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Arqule Inc. (NASDAQ:ARQL)

Q4 2013 Earnings Conference Call

March 5, 2014 9:00 am ET

Executives

Paolo Pucci – Chief Executive Officer

Peter Lawrence – President, Chief Operating Officer

Brian Schwartz – Chief Medical Officer

Rob Weiskopf – Vice President, Finance

Bill Boni – Vice President, Investor Relations

Analysts

Joel Sendek – Stifel

Howard Liang – Leerink Swann

Adnan Butt – RBC Capital Markets

Jason Zhang – Edison Investment Research

Jonathan Eckard – Citi

Vernon Bernardino – MLV & Co.

George Zavoico – HC Wainwright

Operator

Good morning ladies and gentlemen and welcome to the Arqule Incorporated Fourth Quarter and Fiscal Year-End 2013 Earnings conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session and instructions will be given at that time. If anyone should require assistance during the conference, please press star then zero on your touchtone telephone to reach an operator. As a reminder, this conference call is being recorded.

I would now like to introduce your host for today’s conference, Bill Boni, Vice President of Investor Relations. Please go ahead.

Bill Boni

Good morning everyone. Welcome to the Arqule investor conference call reviewing operational and financial results for fiscal year 2013. This is Bill Boni, VP of Investor Relations at Arqule. This morning we issued a press release that reported results for the fiscal quarter and year-ended December 31, 2013. This 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, and thank you everybody for joining us this morning. The last time we spoke for a quarterly conference, there were a number of events afoot and there were some legitimate doubts on whether or not we could be here today to report positive progress to you. And yet, here we are today and I’m very pleased that we are able to report progress on all three of the fronts we discussed during our last call.

The first front where we can report progress is tivantinib. We are once again a Phase III company with a global Phase III trial ongoing worldwide. The second front where I can report progress today is on our proprietary pipeline where ARQ 092, our AKT inhibitor, is making strides quickly towards Phase Ib. The third front for which I can report also progress is the management of our financials. We finished last year with slightly more cash than we had guided to, and we believe that that cash will sustain our operations, including further development of our property pipeline into 2016.

So we have a fairly dense call for you. I’ll ask for your patience and bear with me in the call, and we will also touch upon some topics that have developed in the competitive environment and have come forward just this week, so we will also review a little bit where we are with (indiscernible) trial program for tivantinib.

So the development of the team, as I said, allowed us to refocus tivantinib on the Phase III in hepatocellular carcinoma. The financial discipline allows us to continue that refocusing and though we have restructured our baseline discovery operations, we still are able to pursue at least one target at once. I will go over the tivantinib part of the call and I will be (indiscernible) to introduce the best of our pipeline, 092 and 087, and then I will pass on the call to Rob Weiskopf for the financials. So let me dive into tivantinib first.

We have solidly reestablished tivantinib as a Phase III clinical stage asset. We are implementing a worldwide trial in second line HCC and both trials that are running, one in the west, one in Asia, are testing tivantinib as a single agent in the biomarker defined population and with a companion diagnostic to MET-high – that was all the patients. The first of the two trials we have ongoing is in partnership with Daiichi Sankyo, is conducted in the west and is named METIV HCC. We expect approximately to enroll 300 patients. They will be randomized 2 to 1 to receive either tivantinib or base supportive care. In this study, we plan to involve approximately 123 health sites worldwide. The trial is conducted under special protocol assessment with the FDA and the endpoint of this trial is overall survival.

As we are now in January this year, the data monitoring committee that followed this trial recommended that the trial continue with a dose of 120 milligrams twice daily tablets. The DMC recommendation was based on the review of data analysis for a predefined number of patients who received this reduced dose. The dose reduction, some of you might recall, was implemented following the observation of a higher incidence of neutropenia in the initial phase of the METIV HCC trial when compared with the rate of neutropenia that we had observed in our previous Phase II double-blind randomized trial in a similar population. I shall remind you that the Phase II trial involved a dose of 200 milligrams—240 milligrams BID capsule form.

In addition, the pharmacokinetic analysis that we have been able to perform on this cohort of patients that has been last enrolled and dosed with 120 milligrams BID tablets has demonstrated that the plasma exposure achieved with that dosage form and at that dosage was comparable to that achieved with the dose of 240 milligrams BID capsule that was employed in the Phase II. Furthermore, we are able to say that the pharmacokinetic analysis demonstrated that two dosage forms and dosage regimens had similar medians and overlapping ranges.

All patients will be measured for MET in this trial and the rate of enrollment of this trial will depend on three failure rates for patients. We are gaining experience on that and we will be more precise as the trial proceeds about what we think the screen failure rate is, and there are likely going to be some interesting findings there to share with the scientific community. We are, as I said, employing a companion diagnostic and we are estimating today that this trial will have the last patient enrolled in mid-2016. As I mentioned here as well, we are working with a baseline assumption to complete this trial and we will update as we proceed that assumption as needed. So that’s the first trial, the METIV HCC in the west in partnership with Daiichi Sankyo.

