ARIAD Pharmaceuticals' (ARIA) CEO Paris Panayiotopoulos on Q4 2015 Results - Earnings Call Transcript

| About: ARIAD Pharmaceuticals, (ARIA)

ARIAD Pharmaceuticals, Inc. (NASDAQ:ARIA)

Q4 2015 Earnings Conference Call

February 23, 2016 8:30 AM ET

Executives

Maria Cantor – Senior Vice President, Corporate Affairs

Paris Panayiotopoulos – President and Chief Executive Officer

Ed Fitzgerald – Executive Vice President, Chief Financial Officer and Treasurer

Marty Duvall – Executive Vice President and Chief Commercial Officer

Tim Clackson – President-Research and Development and Chief Scientific Officer

Analysts

Terence Flynn – Goldman Sachs

Phil Nadeau – Cowen and Company

Eun Yang – Jefferies

Mike King – JMP Securities

Katherine Xu – William Blair

Andrew Peters – UBS

Jon Eckard – Barclays

Operator

Thank you for holding for ARIAD Pharmaceuticals Fourth Quarter and Full year 2015 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following the formal report, ARIAD management will open the lines for question-and-answer period. Please be advised that this call is being taped at the company’s request and will be archived on the company’s website for three weeks from today.

At this time, I would like to introduce Ms. Maria Cantor, ARIAD’s Senior Vice President, Corporate Affairs. Please go ahead.

Maria Cantor

Good morning and thank you for joining us. This morning we report on financial results for the fourth quarter and full year of 2015, and provide top-line revenue guidance for 2016. With me on this call are Paris Panayiotopoulos, our new President and Chief Executive Officer; Ed Fitzgerald, our Chief Financial Officer; Dr. Tim Clackson, our President of R&D and Chief Scientific Officer, and Marty Duvall, our Chief Commercial Officer.

Please note that during this call, we will be making forward-looking statements. These statements are subject to factors, risks and uncertainties, including those that are detailed in our Form 10-K for the year-ended December 31, 2014, and other SEC filings that may cause actual results to differ materially from the results expressed or implied by such statements.

Now let me welcome Paris, with opening remarks.

Paris Panayiotopoulos

Thank you, Maria, and good morning, everyone. I joined ARIAD at the beginning of this year and I’m honored and excited to be leading the company at this important time of its growth phase. In my first six weeks, I’ve met with all of our active top shareholders with many key physicians in the CML and ALK-positive non-small cell lung cancer community, and with the ARIAD teams to review our existing functional plans and our potential operational and strategic options ahead.

I’ve made a point to state during each of my meetings with shareholders and industry investors that one of my very first actions would be to embark on a company-wide strategic review aimed at increasing shareholder value.

I’ll come back this in a couple of minutes, but first let me share with you my impressions of ARIAD a few weeks into my new position. First, regarding ARIAD business model, the company has deep expertise in developing precision therapies for orphan cancer indications in which I expect that to sharpen our focus even further. It's both important to patients who have limited treatment options and to our shareholders as ARIAD can move quickly and efficiently the clinical proof-of-concept and approvals with high value-add therapies.

Second, we need to maximize Iclusig within its current label to drive near-term revenue growth. Our commercial team will be implementing new program this year to reach more appropriate patients and to keep growing revenues. In 2015, Iclusig grew product sales by 102%, and in 2016, we believe it has a potential to reach $200 million.

Third, we need to strongly prepare for potential early 2017 brigatinib launch which will take us from one to two marketed product company and add to a high double-digit near-term revenue growth. We’re encouraged by brigatinib and we believe it has the potential to be a best-in-class ALK inhibitor to patients with this form of non-small cell lung cancer.

We’re presenting pivotal, registration data at ASCO and filing for initial marketing approval in the U.S. in the third quarter. And last, but certainly not least, we need a greater degree of focus as a company. Specifically we’re looking hard at our cost base, our clinical programs and whether we can compete successfully on our own with Iclusig and brigatinib in both the U.S. and Europe.

So leading on from these first impressions the five key areas of focus of our strategic review which I mentioned earlier and which is well underway are the following. First, we’re evaluating commercial initiatives to maximize near-term revenue growth. Second, we are actively reviewing the opportunity in each geography in which we have an operating presence.

