Tekmira Pharmaceuticals' (TKMR) CEO Mark Murray on Q2 2014 Results - Earnings Call Transcript

Aug.13.14 | About: Arbutus Biopharma (ABUS)

Tekmira Pharmaceuticals (TKMR) Q2 2014 Results Earnings Conference Call August 13, 2014 5:00 PM ET

Executives

Julie Rezler - Director, Investor Relations & Corporate Communications

Mark Murray - President, Chief Executive Officer

Bruce Cousins - Chief Financial Officer

Analysts

Michael Yee - RBC Capital Markets

Jason Kolbert - Maxim

Stephen Willey - Stifel

David Novak - Clarus Securities

Operator

Good day ladies and gentlemen and welcome to the Tekmira Pharmaceuticals corporate update and second quarter results conference call. [Operator instructions.] I would now like to turn the call over to Julie Rezler.

Julie Rezler

Thank you, operator. Good afternoon, everybody, and thank you for joining us today as we provide our corporate update and report the second quarter results for Tekmira Pharmaceuticals Corporation. Joining me today on our call is Dr. Mark Murray, Tekmira’s president and CEO, and Bruce Cousins, executive vice president, and Tekmira’s chief financial officer.

I would like to remind everybody that there are a number of statements made on this conference call that constitute forward looking statements or forward-looking information under applicable securities laws. Forward looking statements and the information discussed in this conference call include, but are not limited to, those with respect to expected developments and key milestones for our product programs, the potential use of our unapproved investigational therapeutics, our strategy, future operations, clinical studies, prospects, and the plans of management.

Forward looking statements and information are current predictions only, which are based on certain assumptions, which include, but are not limited to, the effectiveness of our products as a treatment for cancer, chronic hepatitis B infection, infectious disease, alcohol use disorder, or other diseases, and our ability to demonstrate the safety and efficacy for our drug candidates on a timely basis.

While we consider these assumptions to be reasonable, these are assumptions and are inherently subject to significant business, economic, competitive, market, and social uncertainties and contingencies. Forward looking statements and information involve known and unknown risks, uncertainties, and other factors that may cause the actual results to be materially different from any future results expressed or implied by such forward looking statements and information.

A more complete discussion of the risks and uncertainties facing Tekmira appears in our 10-K for the year ended December 31, 2013, which is filed on EDGAR and SEDAR and is available online under the Investors section of our website. We do not expect to update forward looking statements as the information continually changes as conditions change, except as required by law.

This conference call is being webcast live and the archive will be available on our website at www.tekmira.com following today’s call.

Mark will begin today by providing a corporate update, and then Bruce will follow and outline key financial highlights. Please note that we do report in U.S. dollars and are in compliance with U.S. GAAP.

At the end of the prepared comments, we will open up the call to your questions. So now, over to you, Mark.

Mark Murray

Thanks, Julie. Good afternoon everyone, and thank you for joining our call today. To give my overview of the quarter, I’d like to say a few words on our TKM-Ebola program and the ongoing Ebola virus outbreak in West Africa.

We’ve been monitoring the escalation of the Ebola virus outbreak and the toll it’s taking in West Africa. This situation underscores the critical need for an effective therapeutic agent to treat Ebola virus infection. The WHO announced yesterday that their ethical review board had reached the consensus that offering investigational medical interventions was an appropriate treatment or prevention in this particular outbreak.

Our therapeutic, TKM-Ebola, is currently such an unapproved, investigational agent, and the regulatory framework to support its use in Africa has not yet been established. Given the severity of the situation, we are carefully evaluating options for use of our investigational drug within accepted clinical and regulatory protocols.

This includes discussions with government agencies in various countries and NGOs, including the WHO, on the potential use of TKM-Ebola to treat Ebola virus infected individuals. There can be no assurance that an appropriate framework for the use of this product will be found. We will continue to provide updates as necessary when clinical and regulatory pathways become confirmed.

Now, as you know, TKM-Ebola is an investigational RNAi therapeutic which targets the Ebola virus and has demonstrated striking efficacy results in nonhuman primates. We’ve completed the first portion of a Phase I clinical study in healthy volunteers.

