Curis Management Presents at Piper Jaffray Healthcare Conference Call (Transcript)

Dec. 4.13 | About: Curis, Inc. (CRIS)

Curis Inc. (NASDAQ:CRIS)

Piper Jaffray Healthcare Conference

December 4, 2013; 10:30 a.m. ET

Executives

Ali Fattaey - President & Chief Operating Officer

Mike Gray - Chief Financial Officer

Mani Mohindru - Head of Investor Relations

Analysts

Ted Tenthoff - Piper Jaffray

Ted Tenthoff - Piper Jaffray

Senior biotech analyst at Piper Jaffray and before I begin I’m required to point out certain disclosures regarding the relationship between Piper and Curis, which are posted at the back of the room and also at the registration desk.

As I mentioned our next presenting company is Curis. Partner Roche, as they are going to gain real traction with their basal cell carcinoma drug, Erivedge, and we’ll get our first meaningful update on wholly owned HDAC PI3K inhibitors CUDC-907 next week at the American Society of Hematology meeting down in New Orleans.

Unfortunately earlier this month or just last month actually the FDA placed a partial clinical hold on an in-licensed IAP inhibitor, CUDC-427, which really clipped shares of Curis. You know I guess if this were easy, everyone would be doing it, right Ali.

Ali Fattaey

That’s right.

Ted Tenthoff - Piper Jaffray

Here to discuss the Curis story with us today is one of my favorite management teams, new President and COO, Ali Fattaey. We also have CFO, Mike Gray in the audience and Mani Mohindru, who left the cell side not that long ago to head up IR for Curis. So thank you all for being with us.

Question-and-Answer Session

Ted Tenthoff - Piper Jaffray

I’m going to kind of work my way down; start with Erivedge, move to 907 and kind of wrap up with some of the developments on 427 and some of the findings that you had there. So Roche grew global sales of Erivedge, I think 33% sequentially to about $21.5 million in the third quarter. This is still primarily U.S. sales.

The company, Roche, just gained approval of Australia and Europe this summer, which should start to contribute meaningfully in 2014. What are some of the efforts that Roche is doing to impact this growth and locally advance in metastasis BCC?

Ali Fattaey

Thank you. Thank you Ted and thanks for everyone being present here and also listening on. So, yes you are correct, that a lot of the focus this year from the Roche and Genentech side regarding Erivedge has been on marketing, and in particular really thinking and focusing a lot more on marketing to the dermatologist and the surgeons in this regard, as well as of course the oncologist.

One of the key things this year with regards to that effort was that Roche and Genentech really viewed this year, 2013, frankly as a launch year for Erivedge. Even though the drug was approved last year, from a budget perspective, Roche even views this year as a launch, which really meant quite a bit more resources associated with it, an increase in the number of the sales force, a significant increase in that regard, the sales force really is focused on Erivedge and that marketing of the product. Again, both to the oncologist community, as well as to the dermatologist.

Secondly as you indicated, the approval of the drug mid-year this year in Europe and a little bit earlier in Australia meant that there is a full force effort now by Roche and Genentech to get the drug into the European market and start working on the pricing regarding the drug, so.

Ted Tenthoff - Piper Jaffray

Fantastic. So basal cell carcinoma is the most common form of skin cancer. As I’ve been aging, I’ve been noticing new scars on some of my friends during swimsuit season and typically basal cells, which are actually very common, are typical excised or frozen. So tell us where Erivedge is playing a role in this market and maybe layout the size of metastasis and operable BCC.

Ali Fattaey

That’s a good question. I think it’s an important one. As you indicated, certainly in U.S. it’s a very prevalent disease, the majority of which is really addressed by excision or freezing as you indicated or in the surgeons or dermatologist office being taken care of.

We would say that roughly 97% or so at the moment of all basal cell carcinomas are categorized as not being advanced, and advanced really means those basal cell carcinomas that have either metastasis or are not amendable to surgery or have recurred after the surgeons have removed it. So that advanced population is roughly 3% of the total.

