Micromet, Inc. Q1 2010 Earnings Call Transcript

| About: Micromet, Inc. (MITI)

Micromet, Inc. (NASDAQ:MITI)

Q1 2010 Earnings Call

May 5, 2010 8:30 am ET


Jennifer Neiman – Director Corporate Communications

Dr. Christian Itin – President, Chief Executive Officer

Mark Reisenauer – Chief Commercial Officer

Barclay Phillips – Chief Financial Officer


Edward Tentoff – Piper Jaffray

Mark Monane – Needham & Company

Jason Kantor – RBC Capital Markets

George Farmer – Cannacord Adams

Joseph Pantginis – Roth Capital Partners

Yale Gen – Maxim Group


Welcome to the first quarter 2010 Micromet Inc. earnings conference call. (Operator Instructions) I would now like to turn the call over to your host for today, Miss Jennifer Neiman, Director of Corporate Communications.

Jennifer Neiman

Good morning and thank you for taking part in today’s call. With me today are Christian Itin, President and Chief Executive Office, Buck Phillips, Chief Financial Officer and Mark Reisenauer, Chief Commercial Officer.

Following the introduction, Christian will provide an overview of our recent accomplishments and highlight upcoming events. Mark will provide our assessment of the market opportunity blinatumomab and Acute Myoplastic Leukemia and finally, Buck will review the company’s financial results for the first quarter of 2010. We welcome your questions following our remarks.

Before we begin, I would like to remind you that during this call we will be making forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ from the results discussed in the forward-looking statements. These forward-looking statements include statement regarding the commercial opportunity for our product candidates, our available cash resources, the efficacy safety and intended utilization of our product candidates and our ability to offer an improvement over existing treatment options, future research and development plans and the development and commercialization of our BiTE antibody technology, our collaboration with BI for the development of the BiTE antibody for the treatment of multiple myeloma, our plans for the development blinatumomab including the initiation of a European pivotal clinical trial, the conduct, timing and results of future clinical trials of our products candidates, our plans regarding future presentations of clinical data and our expectations of the future expansion of our product pipeline.

Factors that may cause actual results to differ materially are more fully discussed in the risk factor section of our annual report on Form 10-K for the year ended December 31, 2009, and our other periodic filings with the SEC.

With that, I will now turn the call over to Christian.

Christian Itin

Thank you Jennifer, and good morning, and thank you all for joining us. I’m pleased to review with you this morning our recent progress and share our outlook for the balance of the year.

This year is an important one for the company as we work to initiate a comprehensive development program for our lead product candidate blinatumomab in patients with acute lymphoblastic leukemia, or ALL and expand research and development of earlier state BiTE antibodies across a range of tumor types with high-unmet medical needs.

We believe that recent corporate developments position us to achieve these critical objectives. First, we were pleased to announce earlier this morning, a global research, development and commercialization agreement with Boehringer Ingelheim for a new BiTE antibody against an undisclosed target for the treatment of multiple myeloma.

Multiple myeloma is a disease that has seen recent progress with the introduction of [Velcade] and [Revelmade]. While these and other agents have improved the response rate, multiply myeloma remains largely incurable and most patients will eventually die of the disease.

We believe that the BiTE antibody approach, with its demonstrated activity in blood, bone marrow and lymphatic tissue offers the potential for a differentiated product profile in multiple myeloma that will enable us to overcome some of the limitations of current therapies.

This program is in the early discovery stages and is intended to compliment our development of fight antibodies for all major hematology malignances. Importantly, we structured this collaboration to support our goal of building a commercial hematology franchise in the U.S.

Under the terms of the collaboration agreement, we will have the right to co-promote the BiTE antibody in the U.S. and are eligible to receive a royalty comparable to profit split on the U.S. product sales. Outside the U.S., Boehringer Ingelheim will be responsible for the commercialization of the product and we will receive a low double-digit royalty on net sales.

With respect to research and development activities, Micromet will be responsible for the generation of the BiTE antibody and we will collaborate with Boehringer Ingelheim on pre-clinical development activities. BI will be responsible then for the worldwide clinical development of the product.

As for the allocation of R&D and commercialization costs, Boehringer Ingelheim will be responsible for all costs of the program except that we will bear the costs related to our own initial pre-clinical activities up to a specified amount and the cost of our own sales force used to co-promote the product in the U.S.

