Synta Pharmaceuticals (SNTA) Q2 2014 Results - Earnings Call Transcript

Aug. 6.14 | About: Synta Pharmaceuticals (SNTA)

Synta Pharmaceuticals (NASDAQ:SNTA)

Q2 2014 Earnings Call

August 06, 2014 10:00 am ET

Executives

Daniel Cole -

Keith R. Gollust - Executive Chairman of The Board, Chairman of Executive Committee, Member of Audit Committee and Member of Compensation Committee

Vojo Vukovic - Chief Medical Officer and Senior Vice President

Keith S. Ehrlich - Chief Financial Officer, Principal Accounting Officer and Vice President of Administration & Finance

Analysts

Joseph Pantginis - Roth Capital Partners, LLC, Research Division

Brian Klein - Stifel, Nicolaus & Company, Incorporated, Research Division

George B. Zavoico - MLV & Co LLC, Research Division

Nicholas Abbott - BMO Capital Markets U.S.

Robin Davison - Edison Investment Research Limited

Operator

Good day, and welcome to the Synta Pharmaceuticals Second Quarter 2014 Earnings Conference Call. Today's conference call is being recorded and webcast.

At this time, for opening remarks, I will turn the call over to Daniel Cole of Synta Pharmaceuticals. Please go ahead, sir.

Daniel Cole

Hello, and thank you, all, for taking the time to join us today. With me are: Keith Gollust, Chairman of the Board of Directors; Vojo Vukovic, Chief Medical Officer; and Keith Ehrlich, Chief Financial Officer.

This morning, we issued a press release that reported results for the second quarter 2014. This release can be found on our website at syntapharma.com.

Before we begin, I would like to point out that we will be making forward-looking statements based on our current intent, belief and expectations, which are subject to certain risks and uncertainties. Additional detail can be found in related SEC filings, also available through our website.

I will now turn the call over to Keith Gollust.

Keith R. Gollust

Thank you, Dan, and thank you, all, for joining us today. Obviously, today's big news is the announcement that Synta has completed its search for a new CEO, and has named Anne Whitaker to that position, effective September 2. Although we completed the search in the time frame we originally estimated, the process was more demanding and time-consuming than I expected when we began in March. Also, while we set the bar high, I didn't expect that we would attract the talent of a senior leader from a major international pharmaceutical company with responsibility for a commercial organization producing over $10 billion of annual revenue. As you know from this morning's press release, Anne is leaving her position as President, North America Pharmaceuticals at Sanofi to join Synta.

During the process, we reviewed the qualifications of dozens of candidates, many of whom were well-qualified, but none of whom were more well-qualified than Anne. Those of us who have gotten to know her during this process feel very fortunate to have found a leader with experience in the areas critical to success and that will enable Synta to realize the exciting potential of ganetespib and HDC. I look forward to introducing many of you to Anne in the coming months.

I would now like to turn the call over to our Chief Medical Officer, Vojo Vukovic, who will provide an update on our clinical programs.

Vojo Vukovic

Thank you, Keith. Since the beginning of this year, ganetespib has reached several important clinical milestones across studies in cancer types, including encouraging results from the GALAXY-1 and ENCHANT Phase II studies in lung and breast cancer, and graduation to the Phase III extension in the AML-LI-1 trial.

With the launch of GANNET53 in ovarian cancer, which we announced in today's release, ganetespib is now being studied in 3 large randomized studies in 3 separate cancer types: non-small cell lung adenocarcinoma, AML and ovarian cancer.

Of note, both the AML-LI-1 and GANNET53 are investigator sponsored studies. This is not only more cost-efficient for the company, it also reflects the strong and growing investigator enthusiasm for ganetespib as a novel potent small molecule Hsp90 inhibitor.

Before year end, we expect to have 3 additional large randomized investigator sponsored studies initiated. These include AML-18 and AML-19, both in acute myeloid leukemia; and I-SPY 2, the well-known and well-regarded breast cancer study.