There has been a report today that our partner in Japan, Kyowa Hakko Kirin, also moved the (indiscernible) forward and in the Asian territory, Kyowa Hakko Kirin has announced the initiation of the JET HCC trial. This trial also enrolls only patients with MET diagnostic high inoperable HCC patients and treated with one prior sorafenib regimen. Kyowa Hakko Kirin expects to enroll approximately 160 patients in this randomized double-blind placebo-controlled study and it has defined the primary endpoint of the study to be PFS – progression-free survival. We plan always to share information on how this trial proceeds as we receive that information from Kyowa Hakko Kirin.

So let me conclude about this Phase III program which should be a major value driver for our stock and for our investors. Based on the data we have update from our randomized Phase II trial, we believe that high MET status is a compelling entry criteria for patients in both the METIV HCC and the JET HCC trial. Previously, (indiscernible) HCC patients have demonstrated that high levels of MET are independent negative probability (ph) factors. I would like to point particularly this week when there is much debate about MET as a target in non-small cell lung cancer that we continue to believe that knowledge can be scarcely transferred from one tumor type to another, and I would like to stress once again that the Phase II that preceded this Phase III trial is the only one that employs MET as a single agent therapy in a double-blind randomized study. We are therefore excited about the potential prospect for both of these HCC trials.

No systemic therapy has yet to be shown to be effective in patients with advanced HCC following failure of first line therapy with sorafenib. The second line setting of this disease represents, as outlined by recent failures last that of an (indiscernible) inhibitor represents an urgent and more importantly an unmet medical need. For patients awaiting, we are proceeding with speed and purpose with both trials. Now given that there is much discussion about therapy in second line non-small cell, we have decided to cover yet again, although briefly, what we have learned from our non-small cell lung program with tivantinib and for what we have yet to learn from it.

Let me talk now about MARQUEE trial, so I’m entering now the non-small cell lung cancer program with tivantinib. The MARQUEE trial was a Phase III trial evaluating the combination of tivantinib plus erlotinib in patients with advanced or metastatic non-squamous cell carcinoma. This trial was stopped in the fall of 2012 after a planned interim analysis showed that for the intent to treat population a significant improvement in the secondary endpoint—although we had observed a significant improvement in the secondary endpoint of PFS, that improvement would not translate to a statistically significant improvement in overall survival in the primary endpoint.

The ITT population, I shall remind you, was defined simply as patients with no squamous cell histology. There were a number of subsets to this ITT and in fact subsequently we have presented results of the most interesting of these subsets at the European Cancer Congress. In September 2013, we did present the total analysis of the Phase III MARQUEE trial, including the predefined subgroup of patients that was evaluable for protocol as MET high. In this subset of patients, which was predefined, we demonstrated that tivantinib plus Tarceva significantly outperformed the control arm, as measured both by OS and PFS. The patients included in the predefined MET low subgroups, on the other hand, did not experience a significant improvement in OS despite an improvement in PFS being (indiscernible) in the treatment arm.

Importantly, and here I come to what we still have to learn from this trial, we are still waiting for mature data from the MARQUEE trial as it relates to another subgroup of patients defined as those patients with EGFR mutant status. The data to this date is immature and we do not have visibility and a sufficient number of events to report to the investor community or to the scientific community relative to the results of this subgroup, so this will come at a later date, hopefully this year, but it is entirely dependent on the flow of events and we don’t control that.

The other trial that was part of our non-small cell program for which we update you formally on the call for the first time was the ATTENTION trial. In January 2014, the Kyowa Hakko Kirin company provided us with top line results of the amended Phase III ATTENTION clinical trial that evaluated the combination of tivantinib and erlotinib in patients with advanced metastatic non-squamous cell small cell cancer with wild-type only EGFR status. The trial was conducted in Japan, South Korea and Taiwan. Enrolling in ATTENTION, you will recall, was originally planned at 460 patients and the trial’s statistical analysis plan was calibrated accordingly, and it remained unchanged even though the trial was reduced in size as far as end goals. Recruitment of new patients in fact was permanently suspended in October 2012 based on the recommendation from the trial safety review committee and following an observation of an imbalance in interstitial lung disease between the two arms, this favoring the treatment arm. Patients who were receiving treatment in attention as of October 2012 were allowed to continue thereafter in the trial only after being re-consented, and the trial concluded with 307 patients that were available for the final analysis.

We had previously reported that, although only in the press release, that in the ITT population overall survival favored the treatment arm tivantinib plus erlotinib numerically when compared to the erlotinib-only control arm. This favoring was not statistically significant. What was of interest was the long—I would say longer than expected, based on the norm, overall survival registered for both the treatment arm and the control arm. Overall survival in the treatment arm logged at 12.9 months, so basically almost 13 months, and overall survival in the control arm logged at 11.2 months – basically 11 months. So very long overall survival observed in this trial. The other ratio was for overall survival 0.89 and the P-value was 0.4. The complete data for the ATTENTION study, including PFS, overall response rate, and other measurements will come at a later time in a scientific congress identified by Kyowa Hakko Kirin.

So as we look back at our non-small cell trial and pending the final analysis of the EGFR mutant group from the MARQUEE trial, we believe that the combination of tivantinib plus erlotinib has demonstrated in this program signs of clinical utility and obviously pending additional data and pending additional development from our competitors, we will consider what options there might be for this combination in the future.

