Sunesis Pharmaceuticals' (SNSS) CEO Daniel Swisher on Q2 2016 Results - Earnings Call Transcript

Sunesis Pharmaceuticals, Inc. (NASDAQ:SNSS)

Q2 2016 Earnings Conference Call

July 29, 2016 11:00 AM ET

Executives

Eric Bjerkholt - Executive Vice President, Corporate Development and Finance, Chief Financial Officer

Daniel Swisher - President and Chief Executive Officer

Parvinder Hyare - Vice President, Global Oncology Operations

Deborah Thomas - Senior Vice President, Regulatory Affairs, Quality Assurance, and Nonclinical Development

Linda Neuman - Vice President, Clinical Development

Analysts

Jim Birchenough - Wells Fargo Securities, LLC

Eric Schmidt - Cowen and Company

Operator

Good day, ladies and gentlemen and welcome to Sunesis Pharmaceuticals Second Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time [Operator Instructions].

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

Eric Bjerkholt

Thank you, Ester. And thank you all for joining us today. With me today are Dan Swisher, President and Chief Executive Officer; Par Hyare, Vice President of Global Oncology Operations; Debbie Thomas, Senior Vice President, Regulatory Affairs, Quality Assurance, and Nonclinical Development; and Linda Neuman, Vice President, Clinical Development.

Dan and I will review recent corporate events and provide an overview of the ongoing kinase inhibitor and vosaroxin programs, and I will discuss second quarter 2016 financial results. We will then open the call for questions for which Debbie, Linda and Par will also be available.

Before we begin, let me remind you that during today's conference call, we will be making forward-looking statements that represents 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.

Daniel Swisher

Thanks, Eric. Good morning, everyone. Thanks for joining us. Today Sunesis is advancing a strategy built around two main pillars of value creation. First is Vosaroxin our lead program and a first-in-class anticancer quinolone derivative with a distinct mechanism which we believe has meaningful potential to address unmet needs and acute myeloid leukemia.

Our efforts with Vosaroxin are currently focused on Europe where we are working to gain marketing authorization for the treatment of relapsed refractory AML and also secure a European pharmaceutical partner to launch into this important territory in 2016. The MAA for Vosaroxin which was validated by the EMA at the beginning of this year continuous progress as planned.

In late April, we reached 120 day comment and question period. The questions and comments were along the lines of what we expected and we are working diligently to provide a comprehensive response, which will then restart the countdown to CHMP opinion.

The second pillar of our strategy is SNS-062 this is our proprietary non-covalent reversible BTK inhibitor currently completing PKTD safety testing and Phase 1A healthy volunteer study. This program is unique among the approved and handful of other clinical stage BTK inhibitors in oncology studies and that SNS-062 binds non-covalently to the BTK enzyme.

This provides an opportunity to address the leading emerging resistance mechanism in chronic lymphocytic leukemia or CLL patients treated with covalent BTK inhibitor such ibrutinib. Namely a mutation in the enzymes binding site required for the covalent binding. This point mutation from cysteine to serine 481 or Cys-481S is emerging with an ever increasing pool of covalent BTK treated patients especially as ibrutinib has recently moved into frontline therapy for CLL.

Our preclinical data underscore good potency and exposure in multiple animal species and SNS-062 demonstrated potent activity is maintained in cell lines with the Cys-481S mutation. Our Phase 1A trial is progressing well and we plan to announce results from the study at the upcoming international conference on new concepts in B-Cell malignancies in Mid-September.

This data will enable us to proceed to a disease directed study in patients with B-Cell malignancies including relapse and refractory CLL patients. We are currently finalizing the trial protocol and we are an active investigator outreach and recruitment with a goal of beginning this trial around year-end.

SNS-062 it's unique in a very important asset for us for several reasons. First, the BTK dominated B-Cell malignancy therapeutics market is very likely to become one of the largest [Haem] markets with projected sales exceeding $5 billion by 2020 and Cys-481S mutations are an emerging and expanding segment within this market.

Second, because SNS-062 addresses an unmet clinical need, we will look to rapidly and efficiently establish proof-of-concept and pursue available accelerated breakthrough pathways with U.S. and international regulatory agencies. On the organizational front I'm very happy to welcome Dr. Linda Neuman to the team to help guide the future clinical development of our pipeline including a strong near-term focus on SNS-062.

Linda who joined as Vice President, Clinical Development in May is a demonstrated leader in development and execution having recently contributed to the development and regulatory filings of neratinib that Puma Biotechnology and it's been previously involved in clinical development in medical affairs with other important oncology programs at Onyx in Millennium Pharmaceuticals.