Based on our understanding of the target for this BiTE antibody, we believe that it has the potential to offer improvement over existing treatment options, and therefore represents a potentially meaningful future royalty stream and revenue stream for the company.

With the execution of this collaboration, we now have three BiTE antibodies in research and development that spans the majority of indications in hematology. We look forward to working closely with the team at Boehringer Ingelheim to advance this program to the next stage of its development.

Second, we made important progress during the quarter to prepare for the formal initiation of our European pivotal clinical trial of blinatumomab in adult patients with MRD positive acute lymphoblastic leukemia. We are moving with a sense of urgency to prepare for the study start in the third quarter of this year, and are now in the process of site selection, training the study staff, filing of the study with health authorities and IRB submissions.

Key end points of the study will include MRD activity and relapse survival rate. With support from leading hematologists and oncologists and study groups, we plan to enroll approximately 130 patients in this study. We view the initiation of this trial to be an important milestone in the development of blinatumomab and a potential important driver of the company’s future growth.

From a regulatory perspective, we held preliminary discussions with health authorities on the regulatory path and registration strategy for blinatumomab in ANL. Our strategy built on a comprehensive development program in ANL with three development tracks. First, consolidation therapy in adult patients; this is the pivotal study in minimal disease after chemotherapy and a second track in relapse refractory ANL in adults and a third track in relapse refractory ANL in children.

We look forward to providing details of the recommended path forward following the conclusion of the discussions with the FDA and other health authorities later this year.

In addition to the pivotal trial, we’re also scheduled to initiate in the middle of this year, a Phase 2 trial of blinatumomab in outpatients with relapse refractory ANL. The primary end point of this study will be response rate. We believe that this trial will enable us to validate blinatumomab’s potential utility in ANL patients with more advanced disease, and if successful would be the basis for a potential pivotal study in relapse refractory ANL plans to follow the current study.

From a research perspective, both the company and its partners made steady progress during the quarter in advancing a number of pre-clinical BiTE antibody programs. At the recent AACR annual meeting, researchers reported pre-clinical data correct new BiTE antibodies targeting 11 tumor-associated antigens including CEA, EGFR, IGFR-1, CMET and Alpha.

The data reported at the meeting demonstrates the BiTE antibodies can be generated to target a wide range of tumor antigens of highly different function, size and molecular composition, which we believe illustrates the wide applicability of our technology for the treatment of fibrous cancer indications.

We are also pleased to announced in April, the achievement of the first milestone of our collaboration agreement with Bayer Schering Pharma AG. The milestone was triggered by Micromet’s achievement of a pre-clinical proof of concept for a BiTE antibody for the treatment of solid tumors. We’re pleased with the rapid progress achieved under this collaboration since signing the agreement in January 2009.

Lastly, our completion of a secondary offering of our common stock in March with net proceeds of approximately $75.4 million provides the necessary resources for future advance and expand our BiTE antibody development programs.

With that recap of recent events, I will now turn the call over to Mark to provide an update on our commercial planning efforts.

Mark Reisenauer

I’m pleased to share with you this morning, our current outlook on the potential role that blinatumomab can play in the treatment of ALL. Market research we recently conducted with key opinion leaders at cancer centers in both the U.S. and Europe continues to reinforce our belief that there is a compelling need for new therapies to treat patients with ALL.

While most adult patients treated with standard chemotherapy regiments will achieve a complete remission after initial induction therapy, a significant percentage will eventually relapse. Unfortunately, post relapse strategies rarely result in long-term survival with five-year survival rates of 7% after first relapse.

Similarly, in the pediatric setting, patients who relapse early after initial diagnosis, have a five-year survival rate of about 21%. Clearly, for both adult and pediatric patients, prevention of disease recurrence is the best strategy for long-term survival.

Results from our market research study revealed wide spread physician dissatisfaction with existing treatment approaches, many of which have been in use for over 30 years. A consistent message from the interviewed physicians was the need for improved duration of remission and reduced toxicity across all lines of therapy.

One key opinion leader stated, “In consolidation therapy, the greatest unmet need is for more targeted therapies. We get them part of the way to remission in induction, but the battle is what to do after induction.”

Another commented, “Targeted therapies would be very exciting and are especially needed for relapse patients. These patients are usually beat up and cannot tolerate aggressive chemotherapy.”