Before I pass on the mic to Brian to discuss the pipeline other than tivantinib, I’d like to remind you all that we still partner with the NIH for a number of trials and there are specifically three trials that are Phase II which are ongoing. One is in prostate cancer, one is in head and neck cancer, and one is in kidney cancer. These trials are conducted by the NIH and we are beholden to the news flow coming from that institution to then turn and update yourself in the scientific community.

I would like now to stop the tivantinib part and let Brian begin to provide – and this will be the first time we do so – positive about how the proprietary pipeline is developing. As we have discussed in the past, we have said that we would bring to Phase Ib, Phase II only what might appear to be the best of the compounds we were developing, and that is necessary to—that harsh decision is necessary to maintain financial discipline. You will see that one compound is emerging to be worthy of further experimentation, and there is another one in the wings that might be considered later in the year.

So Brian, please?

Brian Schwartz

Thank you, Paolo. During the past year, we have defined two product use in our proprietary early clinical stage pipeline, namely ARQ 092, the AKT inhibitor, and ARQ 087, a multi-kinase inhibitor with pan-FGFR activity, or fibroblast growth factor receptor activity. We expect to present data from the ongoing Phase I trials which I will talk about on both compounds later in the year.

Firstly, let me address the ARQ 092 or AKT program. As you are aware, the AKT/PI3 kinase signal pathway, the target of ARQ 092, is involved in growth, survival and metabolism of cancer cells. Disruption of this pathway is linked to the development and progression of many cancers. In addition, multiple people have shown that this pathway is often up-regulated and can be amplified or mutated in primary tumors and in tumors that relapse following initial therapy. This means the AKT pathway is a potential treatment target for numerous cancer types, either at diagnosis or when they relapse to therapy. In addition, we also believe from our own data as well as data from other people that ARQ 092 may be an important drug to be used in combination with other anti-cancer agents.

Let me talk a little bit about 092. 092 is an oral bioavailable non-ATP competitive allosteric inhibitor of AKT. It inhibits both AKT 1, 2 and 3, particularly potent against AKT 1. Inhibition of growth and downstream signaling has been shown with 092 in multiple in vivo models where dysregulated AKT and PI3 kinase pathway is present. We have already presented the beginning of the Phase I trial at the AACR, or American Association of Cancer Research Annual Meeting in April 2013, where we demonstrated inhibition of the AKT pathway with a very manageable safety profile. We continue to test the activity of 092 in this trial in a broad range of solid tumors and have recently modified the protocol to include lymphomas as well.

Following the review of the preclinical data, early clinical data as well as data from other compounds that inhibit this pathway, we have modified our Phase I trial to explore multiple schedules. We have noted that with ARQ 092, blood sugar levels rise before the patient experienced skin toxicity or stomatitis, which has been a critical dose-limiting side effect for other AKT inhibitors. This side effect has often limited the ability to dose escalate; consequently with the help of our investigators, we have been able to treat the hyperglycemia before the toxicity emerges, allowing us to achieve much higher drug levels, much better inhibition of target, and hopefully that will be therapeutically more active than other molecules tested in this pathway.

I’m also pleased to report that in the Phase I trial to date, in addition to a number of patients who have received clinical benefit, we have also observed a partial response in a heavily pretreated patient with lymphoma and a mutation in this pathway. We have not yet declared the maximum tolerated dose, and as we approach that dose we are prepared to implement a specific patient selection enrichment strategy in the Phase Ib portion of the trial to better guide us for the Phase II program.

Let me now move on to 087 or our FGFR program. FGFR, the target of 087, is involved in many different cellular behaviors such as proliferation, differentiation, migration and survival. Disruption or dysregulation of the FGFR signaling pathway has been associated with many developmental disorders and oncology indications. Recently in the literature, a number of new mutations and translocations of FGFR have been reported, opening up new avenues for us to explore with the potent pan-FGFR inhibitor.

A little bit about 087 – 087 is an orally bioavailable multi-kinase inhibitor with pan-FGFR activity, primarily 2, then 1 and then 3. It has shown strong anti-proliferative activity in cell lines, and specifically in cell lines where we see amplification of one of the—FGFR, as I just mentioned, or mutations of FGFR 1, 2 and 3. Like 092, 087 is currently in the dose escalation portion of the Phase I study. We have already demonstrated good bioavailability, a safety profile so far that differs slightly from other FGFR inhibitors in that we have not observed any significant real toxicities to date. We are still dose escalating and hopefully we’ll be able to report on the full toxicity profile on this compound later in the year.

In addition to the safety and PK, we are currently observing a biological effect with continuous dosing and there has been early evidence of clinical activity which includes patients with long-term, stable disease. Like 092, we are in the process of defining the optimal dose and schedule and we plan to expand into a Phase Ib which will focus on FGFR-driven tumors, either mutated or amplified.

