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Progenics Pharmaceuticals, Inc. (NASDAQ:PGNX)

Q4 2013 Earnings Conference Call

March 13, 2014 8:30 AM ET

Executives

Kathleen Fredriksen – Director of Corporate Development

Mark R. Baker – Chief Executive Officer

Angelo Lovallo – Vice President, Finance and Treasurer

Analysts

Brian J. Klein – Stifel, Nicolaus & Co., Inc.

Jonathan M. Aschoff – Brean Capital LLC

Operator

Good day, ladies and gentlemen and welcome to the Progenics Pharmaceuticals Fourth Quarter 2013 Results 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 follow at that time. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, Kathleen Fredriksen. You may begin.

Kathleen Fredriksen

Thank you, Nicole. On today's call, we will review fourth quarter and year-end 2013 financial results and provide a business update. Speaking on the call today are Mark Baker, CEO and Angelo Lovallo, Vice President, Finance and Treasurer.

Before we begin, I will remind you that remarks made on this call that are not historical in nature may be forward-looking statements and are subject to a number of risks and uncertainties. Our actual results may differ materially. Such remarks may include, but are not limited to do, those involving regulatory actions, clinical, developmental and other matters relating to PSMA ADC; Relistor and our other product candidates, our business and commercialization strategies and expectations of future growth, revenues and assessments of our competitive position. Please see our Form 10-K and other filings with the U.S. Securities and Exchange Commission for additional information on the risks that could cause our actual results to differ. As a reminder, statements we make today are as of March 13 only.

I will now turn the call over to Chief Executive Officer, Mark Baker. Mark?

Mark R. Baker

Thank you, Kathleen, and good morning to everybody joining us today. Let’s review our recent accomplishments in meeting the drug development milestones we have laid out previously. As promised, we presented positive data from two Phase II trials at ASCO GU in January. Interim data from the chemo-experienced cohort of the Phase II trial of PSMA ADC confirmed the safety and efficacy of a 2.3 milligrams per kilograms dose.

We saw reductions in CTCs of greater than 50% in more that 70% of the patients treated and there was a direct correlation between PSMA expression and response to PSMA ADC, a hypothesis long held by us asset projects and now confirmed by this clinical evidence. Our PSMA ADC presentation was selected by ASCO to be showcased in a video interview of Dr. Daniel Petrylak by Oncology Times and AudioMedica.com.

Dr. Petrylak, the lead investigator of the trial, elaborated on the positive data and reiterated Progenics' intention to use this treatment in a chemo-naive setting, where our ADC technology could provide benefit to an even broader population of men with prostate cancer. We anticipate completing enrollments of the chemotherapy-naive cohort in the first half of this year and we are targeting the fall for initial data presentation at a medical meeting.

Turning now to our diagnostic imaging agent 1404, we reported positive interim data from the Phase II trial at ASCO GU. This was a particularly rigorous test 1404 was compared to the gold standard of histopathology of the prostate gland removed from the patient during prostatectomy. In its first large-scale use, 1404 proved more accurate than MRI. We currently are preparing for an end of Phase II meeting with FDA to review the development plan for 1404.

On the Azedra front, we are resuming the registrational trial that is being conducted under a SPA. Patient enrollment will continue once we have established the drug supply, which we will be – anticipate will be early next year. Azedra is a promising therapeutic agent for the treatment of pheochromocytoma and paraganglioma, two orphan oncology indications for which there currently are no FDA approved medications.

Next, I'm excited to tell you about our plans for MIP-1095, a PSMA-targeted small molecule radiopharmaceutical originally developed by Molecular Insight. The prestigious Memorial Sloan Kettering Cancer Center has agreed to serve as the principal study site for Phase I trial.

Compelling patient data from the compassionate use in Germany of MIP-1095 in men with prostate cancer led us to decide to move this program forward. Use of the drug in this instance was not part of any clinical study, so I recommend you keep that in mind when you take a look at the data. You can find a link to the paper on our website.

