DelMar Pharmaceuticals, Inc. (NASDAQ:DMPI)
Q3 2016 Earnings Conference Call
May 19, 2016, 5:00 pm ET
Jeffrey Bacha - Chairman & CEO
Scott Praill - CFO
Dennis Brown - Chief Scientific Officer
Joe Pantginis - ROTH Capital
Jason McCarthy - Maxim Group
Good day and thank you, all for joining us this afternoon for DelMar Pharma’s Business Update Conference Call and Webcast, to discuss the Company’s Finance Results for the Third Quarter of the 2016 Fiscal Year Ending March 31, 2016, and business outlook for 2016. [Operator Instructions]. Today’s webcast will be company’s slide presentation that can be found under the IRR calendar in the Investor section of the company’s website at www.delmarpharma.com.
At this time, I would like to remind our listeners that remarks made during this call may state management’s intentions, hopes, beliefs, expectations, or predictions of the future. These are forward-looking statements that involve risks and uncertainties.
Forward-looking statements on this call are made pursuant to the Safe Harbor provisions of the federal securities laws. These forward-looking statements are based on DelMar’s current expectations and actual results could differ materially. As a result, you should not place undue reliance on any forward-looking statements. Some of the factors that could cause actual results to differ materially from those contemplated by such forward-looking statements are discussed in the periodic reports DelMar Pharmaceuticals files with the Securities and Exchange Commission.
These documents are available in the Investor Section of the Company’s website www.delmarpharma.com and on the Securities and Exchange Commission website. We encourage you to review these documents carefully.
Joining me on the call today from the DelMar Management team are Mr. Jeffrey Bacha, Chairman and CEO; Mr. Scott Praill, Chief Financial Officer; and Dr. Dennis Brown, Chief Scientific Officer. Following the Company’s prepared remarks, the call will be opened up for a question-and-answer session.
It is now my pleasure to turn the call over to Jeff Bacha. Please go ahead sir.
Thank you, Lisa, and thank you everybody for taking the time this afternoon to hear our update. Obviously, if you’ve been following the company, there has been lot going on, so we will go ahead and jump in straight to Slide number 3. We will do our best to keep you in loop as to which slide we’re on but you do have to advance them yourself.
So as we talk about last quarter and we’ve been talking about for some time we anticipate that 2016 is going to be a transformational year for our company and during the past quarter and since then we’ve really been implementing some steps to make that happen. As you’re probably aware, today we announced that FINRA has approved a one to four reverse stock split in preparation for a senior up-listing of our shares which is something that’s been very important to us for some time.
Also in support of that as well is our operating capital we recently announced completion of $6.1 million in a private placement as well as restructuring more than 72% of outstanding investor warrants which substantially reduces our derivative liability. And all of those things are now positioning us to achieve that up-listing goal.
Operationally, we’ve also been continuing to make progress with our VAL-083 clinical and preclinical programs, and we recently presented three abstracts at the American Association for Cancer Research Annual Meeting and alongside of that FDA has granted expanded orphan designation to VAL-083 to include medulloblastoma and ovarian cancer and of course we had already been given a designation for VAL-083 in gliomas in both the United States and Europe.
And we also earlier in the quarter we’re proud to announce a new collaboration with MD Anderson Cancer Center which will drive our next steps in the paradigm shift in the treatment of Glioblastoma that we are incorporating and moving forward with in VAL-083.
Before I get into the update on the science, I want to turn it over to Scott to walk us through the financial results for the three and nine months ended March 31, 2016.
Thanks, Jeff, and thanks everyone for joining us this afternoon. Slide number 4 is where we have our financial information. As Jeff mentioned, we announced the completion of a financing and that will give us operating funds till the end of calendar 2017. Currently we’re burning approximately $1 million a quarter but as we move ahead later this year, starting the Phase III towards the end of the year, our burn should increase.
At the moment based on our current share price, we have approximately $10 million in the money warrants. Obviously can’t be predicting those could be exercised those potentials of financing, non-dilutive financing, as we go forward.
Bottom half of Slide 4 is our reported loss for the quarter ended March 31. As you can see overall we had a loss this year of $1.1 million versus a loss of $2 million last year and the primary reason for that is that the top-line level is the changing value of our derivative liability to get. As most you know have been following us, we have had a derivative liability that moves up and down each quarter as those share price moves up and down and for this quarter-over-quarter it’s over $1 million variance and that’s pretty might a total change.