Unfortunately there are no registries for patients with BCC, because it’s such a common disease, there are no actually registries of them. But Roche’s guidance on the numbers really come around to roughly 40,000 patients between the U.S. and the top five EU countries. That’s roughly 28,000 patients in the U.S. in the advanced form of the disease, meaning locally advanced and metastatic and roughly 12,000 patients in the top five EU for about 40,000.

That’s obviously the current – that was the population that the original Erivedge pivotal study focused on. I think the one important part coming up though is the question that you asked in terms of where would Erivedge actually have its utility and be used.

In the advanced setting, which is roughly 1.5% of the population, the remainder of it is another population that is operable, but they are quite sub optimal and by sub optimal meaning that the surgery will have to be over a large potion of the body and usually around the face area or the scalp or it would interfere with functions such as removing an eyelid, removing a part of the nose, part of a ear, which is an important area to start looking at then.

Erivedge is being testing is that population now. Genentech and Roche conduced a Phase II study in that particular population of operable, but sub optimal and we’ll be getting a reading on the results of that Phase II trial in that first quarter of next year, towards the end of the first quarter, so.

Ted Tenthoff - Piper Jaffray

I appreciate you providing the detail in bringing it up to Phase II. How important is the data, considering how broad the label is that Erivedge currently enjoys.

Ali Fattaey

Yes, it’s an important point. I really don’t think we see this as a label expansion, simply because that population from our read of the label, currently which as you indicated is broad. That population of the operable, but very sub-optimal patients focused on to the label, because the label includes physician discretion, for their ability to use Erivedge and that population is one that’s on the fence in the sense because the physicians could view it as really being sub optimal for the patients to have surgery first.

That’s an important one. It shouldn’t be viewed as a label expansion in that sense, but what it is important is for education of the dermatologist. I think that data will be important for that education campaign and the process, and as I said, a lot of this year from the Roche and Genentech side has been focused on educating dermatologists.

Ted Tenthoff - Piper Jaffray

And I think we are starting to see those education efforts really translate into cells. Now last year at this conference, I think Mike and Dan were up all night, the evening before doing a transaction and part of the deal was a $30 million debt deal with Pharmakon Advisors in order to bring some financing into the company, but this is actually being paid off.

I think it was a very innovative deal, because it’s being paid down with Erivedge royalties. So if you can remind us how – what the economics are first from the Roche transaction and how are those royalties going to pay down the Pharmakon debt?

Ali Fattaey

As I said, it’s a good point. I think it’s a very innovative financing opportunity for the company and is an astute move to bring that in. It is a $30 million debt. It is distanced from the company in that regard, so that there are no reach through to the Curis itself as a wholly on subsidiary that addresses that. It is only guaranteed by the royalty or is tied to the royalty.

The economics of the Erivedge deal with Roche is that we do receive royalties starting at 5% on net sales and that can escalate up to high single digits, so that appears between five and that high single digit royalty rate, and the top rate of it is significantly below is $1 billion net sales cap at this point.

Ted Tenthoff - Piper Jaffray

So, last question on Erivedge, through collaboration with the NCI, Roche is broadly exploring development of Erivedge, which is a Hedgehog inhibitor in a variety of other cancers. Maybe just briefly touch on whether or not we should be expecting any potential data read-outs in the next 12 to 18 months that could be interesting.

Ali Fattaey

Yes, it’s a good point. So Roche and Genentech have done some amount of investment, probably the last of it was a couple of years ago in polytumour setting, where the Hedgehog pathway is also altered, not the same way that is it altered in the case of basal cell carcinomas and medulloblastoma, where the tumors are independent of the Hedgehog. These are the tumor settings such as ovarian or colorectal, where the tumors are still dependent on Hedgehog, but the tumor seems to product it for itself.

I think the most exciting parts right now for us is the new look and a new effort in investments from the Roche/Genentech part, in initiating a study and not in polytumors, but in hematologic cancers. This is a study that started in October of this year and focuses on AML and high-risk MDS patients.

There are some very interesting date now coming out in the filed with other Hedgehog inhibitors clinically demonstrating a very, very interesting and important efficacy and a potently use of Hedgehog impact and its in the that indication.