The FDA has placed a clinical hold on this program pending requested information on the mechanism of potential cytokine release and a modification to the protocol for the multiple ascending dose portion of the trial. We are focused on an expedient response and resolution to the clinical hold so that we can advance TKM-Ebola to the multiple ascending dose portion of our Phase I study. We expect to have this resolved by Q4 of this year.

Last week, we announced that the FDA has modified the clinical hold placed on our IND for TKM-Ebola to a partial clinical hold. This action permits the use of TKM-Ebola in subjects with confirmed or suspected Ebola infections.

Given the rapidly evolving Ebola virus outbreak and the speculative potential role for our investigational therapeutic, we have taken a disciplined and responsible approach to communicating with the investment community, the media, and all other stakeholders. We intend to maintain this discipline going forward.

We will continue to provide updates as necessary when clinical and regulatory pathways become confirmed. At this time, I don’t have anything to add beyond what I have said today and is already publicly available on the TKM-Ebola program.

Now I would like to update you on our additional recent developments and key milestones in our other programs, which are on track to be accomplished by the end of this year. Our antiviral product platform also includes an important RNAi therapeutic, TKM-HBV, targeting hepatitis B surface antigen expression in chronically affected hepatitis B patients.

This represents a significant unmet need in the many thousands of patients currently treated with small molecule nuke therapies. Our HBV therapeutic is designed to eliminate surface antigen expression in these chronically infected patients.

The rationale is that by blocking surface antigen, this therapeutic will allow these patients to undergo seroconversion, or to raise their own antibodies against the virus, and to lead to a so-called functional cure of the infection.

Our TKM-HBV will employ a third-generation LNP, the most potent available, and a multicomponent RNAi cocktail that targets multiple sites on the HBV genome. Our product is aimed at the most common genotypes, A through D, of hepatitis virus found across North America, Europe, and Asia.

Our goal is to develop the most effective RNAi therapeutic product in the hepatitis B field. TKM-HBV is currently undergoing a broad pre-clinical evaluation in support of our regulatory filings expected by the end of this year, in order to launch clinical studies in early 2015. We will be presenting a review of our pre-clinical work supporting this product candidate later this year at the Oligonucleotide Therapeutic Society meeting in San Diego.

Our other clinical development program centers on TKM-PLK1, which targets PLK1, an enzyme required for cell division and upregulated in a variety of tumors. We are currently conducting a Phase IIa clinical trial in two specific cancer indications: GI-NET, or gastrointestinal neuroendocrine tumor, and ACC, or adrenocortical carcinoma.

In these Phase IIa studies, we will treat approximately 20 patients with a minimum of 10 GI-NET to be treated. Our objective is to confirm the clinical benefit observed in patients with these diseases seen in the Phase I study.

We have also initiated an additional TKM-PLK1 clinical trial in patients with hepatocellular carcinoma, or HCC. We are encouraged by the clinical benefit seen in our GI-NET and ACC clinical studies, with TKM-PLK1, and there is sound rationale for evaluating this agent in HCC. The study is designed to determine safety, tolerability, and clinical benefit of TKM-PLK1 in these patients. The study is being conducted at sites in North America and Asia.

By initiating our trial in HCC, we have met another important milestone for our oncology platform, and we remain on track to report interim results for our GI-NET/ACC trial in Q4 of this year.

And finally, we remain on track to nominate an additional drug development candidate by year’s end, which we expect will enter clinical studies in 2015.

Turning briefly to our partnering and business development activities, this quarter, we received an additional $1.5 million payment from Monsanto following the completion of specified program developments. In this collaboration, Tekmira’s proprietary delivery technology is being applied to agricultural applications.

The potential value to Tekmira could reach up to $86.2 million following the successful completion of all program milestones. This is an example of leveraging our gold standard LNP delivery technology, and we will continue to take advantage of these opportunities.