Within the detail of R&D and G&A I just want to point out in our nDNA we have a schedule which shows our cash related items. We have our net loss of reported adjusted for non-cash simply share-based compensation. If you want a little bit more detail on that, you can take a look. But overall aside from the impact of non-cash, the increase in our R&D for the quarter was primarily due to the fact that we had a lot more patients on drug in this year compared to last. Last year we’ve been rolling three patients at a time and then we had a wait period then three more patients. But as we enrolled 14 patients in the short period of time in the fall and this last quarter, we incurred quite a few costs to conclude that study and to give a data organizing something of that nature.
G&A aside from non-cash related items increased primarily related to preparation for our upcoming event with the FDA as well as significant cost related to our financing, many of these are not direct financing cost nevertheless it’s still significant admin cost incurred.
We don’t have a slide for the nine months but I’m just going to draw your attention to the cash flow is one item for the nine months it shows a total cash burn of $3.6 million compared to $3.2 million last year and overall the increase is rebargerated to as I mentioned previously because the fact we have 14 patients in the study this year compared to smaller cohorts of three at a time last year.
Moving to Slide 5 this is our capitalization. On the left hand side of this schedule, we show as reported in our most recent Q. We had $937,000 in cash, $1 million derivative liability, and a net shareholders deficit of approximately $700,000. As you all remember financing is now into our statements we made notice on the proceeds and as well amendment to certain derivatives related warrants. We resolved as we on a pro forma basis, have a net equity number of approximately $5.3 million. Bottom half of Slide 5 on the left hand side is our capitalization as reported. The middle schedule on the bottom shows on a pre-split basis, our capitalization looks after our preferred share offering and in the right hand side is our post-split pro forma capitalization reflecting the financing as well as a split we announced today. If anyone is having more detailed questions happy to answer them in the Q&A session but for now back to you Jeff.
So just moving to Slide 6 just real quickly as you can see the activates that we have undertaken including the reverse split of financing as well as working with our warrant holders to restructure some of the terms that relate to derivative liability. We’re now in a strong position in terms of qualifying for the requirements for a senior exchange listing both the New York market as well as NASDAQ. So that’s a very important next step for us and we look forward to working towards achieving that as quickly as possible.
So to jump back into the business and the operations of the company in terms of the science, on Slide 7 you are familiar with the VAL-083 which is our lead product candidate and of course our business model is to leverage historical MCI sponsored research for over 40 clinical -- published clinical studies on the compound with a nice large safety database that we can move forward with.
And of course on Slide 8 the business model is to leverage that prior clinical validation with new intellectual property and a modernized understanding of the mechanism and then once we understand better where the drug is going to be, how the drug works, we can leverage the historical MCI data and point it where it makes sense in the modern context.
Next slide is a little bit more about the mechanism of action what we wanted and this is data that were presented at the American Association for Cancer Research Annual Meeting. Essentially what we have hypothesized all along was that this drug forms a cross-links at the N7 position of Guanine which leads to double-strand DNA breaks. The things that we weren’t not sure of it how quickly that happens, how durable that lesion was and where in the cell cycle it may actually have impact.
And if you look at the summary on Slide 10, what we have now shown and presented to AACR was that VAL-083 appears to take advantage of defects in the cellular machinery that is common to cancer cells. So VAL-083 rapidly forms a DNA cross-link at the N7 position of the Guanine. If you incubate the cells for just an hour and watch the drug up, the evidence of cross-links is already there.
Now normally as the cell would go through the cell cycle, a normal cell would note that DNA cross-link stop the cell cycle and repair it, a hallmark of cancer cells is a defect and checkpoint mechanisms those mistakes get through. Once that cross-link is formed, we know it’s very durable as well. In order to repair it, the cell requires what’s called the homologous repair mechanism and homologous repair again is a hallmark a defect in cancer cells. So the ability to form the cross-link had to move through the cells cycle and not be repaired as the cell moves into the assays is the hallmark of activity for VAL-083 and what we see is a resting in the assays with double-strand DNA breaks.
This mechanism is also very interesting because it appears based on our data to be active independent of common Chemo-Resistance mechanisms including MGMT, mismatch repair or MMR, and p53 mutations.
We also have been able to show that acquiring resistance to our mechanism is very difficult for cancer cells to achieve. So taken together in combination with historical data from the NCI, it really opens a lot of doors for us and where to take the program.
On Slide 11, you can see a Venn diagram of where is cancer the Chemotherapy standard of care is at and where is Chemo-Resistance and unmet medical need and based on our mechanism and just opposing that against the historical clinical activity from the NCI you can see some of the target indications that we have identified for VAL-083 on Slide 12 non-small cell lung cancer, Glioma’s ovarian cancer, and others and certainly these are all large attractive markets characterized by significant unmet medical needs.