Finally, as you know in oncology, most likely one drug may not be sufficient for many different tumors, and we are currently exploring the synergies which are present between ARQ 092 and 087. The addition of independent activity and safety profiles that are emerging with both drugs, we have looked primarily preclinically at this. We know that signaling through FGFR systems can directly activate PI3 kinase or AKT pathways, and we believe that there is a biological interplay that may provide a rationale for this synergy that I just spoke about.

With that, I would like to hand over to Paolo.

Paolo Pucci

Thank you, Brian. So let me go briefly through our goals that we are going to seek to achieve during this year. For tivantinib, timely progress in the enrollment of the Phase III METIV HCC trial and also support of Kyowa Hakko Kirin toward the same objective for the JET HCC trial, and finally continued support of the NIH investigative trial with specific focus on the three Phase II trials that are ongoing. For ARQ 092 and 087, Brian has very eloquently already defined those objectives, but let me remind them in bullet point form: complete and announce data from ongoing Phase Ia trial with ARQ 092, the AKT inhibitor; complete and announce data from the ongoing Phase Ia trial with ARQ 087, multi-kinase FGFR inhibitor; initiation of Phase Ib for one or both ARQ 092 and 087 in a biomarker defined population.

For our discovery program, as I say, though we still maintain the baseline capabilities, we can pursue one target at a time now, not two, so completion of each of these activities for one target and possible initiation of a lead optimization program from that target.

The financials, as I mentioned in the beginning, we continue well capitalized – actually, we enter this year well capitalized. We ended 2013 with $95 million in cash and securities, which is slightly above the top range of our issued guidance for 2013, and as I mentioned in the beginning of the call, we expect that that funds will allow us to fund operations into 2016.

For additional detail on our finances for 2013 and some guidance for 2014, I would like to now turn the call to Rob Weiskopf, VP of Finance. Rob, please?

Rob Weiskopf

Thank you, Paolo. The company recorded a net loss of $24.6 million or $0.39 per share for the year ended December 31, 2013, compared with a net loss of $10,872,000 or $0.18 per share for the year ended December 31, 2012. For the quarter ended December 31, 2013, the company reported a net loss of $5,956,000 or $0.10 per share compared with a net loss of $5,296,000 or $0.09 per share for the quarter ended December 31, 2012. At December 31, 2013, the company had a total of approximately $95.1 million in cash and marketable securities. For the year ended December 31, 2013, revenues were $15,914,000 compared with revenues of $36,414,000 for the year ended December 31, 2012. For the quarter ended December 31, 2013, revenues were $2,275,000 compared with revenues of $5,143,000 for the comparable quarter in 2012.

The $25 million revenue decrease from 2013 was primarily due to revenue decreases of $15.5 million from our Daiichi Sankyo AKIP agreement that ended in November 2012, $1.5 million from our Daiichi Sankyo 092 agreement that ended in June 2013, and $5.2 million from our Daiichi Sankyo tivantinib program. These decreases were partially offset by $1.7 million of other revenue related to a one-time research project.

Fiscal 2013 research and development expenses were $27,555,000 compared with $33,966,000 for fiscal 2012. Fourth quarter 2013 research and development expenses were $5,337,000 compared with $7,246,000 for the fourth quarter of 2012. The $6.4 million decrease in research and development expense in 2013 was primarily due to lower labor-related costs of $1.7 million from attrition and $1 million from our July 2013 restructuring, but also $1.1 million lower outsourced clinical and product development costs principally related to our Phase I and II programs for tivantinib, reduced lab expenses of $0.8 million, lower professional fees of $0.5 million, and other across the board cost reductions of $1.3 million. The $1.9 million decrease in research and development expense in the fourth quarter of 2013 was primarily due to lower labor-related costs of $0.4 million from attrition and $0.8 million from our July 2013 restructuring, and lower lab expenses of $0.3 million.

General and administrative expenses for fiscal 2013 were $12,836,000 compared to $13,852,000 for fiscal 2012. Fourth quarter 2013 general and administrative costs were $3,125,000 compared with $3,352,000 for the fourth quarter of 2012. General and administrative expense in 2013 decreased primarily due to lower professional fees of $0.6 million and $0.2 million lower labor-related costs from our July 2013 restructuring.

Let me now turn to financial guidance for 2014. For 2014, Arqule expects net use of cash to range between $35 million and $38 million, revenues are expected to range between $8 million and $10 million, net loss is expected to range between $30 million and $33 million, and net loss per share to range between a loss of $0.48 and a loss of $0.52 for the year. Arqule expects to end 2014 with between $57 million to $60 million in cash and marketable securities.

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

Paolo Pucci

Thank you, Rob, and we can entertain questions now. Operator, if you wish, please?

Question and Answer Session

Operator

Certainly. [Operator instructions]

Our first question will come from the line of Joel Sendek from Stifel. Your line is open.

Joel Sendek – Stifel

Hi, thanks. Good morning. So Paolo, with regard to what you said about MetMAb, just so I understand your—

Paolo Pucci

Yeah, I wasn’t going to use names, but—

Joel Sendek – Stifel

If I’m interpreting it correctly, so you said it doesn’t apply across the EU because the indication is different and because they have a combination with Tarceva, which might have made it difficult for them to show a benefit.