Turning back to Vosaroxin for a moment. I'd like to have Eric to give us some updates and elaborate a little bit on the business development efforts.

Eric Bjerkholt

Thank you, Dan. As Dan stated, it is our intention to commercialize Vosaroxin in Europe through a pharmaceutical partner. We continued to advance discussions with a number of potential partners to a comprehensive diligence effort with a goal of securing around the CHMP opinion, a strategic partner who is motivated, well resourced, and experienced.

Our goal is to find a partner that can ensure a timely European launch and invest alongside us to achieve Vosaroxin's potential beyond its initial relapsed/refractory AML indication.

We believe the opportunity for vosaroxin in Europe is meaningful, both in the relapsed/refractory setting and in future potential indications such as the front-line AML setting. To that end, we have a broad-based clinical development plan that includes both front-line AML and intermediate and High Risk Myelodyplastic Syndrome or MDS. Our evolving plan account for the number of ongoing and planned investigator-sponsored trials, cooperative group studies, and company-sponsored studies.

Illustrating the potential of this strategy, this past June in an oral presentation at the Annual Meeting of the European Hematology Association, we announced updated results from the ongoing Phase 1b/2 M.D. Anderson sponsored study of vosaroxin in combination with decitabine in older patients with previously untreated AML and high-risk MDS.

At the optimized induction dose of 70 mg/m2 of vosaroxin, the combination of vosaroxin and decitabine demonstrates among 41 valuable patients a very compelling composite CRi rate of 76% and a median overall survival of 16.1 months with the majority of patients treated still alive at the time of the last analysis. This result compares very favorably to historical outcomes for decitabine alone and will figure essentially in our future development plans.

We look forward to more progress from this and other studies throughout the year. Dan?

Daniel Swisher

Thanks, Eric. It’s important to note that despite continued recent advances in many hematologic malignancies, AML remains desperately underserved market. Recent business development activities is evidenced by Jazz Pharmaceuticals recent acquisition of Celator highlights the significant future commercial value of novel AML therapies.

Beyond VALOR, Vosaroxin has activity and studies sponsored by leading investigators and are all part of a broader effort to bring a desperately needed new treatment option to patients suffering from this disease. Beyond Vosaroxin and SNS-062, we continue to progress our other kinase inhibitors program namely our Takeda funded pan-RAF inhibitor, TAK-580, and our proprietary PDK1 inhibitor program, SNS-229.

TAK-580 is a program fully supported by Takeda and offers Sunesis the opportunity for up to $57.5 million in pre-commercialization milestones. In addition to royalty payments on net sales as well as the future option to co-develop and co-promote the program under enhanced economic terms.

Late stage studies for TAK-580 would be initiated with positive data from the ongoing multi-arm combination study from which we expect data soon. In our PDK1 program, SNS-229 is a wholly-owned drug candidate of Sunesis. SNS-229 targets PDK1 and master kinase and a central mediator of PI3-K and AKT signaling and it demonstrates significant inhibitory activity in a variety of hematologic cancer cell lines, including cell lines resistant to active PI3-K and AKT inhibitors and current late-stage clinical testing. We've also seen significant activity in solid tumor models with poor risk mutation.

This activity profile correlates with significant PDK-1 pathway modulation and anti-proliferative properties. From a balance sheet perspective, we remain funded through several key upcoming milestones with cash on hand that extends to the middle of 2017. To address this in greater detail, I'll now turn the call back to Eric.

Eric Bjerkholt

Thank you, Dan. I will recap financials and announce this morning beginning with our cash position. We ended the second quarter with $33.1 million in cash compared to $46.4 million at the end of 2015. The decrease of $13.3 million was primarily due to $20.1 million of net cash used in operating activities and $8 million of principal and final payments against notes payable partially offset by a $14.8 million rates from debt financing.

In total, our capital is expected to be sufficient to fund operations to the middle of 2017. For the income statement, revenue for the three and six months ended June 30, 2016 was $0.6 million and $1.2 million as compared to $0.9 million and $1.7 million for the same period last year. Decrease between periods was primarily due to the increase in estimated performance period through which the remaining balance of deferred revenue is amortized.

R&D expenses were $6.6 million and $12.8 million for the three months and six months ended June 30, 2016 as compared to $6.3 million and $10.8 million for the periods in 2015. The increase of $0.3 million and $2 million between the comparable three and six months periods was primarily related to medical scientific affairs activities.