This unmet need is particularly apparent in the relapse refractory setting in which for both adults and pediatric patients, there is no standard of care. In fact, physicians who participated in our market research study, reported that investigational protocols are the most frequently used approach in the third line setting.

We believe that this feedback underscores the clinical meaningful role of an agent that can safely improve the duration of remission can play in the treatment of this devastating disease. For the balance of the year, we will continue to assess how ALL is treated in the U.S. and Europe, the findings from which, will form the basis of our commercialization plan.

I look forward to providing updates later this year on treatment patterns in ALL and our early commercialization plans.

With that, I will turn the call over to Buck for our first quarter financial update.

Barclay Phillips

Good morning everyone. For the first quarter ended March 31, 2010, we reported total revenues of $6.3 million compared to $7.5 million for the same period in 2009. Total operating expenses were $17.4 million for the three months ended March 31, 2010 compared to $12.4 million for the same period in 2009. This increase is due to larger R&D investments in blinatumomab, the BiTE platform and other programs.

Loss from operations for the three months ended March 31, 2010 was $11.1 million compared to a loss from operations of $4.9 million for the same period in 2009.

For the three months ended March 31, 2010, Micromet reported a net loss of $16.3 million or $0.23 per basic and fully diluted common share. That compares to a net loss of approximately $300,000 or $0.01 per basic and fully diluted common share for the same period in 2009.

The net loss for the three months ended March 31, 2010 includes a non-cash charge of $5.6 million, reflecting an increase during the quarter of the fair value of outstanding warrants. This compares to a $4.4 million non-cash gain for the same item in the first quarter of 2009.

Net cash used in operating activities was $5.6 million for the three months ending March 31, 2010, compared to $1.1 million provided by operating activities for the same period in 2009.

With the completion of our secondary offering in early March, Micromet’s cash, cash equivalents and short-term investments were $182.7 million as of March 31, 2010. Based on the capital available to the company at the end of the first quarter, we believe the company has adequate resources to fund its operations into late 2012.

With that, I’ll conclude the financial report for the first quarter of 2010 and I will now hand the call back to Christian to give you a brief outlook on our expected upcoming milestone.

Christian Itin

Thank you Buck. There are a number of events slated to take place in the coming months that we believe are important to highlight for you. First, we look forward to providing updates on our ongoing clinical trials at two upcoming medical conferences; at [Aschco], which will take place in Chicago in early June, we expect to report updated results on our ongoing Phase 1 trial of our BiTE antibody 110 for patients with advanced heavily pre-treated coloric gastric and lung cancer.

This will be an interim update and a phase of the trial where we continue to escalate the dose and explore the dosing schedule. A further update on this trial is planned for the fourth quarter of this year and the ASCR/NCI/URTC meeting.

Also in June, we expect to report updated data from ongoing studies of blinatumomab in patients with MRD positive ALL and non-Hodgkin’s lymphoma at the European Hematology Association meeting, which will take place in Barcelona, Spain.

With that, I would like to thank you for joining us this morning and we’ll open the call for questions.

Question-and-Answer Session


(Operator Instructions) Your first question comes from Edward Tentoff – Piper Jaffray.

Edward Tentoff – Piper Jaffray

Congrats on all the progress and the new alliance today. Just starting with that, this is separate than the proprietary multiple myeloma programs that you mentioned at R&D day, right? And how will you separate and prioritize these dual efforts in myeloma.

Christian Itin

Thanks for joining this morning, and I’ll be happy to discuss the new collaboration. The new collaboration is our program conducting multiple myeloma. There is no second program conducted at the company for this indication, which is also why it was important to use to make sure that we participate downstream in this collaboration in a much more meaningful way that you typically would see with early stage collaborations.

The structure of the deal clearly is unusual, but it really fits very well with the stage of development that Micromet is in as well as obviously the needs of our partner, Boehringer Ingelheim, and I think it is an unusual but very attractive deal structure for both companies.

Edward Tentoff – Piper Jaffray

Did you announce the target?

Christian Itin

We did not. We’ve never actually talked about this particular target. So what we’re public about in terms of homological programs, it’s obviously the blinatumomab program which targets CD19 in B cells in Hodgkin’s lymphoma as well as acute lymphoblastic leukemia and then it’s CD33 in acute myelogenic lymphoma leukemia that we are public about. This is an added new program and the disease range that we are obviously currently targeting with this approach.

