me now turn to the other non-small cell lung trial that is still blinded and still does not have results. That is the ATTENTION trial. This trial was amended as a Phase III trial some months ago. It is sponsored by our partner Kyowa Hakko Kirin and is testing tivantinib plus erlotinib against erlotinib plus placebo, in second and third line non-small cell lung cancer with the non-squamous EGFR type or wild-type on the histology. The endpoint of this trial is overall survival. The territories where the trial is being executed are Japan, Taiwan and Republic of South Korea.

During 2012, fall 2012, Kyowa Hakko Kirin decided to suspend permanently enrollment into this trial after the DMC reported an imbalance of cases of ILD which is interstitial lung disease, that this favors the treatment arm. At that point in time, the trial was more than half recruited.

I would like to note that ILD, for those of you specifically that are new to ArQule on this call and I see a few names, and it's one of our best event that already has been well-documented epidemiologically in Japan. When we look at the epidemiological evidence, we look at the trial known as POLARSTAR, which is acronym for post-marketing surveillance study of erlotinib in patients, in Japanese patients with non-squamous -- non-small cell lung cancer. That trial focused on the daily use of erlotinib in Japan and reported an incidence of 4.5% of all grades of ILD in everyday practice, with more than half of those cases being grade 3 or higher. So our partner, Kyowa Hakko Kirin had instituted already in the ATTENTION trial due to the combination use with erlotinib a number of provisions that would screen for ILD cases very aggressively and very carefully. One particular note, as we are discussing about the toxicity that led to the amendment for the ATTENTION trial, [indiscernible] And I have reported previously already. I would like to remind that from the 1,000-plus patients that are based on the MARQUEE trial, ILD did not emerge as defining toxicity for tivantinib in the West. And just one case of ILD was observed in MARQUEE treatment arm, while 4 cases were observed in the control arm. That tells you that imbalances could be created many ways and if you look at the MARQUEE database specific to ILD, you would say that there was an imbalance, this favoring the control arm of single use for erlotinib. So once the ATTENTION data is going to be fully available, we're going to all have an opportunity to assess the scope and relevance of the imbalance that was reported by the DMC to Kyowa Hakko Kirin and led to the decisions of reducing -- permanently suspending enrollment.

The ATTENTION trial continue with on a blinded basis although with a reduced number of patients going from a planned number of 450 to a real number of approximately 300 patients. I should say that at this point in time, based on what we have heard from our partner, things as expected very early in 2014.

That concludes the review of the ongoing, concluded and yet to be concluded Phase III trials that we are engaging with tivantinib. There are of course, a number of other trials that are reported as Phase II both company-sponsored and in the Sankyo sponsored, both all of them are reported in clinicaltrials.gov and you can see there that a number of these trials are at the stage that lead us to say this day is coming all throughout 2014 for a number of those trials. In indications that we have already explored and indication we have not yet explored with tivantinib.

So let me conclude the session on tivantinib. In conclusion, we believe that the totality of the clinical data that has been generated today with tivantinib, provides evidence and support of this primary mechanizable option as a c-MET inhibitor. While we are aware that system for clinical publications are putting forth alternate and incremental mechanistic hypothesis, so far, the clinical data that we have analyzed for far more than 1,000 patients does not support those hypothesis. Neither -- there is support when we analyze the side effect profile for this drug, which produces no meaningful neurotoxicity. With the finalizes of the MARQUEE now in hand, our clinical database for tivantinib includes approximately 2,800 patients. In particular, the clinical data from 2 randomized double-blind, placebo-controlled trial again underscored the utility of tivantinib in a MET-high defined patient population both as a single agent, as it was demonstrated in the randomized Phase II in HCC second-line and in combination with approved EGFR inhibitor, has recently emerged from the in-depth analysis of the subgroups from the MARQUEE data. In both of these trials, MET patients have experienced significant and more importantly consistent improvement across all 3 endpoints, overall survival, PFS and overall response rate. While some improvement in one or more of these endpoints has been seen in the MET-low patients cohort, those improvements have been sporadic and we are never observed the same consistency as we observed when we started carefully the results for the MET-high defined cohort. We believe these findings in their totality therefore, provide us for strong rationale for the ongoing trials and for any trials that may be in the platinum [ph] group, in a MET-high patient defined group.

