Acceleron Pharma's (XLRN) CEO John Knopf on Q2 2014 Results - Earnings Call Transcript

Aug.12.14 | About: Acceleron Pharma (XLRN)

Acceleron Pharma Inc (NASDAQ:XLRN)

Q2 2014 Results Earnings Conference Call

August 12, 2014, 8:30 am ET

Executives

Renee Leck - Stern Investor Relations

Kevin McLaughlin - Chief Financial Officer, Senior Vice President, Treasurer

Steven Ertel - Senior Vice President, Chief Business Officer

Matt Sherman - Senior Vice President, Chief Medical Officer

Analysts

Christopher Mortko - Citi

Eric Joseph - JMP Securities

Howard Liang - Leerink Swann

Ted Tenthoff - Piper Jaffray

Operator

Good morning and welcome to Acceleron's second quarter 2014 conference call. At this time, all participants are in a listen-only mode. There will be a question-and-answer session at the end. Please be advised that this call is being recorded at Acceleron's request.

I would now like to turn the call over to Acceleron. Please proceed.

Renee Leck - Stern Investor Relations

Good morning. This is Renee Leck with Stern Investor Relations and I would like to welcome you to Acceleron's second quarter 2014 conference call. You can listen to a live webcast or a replay of today's call by going to the Investors and Media section of the website acceleronpharma.com. A copy of today's prepared remarks can also be found on the website.

The agenda for today's call is, John Knopf, Acceleron's Chief Executive Officer will provide an update on the company's pipeline, clinical plans and R&D efforts. Then Kevin McLaughlin, CFO will review the company's financial results and we will open the call for Q&A. Matthew Sherman, Chief Medical Officer and Steven Ertel, Chief Business Officer will also be available for the Q&A.

Before we begin, I would like to remind you that today's discussion will include statements about the company's future expectations, plans and prospects that constitute forward-looking statements for purposes of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995.

I would now like to turn the call over to John Knopf.

John Knopf

Good morning, everyone and thanks for joining us today. The company made great progress during the second quarter of 2014 and provided encouraging interim results from five ongoing Phase 2 clinical trials across all three of our clinical programs. These results illustrate the significant number of distinct opportunities in our pipeline to generate clinically and commercially promising therapies to treat a spectrum of cancer and rare diseases, each with a substantial unmet medical need. We are proud of the number of opportunities in our pipeline and we believe this is a distinguishing feature of our company.

Of the new data presented this past quarter, we are particularly excited about the opportunity in beta-thalassemia, as this is the indication for the company's first planned Phase 3 clinical trial. I will talk about that and the other encouraging data from our hematology programs in just a few minutes, but I will start with a discussion of our dalantercept program.

Dalantercept is a novel anti-angiogenesis product designed to block the ALK1 pathway and thereby inhibit blood vessel maturation in tumors. We are developing dalantercept primarily for use in combination with VEGF-pathway inhibitors, such as Avastin and Nexavar, which are used in a variety of tumor settings. VEGF pathway inhibitors are an enormously successful category of therapies generating more than $10 billion per year.

We and our academic collaborators have shown in animal models that by attacking tumor angiogenesis through an independent mechanism, dalantercept can be combined with VEGF-pathway inhibitors to achieve a more complete inhibition of tumor growth. Moreover, safety findings from our ongoing clinical studies with dalantercept are distinct from those seen with VEGF-pathway inhibitors, suggesting that these classes of drugs are suitable for combination.

We believe this combination strategy will produce better outcomes for cancer patients and allow us to leverage the large established base of approved anti-VEGF therapies for the treatment of several different tumors. The first such opportunity is in renal cell cancer or RCC. In June, at the annual meeting of the American Society of Clinical Oncology or ASCO, we presented interim data from our ongoing Phase 2 study with dalantercept combined with axitinib, known by the brand name Inlyta, in RCC.

In patients whose disease had progressed after anti-VEGF treatment with either sunitinib or pazopanib, the combination of dalantercept plus axitinib generated an objective response rate in 2nd through 4th line patients of 25%. This exceeded the 11% response rate generated by axitinib as monotherapy in its Phase 3 clinical trial in patients previously treated with sunitinib. Furthermore, the combination of dalantercept plus axitinib was well-tolerated, which has generally not been the case when other anti-angiogenesis agents have been combined in this setting.

Having completed the dose escalation phase in the study, we recently initiated the randomized, placebo controlled phase of the study, comparing dalantercept in combination with axitinib versus placebo plus axitinib. This part of the study will enroll up to 130 patients and the primary endpoint will be progression-free survival.