Edward Tentoff – Piper Jaffray

Looking at the revenues, obviously we’ve seen a very nice ramp. Last year 1Q was the highest quarterly revenue that you reported. Remind me, was there a milestone in there or is there something that kind of puts it to be a little bit front end weighted, or should we look at the $6 million in terms of collaborative agreements as something that will grow from here.

Barclay Phillips

We’ve never given specific guidance on revenues as historically so if the question is what was the driver to that peak in revenue in Q1 2009, I think there were a number of activities that were partner related during that quarter that have frankly tailed over the last 12 months.

As you look in our Q’s and our K’s, you’ll see a specific breakout of partnership revenue for the quarter, and you can look at that when we file the Q later today for this. But I think what you’d see is a tail off in Agramet revenues over the last 12 months, and that might be the biggest piece of that change.


You're next question comes from Mark Monane – Needham & Company.

Mark Monane – Needham & Company

Question on market research that Mark was talking about and Christian too. In the United States, is there, could you review with us what the understanding is for the MRD positivity among the medical community. In Europe, you’ve made a strong case we heard on the R&D day from the investors in Europe. How about in the U.S.? Has there been increasing attention to MRD positivity as a potential outcome?

Mark Reisenauer

What we’ve learned so far, at least in the U.S. in terms of MRD as something that is conducted, a test that is conducted. We are finding that is routinely done for both adults and pediatric patients. So even in the absence of a therapy that could affect outcome for those patients who are MRD positive, they are still using it as a way to risk stratify patients. So it seems quite widespread in the U.S.

Mark Monane – Needham & Company

In terms of the deals going forward, the collaborations going forward, a number of the collaborations have been on solid tumors and now we have a new one on liquid tumors. Could you talk about the antibody and solid tumors and to date, the solid tumors in general for antibodies, maybe not as powerful, not so much versus the hematological. Do you agree with that observation and may you could tell us what the business development world is like in terms of solid tumors and liquid tumors.

Christian Itin

From a strategy perspective as we had outlined at the analyst day in February, obviously we have a key focus on the hematological cancers, a set of indications where we want to build commercial presence in the U.S. as a designated part of the strategy.

The second part of the strategy we outlined was that we are for the majority of solid tumor opportunities, we’re planning to actually collaborate with large companies and other biotech companies to develop that part of the franchise. Also, just being mindful of the fact that we’re looking at a very significant opportunity that obviously will take substantial resources to fully develop.

With regards to our experience to date, obviously our experience to date is that we have with our lead product blinatumomab showing very strong activity in hematological cancers particularly, looking at the lymphatic tissue, bone marrow as well as the blood. So that’s what we know clinically, and we have confirmed clinically.

With the solid tumors, we’re in the process of having our first BiTE antibody in an escalation trial to explore the activity of the program and the approach for this targeting in this case the cellular molecule in solid tumors that are in very late stage patients.

Now one of the big questions will be to what extent we can translate what we have seen pre-clinically, which was outstanding activity into this heavily pre-treated patient. And this is something we will explore, and obviously will have I think a much better view as we go through the course of this year, but it’s still obviously the nature of the current trial we’re conducting to get a better understanding for it.

I think speaking much more generally, I think when you look across all types of therapies that have application, both modalities that have application in both liquid tumors and in solid tumors, the hurdle in solid tumors are generally higher.

I think that has a lot to do with the actual structure of the tumor that the heterogeneity of the tumor cells within a given tumor, usually in hematological cancer, we have clonally disease. This is not actually truly the case in solid tumors. So there’s a much bigger variety there and as a consequence, a lot of the applications that we see are in combinations of combining various modalities.

To what extent that will actually be true for BiTE antibodies we do not know at this point in time, but I think it is certainly reasonable to assume that the hurdle in solid tumors from an activity perspective is higher than the hurdle that you would expect for hematological cancers.

Mark Monane – Needham & Company

How many people now at the Micromet? What’s the optimal number going forward and do you have a shift in people that you’re hiring given as you’re moving later and later into development and think about commercialization as we’ve heard a little bit about today.

Christian Itin

Obviously as we transition the company now from an early stage development company into a later stage development company, you run the company through significant qualitative growth phase and adding a lot of additional skills in terms of late stage development skills to the company and obviously also early commercial skills to the company.

So when you think about it, this is a lot more a growth in quality and in skill base than it is actually a growth in employee numbers, so we’ll be very mindful about the total amount of employees we’ll be adding. Currently we’re at about 130 employees at the company. We obviously will add some additional employees as we go through the year to actually round out the, as I mentioned, the skill base in the company.