I trust this provides a solid overview of Tekmira’s key milestones over the past quarter. We at Tekmira have been at the forefront of many breakthroughs in the RNAi therapeutics field. Our leadership has been built upon decades of drug delivery knowledge, along with immense expertise around siRNA payload design.

With a strong balance sheet and multiple programs in clinical development, we look forward to sharing our progress with you in the months ahead. I’d now like to turn the call over to Bruce, who will share some of the financial highlights from the quarter, before we open up the call to your questions. Bruce?

Bruce Cousins

Thank you, Mark. Tekmira’s net loss for Q2 2014 was $6.1 million, as compared to a net loss of $18 million for Q1 2014. A key factor impacting our quarterly performance is noncash charges for fair value of our outstanding warrants, representing significant movement in our share price through the period.

Our Q1 2014 loss included a $13.6 million charge due to an increase in the fair value of our warrants. Our Q2 2014 loss included a $5.8 million gain due to a decrease in the fair value of our outstanding warrants.

Tekmira’s net loss from operations excluding other income losses and the related warrant revaluations was $9.4 million for Q2 2014, as compared to $6 million for Q1 2014. The increased loss in Q2 related to a revenue reduction of $2.6 million combined with an increase in R&D expenses of $1.1 million in Q2 2014.

Looking at revenue in more detail, Q2 2014 revenue was $1.8 million, as compared to $4.4 million in Q1 2014. In Q2 2014, we recorded only $0.9 in revenue from our U.S. Department of Defense contract to develop TKM-Ebola. This compares to $3.2 million in Q1 2014. Activity under this contract decreased as we completed the single ascending dose phase of our TKM Phase I trial in Q2.

Turning now to expenses, total research, development, collaborations, and contracts expenses increased from $8.2 million in Q1 2014 to $9.3 million in Q2 2014. This increase relates to the purchase of materials for our HBV candidate and expansion in the number of PLK1 clinical trial sites for the ongoing trial and setup costs for our HCC trial.

As at the end of Q2 2014, we had cash, cash equivalents, and investments of $129.5 million, as compared to $134.4 million at the end of Q1 2014, so net cash burn in the quarter of $4.9 million.

I’d now like to turn things back over to Mark for some concluding comments before we open the call up for questions. Mark?

Mark Murray

Once again, I would like to reiterate our deep concern on the Ebola public health crisis. I would like to underscore the commitment and dedication of my team in working with the FDA to ensure the potential responsible use of TKM-Ebola in infected patients, and to ensure the safety of healthy volunteers in our Phase I clinical study.

At the same time, my team has remained fully focused on advancing our other important clinical programs and key milestones to ensure that we are achieving our promises to our investors, shareholders, and stakeholders alike.

I’d now like to turn the call over to the operator, who will manage the question and answer portion of the call. Operator?

Question-and-Answer Session

Operator

[Operator instructions.] The first question comes from Michael Yee with RBC Capital Markets.

Michael Yee - RBC Capital Markets

A couple of questions, starting on I guess the Ebola program. What are the discussions that you’re having? What are the scenarios that could occur? Could one scenario be where it’s used if it breaks out into another country, and they try to prevent the spread? Is that a possible scenario? Maybe you could walk through some of that, how that would actually get implemented.

The second part is how much drug supply do you actually have, could you actually use and supply right now? And how long would it take to manufacture more? And do you plan to manufacture more? And the third part of that Ebola question is, why do you think there would be a Q4 clinical hold release? Did they say that to you? Did you complete and submit your data to get released? Maybe you could comment on that.

Mark Murray

First of all, with respect to what could happen, I think we’ve indicated here that we don’t know yet. I think it’s premature. So I don’t want to speculate. With respect to drug supply, obviously we have an inventory, because we have an open IND and a clinical study underway. We are exploring what it would take to produce more. I don’t have an answer to that yet.

And with respect to resolving the matter, this is our best estimate about what it is we need to do, and the turnaround time required to do it.

Michael Yee - RBC Capital Markets

So you have supply for like, Phase I/II studies, so I could make an estimate as to how much drug supply a Phase I/II study is. So how long would it take you to make more? Six months?

