Sunesis Pharmaceuticals' (SNSS) CEO Dan Swisher on Q3 2015 Results - Earnings Call Transcript

Sunesis Pharmaceuticals, Inc. (SNSS) Q3 2015 Results Earnings Conference Call November 5, 2015 11:00 AM ET

Executives

Eric Bjerkholt - EVP, Corporate Development and Finance, and CFO
Dan Swisher - President and CEO
Par Hyare - VP, Oncology Operations

Analysts

Adnan Butt - RBC Capital
Mara Goldstein - Cantor Fitzgerald
Matthew Andrews - Wells Fargo
Andrew Peters - UBS
Hartaj Singh - BTIG

Operator

Good day, ladies and gentlemen, and welcome to the Sunesis Pharmaceuticals Third Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we’ll have a question-and-answer session and instructions will be given at that time. [Operator Instructions]

I’d now like to introduce your host for today’s conference, Mr. Eric Bjerkholt, Executive Vice President of Corporate Development and Finance, and Chief Financial Officer. Sir, you may proceed.

Eric Bjerkholt

Thank you, Novo. And thank you all for joining us today. With me today are Dan Swisher, President and Chief Executive Officer; and Par Hyare, Vice President of Oncology Operations including Medical Affairs and Market Access. Dan will review recent corporate events; and provide an overview of the ongoing vosaroxin and pipeline programs, and I will discuss third quarter 2015 financial results. We will then open the call for questions.

Before we begin, let me remind you that during today’s conference call, we will be making forward-looking statements that represent the Company’s intentions, expectations, or beliefs concerning future events. These forward-looking statements are qualified by important factors set forth in today’s press release and the Company’s filings with the SEC, which could cause actual results to differ materially from those in such forward-looking statements. Information discussed on today’s call is accurate as of today, and we do not intend to update.

With that, let me turn the call over to Dan.

Dan Swisher

Thanks, Eric. Good morning and thanks to all of you for joining.

We’ve made some very important progress on several fronts over the last quarter, both vosaroxin and with our kinase inhibitor pipeline that ends up for a productive end of the year and 2016 with multiple catalysts. First and foremost, our top corporate priority is to file a European marketing authorization application before year-end for vosaroxin as a treatment for relapsed/refractory, acute myeloid leukemia.

As we announced in the third quarter, we were encouraged from our separate in-person meetings with the Rapporteur and co-Rapporteur to pursue an MAA based on the VALOR results. The Rapporteur and co-Rapporteur who are from the UK and the Netherlands are assigned to provide advice and guidance through the European regulatory process. Specifically the application will include our entire VALOR data set with an emphasis on the largest pre-specified subgroup patients age 60 years or older with relapsed/refractory AML. This is a population with a significant medical need in a setting for whom the greatest benefit was observed in the vosaroxin/cytarabine treatment arm of VALOR, our pivotal Phase 3 trial. Incidentally the VALOR trial -- the VALOR study was recently published in the leading journal, Lancet Oncology.

Since the ASCO and EHA meetings, our investigators have presented analyses and data from VALOR at five regional medical conferences in Europe. In October, Dr. Rob Stuart of MUSC, presented the VALOR results for the first time in Asia at the Japanese Society of Hematology meeting followed by a roundtable discussion with 12 top Japanese AML clinicians. The feedbacks from these clinicians were very positive with a strong expressed interest in moving vosaroxin forward in bridging studies toward regulatory filings in Japan.

Just yesterday, an important new co-stock analysis highlighting the significant benefit of CR and survival which presented at the Chemotherapy Foundation Symposium in New York City. The presentation highlighted VALOR data to support the well-established correlation between CR and prolonged survival in AML. With an improved median survival of more than 12 months for responders and observed two-fold increase in the CR rate with the addition of vosaroxin to cytarabine, these data provide meaningful added support for the potential benefit of vosaroxin in this setting.