Paolo Pucci

What I’m saying—I’m trying to address some of the questions that we have entertained since the MetMAb announcement, and for those that haven’t been brought up to date, just as we did not succeed in demonstrating overall survival benefit in second line of small cell Tarceva plus tivantinib, the same has been for MetMAb plus Tarceva, and it was announced this week.

Joel, I will say two things. The first one is we continue to maintain that every tumor type (indiscernible), and the learning that can be transferred from the experience with Tarceva one tumor tied to another is marginal. It’s even more marginal when you compare non-small cell with HCC because in HCC, the underlying disease plays a role that makes it very unique, and that is what we learned with our past experience working with Nexavar. I guess that’s what all the other people that are trying to bump Nexavar from front line have learned still.

Then where it is fair for us and for you investors and for the scientific community to look is in the self-contained, non-small cell lung cancer setting where there were two trials that were quite similar in design but with some fundamental differences as well. We did not stratify in our Phase III trial for (indiscernible) and our competitors did. So far in our subgroup, admittedly the subgroup which could be analyzed for the MET high, we had seen concurrent in advantage for treatment arm for PFS and OS, but that is a sub-analysis and it should be taken just as such and nothing more.

Where instead we don’t have a sub-analysis and we cannot compare the trials is additional endpoints, because we did disclose that in our trial, we had a substantial benefit in the MARQUEE trial advantaging PFS treatment arm, and we will need to wait the data from this other trial that just completed to see if there was there as well a sign of efficacy which compares to the final efficacy we achieved.

Also, the third piece of info that we are looking for to understand from this other trial is going to be what happens in the subset of EGFR mutant. For those, we still don’t have data from the EGFR mutant, and we are going to be very eager to draw any comparison from the data we will receive once our—once we have the events, and whatever data might emerge from the other trial.

So I’m saying we maintain and we have never changed this position – the transfer alone from one tumor type to another is limited; however, we also are very interested and (indiscernible) be to learn more about other people’s experience in the same tumor setting.

Joel Sendek – Stifel

Okay, thanks Paolo. Real quick, Brian – are we going to get any data from 092 or 087 at AACR that’s new?

Brian Schwartz

Not at AACR, Joel, but we’re targeting the second half of next year to put out new preclinical and clinical together.

Joel Sendek – Stifel

Second half of next year?

Brian Schwartz

Oh – this year, sorry.

Joel Sendek – Stifel

Okay, great.

Brian Schwartz

Second half of ’14 – sorry.

Joel Sendek – Stifel

Got it. All right, thanks a lot.

Paolo Pucci

And Joel, for 092, it will be (indiscernible) because there is three dose regimens that have been employed, so there is continuous dosing that has an ex-patient, then there is a pulsating dose – one week off, one week on, and then the dosage regimen which are now also experimented, which is loading dose—drug holiday loading dose, so shut down the target hard, let the system recover, and shut it hard again. So it’s going to be quite interesting from the scientific point of view.

Joel Sendek – Stifel

Okay, thank you.

Operator

Thank you. Our next question will come from the line of Howard Liang from Leerink. Your line is open.

Howard Liang – Leerink Swann

Hi, thanks very much. To follow up on the Roche study, I guess, can you talk about whether the assessment of MET status, how—is it the same in terms of the level that was deemed to be MET high between your study and the Roche study?

Paolo Pucci

So I would say what we said in the past, Howard, that we selected as MET high patients those that had a stain of 50% or higher and score 2-plus. What we then also said and that I can say, and I think that appeared to be similar to what was done by other companies, what we also had said relative to the analysis of the MARQUEE subset, that we are analyze only the subset that did meet strictly the scientific parameters of the (indiscernible), which means they had to have been within the 90 day stability window. So that—and that, I don’t know how it compares, but in our experience anything outside that 90-day stability window should be treated with caution.

The other comparisons, I cannot really draw, so—but I’ll let Brian comment further.

I just want to disclose one bias that I have. I have not been in favor of discussing MET in the context of MET positive or negative. In my personal opinion and based on what I’ve learned in other therapeutic (indiscernible) where scoring has changed dramatically over the years – take hypertension, take lipid treatment, in my preference, personal preference, I rather talk about MET high and MET low, and I think that over time we will learn—we might learn that that makes a difference and that we need that flexibility rather than the black and white MET positive or MET negative point of view.

But as I say, it’s a matter of point of view, and I am not the scientist in the room and you should not take as a scientific statement the one I just made. But Brian is more of a scientist than me, so he may make some statement that is more relevant.

Brian Schwartz

The only two things, Howard, I just want to add is one thing is that even though we use the antibody, the same antibody, each tumor, you need to optimize the scoring method, the staining time, the reading, sort of your standard set you read against, and there are some differences between tumor types – not huge, but there are some differences between tumor types.

The second thing is we don’t really know exactly how close to the initiation of MetMAb therapy the tissue was taken. We are trying our hardest to understand the timing of the tissue, which may or may not play a role, but these are all hypotheses generating things that we need to go through. In HCC inherently, because the disease is so aggressive, the time between biopsy and patient coming onto the tivantinib therapy is much shorter than most other therapies.