And as those of you who follow the company know the first place that we’ve chosen to focus is in Glioblastoma Multiforme or GBM. One of the challenges with GBM is that most drugs can’t get to a range of we know that VAL-083 crosses the blood brain barrier. The other challenge is that there is a very pronounced resistance mechanism to the currently available chemotherapy is called MGMT which stands for O6-methylguanine methyltransferase. And that represents two-thirds of the patients who are diagnosed with VAL-083 and unfortunately today there is not much that could be done for those patients.
What we have shown is that VAL-083 is active independent of MGMT and leveraging the prior NCI work showing that the drug readily crosses the blood brain barrier and that could generally in Glioblastoma we believe we have an opportunity for a real paradigm shift here in the treatment of this disease.
So couple of years ago we launched a Phase I, II clinical trial in the treatment of patients who had failed everything else. These patients have failed temozolomide stated chemotherapy plus radiation. They have also failed Avastin and our goal was to define a dosing regimen that was suitable for advanced clinical studies to move into a registration directed trial as well as hopefully to see activity in patients that have no available treatment options.
At AACR we are very -- the American Association of Cancer Research Annual Meeting we are very pleased to reconfirm that we now have a well-tolerated dosing regimen with the recent book therapeutic window, we’re able to treat the most difficult TBM patients and we even started clinical activity that is supported by the pharmacokinetics that we have observed.
So the next steps in this program will be completing an end of Phase II meeting with the FDA where we will discuss these data as well as our planned Phase III design. But we’re also going to be get moving the program of the food chain, if you will, in order to benefit patients who are earlier in their disease, who also have no available chemotherapy. These are patients with the high expressive MGMT where we know they are going to fail the available chemotherapies and so we will make VAL-083 available to those patients through our two clinical studies.
So next couple of slides just to summarize the ASCO excuse me AACR data. We have determined a simple dosing measurement for advancement and to registration clinical trials the dose is 40 milligrams per m2 daily, every three days in a 21 day cycle has been selected for advancements. That dose is very safe and well tolerated and obviously we do see dose limiting toxicity the higher doses as we've previously described.
We've also been looking at outcomes if you look at Slide 16, and there are a number of references here I posted that in salvage therapy and you can look at the median survival of Avastin failure and it's relatively dismal in the published literature. And what we're seeing obviously as we’ve reported in the past as we believe we have a substantial better benefit based on our observation and of course that is also supported by the pharmacokinetics. So we're very excited to be able to move this program forward into a Phase III study, and really look at creating that paradigm shift for these patients.
Slide 17, one of the things that we have noticed is that the patients that are failing temozolomide failing to mask, not only tend to have a high expression of MGMT which is correlated with historically poor outcomes. But they also feature a biomarker whilst IDH1 which as you can see on the slide also correlated with very poor patient outcomes.
So we're able to achieve patient benefit in patients that have held all other available therapies whose tumors exhibit features that are known to be correlated with poor outcomes and resistance to currently available therapies. So again this is creating a lot of excitement for us and the ability to move forward and hopefully do something game changing for this patient population.
So our clinical expansion plan on plan achieving we are moving into a registration directed trial in the Avastin failed population which we anticipate kicking that hopefully before the end of the year. But we're also going to in parallel with moving toward the Phase III study, once two additional Phase II studies. One in United States in collaboration with MD Anderson in patients who have our first to be current patients who had failed temozolomide and this will be a randomized study versus CCNU. CCNU is a similar mechanism to temozolomide basically looking to high expression of MGMT, which is correlated with a resistance to CCNU or temozolomide, and we know that our drug is active there based on our non-clinical data today. So we expect to be able to have some patient benefit in that population.
In parallel with that we will be launching an international study which will be a newly diagnosed patients where we will basically replace temozolomide dose regimen in the stoke in combination with radiation for patients that have high expression of MGMT. MGMT as a biomarker is routinely measured as a prognostic today. So we know which patients are unlikely to respond to current standard of care and will be able to treat them with VAL-083 and based on our data to-date we expect to see market benefit there.
Slide 19 reiterates the paradigm shift that we're after. We're looking to create a new survival paradigm in this disease Glioblastoma for the first time in decades. We believe our mechanism unlock the potential to overcome chemo-resistance and surpass standard of care today and also lay in the foundation for the development to address a multibillion dollar global opportunity in the treatment of Glioblastoma and other tumors.