Continuing with this strategy to leverage the role of VEGF-pathway therapies, we have just initiated a clinical trial of dalantercept in combination with sorafenib in first-line treatment of patients with hepatocellular carcinoma or HCC. In HCC, sorafenib is the only approved targeted therapy. However, response rates for patients on sorafenib are quite low and we believe the combination of dalantercept plus sorafenib could produce better outcomes. There is substantial unmet need in HCC and we are looking forward to seeing the activity of the dalantercept/sorafenib combination in this study.

So now, let's turn to sotatercept and ACE-536. In June of this year, positive interim data from the sotatercept and ACE-536 Phase 2 clinical trials in beta-thalassemia and the ACE-536 trial in myelodysplastic syndromes or MDS, were presented at the annual meeting of the European Hematology Association or EHA, in Milan. Acceleron and Celgene investigators gave three oral presentations highlighting the encouraging safety and efficacy data.

In the MDS clinical trial with ACE-536 in low to intermediate-1 risk patients, the data showed dose dependent increases in hemoglobin levels in patients with low transfusion burden. However, most MDS patients have a high transfusion burden. Importantly we have shown that 33% of high transfusion burden patients treated with a 0.5 mg/kg or higher dose level of ACE-536 either became transfusion free or showed a decrease in transfusion burden of at least 40%. It's also important to appreciate mortality in MDS patients is correlated with both anemia and transfusion burden, and therefore we believe that ACE-536 will provide a meaningful clinical benefit in this patient population.

Now we are also studying sotatercept in more heavily pre-treated MDS patients, following treatment with ESAs, Revlimid or Vidaza, and expect to report data from this study later this year at ASH. We are fortunate to be working with Celgene, our collaboration partner for sotatercept and ACE-536, who is recognized as the world's leader in the field of MDS therapies. Both companies are encouraged by the results reported to date, and are working to jointly develop and commercialize sotatercept or ACE-536 as a key element in the in the MDS treatment algorithm.

Now as encouraged as we are about the MDS results, we are also very excited about the results to-date in beta-thalassemia. At the EHA meeting in June, we presented interim data from our ongoing Phase 2 trials of both sotatercept and ACE-536 in patients with beta-thalassemia. Both drugs showed dose dependent increases in hemoglobin in non-transfusion dependent patients. Both drugs enabled a substantial reduction in transfusion burden in transfusion dependent patients. Importantly, in the ACE-536 study, all of the transfusion dependent patients showed a greater than 50% reduction in transfusion burden. We believe that the improvements we are seeing in red cell production in both transfusion dependent and non-transfusion dependent patients will address a substantial unmet medical need in beta-thalassemia.

Another emerging pattern in our thalassemia trials is the effects of sotatercept and ACE-536 on other complications of the disease. Thalassemia patients experience a host of disease-related complications and our preclinical data, as shown in the recently published papers in Blood and Nature Medicine, suggest that our compounds can ameliorate many of these complications.

Now, iron overload is a particularly important complication for these patients, as it's a key driver of multiple and significant comorbidities and mortality in patients with beta-thalassemia. In transfusion dependent patients treated with ACE-536, we have observed a reduction in serum ferritin levels associated with the greater than 50% reduction in transfusion burden. This is very encouraging because serum ferritin is a useful marker of iron overload in organs such as the liver.

To give some context, if we take a patient with a 33% reduction burden and being transfused with two units of red blood cells every 4 weeks, a patient would receive nearly two grams of less iron annually. This reduction is greater than the reported average amount of iron removed from the liver with a year of iron chelation therapy. By reducing transfusion burden and increasing healthy red blood cell production, ACE-536 may reduce iron deposition in the body and long term may reduce the morbidity and mortality caused by iron overload.

We are also now seeing a beneficial effect on leg ulcers, one of the more challenging and recalcitrant clinical complications of beta-thalassemia. In June, we reported data from the ACE-536 trial demonstrating complete healing of a leg ulcer present since 2011. Today we can report that we have treated a second patient with a persistent leg ulcer that has now also healed.

Collectively then, the emerging story in beta-thalassemia is that ACE-536 and sotatercept stimulate effective erythropoiesis in these patients, leading to clinically meaningful increases in hemoglobin and decreases in transfusion burden. And it now appears that by addressing the central erythropoietic deficiency in these patients, ACE-536 and sotatercept may also improve many of the comorbidities associated with the disease. These data are consistent with our earlier preclinical data suggesting that in addition to increasing hemoglobin production we may be effective as a disease modifying agent in ameliorating the secondary complications of thalassemia.

