Oncothyreon's CEO Discusses Q1 2014 Results - Earnings Call Transcript

May. 1.14 | About: Cascadian Therapeutics, (CASC)

Oncothyreon Inc. (ONTY) Q1 2014 Earnings Conference Call May 1, 2014 4:30 PM ET

Executives

Julie Rathbun – Investor Relations

Julie M. Eastland – Chief Financial Officer and Vice President, Corporate Development

Robert L. Kirkman – President and Chief Executive Officer

Analysts

Joel D. Sendek – Stifel, Nicolaus & Co., Inc.

Mara Goldstein – Cantor Fitzgerald Securities

Operator

Good day, ladies and gentlemen, and welcome to the Oncothyreon First Quarter 2014 Financial 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, Ms. Julie Rathbun of Investor Relations. You may begin.

Julie Rathbun

Thank you. Good afternoon, and welcome to Oncothyreon's financial results conference call for the first quarter of 2014. With us this afternoon are Dr. Robert Kirkman, Oncothyreon's President and CEO; and Julie Eastland, Oncothyreon's Chief Financial Officer and Vice President, Corporate Development.

In the first part of the call, Ms. Eastland will review Oncothyreon's financial results for the first quarter of 2014. After that, Dr. Kirkman will review Oncothyreon's corporate and pipeline highlights and discuss upcoming milestones. We’ll then open the call to questions.

Before I turn the call over to Ms. Eastland, let me first remind you that during this call, we will be making a number of forward-looking statements. These forward-looking statements include Oncothyreon's expectations regarding the use and adequacy of cash resources, future expenses, the clinical development of tecemotide, the commercial outlook for tecemotide, and clinical development activities for ONT-380, and ONT-10.

Forward-looking statements involve risks and uncertainties related to Oncothyreon's business and the general economic environment, many beyond the company's control. These risks, uncertainties and other factors could cause Oncothyreon's actual results to differ materially from those projected in forward-looking statements.

For a detailed description of these risks and uncertainties, you are encouraged to review our annual report on Form 10-K filed with the SEC and other official corporate documents filed with the securities regulators in the United States on EDGAR and in Canada on SEDAR.

I would now like to introduce Julie Eastland, Oncothyreon's Chief Financial Officer and Vice President, Corporate Development. Julie?

Julie M. Eastland

Thank you, Julie. As reported in our press release today, Oncothyreon’s loss from operations was $7.2 million for the first quarter ended March 31, 2014 compared with $8 million for the first quarter ended March 31, 2013. The decrease in loss from operations was primarily due to $1 million decrease in research and development expenses. This was partially offset by slight increases in general and administrative expenses.

The net loss for the quarter ended March 31, 2014 was $9.6 million or $0.14 per basic and diluted share as compared with a net loss of $8.3 million or $0.14 per basic and diluted share for the year earlier. The increase in net loss was primarily attributable to the difference in the change in fair value of the warrant liability with $2.5 million in non-cash expense for the three months ended March 31, 2014 compared with $0.3 million in non-cash expense for the prior year period. In addition, the increase in loss was also due to a slight increase in general and administrative expenses that was offset by a decrease in R&D expenses.

As of March 31, 2014, Oncothyreon's cash, cash equivalents and investments were $64.3 million compared to $72.6 million at December 31, 2013, a decrease of $8.3 million or 11.4%. The decrease was primarily attributable to $8.0 million of cash used in operations during the quarter ended March 31, 2014.

Before I turn the call over to Bob, I’d like to provide financial guidance for the remainder of 2014 which is unchanged from the guidance we provided in our year-end calls. Please note that we believe this guidance to be correct as of today, but that circumstances may change, and we assume no obligation to update the guidance.

Oncothyreon currently expects operating expenses in 2014 to be lower than 2013, which included a one-time upfront payment to Array. We currently expect cash used in operations in 2014 to be approximately $30 million to $33 million. As a result, Oncothyreon estimates that its existing cash, cash equivalents, and investments will be sufficient to fund operations for at least the next 12 months.

And this concludes the financial update. And let me turn now the presentation over to Oncothyreon’s President and CEO, Bob Kirkman. Bob?

Robert L. Kirkman

Thanks, Julie, and thanks to all of those listening for joining our call this afternoon. It has been just six weeks since our last update call. So my remarks today will be brief.