On the Relistor front, FDA postponed due to substantial scheduling conflicts, an advisory committee planned for March to consider the use of Relistor Subcu in OIC in patients with chronic pain. FDA indicated at the time they canceled that meeting that they intend to reschedule the committee meeting for the near future.

Lastly, we have been fortunate to attract to our Board of Directors another talented and highly knowledgeable advisor. Dr Karen Ferrante brings with her more than two decades of experience in oncology and clinical R&D, most recently at Millennium and Takeda. Her expertise supports our strategic focus on late stage oncology products.

With that, I turn the call over to Angelo for a discussion of our financial results from the past quarter and year.

Angelo Lovallo

Thanks, Mark. You can review details of our financials in the press release we issued this morning and in our 10-K, but I will highlight some key points for you now. Net loss for the quarter was $8.6 million or $0.14 diluted per share compared to a net loss of $0.3 million or $0.01 diluted per share in the 2012 period. The increased loss was primarily due to lower collaboration revenue and higher clinical trial expenses, but partially offset by higher Relistor royalty revenue. Net loss for the year was $42.6 million or $0.76 diluted per share compared to $35.4 million or $1.2 diluted per share in 2012.

Fourth quarter and full year R&D expenses increased by $1.8 million and $1.6 million respectively, compared to the 2012 periods. This was largely the result of advancing clinical programs in support of PSMA ADC and 1404. These increases were partially offset in the full year period by reduced compensation expenses.

Fourth quarter revenue totaled $3 million, down from $8.9 million in 2012, primarily due to prior year partnering transactions. Full year 2013 revenue was $7.9 million, down from $14 million in the prior year. Royalty income for the quarter was $2.9 million compared to $0.8 million in the fourth quarter of 2012.

Royalty income for the year was $5.9 million compared to $5 million for 2012. Royalty income is based primarily on Relistor net sales as reported by Salix. Relistor global net sales increased 296% from the third quarter and 263% in the prior year period. Global gross sales increased 108% as compared to the third quarter, an increase of 240% versus fourth quarter 2012.

During the first quarter of this year, we successfully completed a public offering of 8.75 million shares of common stock at $4.60 per share, which yielded net proceeds of approximately $37.5 million. We ended the year with cash, cash equivalents and securities of $68.1 million, a decrease of $9.7 million for the quarter and an increase of $6 million in 2012 year end.

Thank you for your attention. Now, we’ll take your questions. Operator?

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Our first question comes from the line of Brian Klein of Stifel. Your line is now open.

Brian J. Klein – Stifel, Nicolaus & Co., Inc.

Hi, thanks for taking my questions today.

Mark R. Baker

Thank you.

Brian J. Klein – Stifel, Nicolaus & Co., Inc.

Thanks, so first, maybe starting with Relistor. Mark, you mentioned the near future, can you give us a little bit more granularity there? Are you expecting another Ad Com scheduled before, let’s say, the summer? Or do you think this will be a second half of the year event?

Mark R. Baker

Yes, we don’t have a new date from the FDA. We do see the FDA working to reschedule. And so I am anticipating that it will be before the second half of the year. But I can’t really speculate on that until we have a confirmation from the FDA.

Brian J. Klein – Stifel, Nicolaus & Co., Inc.

Great. And then in terms of ongoing clinical development, is anything happening right now with the oral formulation?

Mark R. Baker

No, we are waiting to get past this concern that has been raised by the FDA with respect to the potential for cardiovascular risk associated with the use of mu-opioid-receptor antagonists such as Relistor. And I think our feeling, together with Salix, is that needs to get resolved. And with that resolved, we would then discuss with the FDA our plans for the oral form.

As you know, we completed a Phase 3 trial of the oral formulation and it showed, I thought, excellent efficacy and a very good safety profile comparable to placebo in that trial. So we are anxious to move that ahead, but obviously, this has been an overhanging issue. The FDA is concerned about this risk. So I think we have to get past this Ad Com and then take the appropriate steps with the oral form.

Brian J. Klein – Stifel, Nicolaus & Co., Inc.