As we’ve highlighted in the past, there are number of precedence for EU first approval, particularly in orphan oncology indications where emphasis is placed by the European regulators on the evaluation of the totality of a robust randomized data set such as VALOR. A very recent and relevant example is on September 25th of this year, the CHMP gave a positive opinion for a new indication of VIDAZA treatment as a treatment for patients aged 65 years or older with AML not eligible for transplant with greater than 30% myeloblasts. This approval was based off of Celgene’s randomized AML-001 trial which had an overall survival hazard ratio of 0.85 and stratified log-rank p value of 0.1009. This recommendation underscores the willingness of European regulators to take positive steps to ensure access to new treatments for AML patients in need more of options.

We believe the opportunity in Europe is significant, both for relapsed/refractory setting and in the future, moving into a frontline AML setting. This is reflected, both in our own market research as well as from the positive dialogue we have been having with interested potential European licensing partners.

To that end, we are in the midst of a comprehensive process to identify in diligence the best pharma partner who’s motivated, well-resourced and experienced to ensure a successful future European product launch and to work closely with us on expanding the future indications beyond the initial approval in relapse/refractory disease.

In the U.S. we remain committed to helping AML patients by finding the best path forward that is time and resource efficient, makes vosaroxin available for patients and clinicians in need of new treatment options and least, to successful regulatory and commercial outcome. We look forward to making additional tangible progress in this area in 2016.

On the clinical front, we remain committed to fully exploring vosaroxin’s potential. We’re particularly interested in further valuations of frontline AML, intermediate or high-risk MDS and then related hematologic settings. Our evolving plan includes the future indication of additional investigators -- future initiation of additional investigator sponsored as well company sponsored studies. Across Europe and U.S. we have more than 10 ISTs been actively evaluated with the goal to initiate several new studies in the coming months. At ASH, we look forward to clinical updates from our investigators from our ongoing AML and MDS trials. And those presentations just recently posted and put out a press release just recently.

After vosaroxin, the next major element of our pipeline strategy is taking shape in the advancement of our kinase inhibitor pipeline of novel targeted therapies. This includes our oral pan-Raf program TAK-580, formerly called MLN-2480, which is being developed and fully funded by Takeda Pharmaceutical. At the September ECCO ESMO conference, Takeda presented Phase 1 data from their study in patients with advanced solid tumors or melanoma. The safety profile was consistent with pan-Raf inhibition, early signs of any tumor activity were observed in the QTD or every other day schedule. Ongoing expansion of the QW or once weekly dose schedule is underway with early evidence of clinical benefit in B-RAF mutant disease.

The initial safety profile of the once weekly dosing suggests the schedule may be optimal for novel combination strategies and a Phase 1b studies actively recruiting to exploring a multi-arm design in the combination of TAK-580 individually within oral mTORC inhibitor and aurora A inhibitor and leading on market current treatments including paclitaxel, cetuximab and [indiscernible].

Farthest along among our proprietary programs is SNS-062. This is our potent non-covalent oral second generation BTK inhibitor for which we own worldwide rights. Our near term-goal is to file for a clinical trial authorization in Europe to support a phase 1a study in healthy volunteers. We believe this is an efficient way to quickly understand the drug’s PKPD profile in humans, identify a pharmacologically active dose and to get initial human safety data.

We expect to begin enrolling patients in the study in the first quarter of 2016. We plan to follow the study with a Phase 1b in patients with B cell malignancies including relapsed/refractory CLL disease with acquired mutations in the Cysteine 481. We believe the drug also has potential in solid tumors given its strong BTK and ITK inhibitory profile. We look forward to highlighting SNS-062’s unique properties and potential advantages over currently available BTK therapies including ibrutinib in a poster presentation at the AACR-NCI-EORTC triple conference, this weekend.

Also at that triple meeting, we look forward to presenting data from our potentially first in clinic selective PDK1 program, namely from our lead candidates SNS-229 and SNS-510. PDK1 is a master kinase that places a key role in phosphorylation of AKT and also places an important through PITK independent signaling pathway such as RSK and NF kappa B. We’re very encouraged by the pharmacology data we’ve seen to-date and our IND enabling work is progressing. As we move forward with our regulatory and development efforts we remain diligent and also efficiently managing our capital resources. And to speak to that I will turn the back over to Eric.