Nevertheless, in the short period there has been progress with each of our development programs that I would like to highlight today. First, as expected Merck Serono, the pharmaceutical division of Merck KGaA has begun enrolment in START2, a Phase 3 randomized trial tecemotide in 1000 patients with unrestectable Phase 3 non-small cell lung cancer who have received concurrent chemoradiation.

As previously discussed START2 is based on the results of the prior START trial, while the START trial did not meet the primary endpoint of improving overall survival in the overall patient population data from an exploratory analysis of a large predefined subgroup of patients who received tecemotide after concurrent chemoradiotherapy shows that these patients achieved a median overall survival of 30.8 months versus 20.6 months in patients treating with placebo.

START2 is designed to confirm these results in this specific patient population. Concurrent chemoradiation, a combination of chemotherapy and radiation developed at the same time is the current standard of care for most patients. We’re obviously pleased that START2 is underway and that Merck KGaA remains committed to this product candidate.

We would remind investors that STAR2 is entirely the financial responsibility of Merck KGaA under the terms of our license agreement, Oncothyreon is potentially entitled to milestone payments of up to $90 million and our royalty on that sales which ranges from mid-teens in U.S. and Canada to the high single-digits in the rest of the world.

As we’ve noted before, we believe that the results from START and Merck Serono’s decision to go forward with START2 provides significant validation of MUC1 is the target for immunotherapy and are supportive of our going forward with the development of ONT-10 are follow-on therapeutic vaccine against this target.

ONT-10 is designed to be a more broadly immunogenic vaccine and tecemotide producing an antibiotic response in addition to the cellular response seen with tecemotide. It also incorporates our novel proprietary adjuvant, PET-Lipid A, which we believe is more potent than the adjuvant included into tecemotide.

We have now enrolled 49 patients in the dose-escalation portion of our Phase 1 trial of ONT-10 and we’ll be presenting data from this portion of the trial at a poster session at ASCO in early June. We have selected a recommended dose for Phase 2 trials which we plan to test further in two expansion cohorts in our outgoing Phase 1 trial. One cohort will be in breast cancer and the other in ovarian cancer. We expect to begin enrollment in these two expansion cohorts shortly and you can also expect a more detailed further development plan for ONT-10 as part of our ASCO presentation.

Let me turn now to ONT-380 for small molecule inhibitor of HER2 that we’re developing under a collaboration agreement with Array BioPharma. ONT-380 has two characteristics which form the basis of our development plan. First it’s a very potent inhibitor of HER2, but not of the related target, EGFR. To our knowledge, ONT-380 is the only small molecule in clinical development that inhibits HER2 without inhibiting EGFR.

HER2 is a highly validated therapeutic target in breast cancer, but blocking EGFR is not thought to contribute to efficacy in this disease. However, blocking EGFR does cause significant toxicity, especially skin rash and diarrhea.

Secondly, ONT-380 has demonstrated significant activity in animal models of HER2-positive tumors implanted in the brain. Metastases to the central nervous system are a major unmet medical need in the treatment of HER2 positive breast cancer, with about one-third of women with metastatic breast cancer eventually developing brain metastases, and no currently available agents targeting HER2 effective in treating them.

Our development program for ONT-380 is designed to take advantage of both the potential for an improved tolerability profile and the potential activity in the CNS. We’re currently conducting two Phase 1B trials of ONT-380, both in combination with other agents. Both trials are actively enrolling patients.

The first trial is a combination trial with the antibody toxin conjugate Kadcyla also known as T-DM1. The trial is a dose escalation study and patients who have been previously treated with Herceptin and a taxane for metastatic breast cancer, the primary objective is to determine the maximum tolerated or recommended Phase 2 dose of ONT-380 in combination with the approved dose of Kadcyla.

We believe it’s particularly important to demonstrate that ONT-380 can be combined with T-DM1. T-DM1 is currently approved for the treatment of second-line metastatic breast cancer, but it’s likely to move to first-line over the next year or so. We currently plan to initiate a Phase 2 trial of ONT-380 in combination with T-DM1 late this year.

The second trial is a Phase 1B trial of ONT-380 in combination with Xeloda and/or Herceptin in patients who have been previously treated with Herceptin and Kadcyla for metastatic breast cancer. The trial is a dose escalation study again in which the primary objective is to determine the maximum tolerated or recommended Phase 2 – ONT-380 in combination with the approved dose of either Xeloda or Herceptin or both.