But this is something that we’re very mindful of, and we’ve been very careful in terms of making sure we control the cost base. At the same time, obviously, you want to make sure that you’ve got the appropriate set of skills in the company to drive the program.

One of the key areas when you look in terms of geography, clearly there’s going to be a build out of our employee base in the U.S. to go along with the increase of activities that we actually are now able to conduct in the U.S. So that’s going to be the major growth in terms of individuals added to the employee base, but in general the much more important part is really making sure that we have the appropriate skill base to drive the company appropriately.


You're next question comes from Jason Kantor – RBC Capital Markets.

Jason Kantor – RBC Capital Markets

The new BiTE that you’re working on with Boehringer Ingelheim, could you tell us how long you think it might take to get to the clinic. What kind of work has been done. Is this conceptual at this point or have you made prototype molecules and could you speak to that?

Christian Itin

The program is a very early stage. As we said, it’s an early discovery stage program, so it is a new activity. I think the first time we started talking about the fact that we’re looking into and we’re moving into multiple myeloma, it’s just about three months ago when we made the first public announcement.

So this is a truly early stage program and it will have to take its normal course through pre-clinical development that we obviously have to conduct over the next period. So assume it’s an early stage program that will take the normal timeline to the clinic.

Jason Kantor – RBC Capital Markets

Can we expect more deals such as this perhaps this year?

Christian Itin

The guidance we’ve given is that we’ll be doing about one deal. I think that’s what we committed to so I think we check that box. I think the key message is that we’re going to be highly selective in the deals that we’re going to be doing from here on forward as we’ve been in the past, and as you see with this particular deal, it’s a very unusual structure.

Obviously they have to be right for where we are and the importance that we think this particular indication will have for the company going forward. So when you look at that, and look at the quite unique way that we were able to do this deal with Boehringer Ingelheim, I would expect a low number of transactions over the next 18 to 24 months.

We’re really focused on quality and getting it right to make sure that we can really develop and get at the value that’s inherent in the platform.


You're next question comes from George Farmer – Cannacord Adams.

George Farmer – Cannacord Adams

I want to ask a little bit more about development plans. You mentioned that its possible your trial, your Phase 2 study in adult ALL and the relapse refractory setting could serve as a registration trial. What do you think a Phase 3 commitment study would look like in this setting?

Christian Itin

What I talked about and I think it’s probably good to pick that up, is that we’re going to conduct a first study in relapse refracted adult patients which I actually outlined at the analyst day. It’s a 20 patient study and this study will then be followed, plan to be followed by a second study which will be a pivotal study.

We do not at this point expect that the initial study would be the basis for an approval, but obviously it is the basis to understand the activity and make the appropriate design for the pivotal study that would follow the study we’re starting in the upcoming months here.

So it’s too studies in sequence that in combination, then should provide the data package to submit. It’s not based on the current initial study.

George Farmer – Cannacord Adams

But that would probably give you an accelerated approval typically in hemo indications. FDA would be asking for a randomized post approval, post-marketing study to support full approval. Have you thought about what that trial might look like?

Christian Itin

Clearly, there is a possibility for that. One of the key questions is what’s the appropriate comparative here, and that’s actually under discussion and both with key opinion leaders and we will discuss also later on with the health authorities, the FDA as well as the European health authorities.

So that’s actually in progress, but it’s not at the stage I think where we can give you more precise guidance of what the study design should actually look like.

George Farmer – Cannacord Adams

In thinking about the relapse refractory study in kids, what needs to be done before you can move forward in that setting? What are the different nuances between developing the drug for an adult versus a pediatric indication.

Christian Itin

I think the obvious nuance or the most important nuance is we initially, to get ready to actually start a pivotal study, and that is making sure you have a decent understanding of the dose, of the PK in children. And that is I think clearly the key question to answer.

So that’s actually going to be an element that will have to be answered either within the study itself. It could be within one study. It also could be in sequence. And this is exactly what we’re discussing at this point in time.

George Farmer – Cannacord Adams

I remember you highlighted at the R&D day that there were three children that were actually treated at the 13-microgram dose and I know it’s only three kids, but do you think that would be the optimal dose to go forward in pediatric indication or do you think you may need to go lower?