Okay, great. Thank you. Maybe moving on to the PSMA ADC program. Now that we have seen some of the data from the Phase 2, can you give us your plans for future development?

Mark R. Baker

Yes, I think that – we were very pleased by the efficacy that we saw in the PSMA ADC trial. In particular, I have been focusing on circulating tumor cells and reductions or so-called conversions circulating tumor cell numbers from unfavorable to favorable as an indicator of whether the drug will provide benefit to the patients. So, I was very pleased to see the CTC data that we presented at ASCO GU.

As you know, Brian, we have been in discussions with potential partners regarding this program for some time. There has been great interest in this program. So the one step that we're taking at this time is to speak to potential partners. And we would be open to partnering, particularly with a partner who brought commercial capabilities to PSMA ADC. And we are preparing for next stage of clinical trials, but we'll be influenced by the thinking of partners around those possibilities.

Brian J. Klein – Stifel, Nicolaus & Co., Inc.

Okay. Thanks. And then just lastly on Azedra, why do you think it's taking so long to get the supply and to get that trial restarted? You mentioned, you don't expect to start dosing patients until 2015. That seems like a lengthy amount of time to get that trial going. Can you give us a little bit more color there?

Mark R. Baker

Yes, you know Brian, I’ve been taking a deep dive in the radiopharmaceutical space because with the acquisition of Molecular Insight, we are making a substantial bet there. And if you are a student of radiopharmaceuticals as I am, you know that the problems that have hurt radiopharmaceuticals have been in the area of manufacturing and distribution.

So I wanted to make sure that we are getting that right. So we are spending the time to make sure that the manufacturing and the distribution that we put in place will work. The feedback that we received from KOLs who were part of the original Molecular Insight trial is that they've got the patients ready to go when we restart the trial. So we are feeling confident about our ability to enroll those additional patients.

But once we do that, we will be submitting – if the data is favorable, as we hope, we will be submitting for approval. And then we'll have to be in a commercial mode. So, this is the moment in which we are getting the commercial manufacturing into place. For me, it is critical that we do that properly. As you know, Brian, my goal is always to under promise and over perform. And I'm hoping that will be the case here. But our guidance is that we will get the manufacturing up by the end of the year.

Brian J. Klein – Stifel, Nicolaus & Co., Inc.

Great. Thank you for taking my questions.

Mark R. Baker

Thanks, Brian.

Operator

Thank you. (Operator Instructions) Our next question comes from Jonathan

Aschoff of Brean Capital. Your line is now open.

Jonathan M. Aschoff – Brean Capital LLC

Thanks. Mark, I'm assuming that you guys were aware in real time of all this German data coming out over the past couple years. And I'm just wondering, was that pretty much instrumental in putting PSMA ADC more on the back burner? Because even if you just look at the PSA waterfall plots across the trials, as problematic as that is, it still is like, you get one dose of one, it seems to have a superior plot than several doses of the other.

Mark R. Baker

Yes. We have been aware of the data that was created through the compassionate use of the 1095 product in Germany and as I said earlier, that was an important decision for us in wanting to move 1095 ahead in the United States. It’s kind of an unusual circumstance, Jonathan, in that in the United States, this is a pre-IND candidate. We will be working to submit the IND for 1095 in the second half. But we do have this clinical data coming out of this compassionate use in Germany.

As I mentioned, I caution about over-reliance on that data. This is not data that was created in any clinical trial. So it hasn't been monitored. The work has been performed by an extraordinary group in Germany. So that is what is giving us the confidence to move ahead. This is an earlier stage opportunity. This drug does seem to have a big effect on PSA – the paper, there's a link to that paper on our site, shows that data. The treatment of prostate cancer is not just about PSA score reduction. And so I don't think there's a good comparison there between the data we see out of 1095 and the data we see out of the ADC.

