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OncoGenex Pharmaceuticals (NASDAQ:OGXI)

Q1 2014 Earnings Call

April 30, 2014 4:30 pm ET

Executives

Susan Specht

Scott Daniel Cormack - Founder, Chief Executive Officer, President, Chief Financial Officer, Secretary, Treasurer and Director

Susan Wyrick - Principal Accounting Officer and Vice President of Finance

Cindy Jacobs - Chief Medical Officer and Executive Vice President

Analysts

Filippo Petti - William Blair & Company L.L.C., Research Division

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

Stephen D. Willey - Stifel, Nicolaus & Company, Incorporated, Research Division

Presentation

Operator

Good afternoon, ladies and gentlemen, and welcome to the OncoGenex First Quarter 2014 Financial Results Conference Call. My name is Surea.

At this time, I would like to turn the call over to Susan Specht, Senior Director, Investor Relations with OncoGenex Pharmaceuticals. Please go ahead, ma'am.

Susan Specht

Thank you, and thanks, everyone, for joining us. With me today from OncoGenex are Scott Cormack, Chief Executive Officer; and Susan Wyrick, VP of Finance. Also joining me on the call are Cindy Jacobs, Chief Medical Officer; and Jaime Welch, VP of Marketing and Corporate Communications.

Before we begin, I'd like to remind everyone that today's conference call contains forward-looking statements based on current expectations. These statements are only predictions and actual results may vary materially from those projected. Please refer to OncoGenex's documents filed with the SEC concerning factors that could affect the company, copies of which are available on the website.

I'll now turn the call over to Scott.

Scott Daniel Cormack

Thank you, Susan. Good afternoon, and thank you for joining us. Earlier today, we announced our first quarter 2014 financial results, and a copy of the press release can be found on our website.

Since most of you on today's call joined us earlier this week to discuss results from our Phase III SYNERGY trial, we will keep our prepared remarks brief to make sure we have an opportunity to address any additional questions you may have today.

As you know, on Monday, we announced that top line survival results in the Phase III SYNERGY trial indicate the addition of custirsen to standard first-line dose attacks on prednisone therapy did not consistently improve overall survival. The adverse events observed were similar to custirsen's known adverse event profile. The results of the SYNERGY trial are unexpected, given the large amount of preclinical and clinical evidence confirming custirsen's ability to suppress the cancer-protective protein, clusterin, and for long overall survival in CRPC patients. OncoGenex and Teva are performing a thorough analysis of the data to understand the potential factors that may have contributed to the results.

I want to reiterate that we remain strong in our belief that targeting mechanisms and treatment resistance is a critical path forward in the fight against cancer, and we continue to actively pursue this approach through the ongoing development of custirsen and our proprietary candidate targeting Hsp27, apatorsen.

Before I turn things over to Susan for a review of our financials, I'd like to review our anticipated milestones for both custirsen and apatorsen. Our custirsen Phase III AFFINITY trial is designed to evaluate the potential survival benefit of custirsen in combination with cabazitaxel, a second-line chemotherapy, in approximately 630 men with metastatic CRPC. Patient enrollment to the AFFINITY trial began in August 2012, and we currently expect to complete enrollment by the end of 2014.

We also recently announced that the FDA has granted Fast Track designation for custirsen in the AFFINITY trial. As we stated on our SYNERGY results call on Monday, clusterin is more heavily expressed as a reaction to treatment. Therefore, custirsen may have increased benefit in more heavily treated patients like patients in both the AFFINITY and ENSPIRIT trials that are designed to evaluate patients in a second-line treatment setting. Therefore, we believe the AFFINITY trial is extremely important for patients for whom life prolonging treatments are limited after they've developed resistance to docetaxel-based therapies.

Our custirsen Phase III ENSPIRIT trial is also in a second-line setting and is ongoing. This international Phase III trial is designed to evaluate the potential of custirsen to improve survival outcomes in patients with locally advanced or metastatic non-small cell lung cancer, who have progressed after initial chemotherapy treatment. Patients are being randomized to receive second-line standard of care docetaxel treatment, with or without custirsen therapy. Importantly, we expect the first interim futility analysis for ENSPIRIT before the end of this year.