Eric Bjerkholt

Thanks Dan. I will recap financials announced this morning, beginning with our cash position. We ended the quarter with $30.5 million in cash compared to $43 million at the end of 2014. The decrease of $12.5 million of the first nine months of 2015 was primarily due to $29.5 million of net cash used in operating activities and $1.6 million of principal payments against notes payable, partially offset by $18.6 million raised from sales of common stock through the Company’s at-the-market facilities.

Our current capital is expected to be sufficient to fund the Company to the middle of 2016. We’re currently evaluating a range of options including entering into regional partnership to further develop and commercialize vosaroxin that would contribute capital resources towards funding our corporate plan into 2017 and beyond.

For the income statement, revenue for the three and nine months ended September 30, 2015, was $0.7 million and $2.4 million as compared to $0.9 million and $4.8 million for the same periods in 2014. Revenue in each period was primarily due to deferred revenue recognized related to the royalty agreement with Royalty Pharma.

Research and development expense was $5.3 million and $16.1 million for the three and nine months ended September 30 this year as compared to $6.9 million and $21.7 for the same period last year. The decreases between the comparable three and nine-month periods were primarily due to reduction in clinical trial expenses, consulting and other outside services cost in each case.

G&A expense was $4 million and $14.3 million for the three and nine months periods ended September 30 this year as compared to $7.2 million and $17 million for the same period last year. The decreases between three and nine months periods were primarily due to decreases in outside services and personnel cost.

In summary, we have the resources, team and plan to unlock significant value from our maturing product pipeline.

With that, I will turn the call over to Dan.

Dan Swisher

Thanks, Eric. With that, we’re actually going to open up the call to questions. Novo, if you could open up the line?

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Adnan Butt of RBC Capital. Your line is open.

Adnan Butt

So, let me ask one on the EMA first. Dan, do you expect them to focus on any subset of patients or do you expect them to look at the totality of data?

Dan Swisher

It’s a great question. They will definitely look at the totality of the data and that will be part of the filing. But in our separate meeting with the Dutch and the British regulatory authorities, they recommended that where the clinical benefit was strongest including survival translating from the CR in the population was in the over 60. So, we’re expecting that the indication would be focused on that largest subset of patients which was two-thirds of the VALOR study set. But it will depend a little bit on the ongoing discussion that they have with the entire set of member states when the package is reviewed.

Adnan Butt

And since you’ve brought it up, in terms of a potential partner in Europe specifically, what is that they could be looking for. They have the data that they can look at the data and then what is that you would want from them; is the goal potentially enough to run another study in the U.S.? Thanks.

Eric Bjerkholt

I’ve just got back from by Europe and it’s pretty obvious that there are very few late stage programs available for partnering. We’re potentially a year to 15 months away from approval and market launch in Europe. So, that makes the program very attractive. And also there are no approved agents in relapsed/refractory AML. So that’s attractive as well. So, we’re having very good discussions. And what they’re interested in is gaining access to a new program that could become a new standard of care in that setting. From our standpoint, what we’re looking for is obviously somebody who has experienced marketing across Europe, particularly in oncology and hematology in particular and who shares our excitements about the lifecycle plan we’re putting together and would help us sum that over the next several years.

Dan Swisher

And then you mentioned about funding a study for the U.S. As we look at the U.S. path forward, we’re still evaluating the feedback that we got. As we mentioned, our priority was to get the European filing moving. And with the recent Celgene approval with VIDAZA, it’s clear that the European regulators are looking at the totality of the data in these areas of unmet. The FDA may still look at the data in the same way. We have to size whether that’s a potential task. Clearly doing additional clinical work, whether it’s to gain initial approval or just to gain extended approval in the various regions of the world will also be part of our lifecycle plan.

Since I’ve got Par here and he hasn’t previously been on some of these calls, he has been doing a lot of work, running a lot of miles with a small team in both Europe and the U.S. on the Medical Affairs and Market Access. So, Par, you could just say a couple of words to the initiatives that have been underway this year?