As you know, we are currently present in the U.S. and EU16 and have partnerships in Japan and other geographies. Third, we will seek to achieve cost efficiencies and resource reallocation to the areas of the business that bring the most value. Fourth, we are going through a program portfolio review of both current and potential new development programs to prioritize the programs that will bring most value to patients and shareholders. And fifth, we are exploring business development opportunities that will support our chosen strategic direction.

Importantly throughout all of these initiatives, I’ve stated in my meetings at all options for creating value are on the table. There are no sacred cows and we are open to all approaches to maximize shareholder value.

I fully expect that we’ll be in a position to communicate these sometime in the second quarter this year, and we are anticipating that we’ll host an Analyst Day later in the first half to allow us to go into much more detail across all areas of our business. To close, there is tremendous opportunity at ARIAD and I’m delighted to be working with the Board and the management team. I’ve been involved in several successful turnarounds and I’m highly motivated to do the same and better at ARIAD.

All of us at the company have our sleeves rolled up and are working diligently and together to make it happen. Now we have a lot to cover in this morning’s call.

Let me turn the call over to the rest of our team for updates on Q4 and full year 2015 and 2016 revenue guidance, while we acknowledge that our strategic review is currently underway.

Ed will cover the financials, Marty will give you a commercial update, and Tim will provide the R&D update. Ed?

Ed Fitzgerald

Thank you, Paris, and good morning. A brief summary of our results for the fourth quarter of 2015 was reported in our press release issued this morning. Net product revenue from sales of Iclusig was $33.3 million for the fourth quarter of 2015, an increase of 56% from the fourth quarter of 2014. Of this amount $25.1 million is from sales of Iclusig in the U.S., while $8.2 million is from sales in Europe.

For the full year ended December 31, 2015, net product revenues from sales of Iclusig were $112.5 million, an increase of 102% from 2014. In the U.S. net product revenue totaled $85.7 million in 2015, an increase of 114% from 2014.

While in Europe, net product revenue totaled $26.8 million in 2015, an increase of 71% from 2014. The increase in net product revenue in the U.S. is due to an increase in demand and pricing actions offset in part by higher gross to net deductions.

The increase in net product revenue in Europe is due to expanding the access and demand offset in part by the unfavorable impact of changes in exchange rates. Our R&D expenses totaled $44.8 million for the fourth quarter of 2015, an increase of $12.2 million or 37% from the fourth quarter of 2014, reflecting an increase in costs for development of brigatinib related to the fully enrolled in ongoing Phase 2 ALTA trial and NDA-enabling pharmacology and manufacturing activities, costs related to the initiation of the Iclusig Phase 2 dose-ranging OPTIC and OPTIC-2L trials, IND enabling studies related to AP32788 and an overall increase in personnel and other costs in support of our continuing R&D activities.

Our SG&A expenses totaled $43.8 million for the fourth quarter of 2015. An increase of $3.4 million or 9% from the fourth quarter of 2014, reflecting an increase in personnel costs and an increase in costs in support of expanding distribution and sales of Iclusig. Our net loss for the fourth quarter of 2015 was $59.9 million or $0.32 per share, compared to a net loss of $5.8 million or $0.03 per share for the same period in 2014. The net loss for 2014 includes $50 million in non-recurring revenue resulting from an amendment to our license agreement with Bellicum Pharmaceuticals.

As of December 31, 2015, cash, cash equivalents and marketable securities totaled $242.2 million, compared to $352.7 million in cash and cash equivalents at December 31, 2014. Our cash, cash equivalents and marketable securities at December 31, 2015 include the $50 million in funding we received PDL BioPharma under our royalty financing agreement with PDL announced in July.

As disclosed, we’ve also received an additional $50 million from PDL under this agreement in July 2016 and have the option to drawdown up to an additional $100 million until July 2016. Repayment of this financial over time is based on a single-digit percentage of Iclusig global net revenue.

Now let me provide an overview of our Iclusig revenue guidance for 2016. We expect 2016 Iclusig net revenue to range from $190 million to $200 million as compared to actual net revenues in 2015 of $112.5 million. This guidance includes sales of Iclusig in the U.S., Europe and other select countries where ARIAD has distributorship arrangements in place.