But of course this story is not just about GBM based on the mechanism if you look at Slide 20, we believe that the research that we have done to differentiate our mechanism of action from standard of care chemotherapies creates commercial opportunity in solving unmet medical needs in a number of different indications include GBM, non-small cell lung cancer, ovarian cancer and others. And we're moving forward to build a pipeline around this research.
Slide 21 is a pro forma pipeline of what we expect our portfolio with VAL-083 looks like in the second half of the year as well as the current status. The lead program and post-Avastin GBM and anticipate completing and reporting on end of Phase II meeting with the FDA in the first half of 2016. The next two Glioblastoma programs in first recurrence in collaboration with MD Anderson and newly diagnosed patients both of those studies are prepared to submit ethics review, committee review, and we anticipate having approval to begin both of those studies by the middle of the year.
We also have as many of you know a non-small cell lung cancer program that we are planning to initiate shortly as well. Based on what we've learned about the mechanism of action and the ability to treat specific resistant phenotypes in non-small cell lung cancer we are working with the PI principle investigator to modify that protocol to take advantage of those biomarker driven and personalized medicine opportunities.
Beyond those clinical programs we’re looking at potential combinations in ovarian cancer, we are looking pediatric CNS tumors and other research as well. But as we go forward of the year you’ll see our clinical pipeline expanding quite fastly.
In electro property wise we are working with eight separate patent families with multiple patents, five U.S. patents and four international patents have issued to-date and we have over 90 applications going through various internationals as well as having been granted orphan drug protection in United States and Europe where we have got seven years of market exclusivity in United States and 10 years in Europe irrespective of our patent portfolio.
To the last couple of slides to reiterate on Slide 23 we are experiencing what we believe the transformational year for our company in 2016, where we had a number of actionable milestones including advancing our lead program into a Phase III study, expanding into multiple Phase II programs in earlier stage Glioblastoma as well as into lung cancer and be continuing to expand the portfolio of opportunities around VAL-083 into other indications where our research into mechanism of action supports the ability to do address significant unmet medical needs.
From a regulatory perspective you can expect us to report on our guidance leading before the middle of the year and we hit well of that with the FDA discussing our plan for Phase III trial in refractory Glioblastoma as well as achieving the National Exchange Listing on either the New York market or NASDAQ as quickly as possible.
Last slide is to summarize the investment opportunity VAL-083 the first-in-class chemotherapy with a unique mechanism of action, promising interim data from our Glioblastoma trial is back start by historical data from the National Cancer Institute’s supporting activity in Glioblastoma as well in other indications, our research on the mechanism in combination with a historical data supports the pipeline expansion into high value oncology markets we have been building in the robust IP portfolio including expanding or conjunct designations what are available.
We’ve got a team that’s done this before with our business model or with a history of success. We’ve got a solid financial position now we’ve completed the private placement and obviously as we have described several near-term transformational catalysts.
With that I thank you for your attention, and we can open it up for questions.
Our first question comes from Joe Pantginis. Please go ahead.
Hey guys good afternoon, thanks for taking the question. Jeff if I heard you correctly you said you’re targeting around midyear to disclose the results of your FDA meeting?
Frankly we expect to be able to discuss those head of ASCO so but yes we certainly will have something before mid year in terms of guidance, in terms of what the feedback on our Phase III design is.
That’s good, thank you. And then with regard to what is your wish list going into the meeting and can you remind us of some of the basic design of the Phase III that you would like and what you think the FDA might push back on potentially?
Right. Well I think our wish list involves a couple of things. Number one being able to leverage as much of the historical data from NCI as possible. I mean typically FDA would require executive base of hundreds of patients on the new dosing regiments and our response in proposal to that would be a there is safety data base that puts a thousand patients some of the more on higher doses of the drug or on the drug for a long period of time in prior clinical studies. And that in combination with the this particular indication, we would hope that we would be able to leverage that safety database toward a smaller registration directed effort in comparison to other indications that will be one.
Secondly there is a tremendous amount of non-clinical work, in terms of pharmacology and toxicology etcetera that has been done and published by NCI and we have the right to reference that IND and obviously being able to incorporate those studies into our own NDA application in future would streamline our program tremendously, so that's also wish list.
In terms of the registration direct to design obviously the goal standard a randomized study versus an active control. The challenge here is that as we all know there isn't really anything for these patients and in terms of designing something were randomization to an active control would be challenging. And we're looking to work with the FDA and get their guidance on how we manage that appropriately. But our goal is of course to have a streamline development program leverage everything we know based on our work as well as the prior NCI work and move forward into that registration trial as quickly as possible.