As we reviewed in our last call, we reported encouraging results from the final analysis for our GALAXY-1 study. From a clinical development perspective, the GALAXY program is the company's central focus, with other indications being addressed through cooperative group studies. GALAXY-1 is the foundation on which the pivotal GALAXY-2 trial has been built, and is a large, global, randomized, multicenter Phase IIb study of docetaxel, with and without ganetespib, in second-line non-small cell lung adenocarcinoma. The final results from this trial, in particular, the encouraging overall survival results and tolerability profile in chemosensitive patients, validates the selection of the chemosensitive population for the pivotal Phase III GALAXY-2 trial.

Enrollment and progress in the GALAXY-2 trial remains on track, with a target enrollment of approximately 850 patients and based on current projections and statistical assumptions, we continue to expect the 2 interim efficacy analyses of GALAXY-2 to be conducted by an independent Data Monitoring Committee in the second half of 2015, and the final analysis to be conducted in the first half of 2016.

Among the compelling results from our investigator sponsored studies, ganetespib recently graduated to the Phase III extension of AML-LI-1 study. AML-LI-1 is a multicenter randomized Phase II/III clinical study evaluating several novel treatment regimens, including the combination of ganetespib with low-dose cytarabine in newly diagnosed elderly patients with acute myeloid leukemia or high risk myelodysplastic syndrome who are not eligible for intensive chemotherapy.

Advancement into the Phase III extension came after an interim analysis of complete response rate in 50 patients who received the ganetespib-cytarabine combination in the Phase II portion of the trial. We will provide additional details on the expected timelines of the Phase III portion of the study as they become formalized. We expect the other 2 AML studies supported by the Leukemia & Lymphoma Research Fund and Cancer Research UK, AML-18 and AML-19, to initiate before the end of 2014.

I will now turn the call over to Keith Ehrlich for financials.

Keith S. Ehrlich

Thank you, Vojo, and good morning, everyone. There were no revenues recognized in the second quarter of 2014 and 2013. Research and development expenses were $18.8 million for the second quarter of 2014 compared to $17.9 million for the same period in 2013.

General and administrative expenses were $2.9 million for the second quarter of 2014 compared to $4.2 million for the same period in 2013. The company reported a net loss of $22.3 million or $0.24 per basic and diluted share in the second quarter of 2014 compared to a net loss of $22.8 million or $0.33 per basic and diluted share for the same period in 2013.

In the second quarter of 2014, the company raised an aggregate of approximately $56.6 million in net proceeds from the sale of its common stock under its aftermarket issuance sales agreements with MLV & Co., also known as an ATM, and to an affiliate of one of the company's directors who's also a major shareholder.

As of June 30, 2014, the company had $112.1 million in cash, cash equivalents and marketable securities compared to $91.5 million in cash, cash equivalents and marketable securities as of December 31, 2013.

Subsequent to June 30, 2014, the company has raised approximately an additional $12.2 million of net proceeds under its ATM.

Based on its current operating levels, the company expects its cash resources of approximately $112.1 million at June 30, 2014, plus the $12.2 million in net proceeds from common stock sales subsequent to June 30, 2014, will be sufficient to fund operations at least into the fourth quarter of 2015. This estimate assumes no additional funding from new partnership agreements, equity financing events or further sales under its ATM, and that the timing and nature of certain activities contemplated for the remainder of 2014 and 2015 will be conducted subject to the availability of sufficient financial resources.

I will now turn the call back over to Keith Gollust for concluding remarks. Keith?

Keith R. Gollust

Thank you, Keith. This concludes our prepared remarks. Operator, we are now -- we will now open the call to questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is coming from the line of Joe Pantginis with Roth Capital Partners.

Joseph Pantginis - Roth Capital Partners, LLC, Research Division

Congratulations on the progress and congratulations for completing the CEO search. Obviously sounds very, very qualified for the position. Keith, maybe can you discuss a little bit -- and I know we discussed some of this before, but can you share again some of the qualities you were looking for here? And I know we're going to hear a lot from Anne when she joins, but regarding sort of the direction you want to take Synta in with regard to the broad platform that ganetespib has here based on the clinical platforms that are already in place.