Howard Liang – Leerink Swann

Okay, great. And then on the Phase III trial, METIV HCC, I think I heard—did you say that you have the data in 2016, or completion on your own in 2016? Maybe you can talk about how your innovation and the progress will be, and also whether there’s interim analyses or any dynamic site adjustment built in.

Paolo Pucci

I will let Brian comment a little bit about the interim. We are at this point in time targeting last patient in (indiscernible) ’16, and there is a number of actions of course to achieve at least that, which are being coordinated with our partner and are being discussed right now. So more than that, we can’t say. We have gained quite a bit of experience relative to (indiscernible) failure rates and we are beginning to become more confident about that moving eventually in the right direction rather than otherwise.

As far as the interim analysis, Brian, yes there is an interim analysis.

Brian Schwartz

So the interim analysis for this trial, which was agreed upon by FDA and scientific advisor, the MEA, will occur after about 60, 65% of the predetermined events have actually taken place, Howard, and it’s only an efficacy look at that data. There is no futility boundary, even though the DMC will look at safety on an ongoing basis at every meeting which they normally have approximately one to three times per year, depending on their request. So that—it is anticipated that the interim analysis, it’s difficult to predict exactly when it will occur, but it probably will occur close to completion of accrual.

Howard Liang – Leerink Swann

Okay. And can I just ask one question on the—I think it’s 092, the AKT inhibitor study that you said you have seen the response. Can you just kind of describe the lymphoma, type of lymphoma and whether the response was durable?

Brian Schwartz

So it was a durable response. Heavily pretreated patient. Patient did not receive an inhibitor of the pathway, a PI3 kinase or other inhibitor, but had received multiple prior therapies. It was a small lymphocytic leukemia patient with definitely upregulated pathway. We were able to show both visible tumor regression as well as pathway inhibition.

Howard Liang – Leerink Swann

Thanks very much.

Operator

Thank you. Our next question will come from the line of Adnan Butt from RBC Capital Markets. Your line is open.

Adnan Butt – RBC Capital Markets

Good morning. So following along the same line, when this year might you be able to update us on time lines for the pivotal program in the western patients?

Paolo Pucci

In the western patients, probably not in the second, maybe in the third quarter because there are a couple of important countries that are just now clearing the latest amendment and getting in line, and we need to see how those countries start because those countries could decisively move the needle on that. So the circumstances are that some important countries have started early in the process and other ones have had a little bit more challenge to restart obviously because there is a baseline that wasn’t exactly optimal of start, though the start was very encouraging, and then there are some other countries that are coming in line fresh without having had any other experience, so those are easier to move forward speedily. So we need a little bit of time, but before year-end for sure we will provide an update and if we have it before then, we will provide it before then.

Adnan Butt – RBC Capital Markets

Okay. And then on 092, at this time do you foresee any specific expansion cohorts if that were to move forward from the tumor type or expression standpoint, and then secondly for hyperglycemia, how is that being managed at this time?

Brian Schwartz

So let me start with the second one. The hyperglycemia, there’s some very nice guidelines and we’ve worked with the investigator in order to manage it independent on the duration of therapy, so with the very high dose, loading dose is one way to manage it. Sometimes it’s watching and waiting; other times it’s addition of Metformin, and with more chronic use you do have to use anti-diabetic agents if they exceed a certain grade, as per the guidelines. There are some very nice guidelines for AKT inhibitors and we’re primarily following those.

Regarding the expansion cohort, we’re still completing a number of preclinical studies and have basically got tissue from almost all our patients who have entered the Phase I trial and hopefully will define the tumor types plus the molecular characterization that we’ll explore in the expanded cohort. So far, the patients that have had clinical benefit have been patients who have tumor types that are normally responsive to this type of—who have this pathway upregulated, so it’s lymphomas, it’s endometrial, it’s neuroendocrine, so those are the type of patients who probably much further define molecularly and then go after. But we haven’t finally decided where to go.

Adnan Butt – RBC Capital Markets

And the paradigm to manage hyperglycemia, that’s well accepted? That’s used by other AKT inhibitors, or is there something novel?

Brian Schwartz

It’s been used by the AKT. There was a nice paper from Toronto that came out last year which clearly describes the paradigm and the difference treatment options you’d use. The advantage of the loading dose or the shorter schedule is a lot of time, we don’t actually have to manage it because it comes back to normal. It goes up with dosing and then after a day, it comes down; and most patients are asymptomatic and able to get through it. So there are clear guidelines when you initiate therapy and when you don’t, and it really depends on the patient’s underlying status as well as how high the glucose and insulin change.

Adnan Butt – RBC Capital Markets

Thank you.

Operator

Thank you. Our next question will come from the line of Jason Zhang from Edison Investment Research. Your line is open.

Jason Zhang – Edison Investment Research

Thanks. Hi, two questions on 092. I heard you said toxicity of dermatitis before you talked about hyperglycemia. I just want to make sure that I heard it right.

Brian Schwartz

So there’s two other toxicities that have been noted with these—with other AKT inhibitors. The one is skin or dermatitis, different kinds of dermatological rashes which have been quite debilitating, and then stomatitis or mucositis, which has also occurred with these agents. We haven’t seen significant dermatitis or skin rashes or stomatitis without seeing a first change in blood sugar, so we’ve been able to preempt or been able to modify those before the significant toxicity comes through.