That's very helpful. And I guess just on the last part of the design. Do you think it's even ethical to have an active control where there really agent one as you mentioned is a bit of a catch 22 and with that in mind is it a bit of a swing for the fences to potentially ask for a single arm study?
There are certainly examples of single arm trials under some part and where we can we can look at potential approvals there, and it's certainly something that we'll have on the table for the discussion.
Thank you. We’ll go next to Jason McCarthy. Please go ahead.
Hi guys congratulations on the progress. The split coming your improved capital structure it really looks like all efforts should really be focused on the GBM studies, and kind of wanted to just jump over to newly diagnosed GBM. I think is a really interesting area where two of 83 can really be effective. And I wondered have you thought about doing a study in Europe, if you're going to preclude using temozolomide in newly diagnosed patients that are on unmethylated that we have a standard of care in Europe if you are on unmethylated they won’t play on temozolomide whereas in the United States doesn’t matter what your status is, your immigration status, they’re going to put you on temozolomide anyway. And if you thought about doing a study over there may be potentially with a partner or a collaborator.
Right, well I just try you hit the nail right on my head with holding temozolomide from newly diagnosed GBM patients in the United States would be very challenging. And as I noted that study is set to be initiated as an international study. We've disclosed previously that the first site in that study will be in collaboration with Professor Zhang Jun Chen at Sun Yat Sen University in Guangzhou, China. He is the Chair of the Chinese Society for Neuro-Oncology and in fact most of his team trained with our young MD Anderson, and so we all know each other very well.
So we're going to initiate the first site with that a study to confirm that our dosing regimen the optimized sourcing regimen in combination with radiotherapy works and is as safe as we all expected to be so that only a single site initially and our manufacturing collaborator is going to fund that work. From there you're exactly walking through the development strategy which would be to expand that program once we confirm that does taking profile in combination with radiation is as we expect moving into other major jurisdictions where withholding temozolomide might have newly diagnosed problem patients with GBM is not going to be problematic, Europe, Canada are places that make sense to do that and you can imagine that we certainly have some discussions with potential collaborators to help fund that larger effort as we go forward.
Great and just a follow-up. The mechanism of action data with the p53inviation is really interesting and I just want to hear your thoughts on why you think the clinical development strategy would be -- would it be a combination study with Avastin and a long or an ovarian cancer because Avastin does have a utility or efficacy into 53 mutations or would you try to go after about even Avastin naïve or Avastin resistant patients, what are your thoughts on plans going down the p53 road with an 83.
I think the p53 and the sales cycle of rest and the essays are targeting very interesting places that drives into thinking about combination therapies. For example if you think about it back into the GBM world arena Irinotecan used often in GBM. And it's certainly class of compound that are mired with some toxicity issues and part of the reason for those toxicities is the drug has receiving the cells has to be in that space and so you have to give enough of the drug to catching up cells that are in that space.
Well, the fact we are parking the cells there with our mechanism suggest that for example a combination with Irinotecan or one of its triple cousins in other indications might be very, very interesting, so that’s certainly something that we’re thinking through and looking at pre-clinically.
In addition combination with platinum-based agents we’ve shown for example in our models of lung cancer and ovarian cancer that the combination with Cisplatin or Carboplatin is more than additive and the mechanism seem to work in synergy even though they are both N7 cross-linkers and if you go into some of the data that we published you can look at some of the operation in the pathways that are let up etcetera.
Back here thoughts in terms of combination with Avastin. Avastin is a very interesting drug in different tumors reacted with very differently. One of the things that happens particularly in GBM but also in another cancers in response to VASP incubation [ph] as the cell becomes more hypothec and increases the expression of the glucose transporter on the surface and becomes more invasive.
And if you look at structure of VAL-083 it’s a sugar. And so we hypothesize that the combination with something like bevacizumab or another VASP inhibitor might be very interesting because you could hypothetically increase the uptake of the VAL-083 inhibitor that is work that’s ongoing and that’s that something that we’re very interested in and that plays out the way we hope pre-clinically, you can bet that and the next step is going to be looking at combinations with Avastin in the clinic.
Thank you. [Operator Instructions].
It appears we have no further questions at this time. I’ll turn it back to our speakers for any additional or final remarks.
Well thank you very much everybody for taking the time and Joe and Jason thanks for your great questions. As we said this is we believe a transformational year. We look forward to continuing to report our progress on moving to VAL-083 into registration directed trials in refractory’s GBM as well as up-listing and continuing to build our company.
Thank you very much for your support and as always please feel free to reach out with any other questions. Thank you so much.
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