Both of these trials are designed to help us obtain preliminary evidence with respect to the activity of ONT-380 in the central nervous system. Patients with either asymptomatic and untreated or treated and stable central nervous system metastases from HER2 positive breast cancer are eligible for the dose escalation portions of both trials, while patients with CNS mets, which are either asymptomatic and untreated or progressive following local therapy, may be included in expansion cohorts in each trial once the recommended dose is determined. Each trial is expected to enroll approximately 50 patients.

In addition, the Dana-Farber Cancer Institute is currently conducting an investigator sponsored trial of ONT-380 in combination with Herceptin in patients with brain metastases from HER2 positive breast cancer. This trial, which has been ongoing since last September, is also expected to enroll up to 50 patients.

There are, therefore, three ongoing trials of ONT-380, each of which includes patients with brain metastases. From a combination of these trials, we would expect by the end of 2014 to know if ONT-380 is active in the brain and what further trials are justified to continue testing that hypothesis.

Finally today, we recently completed the transaction with Sentinel Oncology for components which target Chk-1. Intervention of this target has been shown to sensitize cells to the effect of DNA damaging agents and may also be affected as a single agent and certain tumor types. We believe Sentinel has very interesting set of components against this target. Under the agreement we’ve agreed to fund further lead optimization chemistry before selecting a candidate for DNA studies.

As our collaboration is just getting started I’m not yet in a position to give you guidance on our potential timing for initiation of clinical development. I expect the expenditure on this program this year is small and is included in our financial guidance. This collaboration with Sentinel is part of our ongoing effort to identify exciting drug development candidates to expand our pipeline. We believe it’s important for Oncothyreon to have multiple opportunities for success and we look forward to sharing more details about the Chk-1 program as we move forward.

Finally, as Julie has already reviewed, we continue to be in a solid financial position. Our use of cash in the first quarter was consistent with our guidance for the year and we continue to expect expenditures of between $30 million and $33 million in 2014.

As always, we very much appreciate the support of our shareholders. And operator, we’d now be happy to answer questions.

Question-and-Answer Session

Operator

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

Joel D. Sendek – Stifel, Nicolaus & Co., Inc.

Hi, thanks. Sorry about the noise.

Robert L. Kirkman

Joel, you’re breaking up. I’m afraid we can’t hear the question.

Joel D. Sendek – Stifel, Nicolaus & Co., Inc.

Wondering if you give some updated comments on enrollment of the Kadcyla trials.

Robert L. Kirkman

We are actively enrolling patients in these trials, the dose escalation trials, but we’re not planning to plan – update of our enrollment cohort by cohort. So other than to say they are enrolling fine I don’t have any further details at this point.

Joel D. Sendek – Stifel, Nicolaus & Co., Inc.

And initially you start the Phase 2 by the end of the year?

Robert L. Kirkman

We believe we’ll be able to start a Phase 2 and Kadcyla’s combination late this year, yes.

Joel D. Sendek – Stifel, Nicolaus & Co., Inc.

Thank you.

Operator

Thank you. (Operator Instructions) Our next question comes from line of Mara Goldstein with Cantor Fitzgerald. Your line is now open.

Mara Goldstein – Cantor Fitzgerald Securities

Thanks very much. Just a follow-up on the Kadcyla and I apologize if I missed this, but is that a multi-site trial or is that going to be a single-site trial?

Robert L. Kirkman

It’s a multi-site trial.

Mara Goldstein – Cantor Fitzgerald Securities

Okay. Are you able to share with us how many sites will be enrolling for that one?

Robert L. Kirkman

I don’t know the exact number, but it is more than five and less than 10.

Mara Goldstein – Cantor Fitzgerald Securities

Okay. Fair enough. Are you (indiscernible).

Robert L. Kirkman

No. We’re actually also opening that trial in Canada.

Mara Goldstein – Cantor Fitzgerald Securities

Okay. Thank you.

Operator

Thank you. (Operator Instructions) And I’m showing no further questions at this time. I’d like to hand the call back over to Mr. Bob Kirkman for any closing remarks.

Robert L. Kirkman

Thank you all very much for joining us this afternoon and we look forward to seeing some of you at ASCO for our presentation with respect to ONT-10 and our Annual Meeting, which is on the 6th of June. Thanks very much.

Operator

Ladies and gentleman, thank you for participating in today’s conference. This does conclude today’s program. You may all disconnect. Have a good day everyone.

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