Christian Itin

At this point in time I think it’s a reasonable dose. I think what we should be mindful of, one of the challenges when you look at children is something you can look at, infants up to teenagers and obviously once the kids are in their teens, obviously they’re much closer to adults. And the kids that we have treated were, some were teens. Some were a little younger than that, but as an example, we haven’t treated infants.

You actually have to have a good understanding of the range there and this is clearly something that we couldn’t with certainty say at this point in time. I think within the group that we have tested, 15 appears to be a good dose, but I think there needs to be more work done to really confirm the schedule for children in a wider age range.

George Farmer – Cannacord Adams

I didn’t hear you mention anything about blinatumomab in your opening comments. Can you give us an update there?

Christian Itin

That study is ongoing, and as we pointed out, this study certainly will take quite a bit of time to complete and obviously are in the enrollment phase for that program, so there’s no update at this point in time.


You're next question comes from Joseph Pantginis – Roth Capital Partners.

Joseph Pantginis – Roth Capital Partners

At ASCR recently, you presented a lot of pre-clinical data and one of the things I’d like to focus on is the long term potential at Micromet. You’ve presented the possibility to develop a real broad range of targets so I was wondering while most of your resources right now are going to the blinatumomab development program, how are you going to prioritize all these programs going forward since you have such broad potential.

Christian Itin

This is the challenge that you have when you have a truly broad applicable new class of agents that you can develop. What was important to us for ASCR was to really show the effects of what we can do, in particular get a good sense for the wide range of antigens we can actually target onto the cells, and that ranged from truly large transmembrane proteins to linked proteins, to enzymes, to receptors, etc.

So it was a wide range that we could show. I think it gave us a lot of confidence that the technology is truly broadly applicable. Now the question is that of choice. Where are you going to put your own resources behind?

As you saw and heard us talk about at the analyst day as well, is that we’re going to be focusing resources behind our programs and we mentioned the fact that we’re working on the CD33 program. And we also mentioned the fact on the solid tumor side that we’re working on a new GFR program, and obviously we have MT110 already in clinical trials.

So it’s already a pretty significant range of activities. And then clearly, for activities that go beyond what we feel is appropriate to fund at the current stage of development of our company on our own, is actually to conduct these programs in collaboration.

This is obviously now on the solid tumor side with MedImmune, Bayer Scherring Pharma AG and three programs we’re conducting there, and now the Boehringer Ingelheim on the side of multiple myeloma program

So it is a significant deck of activities that we’re conducting. There’s a lot more opportunity, and obviously we’ll be very mindful of making sure that we’re selecting what we believe are highly attractive opportunities for our company keeping those on our own side as a proprietary program and obviously we’ll conduct collaborations for programs that we cannot cover on our own at this point in time.


You're next question comes from Yale Gen – Maxim Group.

Yale Gen – Maxim Group

First question is about the latest Ingelheim deals. This one is different from the other deals you have done before and this one seems to incur a little bit more expenses. Would that have anything to do with your recent financing which helped improve the balance sheet that you would be willing to take a higher expenditure with the economy going forward?

Christian Itin

I think it has to do less actually with the financing, but much more with the strategy as we have outlined it. The fact that the hematology indications are going to be a key focus for us going forward from a commercial perspective and the clear intent of the company to build a presence in hematology in the U.S., and that was the key driver for the type of deal structure.

Then we made sure that obviously this transaction and this collaboration as you run through it will be a cash flow positive transaction as we go through the course of the collaboration and I think that’s the other important piece for us when we structure these collaborations.

What we did do, and you’re right about that is, we did not maximize the cash flow up front for this transaction, but wanted to make sure, because we have a lot of confidence in this indication and the ability of BiTE antibody in multiple myeloma, that we capture the upside on the back end.

And I think that is a very important part of the strategy and implementation. So we’re very mindful also from our partner’s perspective, it’s a very mindful deal structure and a very attractive deal structure for the partner as well. At the same time, obviously addressing our strategy to really build the franchise in the U.S.

Yale Gen – Maxim Group

I’d like to know a little bit more about the Bayer deals that you recently received, a milestone. What’s going forward with that. Are there continued milestones for the foreseeable future or how should we see that?

Christian Itin

Obviously we have not given detailed guidance on the structure of our milestones and collaboration. It’s a transaction that is very rich on the milestone side, both development and later on commercial milestones for this transaction that are very well staged across the course of development, but the exact distribution is something we have not outlined to the market.