So as you can see, there is enormous unmet medical need in beta-thalassemia, as there is currently no approved drug to treat the anemia or the disease itself, and the emerging data are very encouraging for moving into a Phase 3 study. So we are in the final stage of our ongoing dose escalation studies for each drug and expect to initiate the dose expansion cohorts this fall that will provide the final assessment of the dosing regimens to be used in the Phase 3 trials.

We and Celgene expect to select the molecule, sotatercept or ACE-536, will be designated for the thalassemia Phase 3 study by the end of the year. We have initiated discussions with our KOLs and several health authorities in different countries to help us formulate the final design of the Phase 3 clinical trials. We expect to initiate two clinical studies in 2015, one for non-transfusion dependent patients and one for transfusion dependent patients.

Another positive development for the ACE-536 program was that the European Medicines Association, the EMA, granted orphan designation to ACE-536 for the treatment of both beta-thalassemia and myelodysplastic syndromes. Collectively, FDA orphan designation has been granted for both sotatercept and ACE-536 for both MDS and beta-thalassemia and EMA orphan designation has been granted for ACE-536 for both MDS and beta-thalassemia, underlining the need for new therapies for both of these rare diseases.

Lastly on ACE-536, the United States Adopted Names or USAN Council has approved the name luspatercept for ACE-536 and we expect the World Health Organization's International Nonproprietary Name or INN group to also approve the name in the very near future. Over the coming quarters we will use both names concurrently and gradually shift to the single name, luspatercept.

Now, I would like to turn back to sotatercept and the ongoing studies in patients with chronic kidney disease or CKD who are on hemodialysis. These end stage renal disease patients experience a number of health complications including anemia, rapid and significant cortical bone loss and an elevated risk of heart disease associated with calcified deposits in the vasculature, including a 25% annual increase in coronary artery calcification score.

A murine version of sotatercept has shown encouraging results in preclinical models of late stage CKD addressing each of these morbidities. While ESAs have been shown to adequately correct the anemia in CKD patients, there is clearly a critical unmet need with regard to cortical bone loss and vascular calcifications which are the likely key drivers of the 20% annual mortality rate in these patients.

We and Celgene are developing sotatercept not only to correct the anemia in these patients, but importantly to attenuate the bone loss and reduce vascular calcifications. If achieved, we believe these effects would represent a highly differentiated clinical profile and would provide benefits to patients that are not currently provided by any approved therapy.

The first step in achieving this vision is to demonstrate that sotatercept can increase hemoglobin and maintain a target hemoglobin range in ESRD patients in the absence of ESA treatment. Our partner, Celgene, recently presented sotatercept CKD trial data at the National Kidney Foundation spring clinical meeting and at the European Renal Association-European Dialysis and Transplantation Association meeting, showing dose dependent hemoglobin increases at the two initial low dose levels, in the absence of an ESA. Celgene is continuing to enroll and treat patients in this Phase 2a study at higher dose levels.

Based on these results, Celgene initiated a separate Phase 2 study in up to approximately 300 patients. This study includes two parts. The first part is a dose escalation study followed by a second part that is an active control study using selected doses and regimens of sotatercept versus an ESA active control. Celgene expects to present additional interim clinical data at the American Society of Nephrology annual meeting in November.

Now as proud as we are of having these promising Phase 2 programs, we continue to invest in discovery research and benefit from our highly productive R&D organization. We look forward to bringing our fourth molecule into the clinic and plan to initiate a Phase 1 clinical trial with ACE-083, a locally acting agent designed to increase muscle mass and strength, as we remain on track to start the Phase 1 clinical trial by the end of this year. As we get closer to the start of this study, we will spend more time describing this program and the substantial clinical and commercial opportunities.

Now beyond this, we continue to leverage our unique understanding of the importance and therapeutic potential of the TGF-beta superfamily to create new product candidates. To that end, we have signed a multi-target antibody discovery collaboration with Adimab, a technology leader in the discovery of fully human antibodies, and we will have worldwide rights to develop and commercialize antibodies resulting from this collaboration.

Now, I will turn the call over to Kevin McLaughlin for a review of the financials.

Kevin McLaughlin

Thanks, John. The company closed the second quarter ended June 30, 2014 with $204.2 million of cash and cash equivalents. This compares to $214.1 million at March 31, 2014. We expect that our cash and cash equivalents will be sufficient to fund the company for three years into the second half of 2017.

As we have discussed in the past, our partner Celgene is responsible for 100% of all the financial costs associated with the sotatercept and ACE-536 programs. The majority of our net cash operating burn supports the ongoing and planned clinical trials for the company's fully owned programs.

Thank you and we can now open the call to any questions.