We expect growth in revenue in all territories including throughout Europe where we expect pricing and reimbursement approvals in additional countries in 2016. At this time, we will not be providing guidance on our 2016 operating expenses. Upon completion of our ongoing strategic review, we will update you on further financial guidance.

Let me now turn the call over to Marty to provide detail on Iclusig commercialization. Marty?

Marty Duvall

Thanks, Ed. Good morning, everyone. Over the past year the commercial team has worked hard to build Iclusig sales across all geographies. In 2015, we made much progress and the net result is a doubling of Iclusig sales up 102% versus prior year.

Iclusig sales in the U.S. reached $85.7 million accounting for just over 75% of total sales while in Europe, sales climbed over 70% to $26.8 million. The strong performance in Q4 up 56% versus Q4 of 2014 speaks well to the prospects of continued strong growth in both the U.S. and EU markets.

In the U.S., the majority of growth versus Q4 of last year was increased demand and new patient growth. In Europe, fourth quarter Iclusig sales increased 86% compared to the fourth quarter of 2014. With product price relatively unchanged across Europe, this increase in sales is driven exclusively by increased demand and patient growth.

The revenue guidance, $190 million to $200 million in 2016, demonstrates our confidence in continued growth of Iclusig. We estimate that approximately 70% to 75% of sales will be generated in the U.S., with a clear objective to maximize product sales, success will be driven by a combination of demand growth, pricing action, and expansion into new geographies.

In select countries, notably in the U.S., we will drive demand to improving our commercial competitiveness, increasing our share of voice, and delivering more competitive messaging.

In Europe, we look to expand access in the EU16 including Spain, UK, and Belgium, while driving demand growth in Germany, France and Italy, our largest markets in Europe. Additionally, we will consider expansion of our distribution partner network to impact patients in more geographies. As always, we are committed to patients with resistant/intolerant Ph-positive disease and we will work to leave no patient behind in our efforts.

Finally, we are confident and diligently planning the brigatinib launch in the U.S. market. Pre-commercialization efforts and launch prep activities are underway. We are working towards expanding our U.S. footprint later this year in both commercial and medical affairs to launch brigatinib in early 2017.

Now let me turn the call over to Tim.

Tim Clackson

Thanks, Marty and good morning, everyone. Following the progress made in 2015. 2016 will be a year of execution and delivery for the R&D group. In particular, this will be a very exciting year in a development program for brigatinib. ARIAD’s next cancer medicine is potentially less than one year from approval. And we are mobilizing to bring it potential benefit to patients, as soon as possible.

Full enrollment in the ALTA trial inpatients previously treated with crizotinib was completed in September of last year. And we have submitted data from this global pivotal trial for presentation of this year’s ASCO meeting. The abstract we have submitted contains preliminary data, if accepted the data presented at the conference will be from a later data cut than that described in the abstract.

NDA-enabling studies for brigatinib are now well underway and we are on track to file for the initial approval of brigatinib in the U.S in the third quarter of 2016. We are confident about the potential for brigatinib to be an important differentiated and valuable medicine. Long-term follow-up data from our Phase 1/2 trial have demonstrated several features, we see as key assets for the molecule. We’ve seen robust response rates, highlighted by a high proportion of deep responses including complete responses.

We have seen robust PFS in both lung lesions and in CNS metastases of beyond 12 months. Brigatinib is also administered once-daily with no food restrictions. In preclinical studies, brigatinib has the profile of a pan-ALK inhibitor with substantial activity against all tested ALK mutations that are linked to resistance of other inhibitors.

Overall, we have many reasons to believe in brigatinib and we look forward to seeing these features highlighted in presentations and publications, as we move through the year. Beyond Iclusig and brigatinib, we are very pleased to be advancing AP32788 into clinical development this year. 788 is another molecule delivered by our internal small molecule discovery engine, designed to serve a genetically defined orphan subset of cancer patients currently with no targeted treatment options.