Keith R. Gollust

Sure, Joe. We -- I think I mentioned this back in the first conference call we had when I took over as Interim Chief. I think, obviously, as is the case with any CEO, the #1 thing that you're looking for is leadership capabilities. One of the things that impressed us most about Anne during this process was her emphasis on team building as her preferred method of leadership. I think that's essential for a company like ours. So her leadership qualities were very high. And then, of course, because of the fact that GALAXY-2 is well under way, we recognized that there was little opportunity for the new Chief Executive to ultimately influence the outcome of that trial. Instead, what is most important are the factors that come after we get successful data in GALAXY-2. And that involves building a commercial team because it is our expectation that we will become a commercial company. So if you take a look at Anne's background, you can see that her over 20 years of experience is heavily concentrated in the commercial area. And that's exactly what we were looking for.

Joseph Pantginis - Roth Capital Partners, LLC, Research Division

That's perfect. And I guess, would you sort of portray, and I'll sort of use a political phrase, the first 100 days or so? You guys sort of had your marching orders in agreement with each other. Is She going to come in and take a look at things and see if anything requires changing from a business development strategy standpoint or is everyone pretty much in sync right now?

Keith R. Gollust

Well, Joe, everything's on the table. But I can assure you that in terms of the discussions that I've had with Anne over the last couple of weeks, the, what we're calling the 90-day plan, the first 3 months is well under way.

Joseph Pantginis - Roth Capital Partners, LLC, Research Division

Great. And then maybe just a quick question for Vojo. Vojo, can you remind us what the hurdles were for the LI-1 study to move from Phase II to Phase III? And what the potential timelines are for the Phase III portion?

Vojo Vukovic

All right. So the hurdle for the LI-1 study, which is set in elderly patients that are unfit for intense induction chemotherapy -- historically, in this patient population, low-dose Ara-C, which is the comparator, achieves complete response rates of up to 15%. And in this disease, complete response rates closely correlate with survival, so it's seen as a good surrogate for survival. The minimum activity needed to advance it to Phase III, the protocol was 17.5% complete response rate.

Your second question regarding timelines. We really don't have precise timelines at this point in time because this study is, as you know, under cooperative group sponsorship and conduct. So it's really difficult for us to talk about specific timelines. We do expect that the enrollment should go forward very quickly. But then because it's a survival endpoint into Phase III, it may take some time before we have the final data in hand.

Operator

Our next question is coming from the line of Brian Klein with Stifel.

Brian Klein - Stifel, Nicolaus & Company, Incorporated, Research Division

So first, for Vojo, on ganetespib in LI-1. Can you give us a sense of when we might see data from that Phase II portion?

Vojo Vukovic

Yes, that's a good question. The design of the study, the LI-1 study is designed as a Phase II/Phase III study. And one of the provisions there is that the Phase II data set becomes part of the Phase III data set. And so far, the only people who have looked at the data in an unblinded fashion is the Data Monitoring Committee. And that has to -- that integrity and blinding of the data has to be -- has to remain in place until the very end of the study. That is the condition in order to be able to use that data set for the Phase III analysis. And we want to respect the intention of the investigators to protect integrity of the trial. And also, by adhering to that process, we are also qualifying the study to potentially serve as a registration study in this indication.

Brian Klein - Stifel, Nicolaus & Company, Incorporated, Research Division

Okay. So I guess, is -- this is my interpretation, and you tell me if this is correct. We won't get the Phase II data. At this point, we don't have timelines for Phase III in terms of enrollment or when we might see final data from Phase III portion. And I guess, my understanding is that because it's an investigator sponsored study, it may not be sufficient for a U.S. filing? Are those correct?