Now this concludes the review of tivantinib. I have to say that we are very proud to have such a large clinical data base for this drug, 2,800 patients of clinical data and that represents in our opinion a very strong foundation to build on for the future with more trial and we do have the time to do so and the willingness, but more importantly the time because this drug has a very, very long patent life, which brings it in the proximity of 2,030.

So we are well in the game. We are getting in the game with our pipeline. In our pipeline, beyond tivantinib that is, our priority is the completion and possible expansion of Phase I, Ib testing with 2 compounds, that are both of great interest to us. One is ARQ 092, which is an AKT inhibitor and the other is ARQ 087, which is a multi-tyrosine kinase inhibitor with a strong preference for the FGFR target of family target. We have completed the continuous dosing regimen for ARQ 092 AKT inhibitor and we are now moving, I believe, we are in the second cohort of the weekly regimen. 1 week on, 1 week off, which is the most interesting concept that has emerged for dosing this class of drug. With ARQ 087 and FGFR, we have completed dosing of 6 cohorts of patients, and we believe that we are now in the range of dosage that should soon allow us to determine MTD as well as observe preliminary signs of efficacy. We expect to begin to release data from both of these trials sometimes in the middle of 2014.

In conclusion, and before I turn over to Rob Weiskopf for the finance presentation, I would like to mention that we are also updating our financial guidance for this year, which now includes ending the year with between $91 million and $94 million in cash and cash equivalents and marketable securities. This update reflects our commitment to maintain fiscal discipline, and we had discussed about this in our last call when we announced a restructuring and we mentioned that the objective of that restructuring was threefold. It was to maintain financial scope of operations into 2016. It was to generate savings that would allow us to continue to fund independently our pipeline. And it was to maintain cohort discovery capabilities, which we have maintained. So now that the restructuring is executed, we are able to give refined financial guidance and that is the guidance you are receiving today. We are -- as we have been for the past 5 years committed to maintain financial discipline and channel most of our investments into the more value adding for our shareholders project.

So without further ado, let me turn over to Robert Weiskopf for the Q3 financial discussion. And thank you for your time.

Robert J. Weiskopf

Thank you, Paolo. The company reported a net loss of $6,083,000 or $0.10 per share, for the quarter ended September 30, 2013, compared to a net loss of $431,000 or $0.01 per share for the quarter ended September 30, 2012. For the 9-month period ended September 30, 2013,

the company reported a net loss of $18,644,000 or $0.30 per share compared to a net loss of $5,576,000 or $0.09 per share for the same period in 2012 (sic). At September 30, 2013, the company had a total of approximately $103,054 -- $103,054,000 in cash, equivalents and marketable securities. We reported total revenues of $3,542,000 for the quarter ending September 30, 2013, compared to revenues of $10,944,000 for the third quarter of 2012.

Revenues for the 9 months ended September 30, 2013, were $13,639,000 compared to revenues of $31,271,000 for the 9 months ended September 30, 2012. The $7.4 million revenue decrease in the 3 months ended September 30, 2013, is primarily due to revenue decreases of $4.5 million from our Daiichi Sankyo AKIP agreement that ended in November 2012. $2.3 million from the tivantinib program, and $600,000 from the Daiichi Sankyo ARQ 092 agreement that ended in June 2013. The $17.6 million revenue decrease in the 9-month period ended September 30, 2013, is primarily due to revenue decreases of $14.3 million from the AKIP agreement that ended in November 2012. $4.1 million from the tivantinib program and $1 million from the ARQ 092 agreement that ended in June 2013. These decreases were partially offset by $1.75 million of revenue related to a onetime research project.

For the quarter ended September 30, 2013, the company reported total costs and expenses of $9.7 million compared to total costs and expenses of $11.5 million for the quarter ended September 30, 2012. Total costs and expenses for the 9 months ended September 30, 2013, were $32.6 million, compared to $37.2 million for the same period in 2012.

Turning to recent -- research and development costs for the 3 and 9 month period ended September 30, they were $6 million and $22.2 million respectively, compared with $8.1 million and $26.7 million for the comparable 2012 periods. The lower research and development expenses in both the 3 and 9 months period ended September 30, 2013, were primarily related to lower labor related costs and lower outsourced clinical and product development costs.