The two main lung cancer target populations for 788, exon 20 EGFR mutations and HER2 mutations collectively represent approximately 6,000 patients in the U.S. Like Iclusig and brigatinib, 788 has the potential to show rapid proof-of-concept early in clinical testing, based on its clearly defined mechanism of action. We expect to begin a Phase 1/2 proof-of-concept trial for 788 this year, and we’ll present initial data on the products preclinical profile in an oral presentation at the AACR meeting in April.

Now, let me turn the call back to Paris.

Paris Panayiotopoulos

Thank you, Tim. And operator, please open the lines to analysts’ questions.

Question-and-Answer Session

Operator

Thank you, sir. [Operator Instructions] Our first question is from Terence Flynn of Goldman Sachs. Your line is open.

Terence Flynn

Hi, thanks for taking my questions. And I know you're still are in the midst of a strategic review, so I'm not sure how much of this you can answer. But just on the expense side, you mentioned a couple of things, so improving commercial competitiveness for Iclusig with some new programs, and then also the brigatinib launch prep, building out the footprint there. So as you think about your potential expense guidance, is there a scenario where this could be lower than 2015? That's my first question, and I have one follow-up.

Paris Panayiotopoulos

Yes, thank you, Terence. I can tell you that it's very unlikely that it will be higher than 2015. Obviously, as I mentioned earlier, we're looking at reallocating resources to the parts of the business that are going to drive the most value. But as I mentioned, we're currently going through all these initiatives, and we'll be able to be in a position in the second quarter, where we can address – not just the cost side, but the growth side as well.

Terence Flynn

Okay. And then, just one on your Iclusig guidance. Can you give us any more detail on which European countries are included in that guidance? Thank you.

Paris Panayiotopoulos

Yes. So in terms of which the European countries that are included, they all would be included in that, in the guidance. So from our own footprint, the E16 that would be generated by ARIAD and then outside of that, it would be through our partner distribution network.

Terence Flynn

Okay. Thank you very much for taking the question.

Operator

Thank you. Our next question is from Phil Nadeau of Cowen and Company. Your line is open.

Phil Nadeau

Good morning. Thanks for taking my question. First, just to follow on to Terence's question. I'm assuming that the guidance, the Iclusig guidance for 2016 includes the recognition of deferred French ATU revenue. Is that correct, and can you give us an update on what – where that figure stands as of the end of 2015?

Paris Panayiotopoulos

Yes, I can. It does include it and we are continuing the negotiation process, and we feel confident that it will be concluded. We are not guiding to any specific date on conclusion, but it is moving and progressing well.

Phil Nadeau

And what's the most recent figure for…

Ed Fitzgerald

Phil, this is Ed, through 12/31/2015, we've had cumulative sales of Iclusig in France of $25 million. We expect that as a result of the pricing and reimbursement negotiation, we will be able to recognize revenue net of any amount that we would have to refund to the authorities based on that negotiation.

Phil Nadeau

Great. And then, my second question is on brigatinib. I know you said you submitted to ASCO for the presentation. I’m curious, does that mean that you have a good amount of pivotal data in-house, or did you just submit a placeholder abstract, and kind of based on what you seen either in Phase 1/2 or the pivotal trial, where do you think you will really be able to differentiate this versus the other ALK inhibitors out there?

Tim Clackson

So I’ll take that. So I tried to hit some of those points in my comments. We, the abstract that we submitted to ASCO definitely is a – I wouldn’t call it a placeholder, but it’s early data. And should it be accepted, we would definitely be updating with a later data cut. So that’s important to know, when you see the abstract. Regarding the differentiation points, I think a lot of those do emerge from our long-term follow-up with the Phase 1/2 data, recognizing, of course, that a pivotal trial in broad number of centers is a slightly different type of trial.

But what we’ve seen in the Phase 1 trial, are very robust response rates, and the highest response rates that have been seen in any trial in the resistant setting I believe, characterized especially by the depth of response. If you can visualize the waterfall plot that we presented at various conferences, the right hand side is very – is dominated by a lot of 100% tumor shrinkage including complete responses, which we think is an important feature of the drug. PFS is prolonged. The long-term follow-up in the Phase 1/2 trial in the second line is now beyond one year, 13.4 months, and we’ve seen equivalently robust responses and durations in CNS lesions.