Question-and-Answer Session

Operator

(Operator Instructions). Our first question comes from Yaron Werber of Citi. Your line is open.

Christopher Mortko - Citi

Hi. Thanks for taking the questions. This is Chris in for Yaron. Can you remind us in terms of what data we will see at ASN in November? Will it just be data on hemoglobin or is there a chance we might see data on bone biomarkers and vascular calcification?

John Knopf

Hi, Chris, this is John Knopf. Certainly we will present data on hemoglobin level. We will also be looking at some bone parameters which will include bone biomarkers as well as bone mineral density and perhaps we will have the opportunity to report on vascular calcification. But we will have to see how the data emerges.

Christopher Mortko - Citi

Okay, great. And then just one other question. I know it's a little early, but can you maybe share your current thoughts about how you are thinking about ACE-536 and MDS? Are you thinking this drug may ultimately be used in Revlimid, any ESA failures or what are your thoughts there? At least your initial thoughts? Thank you.

John Knopf

Steve, would like to take that question?

Steven Ertel

Sure. Hi, this is Steven Ertel, the Chief Business Officer at Acceleron. So our current studies with both sotatercept and ACE-536 look at a broad spectrum of low intermediate-1 patients both those that are naïve to ESAs and for that matter Revlimid or hypomethylating agents as well as patients that have received prior ESAs, Revlimid hypomethylating agents and are now transfusion dependent. We and Celgene are still evaluating data across the spectrum of patients and haven't yet made a decision as to which population we will take forward into a Phase 3 study should our data support that.

Christopher Mortko - Citi

Great. Thank you very much.

Operator

Our next question comes from Mike King of JMP Securities. Your line is open. If your telephone is muted, please unmute. (Operator Instructions). Our next question comes from Mike King of JMP Securities. Your line is open.

Eric Joseph - JMP Securities

Hi, this is Eric, in for Mike. Can you hear me?

John Knopf

Yes.

Eric Joseph - JMP Securities

Great. Thanks for taking the questions. Just to come back on upcoming presentations. I am wondering if you can say anything about when do you cut off dates for ASN and when the presentation next might be? And how much additional follow-up we can expect to look for there?

Matt Sherman

Hi, Eric. This is Matt Sherman, Chief Medical Officer at Acceleron. So your question is relating to the cut off date for the abstract submissions for ASN?

Eric Joseph - JMP Securities

Not for abstract submission but for data analysis. Whether you are going to say anything about what the follow-up cut off will be for the upcoming presentations and what additional length of follow-up we can hope to see over what we saw in NKF and EHA.

Matt Sherman

Okay. So for chronic kidney disease for end-stage renal disease patients on hemodialysis with sotatercept, we are able to present data from the first three cohorts of 0.3 and 0.5 milligrams per kilogram given every 28 days. And those are the data that we will present at the National Kidney Foundation and the ERA-EDTA meeting in Europe. We will be able have data for the next cohort of 0.7 milligrams per kilogram every 28 days, and that will be the updated data that JK just indicated would to be available at the ASN meeting in November and that would include hemoglobin data as well as data on bone biomarkers and bone density. That study has progressed as well and we are into the highest cohort in that study, which is 0.7 milligrams per kilogram every two weeks followed by 0.4 milligrams per kilogram over two weeks. But I do not know yet if those data will be available at the time of the meeting in November.

For the ASH meeting, as you know, we have a series of higher cohorts. So for example four ACE-536, we are able to present data for thalassemia through 0.8 milligrams per kilogram data and we are currently enrolling patients at 1.2 milligrams per kilogram dose level for that study. So we should have data that will be available at the ASH meeting in December. And certainly for MDS, we are currently at our highest dose level 1.75 milligrams per kilogram and that data also would be available for the ASH presentation in December.

Eric Joseph - JMP Securities

Great. Thanks. Just another question about the upcoming Phase 3 plans, Phase 3 trials. Just wondering if your expectation is to be able to maintain trial starts end of year, early first quarter 2015 and whether the plan would be to initiate in both indications, both in transfusion dependent and in non-transfusion dependent concurrently? Or would you be expecting to the rollout to be staggered?

John Knopf

Hi, this is John Knopf. At our IPO, we had discussed the potential of starting this study at the end of 2014, but I think more recently, we have said that it will likely be 2015 and we still expect to start this study in 2015 probably, but we hope to get this started by mid-year and as we go through our dose escalation studies examining both compounds, we will be able to give you a little more guidance, but mid-year is what we are targeting at present.

Eric Joseph - JMP Securities

Okay, great. Thanks very much.

Operator

Our next question comes from Howard Liang of Leerink. Your line is open.