With regards to our proprietary program, apatorsen is currently being evaluated in a total of 7 Phase II clinical trials in bladder, lung, pancreatic and prostate cancers. We look forward to sharing with you results from our randomized Phase II Borealis-1 trial of apatorsen in the treatment of advanced bladder cancer in the second half of this year.

I would now like to turn the call over to Susan, for a review of our first quarter 2014 financial results. Susan?

Susan Wyrick

Thanks, Scott. We ended the first quarter of 2014 with approximately $37.6 million in cash, cash equivalents and short-term investments. We continue to believe that we have sufficient operating capital to fund our currently planned operations beyond the first quarter of 2015 and through the expected release of final results from the Borealis-1 trial and through the completion of enrollment in the AFFINITY and Spruce clinical trials in the second half of 2014.

Revenue for the first quarter of 2014 increased to $11.7 million compared with $5.1 million in the same period in 2013. The increase in 2014 as compared to 2013, was due to an increase in revenue earned through our strategic collaboration with Teva, as a result of patient enrollment and treatment in the AFFINITY trial.

Total operating expenses for the first quarter of 2014 were $19.7 million compared with $13.4 million in the same period in 2013. The increase in the first quarter of 2014, as compared to the first quarter of 2013 was predominantly a result of higher clinical trial expenses associated with patient enrollment and treatments in the AFFINITY trial and the apatorsen investigator-sponsored trial.

Net loss for the first quarter of 2014 was $8.6 million or $0.59 per diluted common share. Comparatively, net loss for the first quarter of 2013 was $6.7 million or $0.46 per diluted common share. The net loss for the first quarter of 2014 included a noncash loss on revaluation of our warrant liability of $721,000, compared with a noncash gain of $1.4 million in the first quarter of 2013.

I will now turn the call back over to Scott for closing remarks.

Scott Daniel Cormack

Thanks, Susan. In conclusion, we continue to believe that our approach of targeting proteins that contribute to treatment resistance is critical in the fight against cancer.

There are several exciting near-term milestones and our focus throughout the coming months will be the following: to announce Borealis-1 results in the second half of this year; to complete the first interim futility analysis for ENSPIRIT; to complete enrollment of the AFFINITY trial of custirsen in second-line prostate cancer; and to support enrollment efforts of the 6 ongoing Phase II trials of apatorsen in 4 tumor types, including the completion of enrollment in the apatorsen Spruce trial in non-small cell lung cancer.

We look forward to sharing more with you as these programs continue to advance. Thank you, again, for joining us today.

And at this time, I'd like to invite the operator to open the line for questions.

Question-and-Answer Session

Operator

[Operator Instructions] And I'm showing our first question comes from the line of Katherine Xu of William Blair.

Filippo Petti - William Blair & Company L.L.C., Research Division

This is Fil, calling for Katherine. Just real quick, just wanted to get some additional thoughts on the collaboration agreement with Teva. Is there any type of provision at all in the agreement that would allow them to reassess the collaboration with custirsen following the results of the SYNERGY study?

Scott Daniel Cormack

Fil, so with regards to the relationship with Teva, as you know, we've had a very strong relationship with Teva since 2009 as we initiated the Phase III trials. And with regards to the relationship and the interaction between the SYNERGY trial and the other 2 trials, as you may recall from previous discussions that we've had, there are a couple of provisions that would allow Teva to reconsider the other opportunities when they come down to basically safety and patent estate matters. Those obviously are not related to the SYNERGY results that we're seeing presently and so really don't affect the ongoing AFFINITY and ENSPIRIT collaborations.

Filippo Petti - William Blair & Company L.L.C., Research Division

That's great. Appreciate the color on that. And then, real quick, turning to AFFINITY. I know you guys haven't built in an interim analysis there, is there a thought maybe that you would reassess the protocol there? Maybe incorporate one in to the study or just leave as is waiting for the results to come out perhaps later next year?

Scott Daniel Cormack

Fil, I'm going to let Cindy Jacobs, our CMO, take the question.

Cindy Jacobs

Basically, there is one interim futility analysis that has been designed in the study, and so we would obviously have that interim that has not occurred yet.