As I mentioned, there are also patient convenience advantages including dosing once-daily with no food restrictions. So overall, we think that’s a pretty compelling package, from a clinical point of view. Pre-clinically, we see the drug to have the profile of a PAN inhibitor. In other words, it can tackle all of the known resistance mutations that have been seen with other agents, certainly those that have been seen so far. So overall we look forward to seeing that tested in the ALTA clinical setting. Obviously, the data are still rolling in, but we will see a more mature data set, we hope to be presented at ASCO.

Phil Nadeau

Great. Thanks for taking my questions.

Operator

Thank you. Our next question is from Eun Yang of Jefferies. Your line is open.

Eun Yang

Hello, can you hear me?

Ed Fitzgerald

Yes.

Maria Cantor

Hi, Eun. Yes.

Eun Yang

Oh, thank you. Questions on the sales reps expansion for brigatinib. Can you tell us how many sales reps do you have in the U.S. and Europe for Iclusig, and how many additional sales reps do you need in order to effectively commercialize brigatinib?

Maria Cantor

Hi, Eun, this is Maria. You were asking for the size of the sales force in the U.S. and Europe that we currently have?

Eun Yang

Yes, and then how many additional sales reps do you need, in order to effectively commercialize brigatinib?

Marty Duvall

Yes. We have – so we – I think that it would be safe to characterize that we have a very small and reasonable footprint, as we look at, in both the U.S. and Europe to maximize the sales of Iclusig. So I think it’s right-sized, given the scope of the indication. The good thing from a U.S. brigatinib launch perspective is that we know the ALK prescriber base is very concentrated, and we will be able to significantly leverage the existing U.S. infrastructure in launching brigatinib in the U.S.

Eun Yang

Okay. And the follow-up question, Paris, you mentioned in the prepared remarks, that you are looking to BD activities and some M&As. Can you kind of give us a little more specific as to what kind of BD activities and M&As you are looking into?

Paris Panayiotopoulos

At this stage, Eun, what I’ve stated is that all options on the table, and we’re open to all approaches to maximize the shareholder value. I think for that, it’s probably best to wait until the Analyst Day or before that, when we are in a position to announce anything further.

Eun Yang

Thank you.

Operator

Thank you. Our next question is from Mike King of JMP Securities. Your line is open.

Mike King

Good morning, guys. Thanks for taking my question. Paris, it seems to me talking about sort of where your resources are best concentrated – I know you guys talked about OPTIC and OPTIC-2L in the PR. But it seems to me, the value inflection comes around moving Iclusig further up into second-line therapy. So I’m just wondering if we can get an update on, not only your sponsored studies, but the ISTs that aim to do that, and when we might start getting readouts on some of those trials?

Paris Panayiotopoulos

Sure, Mike. Hi. I’ll give you some color on that. So as you know, both the OPTIC and the OPTIC-2L trials are underway. We’ve guided generally to first data from OPTIC probably in 2017, given the need to have a reasonable follow-up on those patients. And as we get further into the trial, we’ll probably refine that. OPTIC-2L, we projected two years for enrollment. So that takes us to approximately the end of 2017, and then interim data potentially in 2018. We do have ISTs underway, a large number of – if you like, targeted investigator sponsored trials, targeted by the investigators to specific areas of potential for Iclusig, both within CML and Philadelphia-positive ALL, and outside those core indications, including AML and some lung subsets.

We don’t – as you realize, control those trials operationally, so we don’t have complete control over when they may readout. But we would expect to see a steady outflow of potential data from those trials over the next year or two years. Some of those trials are in earlier lines of therapy, but obviously are not robust control trials. And I hope that gives you a bit more color on where we are.

Mike King

So in the meantime then – I think Marty talked about this in his remarks about what then drives the Iclusig revenues in 2016, and just wonder if we can get a little more granularity on that in terms of patient mix? A second, third – second-line, third-line and beyond, as well as duration.