Par Hyare

Absolutely. So, the beautiful thing that we have in front of us is the largest relapsed/refractory Phase 3 trial ever presented to any agency. And with that we have a significant amount of global physician support for the data and a significant amount of interest for ongoing clinical programs. So, as Dan mentioned in his earlier statements, we have just shy of about a dozen concepts and/or protocols that we’re reviewing. There is strong interest in advancing vosaroxin from relapsed/refractory and beyond. And I think as you particularly look at European partners, they are keenly aware of the KOL support that we’re garnering in Europe and beyond. I mean that is becoming a very strong, let’s say, value for vosaroxin and opportunity in Europe.

Dan Swisher

Adnan, we probably gave you more than you were looking for but...

Adnan Butt

Sorry, if I can just get on follow-up, so I think I heard Eric mentioned regional partnership, is that what -- was that in relation to the European plans or was that separate from the European plans?

Eric Bjerkholt

We’re looking for ex-U.S. partnership, so that would include Europe, Asia, other geographies and whether that turns out to be one or multiple partnerships, it’s too early to tell.

Operator

Our next question comes from the line of Mara Goldstein of Cantor Fitzgerald. Your line is open.

Mara Goldstein

The abstracts that were published today, I am wondering -- I think the AML study had that MD Anderson suggests about 50 something patients. Can you update us as to what to actually expect at the conference?

Dan Swisher

Sure. Yes. So, we’ve got three presentations at ASH. Two are poster presentations which include analysis of the VALOR dataset in terms of baseline predictors of mortality. And we think that’s very important for both regulators in understanding risk benefit and patients and also guiding clinicians to what patients are most at risk through treatment and need to be carefully followed. So, that’s an important presentation. That took a lot of analysis on Sunesis scientists part.

The two ISTs that are being presented is one in oral, second year now with the nearly completely trial with MD Anderson. And it will close to 60 patients worth of data. If you remember from last year, we had very promising responsive, composite responses in excess of 70% versus less than 20% expected for decitabine. And the survival was fairly immature. And we’ve just -- MD Anderson just shifted from a 90 milligram to a 70 milligram initial dose for these older patients who are no candidates for standard cytarabine base therapy. And what we’ve seen now in the abstract is many more patients who have been added to that 70, the response rate is held to a very high level. And the maturing survival which is still maturing looks very promising. So, I think we’ll just see some updated data at the conference which will be few patients and a more mature look at safety efficacy and survival. And that could fall on the basis as we’re thinking about future company sponsored studies to consider a study in that setting.

The other abstract that I just want to reference is Wash U abstract. This is a pretty exciting one. It’s an intermediate high risk MDS. So, it’s our first ever data in MDS. Market opportunity that’s at least as large as AML. And we saw for the third time now with the third compound we combined with synergy. So, this is with VIDAZA azacitidine. And while it’s small number of patients 12, three quarters of them had some form of marrow response and a significant number of them also went on to transplant, which is unusual in this setting. And it’s promoting a number of our investigators around the world to want to follow those signals and explore the compound more broadly, MDS. So that’s probably our third indication, relapsed/refractory is probably the first one with VALOR, frontline AML and then moving into frontline MDS.

Operator

Our next question comes from line of Matthew Andrews of Wells Fargo. Your line is open.

Matthew Andrews

Dan, as it relates to Europe, can you talk about thoughts on potentially starting an early access program? Whether you think that would help in terms of getting approval there? You’ve talked about potentially running in the past. And then secondly, back in July when you had the regulatory update call, it sounded like the door was pretty close to being shut with FDA. So, the fact they have the briefing book in a way of the different analyses, presumably of datum. What point do you go back to them and what sort of information might you need to get them to change their opinion on that current data set?

Dan Swisher

So, on the first one, I’d just like to say commitment that Sunesis has to AML patients around world that we really want to make vosaroxin available to -- in the right center with the right doctors for the right set of patients, given sort of the unmet need and the limited treatment options they currently have. And so we have them looking at an early access program. And maybe Par, who has been leading that effort, could say a few words about -- preview that program and when we expect it to go live and where it’s going to go.