Jason Zhang – Edison Investment Research

Okay, that’s very helpful. Can you tell us how many patients have you dosed in this trial, and you mentioned 1 PR. Have you seen stable (indiscernible), particularly that you saw the tumor types?

Brian Schwartz

We don’t—you know, standard Phase I is pretty much—we’ve got three different sort of schedules that we’re looking at, and it’s about 20 per schedule, so we’re now on the third schedule so we’re around 50-odd patients.

Paolo Pucci

And most of the signs of efficacy have occurred in the second schedule, so the one week on, one week off. And the PR has occurred in that schedule as well in the schedule, one week on, one week off.

Jason Zhang – Edison Investment Research

Okay. Have you seen any stable diseases other than the PR?

Brian Schwartz

Yeah, we’ll present the whole data set later this year, Jason, but we’ve seen patients on for a relatively long time. We’ve got a number of patients with some degree of shrinkage, not formal PRs, so we’ve seen a wide range of clinical benefit. And as I said, most of that effect has been in the tumor types that one would expect, so lymphoma, neuroendocrine are the ones we’ve already disclosed.

Jason Zhang – Edison Investment Research

Okay, very good. Thank you.

Operator

Thank you. Our next question will come from the line Chad Messer from Needham & Company. Your line is open.

Paolo Pucci

Good morning, Chad. I think you’re on mute.

Operator

Mr. Messer, if you could please check your mute button? We’ll move along to the next question. Our next question will come from the line of Jonathan Eckard from Citi. Your line is open.

Jonathan Eckard – Citi

Thank you for taking the questions.

Paolo Pucci

You’re welcome, John.

Jonathan Eckard – Citi

First was on tivantinib and lung. Do you—are you going to require to see data in EGFR patients before making a strategic decision on what to do in that setting? And I ask because with the emergence of (indiscernible) inhibitors, I’m just trying to figure out how c-MET would fit into that subset of patients.

And then my second question is around 087, and I was just wondering if Brian might be able to give an overview, a profile of FGF 1, 2 and 3 inhibition and how 087 may differ from some of the other FGFRs in this clinic, and how that more specificity to 2 may be beneficial for either safety in certain cancers and/or—safety and/or efficacy of certain cancers.

Brian Schwartz

I think the first one, John, you hit the nail on the head – why we actually have to wait for time, because we have two sets of data and we actually know the EGFR mutant status of the patients in the trial for METIV, and you can basically—and we look at both—we have both activating and non-activating mutations. We also have a trial from Kyowa Hakko Kirin where they took patients and treated—this is an uncontrolled trial that they’ll present at ASCO where they took patients who had failed an EGFR inhibitor and of which half of them were T790 mutants and half weren’t. So we have these two sets of data, and we need to look at the totality of the EGFR data before we decide on the next steps. So you’re right – the T790 emergent mutations are going to be difficult to go after because the response rate is so much higher.

The second question around the FGFR, the drug we have – so you can basically put FGFR inhibitors into two buckets. The one is the ones that hit other targets, for example VEGF may be a little bit harder than they hit the FGFR target, and then the drugs that hit the FGFR (indiscernible) one hundred-fold of VEGF or similar type kinases. The advantage of our drug is that it was primarily discovered to work against FGFR 2 and then we also have 1 and 3 inhibition, so our primary target with the drug is FGFR. We do hit other kinases, but we hit a slightly different profile than, for example, dovitinib or brivanib or some of the other—or the new Clovis FGFR inhibitor, which have VEGF within a tenfold inhibition range. So the competition that we have is really the molecules that are very potent against FGFR first, for example the AstraZeneca for the (indiscernible) FGFR inhibitor that inhibits the FGFR family much more potently.

With regard to the target indications, they are specific: amplification of mutations for both 1, 2 and 3, and we see from our preclinical data that the best effect we get is the amplified cell line to FGFR 2 and the mutated cell line to FGFR 3.

Jonathan Eckard – Citi

That’s very helpful. I appreciate it. Thank you.

Operator

Thank you. As a reminder, ladies and gentlemen, if you have a question at this time, please press the star then the number one key on your touchtone telephone. Once again, if you have a question at this time, please press the star then the number one key on your touchtone telephone.

Our next question will come from the line of Vernon Bernardino from MLV & Company. Your line is open.

Vernon Bernardino – MLV & Co.

Hi, thanks for taking my question. You had mentioned in the METIV study that for—you were going to look at the findings from that for the Phase III design enrollment, who would be dependent on the screening and failure rate. Have you mentioned some initial findings that you may have? If not, what are the initial findings will you be looking for for the Phase III design?