In connection with the reorganization implemented in July 2013, the company recorded $667,000 restructuring costs, including $403,000 of which was paid in the 3-month period ended September 30, 2013, as well as $139,000 of non-cash stock compensation costs. The restructuring actions related to these charges are expected to result in annual cost savings of approximately $3.5 million to $4 million commencing in 2014.

General and administrative expenses for the 3 and 9 month period ended September 30, 2013 were $3,113,000 and $9,711,000, respectively, compared with $3,387,000 and $10,500,000 for the 2012 3 and 9-month periods.

As Paolo mentioned, today we're updating our financial guidance for 2013 as follows. For 2013, ArQule expects net use of cash to range between $37 million and $40 million. Revenues are expected to range between $13 million and $16 million. Net loss is expected to range between $26 million and $29 million, and net loss per share is expected to range between a loss of $0.42 and loss of $0.46. ArQule expects to end 2013 with between $91 million and $94 million in cash and marketable securities.

With that, I would like to hand the call back to Paolo.

Paolo Pucci

Thank you, Rob. And operator, if you may, we can open up to questions for me and any of my colleagues here today. Thank you.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Joel Sendek of Stifel, Nicolaus.

Joel D. Sendek - Stifel, Nicolaus & Co., Inc., Research Division

I just have a question about the METIV trial and there was a change in the dosing. Will that make the trial take longer or do you think that's an improvement and you might actually get to the result sooner as a result?

Paolo Pucci

Joel, thank you for the question. It's a very relevant one. So the -- it's hard for us to predict the timing for this trial. So let me restate what we have said so far before this amendment. The -- what we have said is that we expected to complete recruitment mid-2015 and to have data for this trial sometimes towards the end of '15 or early '16. We haven't updated that guidance, but we have said that the least of risk with this amendment, that the timeline could be -- could take a little longer. Now this said and until we can say more, let me also clarify that the trial has continued on. So the trial was not at any point in time suspended and it was seamless. It was a seamless development. However, we will need to understand if the -- fewer than 40-some patients that have been recruited will be available or not for a final analysis. And then my influence at the time as well. On the positive side, I would say that the level of toxicity, which was encountered in this very early stage, was likely not a positive factor when looking at trial completion. And indeed, if the 120-milligram dose where to demonstrate itself equivalent in terms of toxicity and in terms of a potentially efficacy to the 240-milligram dose tablet form we used -- sorry, capsule form we used in Phase II, that will probably encourage speedier enrollment for the trial. And so we're watching carefully as it is doing the DMC, what is the toxicity profile for this 120-milligram patients that are now being treated. And obviously, if we haven't reported anything so far, it means that nothing to report has emerged. And we've been deploying that -- those brand now for what, a month or so? So we are quite encouraged for what we are seeing so far. But we were also not expecting to have those reduction because we had a body of evidence that in the standard of Birkenau [ph] experiments for cohort equivalent. And that tells you that -- for clinical experiments are very useful. They are at some point in time, the only thing that can guide us, but then you're in the clinic and you have to keep in mind that, that's a very different setting. So more precise, we will be able to be very early next year, I think, with the Q4 call, we'll be definitely more precise because we'll have evidence. Go ahead.

Joel D. Sendek - Stifel, Nicolaus & Co., Inc., Research Division

And you're going to look at -- when you unblind or when you look at the final data, you're going to look at it for all of the doses or you subsegment it based on the dose that you use?

Brian Schwartz

Paolo, let me take this up. We've had discussions with some regulatory authorities, and we haven't completed it with all regulatory authorities. So it's difficult to say what the final one is, but the likelihood -- so there's 2 potential options, as you mentioned. Either exclude the cohort of patients who were randomized to 240, which would add maybe a month to the trial, maybe 2 months, or include all of them. I think there's advantages and disadvantages. Some regulatory agencies have expressed that they would like to see 1 dosage form, but it hasn't been presented to all the regulatory agencies yet. And once it's approved by everybody, we'll let everyone know.

Operator

Our next question comes from the line of Chad Messer of Needham & Company.