Ted Tenthoff - Piper Jaffray

I appreciate you mentioning that Ali; that’s something we’ll keep an eye out for. So I want to transition and spend the rest of our discussion today on the wholly owned pipeline and I think over the last two years Curis has made a very important transition as a company from the partnership with Erivedge being the primary driver, now really to this wholly owned pipeline and really a platform, a drug discovery platform to drive value going forward.

CUDC-907 is an oral dual HDAC PI3K inhibitor. Now PI3K is obviously a very high target in the space, there’s a lot of completion going on including some winter stage programs, activities seen in B-cell malignancies. So maybe start off by telling us a little bit about you’re molecule and how it’s different, and what the rational is between combining PI3K with HDAC.

Ali Fattaey

Yes, very good points. First a short comment on what you started with in terms of our business model and the strategy that we have gone with. We do have a proprietary pipeline and much of the company focus and efforts is really in regards to clinical development of that pipelines. Going forward we have really brought on a new and very professional team of clinical developers. Jaye Viner who is our new Chief Medical Officer has also recently joined this year as of the September timeframe.

So the clinical pipeline that we had was a very important part of it, but Curis is also a very unique organization and that we do have an approved drug that we have just discussed. So the combination of the revenue generating partnership, along with a healthy, internal, proprietary owned pipeline is a interesting model and that’s the one that we follow.

Now with regards to CUDC-907, it is the first of its kind in terms of combining two targeted molecules into one molecule. That was the way it was engineered. Not a promiscuous compound. Very selective for the individual classes of enzymes, meaning HDAC and PI3 Kinases that we target.

With regards to the efficacy, PI3 Kinase is in generally in the hematologic space. That’s obviously garnered a lot of attention this year certainly and we have seen that with CUDC-907 through our discovery of the compound, as well as all of the pre-clinical developments of it, that it was a very potent compound in hematologic cancer models.

The setting that we took it into the clinic, in particular also is in the setting of lymphomas and multiple myelomas. First and foremost that’s an important part of it, because if we look at PI3 Kinases and PI3 Kinase delta inhibiting compounds that are in the clinic at various stages of development, really they have very little effect in the multiple myeloma setting.

Part of that comes from the fact that multiple myelomas as a diseases are fairly mature population of B-cell. They are independent of the B-cell receptor, BTK PI3 Kinase delta, but they are very dependent on PI3 Kinase alpha number one, which is one of the targets of our compound, but they are also very sensitive to HDAC inhibition.

This is an area where we think the two activities of our drug, PI3 Kinase alpha, as well as the HDAC inhibitor really converges on the two things that multiple myeloma cells happen to be very sensitive to and reliance on, that’s one of the places.

And the second part of it is in the setting of the lymphomas as you’ve seen, there are a number of studies (inaudible) being one of those compounds that have had very, very good effects in the setting of indolent lymphomas. However when we look at the more aggressive types of lymphomas, for example, defused large B-cell lymphomas, that’s an area that’s still to be addressed.

I think there has been many –those cells are dependent on PI3 Kinases that’s for sure, but being able to get long term and disease responses and effective responses in that population has been very difficult. I think this is another place where we think the combination of the PI3 Kinase inhibition and a second inhibition can provide benefits.

We’ve seen it pre-clinically with our compounds and as we had indicated and we have done throughout the year, at least we have shows one patient in our study with diffused large B-cells lymphoma and so far has had a very long lasting stable disease beyond cycle nine at this point, every cycle being 21 days of treatment.

We’ll present much of this safety data around our drug, as well as the totality of the clinical benefit up to date at ASH.

Ted Tenthoff - Piper Jaffray

So, I’ll pick up ASH in a minute, but one of the things, you guys had a very successful R&D day this fall and one of the things that I learnt from that was the importance of how 907 is metabolized and kind of the dual hit where the longer on target exposures you’re your getting with this compound. I’m not sure how well know this is, so I’d love for you to share this, because I think there is actually a really important differentiator with the molecule as well.

Ali Fattaey

Yes, it’s a good point. In general, it needs back up just a bit. In generally HDAC inhalation, especially for potent HDAC, which our drug as one of those in that class, its difficult to administer HDACs for long periods of time, especially in successive sessions. It is important to have shorter duration of HDAC inhibition and their biomarker activity and pharmacodynamic effect of HDAC is relatively long lived.