Paris Panayiotopoulos

Well, before Marty goes on to that, maybe I can add one more point to my comments. In addition to the readout of the new trials that I just mentioned, we are going to see important continuing readouts from the ongoing Phase 1, and especially the PACE trial, where we now have four year minimum follow-up from that trial, which we’ll be submitting to the European Hematology meeting. Should that be accepted, that will be an important mid-year readout of long-term data that should provide additional color on the benefit risk of Iclusig and longer follow-up. And we anticipate in due course that, that may also move into the package inserts in the U.S. and beyond. Obviously, we continue to update, work with the regulatory authorities to update data, and that would be an important potential inflection point in terms of awareness of the drug.

Marty Duvall

Yes, Mike, regarding patient mix, I mean, it’s pretty clear as we’ve talked about over the past few quarters, that the key for us is going to be penetrating that third-line chronic phase marketplace. That’s going to be the real sweet spot. As we look at ongoing patients for Iclusig coming out of 2015, about 60% are in the chronic phase. So our ability to penetrate that third-line chronic phase market will result in the stacking of patients that will help drive revenue.

So that that’s going to be an important part of our effort is, gaining more share in third-line chronic phase, patient retention. We’re really going to pick up the noise and activity as it relates to retaining patients. And as I mentioned with the brigatinib preparation, we’re going to have a little more synergy and leverage on the sales force side, so a slightly larger footprint is going to create smaller geographies. It’s really going to improve our share of voice. So I think there are a number of things that we think we can do to really improve the results, particularly focused on growing in that third-line chronic phase population.

Mike King

Okay. Thanks.

Operator

Thank you. Our next question is from Katherine Xu of William Blair. Your line is open.

Katherine Xu

Yes, hi. Good morning and Paris, welcome. Just curious, in the PR, you didn’t really mention the switch study, the SPIRIT 3 in the UK. Is that study still on?

Paris Panayiotopoulos

Hi, Katherine. Yes, the SPIRIT 3 trial is still moving towards initiation. That’s an investigator sponsored study in the UK, being run by the NCRI, one of the main cancer national institutions there. So it’s still moving through various internal national and local approvals. Our latest understanding from that group is, is a start potentially in 2016.

Katherine Xu

Right. And with regards to commercial performance of Iclusig, the 2016 guidance is – has included what level of market share takes, largely in the – you just mentioned you want to focus on the chronic 3L patients. But any others, and what kind of assumptions that you have taken into giving that kind of guidance?

Marty Duvall

Yes, we aren’t guiding at quite that level of detail, but certainly as it relates to the increased demand and patient penetration, that third-line chronic phase is a focus in terms of the expansion.

Katherine Xu

Thank you.

Operator

[Operator Instructions] Our next question is from Andrew Peters of UBS. Your line is open.

Andrew Peters

Hi, good morning, and thanks for taking my questions. So just first want to understand a bit more on the strategic front, in particular BD. I know you’ve mentioned you are not going into a whole lot of detail. But maybe just so we could understand, big picture how you think about the potential to bring in new assets, balanced with kind of the existing capital environment? And how you think about best use of cash right now, in a potentially capital constrained environment going forward?

And then just secondly, on guidance this year, I know you mentioned that it does include some price increases. How do you think about the current political environment right now as it relates to pricing, and have you gotten any pushback so far from payers on price increases that you have taken? Thank you.

Paris Panayiotopoulos

Yes, thanks for the question. I think on the BD side, I would go back to the same answer that I gave Eun earlier. I think a point here, is that business development opportunities could be in and out. And when thinking about the five areas that I mentioned, some of the considerations are regarding the geographical presence that we have, as well as the number of programs that we have as well.

In addition, business development opportunities could be anywhere along the continuum of R&D, from preclinical all the way to on market. I think one of the things that is very good about the business model of ARIAD, is this deep expertise in developing precision therapies for orphan cancer indications. So it means that we can move very, very quickly between clinical proof-of-concept and approval. So in terms of the opportunities that we could look at, it could really be along – anywhere along that continuum. But I think as I said earlier, the – all of this will be considered together, with the growth and the cost opportunities that we have and we’ll provide much more of a detailed view on Analyst Day or before that.

Ed Fitzgerald

And as it relates to the guidance, yes, as I kind of mentioned, price increases are included there. Our emphasis is really going to be on driving demand. That’s going to be a big component in new patient growth, and penetration of that third-line chronic phase market will be very important. Now we are monitoring, of course, the political environment with the elections ongoing, and certainly we’ll take that into consideration. At this point in time, we have not had pushback from payers regarding the pricing of Iclusig. So we also, of course, take that into account as we move forward.