Chad J. Messer - Needham & Company, LLC, Research Division

You alluded to this a little bit, but I was just wondering if you could give us just a little bit more on what PK studies, preclinical or otherwise, you ran when you were trying to determine bioequivalence between the capsule and the tablet? Obviously, you thought you had something equivalent that may end up not being true in clinical practice. But could you just outline for us what studies you ran?

Paolo Pucci

So Chad, they are pretty much the standard of technical operation experiments that led to a modeling that was considered to be [indiscernible] at that time. Let me pull a qualifier, though, on your question before I let Brian give more details. The toxicity profile of the drug often time, that's true for any drug, varies depending on the indications that you studied. And we just hope, if you take the non-small cell program, we deploy -- we utilize the 360-milligram capsule for the Phase II trial. And then we use the 360-milligram tablet in the Phase III trial, MARQUEE. When you look at the general body of evidence in MARQUEE, though there was some increased toxicity, comparing the Phase II to the Phase III, some of that might be ascribed to the fact that it was a bigger body of evidence, 1,000 patients versus couple of hundred. But some of it might be trapped in exposure. And in fact, we are going back to the MARQUEE trial to see how much of that somewhat increased -- not dramatically, somewhat increased toxicity form from Phase III to Phase II could be ascribed to body of evidence being launched and what could be ascribed to tablet form giving in vivo in non-small cell same-patient population greater exposure. You also know, if you look at the history of the HCC, that we started the Phase II with 360 milligrams of BID capsules. And then we down those to the 240-milligram capsule as well. And then here, again, in the Phase III, we have -- within the Phase III, we have moved from 250 -- 240 to 220 tablets. So the exposure is what likely matters most. And that's where we are -- that's what we are assessing across the board. Cognizant that there is difference from indication to indication. And let's also remember that the second line HCC is a particularly good opportunity, but it's also a particularly challenging venture in that there is no standard of therapy, and there's a reason for that, obviously. And the patients have a fairly significant underlying disease beyond, unfortunately, the cancer they have. I believe that we are -- probably one of the confidence accumulated the greater body of evidence, and that makes us vigilant, that makes the DMC vigilant. And we are acting aggressively to protect the patients' well-being, but also to give the trials ultimately the best chance to establish the standard of care in this difficult setting. And I think Brian wanted to add a couple of things.

Brian Schwartz

Let me just add a few things to what Paolo mentioned. I think, first of all, when we switched from the capsule to the tablet, we did this prior to initiating the MARQUEE trial and went through the standard testing of both the solution preclinical testing, as well as the bioequivalence study where we showed, in terms of area under the curve or AUC, we fell within the norms of bioequivalence in healthy volunteers and in cancer patients -- non-HCC cancer patients. We also have the luxury of looking at the MARQUEE-pop PK, and we now have a much larger body of evidence showing that there is higher exposure between the tablets and the capsule. I think the other thing that we haven't mentioned that I think is important for this call, is at the DMC's disposal is both the PK of patients in the Phase II trial, as well as the Phase III trial, where they can comfortably compare the 2, as well as make recommendations to us. We remain blinded to the study, but the DMC does have the option to review both efficacy, both safety and PK data of the Phase III patients as well.

Paolo Pucci

So if you go back to our experience in HCC, Chad, the Phase II trial experience was as follows: double-blind randomized, we start at 360 BID capsule. We saw that the exposure was such that the read on neutropenia was more than the DMC and ourself and the patients and the physicians would have accepted. We promptly reduced the dose to 240-milligram capsules. And when the data was open, we saw that, that lower dose produced similar efficacy to the higher dose, but 2/3 less neutropenia. And [indiscernible] here, we are again with the Phase III, but with the different formulation. We started with 240-milligram BID tablet, and we are now with the 120-milligram BID capsule -- tablet as well. Now what do we need to demonstrate to be comfortable, and then eventually answer precisely Joel's question, what is the time for completing the trial, including when will we expect the interim analysis that is planned in this trial? Well, the first thing to establish is the safety of this dose. And so far, we are encouraged by what is seen, though it's in a blinded fashion. Obviously, the DMC has a different kind of access than we have to the data. And then the second thing is with the evidence that emerges from this blinded trial, but also looking at all the others, trying to establish, to understand exposure as a potential proxy for efficacy equivalent between the 2 dosages, deploy Phase III and Phase II and the 2 different forms. And that's as much as we can say now.