Yale Gen – Maxim Group

In terms of refractory ALL study, will this one be about the same time as the pivotal study I guess in the third quarter of this year or they will be sequentially started.

Christian Itin

The will be very close together. Submissions were actually done almost in parallel to health authorities and then it’s taking time lines through these processes will determine the start of the study, but we expect those studies to start reasonably close together.


You're next question comes from Edward Tentoff – Piper Jaffray.

Edward Tentoff – Piper Jaffray

It seemed to me that, and I want to make sure I’m understanding this right with respect to the BI deal today, but you are really just responsible for the pre-clinical costs, is that correct? And then ultimately in terms of funding the U.S. sales force. So is there any other expenses that you would be required to pay for this deal?

Christian Itin

Our initial activity is what we’re covering the initial costs for, but those costs are also capped. This is not an unlimited amount. It is a clearly defined amount in the initial part. And then actually all the other costs related to manufacturing, to clinical development, to marketing and any costs related to the commercialization of the product worldwide is going to be with our partner.

Our obligation then, once the product is commercial in the U.S. is actually the cost of our own sales force, which obviously we expect to have in place for blinatumomab at that point in time.

Edward Tentoff – Piper Jaffray

I see really more as you are getting more for less in a way because of the validation of the pipeline.

Christian Itin

I think it’s an interesting way of thinking about it, and clearly as I pointed out before, we do have obviously a fairly high level of confidence that the antibodies have an unusual activity in hematological cancers and obviously because of MT103 data, obviously we have more risk reduction already in these approaches compared to other approaches that we’ve been partnering on, and I think that is also reflected in the overall value of the transaction.


You're next question comes from Mark Monane – Needham & Company.

Mark Monane – Needham & Company

AARC meeting, during that session there was an abstract on the EGFR BiTE antibody and I was just given the side effect profile which does not seem to show the skin rash normally associated with the disease. That rash is very unpleasant for patients but it also serves as a biomarker I believe for which patients might do well. Can you talk about that observation? Do you agree and what does it mean for thinking about measuring efficacy for the BiTE antibodies?

Christian Itin

What drives that is the fact that early toxic BiTE [inaudible] the EGFR antibodies. In the patients that appear to actually have a response down the line, they do experience skin rashes, which can be actually as Mark pointed out, very unpleasant. At the same time, there seems to be at least some extent correlated with actually seeing an activity.

The interesting thing about the skin rash I think is that what we see here is a consequence of interfering with the EGFR signaling pathway in those patients and you can actually see the skin rash is also a small molecule inhibitors of EGFR receptors. So it is actually intrinsically linked with the signal transaction pathway and interfering with it.

In our case, obviously we’re not interfering with the signal transaction pathway, but what we do is, we literally use the AGFR as a hook on the surface of the tumor cell and actually attach the BiTE antibody to, and that way allow the T-cell to recognize that tumor cell.

So we’re not actually having any impact on the downstream signal. And that also then is the reason why we in fact can actually target tumor cells that have an active EGFR pathway. In fact they’re insensitive to interference with the EGFR receptor, because the pathway has been mutated to an extent by BiTE applications to be considered turned on.

So by just using the structure on the surface of the EGFR receptor as a hook to guide the T-cell, to kill the tumor cell, we have shown that we have very strong activity against these tumor cells that in fact, cannot be efficiently targeted with early tox or actually many of the other small molecule inhibitors.

So yes, there is a difference. Yes, there is a connection between the outcome in patients that are treated with conventional antibodies and skin rash, but obviously that is only linked if you’re interfering with the pathway. If you don’t interfere with the pathway, you do not get the skin rash, but you’re still active; in fact, even active against those tumor cells that cannot actually be engaged by conventional antibodies.

So then actually circle up to the final part of your question, how do you measure whether you’re active. This only to measure whether we’re active is whether we have an impact on the actual tumor, which is also a direct measure on how you have to actually understand, to confirm that your drug has the activity that you’re looking for.


There are no further questions at this time. I would like to turn the call back over to Mr. Itin for closing remarks.

Christian Itin

Thank you very much for joining us this morning. Obviously we’re looking forward to an exciting outlook for the remainder of this year with the upcoming conferences. It’s midyear, the next data point and we’re looking forward to seeing you at those conferences and keeping you updated on the way. Thanks a lot for joining.

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.


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