Paolo Pucci

For METIV, the findings that I mentioned that would be ongoing is going to be simply the screen failure rate past Phase I that’s going to be fairly new science, because this is the first trial of this kind for non-small cell lung cancer program. The findings that we are still waiting to achieve is from our trial MARQUEE that’s a group of EGFR mutants where the data is not much yet to be looked at, and then in non-small cell for broader competitors, we are very interested to understand a little bit better the final results of the MetMAb trial because there might be some learning in there as well. And quite frankly, I think the general learning that we all have taken as a company as well as investors and scientific community, the bottom line is that second line of small cell lung cancer remains a very, very difficult indication and that is symbolized by the many failures, including ours, so far in that broad or even a narrower patient population. But there might be still narrow population where the data suggests that one could try. Fortunately, there was a success recently by an antibody combined with docetaxel, but there as well we need to see what the actual improvement (indiscernible) was.

I think and I hope that the regulatory authorities will take stock of that as well. It is becoming increasingly difficult to demonstrate PFS advantage in second line HCC and also small cell lung cancer. That’s a fact, and it applies to (indiscernible). It applies to everybody, and we are largely coming to a point that either there has to be some flexibility in the endpoints that are looked at for large trials in non-small cell lung cancer populations, or the population will have to be very carefully selected and the trial that just ran for Roche might suggest that they need to be selected even beyond the supply in molecule market.

So those are the learnings that we have yet to acquire to make certain decisions, and that applies to us and I think everybody else.

Vernon Bernardino – MLV & Co.

Okay. As a follow-up, I know that some of that will likely be related to what you see as far as overall survival and progression, but when do you think we may see some of those findings, or will it need to wait until perhaps the completion of the study?

Paolo Pucci

We are likely going to disclose what we might be able to about screen failure rate when and if we recalibrate our timeline for completion of the METIV trial. Some of the other findings, I really don’t know when we’re going to have mature data for the MARQUEE subset, the EGFR mutant, and I really don’t know when additional data from other companies will be available, so I can’t be more precise than that. Unfortunately, I don’t control the patients. Sorry.

Vernon Bernardino – MLV & Co.

Okay, thanks for taking my questions.

Operator

Thank you. Our next question will come from the line of George Zavoico from HC Wainwright. Your line is open.

George Zavoico – HC Wainwright

Hi, good morning everyone. A couple of hopefully quick questions. One, just something about basic biology regarding the c-MET and the receptor, the kinocyte growth factor receptor. MetMAb obviously is an extracellular receptor—anti-receptor antibody and tivantinib is a kinase inhibitor. Is there any evidence that neuronal constitutive activity of the kinase in the receptor that is not dependent on (indiscernible) growth factor binding that may explain perhaps lack of activity of the MetMAb?

Brian Schwartz

George, it’s Brian. How are you doing? There are a number of different theories around that regard, I think have been published by the group in Turin, but right now it’s all really hypothesis generation and no one really knows for sure. I think they put a paper together not so recently looking at the differences between MetMAb as a single arm versus a double arm versus different ways of activating the receptor, different types of mutations; but there’s multiple difference areas and no one really knows.

George Zavoico – HC Wainwright

Okay, to be determined later.

Brian Schwartz

Yeah.

George Zavoico – HC Wainwright

Very helpful. Quick question about 092 – you guys are known for developing non-competitive inhibitors. Is 092 the only non-competitive AKT inhibitor that’s out there? Is that one of the things that makes it distinctive from other AKTs?

Brian Schwartz

George, right now there are other—well, the one that was another allosteric type binder, the MKN, the Merck molecule, is sort of—the development has been slowed down. The other—there are other allosteric type binders either preclinically or in the clinic, and there are also ATP competitive ones, for example the one by GSK and Genentech. So there’s a mix of both competitive and non-competitive inhibitors out there at the moment.

George Zavoico – HC Wainwright

And apart from that, how do you distinguish 092 from some of the other allosteric inhibitors, then?

Brian Schwartz

I think it’s a selectivity profile. It’s relatively clean, very selective against the AKT family, and it’s behavior now in the clinic, it’s—maybe it’s the fact that it has more preference to one of the AKTs more than other ones. But it appears to be behaving relatively—a little differently in the clinic.

George Zavoico – HC Wainwright

Okay, and a final quick question – clearly with your tivantinib program, the biomarker data has been transformative for you and it’s really—it’s truly led to the set of trials that you’re doing now. Are you looking at potential—I mean, (indiscernible) different FGFRs, for example, for the 087, or you’re going to look for FGF 2 high perhaps? And for the AKT, is there any biomarkers that you can use there to try and select more of—petition more responsive patients?

Brian Schwartz

We’re looking at all of them, George. We’re focusing—because the antibodies for some of these are a little bit more complex, we’re focusing on not only protein but we’re also looking at amplification and mutations, which it’s not much different from a lot of the other companies that they’re looking at as well.

George Zavoico – HC Wainwright

So these will be reported out with the Phase Ia data later this year?

Brian Schwartz

Correct.

George Zavoico – HC Wainwright

Okay. Thank you very much.

Operator

Thank you, and at this time I’m not showing any further questions. I’d now like to turn the call back to management for any closing remarks.

Bill Boni

Thank you everyone – this is Bill Boni again. If you need to follow up on this call for any reason today, please don’t hesitate to give me a call back. Again, thank you very much for attending the call. Take care. Bye bye.

Operator

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone have a great day.

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