Vojo Vukovic

Well, on the first 2 points, I would agree that the correct -- the time -- the data will not be presented until the end of the study. The timelines are being worked out. So as we get more detail, we'll certainly share what we can share. And we hope to be able to do that in the future. And when it comes to the last point, whether the data will support a filing in the U.S., we are in discussions with investigators around this and other details. It is our intention to explore the use of this study as a potential registration-angled study, which would, of course, require that the study meets technical quality standards that are needed for a pivotal trial. So we are in discussions with investigators around that point, and we hope to be able to provide an update on the status of that in the future.

Brian Klein - Stifel, Nicolaus & Company, Incorporated, Research Division

Okay, great. Just turning quickly to the pipeline. Any update on the filings in IND for the HDC program?

Keith R. Gollust

Brian, no. We're not providing any update on that. I think, as I reported in the past, we've taken a very careful look at HDC. We don't want to create expectations at this point by providing timelines. I can tell you that we're pleased with the progress we've made since the last call, and we continue to be optimistic that HDC will provide some interesting reports in the future.

Brian Klein - Stifel, Nicolaus & Company, Incorporated, Research Division

Okay, great. Maybe a question for Keith. How much is left in the ATM?

Keith S. Ehrlich

We -- let's see. I think there's about a little over 40 left, between 40 and 45 remaining in the current ...

Brian Klein - Stifel, Nicolaus & Company, Incorporated, Research Division

Okay. So based on press release today and your guidance, it looks like you guys only have sufficient cash resources to get you through maybe the second interim analysis. But it doesn't seem like you have enough to get to the final GALAXY-2 data. So just wondering what the strategy here is in terms of funding the company through that, what looks like to be the key pivotal data that you'll need to get ganetespib commercialized.

Keith R. Gollust

Sure, Brian. Obviously, we're well aware that we need to maintain adequate cash reserves, not only to take us to final data, but beyond that. We feel now, as we have in the past, that we have multiple sources of financing. And it's -- the board is very actively considering our financial alternatives, and we make decisions on a real-time basis. You're correct in your analysis. Our current cash reserves take us well into the fourth quarter of 2015. But you can anticipate that there will be some additional financing to give us the cash reserves we need well into 2016.

Operator

The next question is coming from the line of George Zavoico with MLV & Co.

George B. Zavoico - MLV & Co LLC, Research Division

Again, congratulations on finding what appears to be a very qualified CEO. Look forward to meeting her when she comes onboard in September. I have a couple of questions mainly for Vojo, I guess. With regard to the GANNET53 trial, a couple of questions there. First of all, how does the recent approval of Avastin for ovarian cancer in platinum-resistant patients in the EU affect GANNET53? That's part one. Number two, there seems to be a focus on p53 mutations. Is it going to be a biomarker-driven trial there? So first were those 2 questions.

Vojo Vukovic

Okay. So regarding your recent -- your first question, how is the recent approval of Avastin in second-line ovarian cancer going to affect the prospects of GANNET53. So in GANNET53, we generally -- we'll generally enroll patients that are refractory or resistant to platinum. And as you know, platinum can be used in first line, second line and sometimes even third line in ovarian cancer. So the conflict is really -- once patients fail initial treatment, whatever that treatment might be, and as the standard evolves and now includes Avastin in addition to platinum in first and second line, we'll just basically continue enrolling patients that fail that line of treatment. So we do not expect that the timelines or the prospects for ganetespib in this indication will be greatly affected by Avastin. And regarding the biomarker question, we're enrolling all patients that are resistant or refractory. We're not selecting them upfront with a biomarker. The reason is twofold. One, there's going to be a post hoc analysis of the biomarker. So we will identify patients who are and who are not p53 mutated. And then secondly, it's a practical question. Most of the patients, historically, 95% or sometimes even higher, are expected to have this p53 mutation. So one can say, for practical reasons, virtually all patients will have that mutation.