Where as much of what we see with PI3 Kinase inhibition suggest, from the field at least, suggest the continuous inhalation and engagement of that target is an important mechanism and affect that has to be sustained.

Now for two other – this is not something that we designed into the drug. Our drug, the dual inhibitor is metabolized, fairly rapidly in the body after oral administration to where the dual act of parent compound is converted to a metabolite that retains all of its PI3 Kinase activity. That metabolite happens to be relatively long lived, beyond 24 hours, which is an important part.

What this really allows us to do is to give one drug but within the combination of the parent drug and the metabolite provides us the opportunity to not only briefly inhabit HDAC and have a long pharmacodynamic effect, but also with the presence of the metabolize have a continual in addition of the PI3 Kinase activity.

Ted Tenthoff - Piper Jaffray

Excellent, and I really appreciate you going into some additional detail on that. Speaking of hematology, this weekend down in New Orleans, walk us through the data that you will be reporting or what at least we should be expecting.

Ali Fattaey

Yes sure. I won’t give you any specific details of it, but at least the category. In general for any early clinical, a drug that’s an early clinical development, the things that are important, first and foremost is the safety profile of the drug.

We’ve discussed that a little bit already in terms of the fact that we’ve observed some of the mechanism, on target effects of the drugs certainly and with regards to the current thrombocytopenia, a drop in platelet accounts and also an amount of diarrhea that’s been associated with HDAC activity and to some extent with some PI3 kinase. So its safety profile will be one we’ll present.

Secondly, around the pharmacokinetic. We’ll clarify more around the exposure of the patient, the metabolite profile as we just discusses and to a good extent for the first time we’ll just present some of the tissue distribution of the drug as well.

The third category obviously is in the context of the benefits that’s been seeing. We’ll present the data, it is an interim presentation, so to the extent that we have it we’ll present the amount of clinical benefits and clinical activity that’s been observed with the drug in this Phase I clinical study.

With regards to pharmacodynamic markers, we will touch on that. There’s not as much pharmacodynamic data coming through and that will become clear, simply because we actually need to access additional tissues from patients, which becomes an important part of this study as its being conducted as well.

So those four categories of safety, pharmacokinetic, clinical benefit and activity, as well as touching on pharmacodynamic effect of the drug.

Ted Tenthoff - Piper Jaffray

Okay, well I’ll look forward to seeing you down there and seeing the data. So part of the rational for last years Pharmakon deal was to in license an IAP inhibitor CUDC-427 from Roche/Genentech who’s obviously been a long time partner. Tell us a little bit about the biology here. What is an IAP inhibitor and how does this function? What role does it play in oncology?

Ali Fattaey

So the two different mechanisms are really being targeted with one drug. IAP antagonists traditionally or classically are part of the reason they are referred to as inhibitors of apatosis, so that they do interfere with the mechanism that the cell, every cell has in place for inhibiting apatosis, and there are a couple of two different IAP proteins themselves, one of which is XIAP and the second one referred to as ML-IAP or melanoma-specific IAP. These classically bind two and inhibit the enzymes that are involved in apatosis and any of the CAT-based proteins.

Now as proteins with a similar motive for domain as these IAPs are referred to as the cIAP or the cellular IAP proteins; are also involved in signaling cascades in the tumor necrosis family of receptors and in particular these IAPs are involved in activation of a cytokine response, an immune mediated cytokine response through the TNF family of receptors. Historically or classically we should think about this tumor necrosis factor as an innate or immediate immune response and these proteins play a role in there.

Now by administering the drug we really are getting two separate effects. One is affecting the tumor necrosis family receptors signaling and pushing that more towards tumor apatosis versus survival, which is one thing that caters to. Secondly they also inhibited those classic IAPs that inhibit apatosis. That’s really the biology or the intricate biology that we’re trying to address.

One point I’ll make is that the IAPs are shown to be very, very important resistance mechanism to several different types of cancer therapies and in particular chemotherapy. By just simply up regulating the levels of the IAP protein cells are able to, second then apatosis induction by these chemotherapies.

Some of those are the classic ones such as Xeloda capecitabine, as well as for example the taxanes, IAPs play a role in seconding apatosis induction by those chemotherapies and those are the same very chemotherapies that we very much look forward to combining our drug in the clinic with.