Operator

And our next question comes from the line of Jason Zhang of Edison Investment.

Jason Zhang - Edison Investment Research Limited

Thanks for the discussion about the bioequivalence between the capsule and the tablets. I have a question related to that is, all the data we have seen before, particularly in HCC, with a higher dose, 36 -- 360 initial and then changed to 240, we really didn't have any clinical data for 120-milligram dose. And I guess, maybe Brian can help us understand from your PK study at least to show that, at that dose, without clinical data, but you have biologic to show that the target is where inhibitors so that we'll have some comfort saying that even at a lower dose, if the drug truly works, it should have evidence because the biological inhibition of the target is already there. Can we make that statement? Or what data do you have to support that statement?

Paolo Pucci

We cannot make you that definitive statement yet, as I mentioned before. But we can discuss briefly where we are in our -- in the process.

Brian Schwartz

So Jason, in the context of the PK -- the whole PK data that we have, plus the HCC studied data set, we know that the exposure in HCC patients is at least two- to threefold higher than in non-HCC patients. We also know that the tablet versus the capsule, there is a difference in exposure. The third complicating factor is the fact that tivantinib has a relatively wide sort of -- that there's quite of bit of variability in the PK in general. It's quite variable as often seen with a lot of these other cancer drugs as well. So putting it all together, we feel reasonably comfortable that, from the data we've known, that the 120-milligram range of the tablet is similar to the 240 capsule range. What we do know is we above -- definitely above the exposure we've seen solid tumors even with the projected 120-milligram dose. So we feel reasonably comfortable that we're in that range. But the DMC will have that ability to look at it as well. And as we get more data from other trials, we'll be able to build a model to PK and have additional confidence that we're in that range.

Jason Zhang - Edison Investment Research Limited

You mentioned that in the HCC patient you have two- to threefold higher exposure than non-HCC cancer patients, so that exposure is what, hypothesized or it's just the drug exposure in the serum?

Brian Schwartz

Our theory is twofold. One is this poor -- this very poor clearance. The other theory is as patients become more cirrhotic and their liver functions become more impaired, they behave more like sub 2C19 poor metabolizers than extensive metabolizers. So the metabolism of the drug, which is primarily sub 2C19, is impaired. So they behave more like poor metabolizers and have poorer clearance. And those 2 things put together is our current working hypothesis why the exposure is much higher in patients with HCC and cirrhosis.

Jason Zhang - Edison Investment Research Limited

And again, the exposure is matching in the serum concentration of the drug, right?

Brian Schwartz

Yes. Unfortunately, it's only total serum concentration. We always look at metabolize, we always look at all the other factors as well, but our primary measurement that we've been talking about is total drug in serum.

Jason Zhang - Edison Investment Research Limited

Is actually the higher incidence of cyclopenia kind of indirect evidence of that, the high exposure in HCC, as well?

Brian Schwartz

We do see a correlation between exposure and neutropenia across all studies. And that was one of the flags that we also didn't mention earlier on is -- we feel that the trigger of neutropenia is much probably a trigger of very higher exposure as well, because that's what we observed in our model in our non-HCC trials.

Jason Zhang - Edison Investment Research Limited

Okay. And also maybe a little more clarification for Paolo is, so the ongoing DMC is looking at data, have you communicated to the DMC how many patients are they going to look at the -- make conclusion first on safety? And also are they going to look at the efficacy as well for the lower dose group?

Paolo Pucci

The DMC's focus is obviously on the safety side. And we haven't communicated what is -- what number of patients because it is in some ways a moving target, though -- and we are limited also in the interaction with the DMC for that matter. There is a very strict charter. So I would not say anymore about that. Only that the moment we are cleared, if we are, hopefully, by the DMC, to proceed with 120 milligram for the rest of the trial, we will promptly communicate that even if it happens in between calls. As far as the efficacy, that's not exactly the remit of the DMC, though, obviously, there is data on exposure. That might be of interest, and we're certainly here to provide any data from other trials that goes to exposure as well. So unfortunately, it's a stepwise process. I think we are encouraged by now that the trials continue. We're encouraged by now that we had seen a reduction in our toxicity since we've been employing this dose. We're encouraging by the growing understanding of the range of equivalent exposure between different doses and dosage forms. So that have been employed so far, but more than that I cannot say now.