George B. Zavoico - MLV & Co LLC, Research Division

Okay. And a follow-on. In your press release, you write -- it's written that, "The study's consortium consists of national clinical trial groups in gynecological oncology." But it also says that there are 3 innovative small- and medium-sized companies involved. What exactly does that mean, the SMEs, as you point out in the press release?

Vojo Vukovic

That means that, that consortium is a consortium that's not only evaluating our drug, ganetespib. It's also evaluating other drugs. And I think some of these smaller companies are also -- that includes also diagnostic companies. Because the program is not just a clinical program, it has a very strong translational research component. And there are research efforts under way to identify not only mechanisms for potential biomarkers and tests that could be used for patient selection.

George B. Zavoico - MLV & Co LLC, Research Division

You said other drugs, so is this like LI-1 in that it's looking at different drugs in platinum-resistant ovarian cancer, as well as ganetespib?

Vojo Vukovic

This specific group[ph] for GANNET53 is not. So it's focused on ganetespib only. But my understanding is that this group is also interested in exploring and evaluating eventually other drugs.

George B. Zavoico - MLV & Co LLC, Research Division

Okay, I see. And now a final question. Can you describe a little bit how AML-18 and AML-19 will differ from the ongoing AML study, please?

Vojo Vukovic

Yes, sure. So essentially, the 3 studies, AML-LI-1, AML-18 and AML-19, are essentially very similar comparable studies and addressing all front-line patients with AML or high risk MDS. And the only difference, really, between them is the subset of the population they are addressing. So the LI-1 is addressing elderly, unfit for induction chemo. 18 is addressing elderly that are fit for induction chemo, so they can be treated upfront with induction chemo. And then AML-19 is addressing younger patients who will receive induction chemo. So fundamentally, there's 2 different combinations. The combination in LI-1 is combination to Ara-C, and the combination in 18 and 19 involves combination with induction chemotherapy and then, is followed by maintenance treatments.

George B. Zavoico - MLV & Co LLC, Research Division

And they're all front line?

Vojo Vukovic

They're all front line.

Operator

The next question is coming from the line of Nicholas Abbott with BMO Capital Markets.

Nicholas Abbott - BMO Capital Markets U.S.

Congratulations on what looks to be a great hire for a CEO. Vojo, you provided some very valuable information already, so some of my questions have been answered. But are you aware of any ASH abstracts that have been submitted for ganetespib in hematological malignancy. And specifically with 18, 19 trials, do they have the same design constraints as LI-1 with respect to data?

Vojo Vukovic

Yes. The intention of this cooperative group is to have the same constraints in place for the Phase II and Phase III portion. I should mention that before we ran -- before the cooperative group ran the LI-1 study, they ran a pilot to evaluate the safety and feasibility in a small number of patients. And they did the same thing for -- as a precursor or pilot for AML-18. I'm pretty sure that at some point in time, the cooperative group will publish that data. Whether it's going to be ASH or not, we had not been notified. For contracts, we get notified 30 days before submission, and we haven't received the submission. The submission deadline for ASH is mid-August. So based on that, I'm not expecting a submission to ASH.

Nicholas Abbott - BMO Capital Markets U.S.

Okay. And in terms of the -- you already discussed the quality aspects in terms of these trials serving to, hopefully, expand the ganetespib label. And while these trials are designed by world experts, experts often run ahead of regulators. So did they [indiscernible] colleagues discuss the trial design with regulators or have you had the opportunity to review the trial design at a high level with regulators to see if they agree that the design per se is suitable for a registration trial?

Vojo Vukovic

It is our intention at a later point to review the design with regulators and discuss. What we're also discussing with the investigators, with the cooperative group, are data quality requirements that are typically required for registration quality studies. Right now, the cooperative group trials, they collect relevant information. But some of the methodologies of data collection, verification, storage and so on, need to meet internationally accepted standards in order to be seen as suitable for registration. And it is our intention to discuss this and other aspects of the trial execution with the investigators and subsequently, with the regulators.

Nicholas Abbott - BMO Capital Markets U.S.