Mark Murray

Phase I.

Michael Yee - RBC Capital Markets

Phase I. And I know what a Phase I study looks like, but if you need to make more, would it take months to make more supply?

Mark Murray

Yeah, I would say months.

Michael Yee - RBC Capital Markets

My second question is actually on hep B. Obviously there was some data announced this week. I wanted to get your opinion and impressions on that data, and specifically what we know about the cytokine release. Do you therefore plan to use an antihistamine in your hep B program, pre-dosing?

Mark Murray

We haven’t had a chance to study this information thoroughly, but I think the top line is we think it’s good news. Apparently, our colleagues were able to demonstrate [unintelligible] knockdown in human subjects. We think that’s good news.

Their product and their pre-medication strategy is different from ours. As you know, we’re employing third-generation LNP and our expectation is that we can dose that without pre-medication.

Michael Yee - RBC Capital Markets

Given your experience with the Ebola program, do you still expect that?

Mark Murray

Yes.

Operator

The next question comes from Jason Kolbert from Maxim.

Jason Kolbert - Maxim

On the financials, the statements weren’t broken out in great detail, so can you go through with me, for example, how is Marqibo doing? I know there were some royalties recorded under the agreement with Spectrum?

Bruce Cousins

Firstly, our 10-Q will be filed very, very shortly, and you’ll get the full transparency on our financials, so please look for that. Specific to your question on Marqibo, that product was launched very late last year. The sales uptake on the product has been modest, and a very modest royalty is reflected in our results to date.

Jason Kolbert - Maxim

So let’s kind of switch back. I think Michael covered most of the questions on Ebola, but can you help me understand, when you talk about the regulatory framework in Africa, and can you clarify in a little bit more detail how the FDA made this transition from full clinical hold to partial clinical hold? It would be helpful to have some insights so that we have some concept of what the regulatory framework would be.

And just so you know where I’m going with this, if a situation were to occur in the future, where you actually treat patients in the field, how would that change the regulatory landscape? Because it seems like if you’re actually in the field treating and hopefully rescuing patients, how does that then impact the trial requirements for approval on Ebola?

Mark Murray

Jason, I think as I said to Michael a moment ago, these are early discussions. I have no answers to your questions. And I think I would just revert to what I said earlier. We will update you as we learn and are able to confirm that there are pathways going forward.

Jason Kolbert - Maxim

Maybe could you at least share with us what the communications were like with the FDA, and how you transition from full clinical hold to partial?

Mark Murray

I think simply stated, the FDA reevaluated the risk-reward for use of the drug in infected patients as opposed to healthy volunteer subjects.

Jason Kolbert - Maxim

Well, you know, you and I have talked about that, Mark, and we even published a note talking about kind of the prophylaxis of, I’ll call it almost an allergic-like response. And it seemed like you were just being very cautious and really targeting the development of an MCM, medical countermeasure, in the field, and it would be better to dial in the dose that didn’t require prophylaxis. And it sounds like on their own the FDA came to the same conclusion.

Mark Murray

I think that’s fair.

Jason Kolbert - Maxim

And can you just close out with me a little bit? I’m obviously very interested on the things that you’re doing in the liver. And you mentioned the fact that the liver program could kick off next year. Can you just walk me through what you’re thinking in terms of what the initial design would look like? Who would the patients be? What would the entry criteria be? You know, just give us some idea of just a really rough layout on how that program might evolve.

Mark Murray

Are you speaking about the HBV program?

Jason Kolbert - Maxim

Actually, I was thinking HCC, but I’m equally interested in HBV.

Mark Murray

So, HCC, it’s the same agent, TKM-PLK1. We have a dose ranging data set from the patients from the GI and the ACC patients that were treated previously. We want to make sure that that same dose range is applicable to patients with HCC. So we are doing a modified dose escalation, up to a couple of cohorts, just to confirm that the compound is safe and tolerated, and looking for clinical benefit.