Howard Liang - Leerink Swann

Great. Thanks very much. Regarding 536 or sotatercept, can you talk about your understanding of what will be an acceptable endpoint for the approval of MDS and how would that influence your choice of the patient population to move forward. I guess the question is, do you think there is an endpoint other than transfusion independence that could be an approvable endpoint for MDS?

John Knopf

Steve, do you want to take that?

Steven Ertel

Sure. Hi, this is Steven Ertel, Chief Business Officer at Acceleron. So as we mentioned earlier, we are looking at both non-transfusion dependent patients or those that have a relatively low transfusion burden as well as patients who have a high transfusion burden and are often referred to as transfusion dependent. In the high transfusion burden or transfusion dependent patients, our endpoint now is to look at least a four unit reduction in the number of units transfused as well as looking at the proportion of patients who have become transfusion independent. So we are looking at both measures of activity in those patients. And in the non-transfusion dependent with a lower transfusion burden, we are looking at an increase in hemoglobin as well as a proportion of patients who could become transfusion dependent in the low transfusion dependent patient population.

In terms of which endpoint would be a regulatory endpoint, I think it's a little early to say. We want to complete these Phase 2 studies, see the magnitude of the effect and have a discussion with Celgene and health authorities before we give any further guidance in MDS as to specifically what the endpoint will be in which of those patient populations.

Howard Liang - Leerink Swann

Okay, great. Regarding dalantercept, if you can talk about your plan to move forward. Whether the plan is to choose between RCC and HCC or one indication position will be made independently for each indication and how will the availability of checkpoint parameters influence your position?

Matt Sherman

Hi, Howard. This is Matt Sherman. So we are excited about both indications. These are totally separate opportunities for us. So both are moving forward. So in regard to RCC, as you know, we are currently conducting the randomized placebo controlled part two of our Phase 2 study and this is 130 patients, a robust Phase 2 study of looking at progression free survival as the endpoint. This is in patients who have failed first line tyrosine kinase inhibitors such as sunitinib or pazopanib, and dalantercept is being studied in combination with axitinib which is the only approved second line tyrosine kinase inhibitor.

Now regards to checkpoint inhibitors, we have also allowed patients to receive prior immunotherapy as well as checkpoint inhibitors and this will make the patient population applicable for when these patients, if checkpoint inhibitors become more widely used over the next coming years, we make study results from the study a more applicable to their world situation. In fact, in the first part of the study, we will have patients who have progressed following treatment with nivolumab and that patients went on to have a partial response combination of dalantercept and axitinib.

As you know for single agent checkpoint inhibitors right now, the failure rate or patients ultimately progressing is as high as 70%. So in regard to our HCC also, that study is a bit earlier but it's also progressing very nicely. As we announced this morning that we have initiated enrollment in that trial and that will be dose escalation trial using just a couple of dose levels of dalantercept in combination with sorafenib, the only approved targeted agent for HCC. And we will be on able to update the results of that study as it moves forward. Single agent sorafenib in a population is quite limited, with only a 2% response rate. So should we see a high degree of activities, we would be able to note that early in this open label study.

Howard Liang - Leerink Swann

Okay, great. Thanks very much.

Operator

Our next question comes from Ted Tenthoff of Piper Jaffray. Your line is open.

Ted Tenthoff - Piper Jaffray

Great. Thank you. I guess my question has to do with the muscle program. Can you tell us where that is and when we could get that into the clinic? And just refresh us on what the mechanism is there?

John Knopf

Hi, Ted. This is John Knopf. We are very much on track with our muscle program and remember this is a molecule that inhibits members of the TGF-beta family that have a negative or negative regulators of muscle mass. And the unique aspects of this particular product candidate is that it inhibits muscle, it stimulates muscle growth or development only in the muscle in which it is injected. So it's locally acting. And we feel this will provide a very well tolerated product that could be used in a variety of indications.

So again, very much on track to start this study in healthy volunteers this year. We will be looking at a variety of parameters, including some MRI analysis of muscle and fat content in the particular injected muscle and then go on to some other indications that we could discuss with you in the future. But every thing is very much on track. We are excited about what we have seen preclinically with this molecule. Again very significant increases of 50% to 100% in a very short period of time in animals. And again just in the injected muscle.

Ted Tenthoff - Piper Jaffray

Great, excellent. Looking forward to that and updates from your other programs too. Thanks.

Operator

I am showing no further questions. At this time, I would like to turn the call back over to John Knopf.

John Knopf

I would just like to thank everyone for listening in this morning and we look forward to keeping you apprised as we move ahead.

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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