They're two very different approaches. I think both of them can be highly efficacious in prostate cancer. We'll have to see clinical data from a rigorous clinical trial on 1095. But I'm hoping that we are able to come close to the PSA reductions that we are seeing in this compassionate use. I'm also hoping that we see good effect on circulating tumor cells. But we will have to await the results of our Phase I trial. So pleased to see that Mike Morris at Sloan Kettering will take the lead on that trial, and I know he's excited about moving the compound forward.

Jonathan M. Aschoff – Brean Capital LLC

So what have you learned regarding your Phase 1 to come with 1095? What have you learned from the German study when it comes to dosing interval?

Mark R. Baker

It's not a study, Jonathan.

Jonathan M. Aschoff – Brean Capital LLC

Right.

Mark R. Baker

It was – men, late stage prostate cancer patients being treated in Germany by a renowned the team and under German law and regulation, they were committed to use, when there was no other alternative, this drug to treat those patients. And the results in that, very end-stage population, were very intriguing to us. But again, I caution about over-reliance on that data, because it’s a different type of data than what we are used to seeing.

Jonathan M. Aschoff – Brean Capital LLC

No. I was asking, what did you learn in terms of where you are thinking of dosing your Phase I?

Mark R. Baker

Thinking of dosing, meaning what dose level? Or…

Jonathan M. Aschoff – Brean Capital LLC

Yes. Dosing? Dosing interval?

Mark R. Baker

Yes. We will be working that out with Mike Morris and our internal team. We will be putting that in front of the FDA in our filings. And so I think it’s a little soon for us to talk about the dosing level that we would use.

Jonathan M. Aschoff – Brean Capital LLC

How is that – how you compare both the imaging agents, the 1095 one as well as the 1404? Or do you just take both forward without sort of sidelining one of them?

Mark R. Baker

1095 has the potential to be a so-called theranostic, where you would image and treat using the same targeting molecule. So that is an intriguing possibility. I think with 1404, we similarly have been able to target disease. And of course, that’s a much later stage asset ready to go into Phase III. So I think in terms of getting to the marketplace, 1404 is much more advanced and showed excellent results, I thought, in the data that we presented at ASCO GU, more accurate than MRI.

And we see the prostate cancer space moving to a space where the potential to image the disease rather than to have to move quickly to remove the prostate, for example, could provide great benefit to patients and to society overall. At the end of the day, will the 1095 targeting molecule be a better imaging agent than the 1404? We can’t speculate today, but I think both have great promise.

Jonathan M. Aschoff – Brean Capital LLC

All right. Thank you, Mark.

Operator

Thank you. Our next question comes from the line of Thomas Maddy [ph], Private Investor. Your line is now open.

Unidentified Analyst

Hi, good morning Mark, just one question. The Progenics website shows, three poster presentations coming up in April. Can you describe what data will be presented?

Mark R. Baker

Which ones are you looking at Thomas?

Unidentified Analyst

There is one for AACR on April 6, PSMA ADC poster presentation, Sunday, April 6 at AACR.

Mark R. Baker

Right. So we have a program of presenting data at upcoming conferences. I think that the data that's coming out in the conferences that are coming up in April will provide some additional information around the trials that we first presented at ASCO GU. So I think that those presentations – we will give some more insights into what we accomplished in our clinical trials of the PSMA ADC and the 1404.

Unidentified Analyst

Great, thank you.

Operator

Thank you. (Operator Instructions) And I'm showing no further questions at this time. I would like to hand the call back over to Mark Baker for any closing remarks.

Mark R. Baker

Thank you, operator. Throughout the last year, you've seen us acquire and then integrate exciting oncology assets. We have advanced studies of multiple late stage product candidates. And you have seen us fortify our Senior Management team and Board of Directors.

We have made good progress in clinical programs while reducing headcount, compensation, facilities and other overhead. Medical research is a costly pursuit of course, but the rewards can be great for patients, for shareholders and for the medical community at large. As always, we appreciate your time and attention and your continued support of our mission. Operator, this brings us to the end of today's call. Thank you very much.

Operator

Ladies and gentlemen, thanks for participating in today's conference. This does conclude today's program. You may all disconnect. Have a great day, everyone.

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