Jason Kolbert - Maxim

And when you say you’re looking for clinical benefit, help me understand, in HCC, what would define benefit, given the fact that these patients are probably on a lot of different drugs, and a lot of different, whether it’s surgical resection, or chemo, or even biologics. How do you define, in that spectrum, what an effect is?

Mark Murray

So keep in mind that in a study like this, these patients would have been failed or weaned from other therapies. So this is a single-agent study. These patients would be having progressive disease, and we would be looking for what we call clinical benefit, which at this stage of the game is stable disease or partial response, or anything that you broadly could describe as clinical benefit, that is drug related.

Operator

The next question is from Stephen Willey from Stifel.

Stephen Willey - Stifel

Just one question on Ebola. I guess what’s the level of confidence right now with respect to - again, understanding that this is kind of a bit of a sensitive issue - your ability to address the FDA criteria that’s been outlined with respect to dose modification and being able to avoid pre-medication in the next multiple ascending dose study in humans?

Mark Murray

We’re confident that we can avoid steri pre-medication in the multi ascending dose portion of the trial. It’s something we don’t want to do. I think we have reasonable confidence that we can address the FDA’s concerns and move forward. But you know, we’re not there yet.

Stephen Willey - Stifel

And if you can remind us, this current tranche of DOD funding takes you through the multiple ascending dose portion of this program, correct?

Bruce Cousins

Yeah, the current tranche of the DOD funding takes us through our Phase I program in its entirety.

Stephen Willey - Stifel

And so does this then change timelines with respect to when you solicit or apply for the second tranche?

Mark Murray

Yes. I mean, I think there’s an inevitable delay here, because the second tranche will come after we finish the trial.

Stephen Willey - Stifel

And then just on HBV, can you give us maybe a little bit of color as to what we should be expecting from some of the preclinical data that you’re going to be presenting at OTS in October?

Mark Murray

We’re going to be showing you the performance of the drug product against a variety of parameters and a variety of models. So influences on surface antigen, influences on virus levels, in a variety of models.

Stephen Willey - Stifel

Will one of those models include nonhuman primate data?

Mark Murray

No, it will not.

Operator

The next question comes from David Novak from Clarus Securities.

David Novak - Clarus Securities

I’d just like to say we certainly respect your responsible approach to dealing with the Ebola outbreak. Most of my questions about Ebola have been covered, but considering the recent exposure Ebola has gotten, your internal business case has always been based on stockpiling by the United States. Obviously, there’s increasing exposure, everybody’s looking at this. Have you been approached by any jurisdictions, any entities outside the U.S.? Is there increased interest? And are you considering internally increasing that business case now, based on additional contracts outside the U.S.?

Mark Murray

We are. We are rethinking that.

David Novak - Clarus Securities

And can you give us any clarity about how many entities have approached?

Mark Murray

Let me be clear. There were two parts to your question. The first part was have we been approached by anybody for a stockpiling discussion. The answer to that is no, we have not yet been approached. The second part of your question is, are we rethinking the business thesis, and the answer to that is yes, we are rethinking the business thesis.

David Novak

And just one final question. You have a ton of stuff in the pipeline. It’s an excellent story. Can you at all talk on mRNA or subcu? Is development continuing? Has anything else significant happened there? Are you in discussion with any potential partners for mRNA? Anything you could tell us on those programs would be great.

Mark Murray

We continue to remain interested in mRNA, and we think that LNP can be an enabling agent here in the development of the mRNA field. We are in a number of discussions, but we’re just not able to provide guidance on BD activities. So I think I’ll just leave it there.

With respect to subcu, I think we’ve said in the past that we have demonstrated already that you can deliver LNP subcu and get potent knockdown of targets in the liver. We think that there are maybe better ways to do it, and while we continue to work on subcu, we’re not very focused on it.

Operator

And I am showing no further questions. I would now like to turn the call back over to Julie Rezler for closing remarks.

Julie Rezler

Thank you, operator. We appreciate everybody’s participation in the call today, and we look forward to sharing our updates with you on our progress in the months ahead. This concludes our call for today. Thank you very much.

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