Par Hyare

We’re definitely underway with that initiative. We have selected a partner. And what I can do is provide you all an update shortly but significant efforts been taken over the last several months on that initiative. And we should have some updated information for you shortly.

Dan Swisher

So, we will be doing early access program that will span both Europe and the U.S. So, stay tuned. We’ll be given more detail as that launch is probably by year end. Just with regard to the FDA, I don’t want to go too deep into what our current thinking is other than to say, we’re going take some tangible steps next year. And it’s likely that some of the steps will include further interaction with the FDA probably around midyear. And so I am going to leave it at that. We’re carefully evaluating -- we have a number of experts, we’re talking to; we’re talking with our VALOR clinicians. And we, also in that interim, want to make as much tangible progress as we can toward the European market where obviously there is a closed network of KOLs between the U.S. and Europe. And just overall, we want to ensure that we can get -- patients can get access to this therapy as quickly as possible.

Operator

Our next question comes from the line of Andrew Peters of UBS. Your line is open.

Andrew Peters

I have a couple. I just wanted to understand what kind of the initial work that you’ve been doing around access and payers and things like that. Just wanted to understand a bit more the extent of any sort of pharmacoeconomic work that you’ve done, as you think about potential conversations with organizations like NICE. And then just a question for Eric, wanted to understand is the -- on the OpEx side, is this quarter a good run rate going forward in terms of expectations or should we expect some growth from here as you increase your activity towards that filing, the MAA.

Dan Swisher

Par, I’m going to let you address the market access and some of the initiatives we’ve had underway in Europe and where we stand to support our product launch.

Par Hyare

So we recently just got back from our first national, if you will, European pair advisory board. And if I could give you one take away from that encounter, it is the fact that the payers recognize beyond that unmet need within AML and willingness of payers to provide an option to patients that clearly need it. So, we are underway from a national perspective. Those initiatives will be followed by regional initiatives and then also country specific initiatives within Europe to support our value proposition testing to understand challenges that we will face and we will overcome. So, it’s early in its development but we’ve done some initial pricing research globally and some initial payer work. All of these things will clearly inform our work streams. And we’re confident that within the next 12 and 15 months, we will be able to address the questions of each in individual HTA. We’re working on a very robust publications plan that will address a number of unanswered questions within AML. One of the key things is that a lot of payers have not reviewed many new AML products for the simple fact that there hasn’t been much advancement in the space. So, there’s going to be a fair amount of education that is required. And through our interactions, we’re addressing the specific points of education and most importantly where vosaroxin sits in within AML patient journey and the value that it’s going to provide the patient, the provider and also the country and or health system that it’s going to impact.

Dan Swisher

And Eric?

Eric Bjerkholt

Yes, Andrew, so what we’ve said consistently for a while now is that we’re funded to the middle of next year. So, on average, it follows that our quarterly burn would be approximately the same as this most recent quarter. However, not every quarter will be the same of course. But on average, you are right. It is a good guide.

Andrew Peters

And just one last question. I wanted to understand a bit more how you think about that the path forward for 062? When you think about the opportunity, is it looking at ibrutinib failures or do you see advantages pre-clinically that I would think that you can maybe offer something on that would benefit patients beyond ibrutinib?

Dan Swisher

Great question. Look forward to having more discussion about the kinase pipeline just for people who’ve joined the call and haven’t followed Sunesis, this comes from our original discovery platform and many years of investment and effort between Biogen scientists and Sunesis scientists. So, it’s great to be on the threshed now of having us next second generation BTK inhibitor, first non-covalent binder go into the clinic. And so I think there’s kind of three areas, let’s say. One is we’re spread about this class of molecules, non- mutagenic, you can go straight into healthy volunteers and learn a lot of information lot faster than you would. So, what would typically take 18 months of dose escalation in cancer patients for a typical Phase 1 study, you can do in healthy volunteers within less than six months. So that means we can be in the second half of the year, moving into cancer patients with pharmacologically active doses. And our plans are still underway. We’re talking with the clinicians in the space. It’s beautiful about ibrutinib being before us is a lot of investments gone into validate the pathway which has become a leading therapy in many settings.