Andrew Peters

Great. Thank you.

Operator

Thank you. Our next question is from Jon Eckard of Barclays. Your line is open.

Jon Eckard

Good morning, and thanks for taking the question. The first one will be for Paris. And I was just going to ask, given what you knew about Iclusig and its overall profile when coming to ARIAD, what message, when you went out to meet with the treating physicians most surprised you, with regards to how they currently use the drug, or plan on using the drug? And then I have another question on brigatinib.

Paris Panayiotopoulos

Yes, thank you. Actually, I wasn’t that surprised, because I was very well-briefed before going out to see the physicians. I think one thing that is very clear, is that the perception of efficacy is very high in the physician community. And that’s certainly something that I found in my meetings and calls with them as well.

Jon Eckard

Okay, thanks. And then with regards to brigatinib, maybe for Tim or Marty. I guess, what are some of the thoughts of physicians, with regards to how they’re going to sequence the various ALK drugs? And what attributes of brigatinib, I know you hit on some of the attributes with food restrictions, response depth and CNS effects, which ones do you think best could position the drug to potentially be – kind of detailed, to get ahead of some of the other approved ALK agents on the market?

Tim Clackson

So I wouldn’t presume to speak too much for ALK physicians, but I think what we’ve heard in our interactions so far, is that among the different parameters, PFS is a very important feature. If you like PFS is – it’s a bottom line readout of all of the other elements of response, including response rate, CNS response, depth of response. But in the end, you want to look for really differentiating and patient valuable type of PFS. And we’ve been very pleased so far, in what we’ve seen in the Phase 1/2 trial with PFS in the second-line of 13.4 months. For calibration, the typical PFS you see for crizotinib in the front-line, TKI-naive patients is 10.9 months.

So we see that as really playing into making the case for use of brigatinib. The main discussion that has been happening, or one of the important discussions that has been happening in the ALK lung field, is whether it makes more sense to – as you said, sequence existing agents, so crizotinib first, and then come in with next-gen agents in the second-line and beyond. Or whether there will ultimately be a case for using the newer agents up front, and that’s going to be driven ultimately by their differentiated PFS, especially in the front-line. I think in that regard, Brigatinib looks like a very promising molecule that really could bring great value to patients.

In the front-line, we have eight patients in our Phase 1/2 trial, which again has long-term follow-up. And of those eight patients, all of them responded, and the PFS have not – the median PFS have not been reached at 24 months of follow-up. So as that translates into a broader trial setting that could really be a substantial improvement over the use of crizotinib in TKI-naive patients. So I think those are the kind of thought processes that we see in play, as we think about the role for brigatinib, both short-term and long-term.

Marty Duvall

And as I look at it from the commercial side, with alectinib just launching, we’re obviously monitoring that very closely. We’re in a situation now where, there are three agents on the market, and we’ll be seeing how sequencing occurs, and how patients are treated. The big difference here, compared to CML, as the second-generation agents impacted that marketplace, as the prognosis of an ALK-positive non-small cell lung cancer patient is certainly much different. Not a chronic disease, but as Tim mentioned, products like brigatinib, that may be able to, at least from the Phase 1/2 experience, prolong progression-free survival can really have a significant impact.

So it remains to be seen how effective, putting two great drugs together in sequence can really change, and impact the prognosis of non-small cell lung cancer patients. So we feel we can be part of changing the equation, and shaping the market with a drug that is potentially best-in-class based on the preclinical profile.

Jon Eckard

Well, very helpful. Thank you very much for taking the questions.

Operator

Thank you. At this time, I see no other questions in queue. I’d like to turn it back to Paris for any closing remarks.

Paris Panayiotopoulos

Thank you, everyone for joining our call this morning. We aim to be very present and open in our continuing discussions, and look forward to seeing you all at upcoming industry conferences, and to communicating our ongoing progress, and importantly, the outcome of our strategic review in Q2 of this year. Thank you.

Operator

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the program. You may now disconnect. Everyone, have a great day.

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