Jason Zhang - Edison Investment Research Limited

Now one final question is, since the data in lung, particularly in the high MET-group -- subgroup data in lung is presented, have you had any specific communication with Daiichi about what plans to go forward?

Paolo Pucci

We have a normal process of interacting for the governance, and we're going through that process. The only thing that I would say is that the discussions center exclusively around the -- a possible repeat, though in a more focused, formal MARQUEE. The non-small cell lung cancer landscape has changed a lot based on what we observed at ESMO and what Brian observed and I was there and, what Brian heard at Woodland in Australia. So there are multiple discussions. And there is 1 additional piece of evidence I think we are all looking to receive, which is the ATTENTION data. It's an additional 300-some -- approximately 300 patients, and it's going to allow us also to understand better what's the balance of value of the combination between 2 -- another category of biomarker driven population, EGFR wild-type versus EGFR mid. So that was as much as I can say. And obviously, Daiichi has this quarterly report, and I will refer you for that for any other details.

Operator

[Operator Instructions] Our next question comes from the line of Jonathan Eckard of Citi.

Jonathan Eckard - Citigroup Inc, Research Division

I apologize if you addressed this, I've had to jump off the call briefly, but for the 120-milligram dose, I guess my questions would be, one, is there an ability to dose down from that level if a patient has neutropenia at that level? And I guess, the second question would be based on the ongoing PK studies or analysis in HCC patients, I guess, is there a chance -- or when we will have clarity that the 120 is definitely going to be the dose going forward or if additional kind of alterations may be needed?

Brian Schwartz

Jonathan, let me address your 2 questions. Regarding the 120, they are different doses. The escalation scheme is bolt in. They go from 120 twice a day, 120 once a day, then 120 alternate days. So there is a dose de-escalation scheme above into the current protocol. The second question around when would we be comfortable with the number. Right now, we're dealing with tens of patients. I think when we have another 3, 4 months experience in PK, we will be able to make a much more confident call in regards to how much less or how much similar the 120-milligram tablet versus the 240-milligram capsule that we used in the Phase II, how close or not it is. But I think you still need -- we still need more patients.

Jonathan Eckard - Citigroup Inc, Research Division

Great. But I'm guessing that since you have a de-escalation aspect built into the protocol that, that gives a little bit of a buffer with regards to kind of it ranging the patient in case 120 twice a day is -- ends up being a little bit much for a particular patient.

Brian Schwartz

Correct.

Paolo Pucci

Yes, Jonathan, and I think even that we are on the theme, we are also looking at worldwide -- back to the Phase II trial, right? In the Phase II trial, we had 2 designated doses, but then if you -- or 240 and 360 at the [indiscernible] capsules. But then once you look at de-escalation, you have a mean and an average dose utilized for the totality of the treatment of the patient. And those numbers are not necessarily equivalent exactly as the sum of 360 BID for x days and the sum of 300 -- or 240 BID for x days, right? And that is also a measure we're looking at. So that we are comparing these means and average as well across trials to understand what exposure could be taking different measurements of it.

Operator

And I'm not showing any further questions at this time. I would like to turn the call back to management for closing -- one moment, we have a final question from the line of George Zavoico from MLV & Co.

George B. Zavoico - MLV & Co LLC, Research Division

In terms of the changing landscape, I mean, you spoke several times about the changing landscape in non-small cell lung cancer. There's clearly a lot of stuff going on both in terms -- especially in terms of molecular classification of non-small cell lung. And you're using IHC mainly for the c-MET. There's a lot of movement toward next-gen sequencing and that sort of thing, that might get a little bit more specific and perhaps even quicker and more accurate measurement of what the c-MET status is. Is that something that the field is moving towards for c-MET?

Paolo Pucci

I think it's more a fragmentation. The theme that we are identifying is smaller relative to the fragmentation of non-small cell across all lines of therapies. We initiated the MARQUEE trials 3 years ago where it was -- with IHC, it wasn't fully reliable, and you still have to have a Phase III trial that finally sanctions it, so to speak. I think we look -- I personally look more at the fragmentation of the landscape across lines, including frontline, including frontline. And we are mining our data, and we will be mining the Kyowa Hakko Kirin data as well to understand the frontline combos for EGFR, plus a met inhibitor. And other people are doing the same. Most specifically to -- I'll let Brian comment because I'm not qualified for that.