I think as we learn more about our drug, we clearly know there is a subset of patients that ibrutinib doesn’t work because of its covalent binding to the Cysteine 481. And lot of that information and preclinical evidence is in our poster that’s being presented this Saturday. So, we’ll have those posters up on our website. And any of you who are at Boston for the triple meeting, should come by and our scientists are there for those presentation. So, we do want to see, if there is single in those Cysteine 481 mutated patients where they’re no longer benefiting from ibrutinib. That’s kind of a low handing fruit and could be a very fast path to market if that were true.

But the other thing is with sort of the kinase inhibition profile, there may be some potential advantages over ibrutinib more broadly. One of the things that’s highlighted in the poster is the lack of EGFR inhibition. And that could have less of the safety issues and there maybe some efficacy advantages as well. But we’ll only be able to tease that out when we can get more broadly into the cancer patients. So, very excited that we could add a lot of clinical value pretty quickly in this program over the next 18 months.

Operator

Thank you. [Operator Instructions] And our next question comes from the line of Hartaj Singh of BTIG. Your line is open.

Hartaj Singh

A lot of traveling going on. Just what is -- could you just highlight, I mean you’ve got a very busy next couple of months. Can you just highlight for me what are your strategic and operational perspectives or what’s your focus on starting in January and sort of what would be the thing that you would be sort of wanting to accomplish over the first six months, going from the operational to the regulatory to the financial just how do you -- if just kind of prioritize them once we’re through with this year? Thank you.

Dan Swisher

Now, Hartaj, it’s great question. And what’s really exciting about where we stand, there is so much optionality in the current product pipeline. And I think that’s got us very excited internally. And we do have to focus and prioritize; we can’t do everything. And it’s part of what’s driven us to look for partners, so we can do more with our lead program vosaroxin at which time, we may need partnerships around some of the kinase programs as well as to fully clinically evaluate these molecules. But it will be from a position of strength of having worldwide rights and clinical data that we generated.

So top priority by far is the development team, submission of the MAA. So, that’s going, taking quite a bit of efforts but we feel confident that we got a very good shot at getting that application in by December which would start the regulatory clock on January 1st, if we get through validation. So look forward in the New Years to be able to reach that milestone. And then we’ve got some very clearly defined upcoming interactions with the European health authorities where we gain further insight and confidence of getting to approval, particularly in Q2, the day 120, set of questions that come from the full set of EMA members states. And that’s where we’ll have a good sense that everything is very addressable and we’re moving toward a year-end or early ‘17 product launch. And that would time nicely then with where regional partners would come onboard with the midyear timeframe when we’ve gained those insights.

So kind of stay tuned for that. And that would intern enable us with the planning that we will be doing from now till then to start to initiate additional company-sponsored trials beyond wide range of investigators sponsored studies that you will see happening over the next several months, which will be the first new studies we’ve done in a couple of years now. So, pretty exciting for the program.

And then obviously on the kinase side, to get clinical data on the 062 second generation BTK inhibitor and then get the PDK1 which is a very exciting pathway which again very data rich poster presentation. And it’d be the first in clinic selective PDK1 inhibitors that have a lot of unique possibilities on the cancer side. So kind of stay tuned for all that. So, we will be giving a very clearly set of key milestones and objectives for 2016 as we go into the New Year.

Operator

I am showing no further questions in the queue. I would like to turn the conference back to Dan Swisher for closing remarks.

Dan Swisher

Thanks again everybody for participating. I know it’s busy times right. We look forward to achieving this top corporate priority that we just reiterated, this mission of our European MAA. It’s very exciting to think after the years of investment in this program to get it to a large commercial market. And that would be the first of many to come. We’ll look forward to also providing further updates on the clinical regulatory and all the pipeline initiatives that are underway. And as always, we will be at several of these conferences, so look forward to seeing most -- many of you in person. But if any of you have questions in the meantime, feel free to call Eric or me. Thanks for participating.

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 wonderful day.