Filippo Petti - William Blair & Company L.L.C., Research Division

Okay. I appreciate that. And then lastly, just in terms of apatorsen here. I know you said you're going to continue -- we're looking for Borealis-1 results. Any discussions potentially with partners regarding the asset or is this kind of just waiting to see what the initial results come from the Phase II before discussing potential partnerships?

Scott Daniel Cormack

Right. Thanks for that question. What we've done with the apatorsen program and partnering is typical to what we've done historically with our assets and that is to continuously keep up-to-date potential partners as we advance the programs through clinical strategies. And the intent of that is to obviously ensure that they remain aware of all the data as it matures. And that's kind of been the approach for the last couple of years with respect to apatorsen. At this point, I think the focus continues to be on generating data and more specifically with the Borealis-1 data, in regards to future collaborations. And I think in the past, we have discussed a lot of the partnering strategy will be determined off of what we do with custirsen and how it shapes out. And then, also with regards to the independent Phase II trials that are being run with that program, you can imagine that if you decide to advance into a single Phase III trial and a single indication, that's something that's recently tangible to bite-off as a company. But if you see success and you decide you want to advance in all 7 of these randomized Phase II [ph] pursuits, that's a pretty big bite of the apple. So if the drug got -- demonstrates that kind of activity, then I think we'd have to be looking at partnering, just because the magnitude of the opportunity that apatorsen presents. I'll also go on to say that the apatorsen program is quite unique in that although we're doing 7 randomized Phase IIs in 4 indications, that could actually extend even further. So if you see positive indications off these first trials, the ability to further expand that is quite extensive and we may even want to consider diversifying beyond what we've said seen, if you see early successes and again, that may justify going down partnerships. But at this point, the focus is generating the randomized Phase II data set at least in Borealis-1 and then consider the options from there.

Operator

And our next question comes from the line of Chad Messer of Needham.

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

First, in ENSPIRIT, it's been a little while, I think, since I've looked at this, can you remind me what the interim analyses are? I know this is the first one's of futility. Have you told us what kind of cutoffs you have for that in terms of statistics? And what the other interims might look like.

Scott Daniel Cormack

Chad, again, thanks a lot for the question this afternoon. Again, I'm going to turn that question over to Cindy Jacobs, our Chief Medical Officer, and she can take you through the details of the futility.

Cindy Jacobs

There are actually 2 analyses, 1 early and 1 later. The early one involves a 2-step kind of analysis. One, looking at PFS and showing a clinical benefit. And then if -- the second one would be, if that didn't show a benefit then it would be an early overall survival futility analysis. The second one is a lot later in the trial, which would be then just a survival futility analysis.

Operator

[Operator Instructions] Our next question comes from the line of Stephen Willey of Stifel.

Stephen D. Willey - Stifel, Nicolaus & Company, Incorporated, Research Division

Just a quick question regarding meeting milestones out of the Teva agreement. And I'm just wondering, I guess, how much of those back-ended milestones are now eligible based on the results of the next 2 studies? And I guess can you earn all that was part of the original collaboration now that SYNERGY has failed or has some of the -- kind of some of those milestones [ph] now kind of got away?

Scott Daniel Cormack

Right. The -- so just I may paraphrase or restate your question, because your line was a little bit scratchy, so people may not have caught that. I believe your question was specifically in regards to milestone payments and with the results of the SYNERGY trial, whether any of those may be in potential state of being foregone given the results. So with regards to that question, there are milestones that will be attached to the clinical strategies in the development plans, so some of those now would be going away, but there are specific milestones that do relate to the other clinical strategies, as well as commercial potential and that specifically relates to sales efforts and so on. So it's not obviously the entire totality of the milestone payments or obviously the royalty rates that would then flow from that.

Operator

Thank you. And at this time, I'm showing no further questions in the queue. I would like to turn the call back over to Scott, the CEO, for any further closing remarks.

Scott Daniel Cormack

Thank you. And again, just in closing, we would to close off today's call by restating the milestones that we have in 2014. There remain some very strong activities as we go into the second half of the year, as we've gone through the conference call. And again, I wanted to thank everybody for participating on this call, first call this afternoon, and we do look forward to providing you with the next update. Thank you.

Operator

Thank you, ladies and gentlemen. This concludes our program. You may now disconnect. Everyone, have a great day.

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