Ted Tenthoff - Piper Jaffray

Great. So early last month the FDA placed a partial clinical hold on CUDC-427. Tell us what led to this decision and highlight what you’ve learned about this patient subsequently. What are your plans for getting the drug off partial clinical hold?

Ali Fattaey

Right. When we in licensed the drug from Genentech, Genentech had conducted a study in 42 patients in a Phase I clinical study using the drug as a single agent monotherapy in a dose escalation that took it from 5 mg to 600 mg dose.

In the higher doses on the drug, in the Genentech study there were two patients that had increases in their liver enzyme levels, mainly the AST and ALT, causing some amount of transaminases in those patients. But these effects were not really considered to be dose-limiting toxicities associated with it. In fact the only dose of an in toxicity associated with the drug was a grade three or high-grade fatigue.

So in our clinical studies we really needed to understand a couple of things better with regards to how to best administer this drug as a single agent first and one of those was exactly what dose of the drug; secondly, what schedule? Is it better as a daily drug versus introducing a holiday in the treatment and those are some of the parameters that we initiated testing in our study.

In our study that was initiated in July, with our dosing schedule at a similar dose to Genentech; had administered their drug as a 600 mg dose, one patient with breast cancer and that had already disseminated to several parts of the patients body, including the liver, bone, lungs, as well as her ovaries. This patient also experienced transaminitis, increases in liver enzymes similar to what had been seen before and the best course of action that had been used in the past and we thought necessary as well was to discontinue our drug.

And upon discontinuing our drug, the levels of her liver enzymes began to stabilize and come down, but unfortunately still pick back up several days later and continued to rise, even though the patient was no longer on our drug.

This was a very unusual case. It’s the only time that this has been observed in treating patients with CUDC-427, where upon discontinuation, especially after segregation of the liver enzyme level, that the liver enzymes go back up.

So we’re obviously very – and unfortunately the patient 30 days later passed away from her liver disease, from liver failure. We communicated with the FDA as you indicated and we were placed on a partial clinical hold, meaning we couldn’t enroll any new patients into the study and that’s an important part of it.

So the requirement for us to have this hold lifted is a fuller analysis of this particular patient’s disease. The effect of our drug in there and also a very careful look at all other drugs and comments on medications that this patient may have been on, that could have contributed to this disease, unless really the three avenues that we’ve been assessing in with regard to this patient, the affect of our drug, the disease nature for the patients liver disease as well, as well as all other medication. That will be one of the requirements to submit in which we’re in the process of putting together.

Secondly a full analysis, safety analysis of all 51 patients so far that had been treated with CUDC-427, including our study and the Genentech study, so that’s the number two requirement. And thirdly, when we intend to start initiating new – starting enrolling new patients, are there any changes to the protocol that we’ll withdraw, are there additional precautions that we would take, so those protocol modifications are the third component of our submission to the FDA. We have been putting this together ever since our discussions with the FDA and plan to submit that before the end of the year.

Ted Tenthoff - Piper Jaffray

Great, excellent. We’re actually out of time, but I do want to just finish with this last question. So assuming and its our assumption that you will be able to get this off clinical hold. We believe that this was something specific with the patient particularly as we haven’t even seen (inaudible) changes in any of the other treated patients. So as quickly as you can, not to rush you at the end here, but assuming you get off clinical hold, what would be your future development plans for 427?

Ali Fattaey

Yes, very good point. As soon as we can initiate patient enrollment, our plan really is to start the study that we had intended, which is the combination of this drug with chemotherapy Xeloda in HER2 negative breast cancer patient population. That’s a study that we had intended to start this year and have been planning and has been ready to be initiated.

That’s a very important study for us. Frankly the full development of this drug is really much more focused on combination with other agents as the mechanism of the drug action requires. The monotherapy study will also continue to go and we’ll predominantly focus on patients that have genetic alterations of IAPT and so.

Ted Tenthoff - Piper Jaffray

Awesome. Now, thank you so much for joining us and thanks everybody for participating and joining us for the Curis presentation.

Ali Fattaey

Thank you.

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