Brian Schwartz

George, you're 100% correct. In some of the studies, we are looking at exactly that. And some of the challenges I know there's less variability in that kind of technology, but we also try to look in trials where we have a more homogeneous populations. For example, all the mutants who failed erlotinib. There we do gene sequencing and correlate it to MET expression and to other factors as well, rather than a more homogeneous population where, as you know, some of these technologies produced a hell of a lot of data that may be more difficult to interpret. So the short answer is yes, we're looking. The long answer is, we're trying to look in the most homogeneous group first and then see if we can take it further out.

George B. Zavoico - MLV & Co LLC, Research Division

That makes sense. I mean, clearly the -- few beginning far more complicated, and you're right about the fragmentation of the patients falling into different xylose for particular drug combinations. With your very selective mechanism of action, do you still believe that you might be more -- but I shouldn't say more, but do you still feel with your very selective mechanism of action that tivantinib can be compatible with a wide variety of other drugs as long as the toxicity isn't cumulative?

Paolo Pucci

Well, so far we have seen that -- yes, I mean, we have data in the tumor world. We have focus. We have data that shows that we are potentially accretive to Nexavar, both in a preclinical experiment, as well as in real life because we have about -- Brian, 30 patients or so in combination with Nexavar?

Brian Schwartz

More. 60.

Paolo Pucci

60, about 60 patients in combination with Nexavar. No other drug has -- no other c-MET, maybe I should say, has that kind of evidence. We have now almost 2,000 patients of evidence of the combinability with erlotinib. We just need to understand where better clinical outcomes can be derived in looking at non-small cell at a much more fragmented landscape than we did originally where we basically split the landscape in squamous and non-squamous. And then we have also, I think, demonstrated combinability in the triplet in colorectal cancer. And though that has not found a way forward beyond the Phase II, which gives us good -- an interesting signal, I should say, that landscape for colorectal cancer is becoming more fragmented. So I'd say that in the clinic, we have demonstrated good combinability and varied level of clinical utility where the 2 doublets and 1 triplet, and that's quite a bit. And then it might speak to the fact that the drug is relatively more selective based on what we know.

George B. Zavoico - MLV & Co LLC, Research Division

Sounds like with -- especially in non-small cell lung cancer you might be doing a number of small Phase IIB-type studies to find exactly what the best combination and patient selection would be?

Paolo Pucci

Well, whenever you imagine a well -- very well-defined patient population, the step between -- at Phase IIB or -- and something a little bit lighter than that, is a very short step, George. So we'll have to see the distance between the 2 and 3 where it is. And what kind of risk ourselves or ourselves, plus our partners, are willing to take in that respect.

George B. Zavoico - MLV & Co LLC, Research Division

So if I suppose the bottom line when you cut the MARQUEE data to the MET-high patients, and assuming that the benefit can be translated into larger patient population, I think that you probably feel some confidence with that data in tivantinib. In that tivantinib, you have an active drug?

Paolo Pucci

I feel confident I had an active drug ever since we presented the Phase II double-blind randomized data for HCC. And I should remind you and everybody else on the call that we have -- we are the only one that -- how much we have written about c-MET inhibitor that has produced double-blind randomized single-agent activity. To my knowledge, I haven't seen, Brian, another c-MET inhibitor produce single-agent activity in a double-blind randomized setting, as we did for the HCC trial. So I am happy if more people are clearly happy for people, particularly investor -- willing to invest, come of that opinion. In my own humble opinion, that was for me, proof that we have an active drug, and the rest just reinforces that conviction.

Operator

I'm not showing any further questions at this time. I'd like to turn the call back to management for closing remarks.

William B. Boni

This is Bill Boni again. Thank you, everyone, for joining us on this call and don't hesitate to be in touch with any follow-up. Take care, and have a good rest of the day.

Paolo Pucci

Bye-bye.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This now concludes the call. You may all disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: ArQule Management Discusses Q3 2013 Results - Earnings Call Transcript
This Transcript
All Transcripts