Okay. And then just 2 very quick ones. There are a whole variety of small IITs ongoing with ganetespib on a broad range of tumors. Do you have a sense, Vojo, of what the timetable is for signals from some of those trials? And then also one for Keith, you indicated in terms of the HDC platform, obviously, no commitment at this stage for an IND or timing for an IND. What about partnership, Keith? That's a very interesting platform. Can you, perhaps, make any comments in terms of ongoing partnership discussions?

Vojo Vukovic

So there are 2 questions, 1 is the timelines for IST results and the other is the HDC partnership status. If that's okay, I'll address the IST timelines. In terms of meaningful signal detection trials, it is our expectation, based on performance and based on, generally, our experience with ISTs, that we should get 1 or more data readouts from a meaningful signal detection IST study next year, in 2015. As a reminder, we have a breast cancer study, that's a small randomized trial, where we combine ganetespib with fulvestrant in the setting of hormone therapy refractory breast cancer patients. And we are hoping that this trial may be able to produce a data readout sometime next year. I think that's probably the most important part. Several other trials with valid combinations have graduated beyond the Phase I evaluations, so they're now in the process of recruiting patients for the efficacy evaluation. So it is possible that next year, we may get several of such readouts from the ongoing ISTs.

Keith R. Gollust

Okay. Nick, in terms of your question about HDC partnerships, again, I want to emphasize, where we don't want to create specific expectations or describe any specific discussions, I will say that the progress that we have made on the -- in the research we've been doing over the last few months I feel will be supportive of partnership discussions. We continue to get expressions of interest from people who see a great potential in this platform. And I'm hopeful that these discussions will eventually lead to the types of partnerships which we feel will be essential to the full development of the platform.

Operator

Our next question is coming from the line of Robin Davison with Edison Group.

Robin Davison - Edison Investment Research Limited

It's a quick one, really. I presume that having spent almost 6 months recruiting a new CEO and putting out a search and so on, you've had the opportunity to sort of consider the strategy that the board would like to pursue for Synta. So the -- I mean, really, the most important question to me is whether you consider it preferable to partner ganetespib ahead of the readout of the GALAXY-2 study or afterwards? I mean, is there any comment you can make on that point? Would you take an earlier partnership? Do you bring somebody in that you hope to deliver that? Or are you still looking to financing and take the GALAXY-2 to its conclusion before seeking a partner?

Keith R. Gollust

That's a good question, Robin. I think it's pretty clear that positive data and eventual approval by the FDA will make us interested in a long-term partnership with a larger company with the resources to fully develop ganetespib beyond its initial indication and also to commercialize the product on a worldwide basis. So long term, we are hopeful and we do expect to have an important partnership. Whether or not we do that before we get the data is up in the air at the moment. Our business strategy and our financial strategy is to have the resources to complete the trial without a partnership. Obviously, it depends on factors that we can't predict at this time. But we certainly don't need to get a partnership done. If something develops over the course of the next 12 months that encourages us, it is a possibility. But it is an essential part -- it is not an essential part of our business strategy.

Robin Davison - Edison Investment Research Limited

Right, okay. Just a quick one again. I mean, obviously, there's a been a fair amount of use of the ATM post the quarter end. I just wonder if you can give me an up-to-date share count currently?

Keith R. Gollust

Share count.

Keith S. Ehrlich

It's -- it hasn't changed dramatically from what was there at the -- as reported in the 10-Q.

Keith R. Gollust

105 million, I think? Yes, 104 million.

Keith S. Ehrlich

104 million.

Operator

That concludes the question-and-answer session. I will now turn the floor back over to Mr. Gollust for any closing remarks.

Keith R. Gollust

I want to thank you all for your time today. Obviously, if you have any follow-up questions, we're all here and we're available to take your calls. Thank you.

Operator

Thank you, ladies and gentlemen. This concludes today's call. You may now disconnect.

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Synta Pharmaceuticals (NASDAQ:SNTA): Q2 EPS of -$0.24 beats by $0.03.