G&A expense was $4 million and $8.3 million for the three and six months ended June 30, 2016 as compared to $5.2 million and $10.3 million for the same period last year. The decrease of $1.1 million and $2 million between the comparable three months and six months periods was primarily due to a decrease in outside services cost.

In summary, we believe we have the team, plan, and resources in place to achieve our key corporate objectives in the coming quarters with an exciting period marked by several key action points ahead of us.

With that, let’s open the call to question. Operator?

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Jim Birchenough with Wells Fargo. Your line is now open.

Jim Birchenough

Hey, guys. Thanks for the update. Couple of questions. First, on 062, maybe if you could give us some insight into what we will learn in September from the healthy volunteer study in terms of potential for dosing frequency as well as target, in fact on the BTK target.

And then also if you could remind us in terms of this non-covalent BTK-inhibitor, what other kinases might be hit and how comfortable you are on the safety profile. And then just a final question for Eric and Dan on the Takeda program, how much of the milestone could you earn this year as things go well and what [if have on your past run within]? Thanks.

Daniel Swisher

Great, Jim. Thanks for the questions. I’m going to have Linda Neuman to address the first part and maybe just a quick overview on the trial design for the healthy volunteer study and what we will learn and what data is coming from the first portion.

Linda Neuman

So we finished our first stage of the healthy volunteer study and that data will be presented in September. We dosed multiple dose levels and our safety profile is consistent with that what we believe to be evident in our investigator brochure. We will be presenting data suggesting that the drug is active at the target with our PD levels in the presentation, and we hope to be able to support at least twice a day dosing with our compound.

Daniel Swisher

So, on the second question about the kinase inhibitory profile. Do you want to touch on that Linda?

Linda Neuman

Yes. So our primary target of course is BTK we believe that we do have some different profile than what is currently out there with other being studied BTK-inhibitors. So we believe that the ITK might be different than what is currently known with the other BTK-inhibitors as well as some other off target agents as well.

Daniel Swisher

Yes. Just to for anyone who wants to dig in a little deeper we've got a poster we’ve presented at EORTC which is up on our website. And one key sort of potential advantages the lack of EGFR activity which may cause some of the adverse events with ibrutinib, but again it's going to be in the multi-dose cancer study which will really get a good picture of the safety and efficacy profile.

I think what's important to note and why you know the healthy volunteer data is so important is to date all the compounds in the clinic and on the market for cancer indications are covalent binders. And in part they're covalent binders because they have four pharmaceutical properties which short half-lives and poor clearance and exposure. And so there's a big hurdle then for a non-covalent inhibitor to have sufficient blood levels and inhibitory effect on the target to be able to keep the target suppressed 24/7 with the ID dosing and that's data that we look to elucidate and share with everyone in Mid-September.

Eric on the financial.

Eric Bjerkholt

Yes. From Takeda collaboration the next milestone payment would be start of a registration trial. So we don’t expect any milestones from that collaboration this year and none are included in our guidance.

Jim Birchenough

Thanks Eric, thanks Dan.

Daniel Swisher

Thanks Jim.

Operator

And our next question comes from the line Eric Schmidt with Cowen and Company. Your line is now open.

Eric Schmidt

Good morning. Thanks for taking the questions. Just maybe one more in 062. Do we know what percent of ibrutinib resistance is now may be driven by Cys mutations because any more time to look in to that?

Daniel Swisher

Yes, hi, Eric that's a great question. And yes it is an emerging area where investigators are starting to look at this more clearly and Linda can elaborate here. Clearly, the centers that were involved and describing this resistance mechanism which led to a New England journal publication a couple of years ago.

The two sort of lead institutions there were Cornell and Ohio State and Ohio State is probably the group that most rigorously has been looking at this where longitudinally now I think crossed almost 100 patients that have been, ibrutinib treated they have frequently assess the mutational status of those patients. And what they had said at the EHA Conference recently is with the median follow-up of 30 months they see approximately 30% resistance emerged with those patients and within that resistance more than half of those patients have the mutation.

So what we need to do is kind of back - sort of build that market backward to how many CLL patients are getting treated with ibrutinib which is an ever increasing number and get to a more accurate number, but I can say as we've talked with top centers, there’s an awareness that this is an area of emerging need. Linda, do you want to add to and maybe just a little discussion about the KOL outreach we've had recently and the response from those investigators.

Linda Neuman

Yes. So recently there was the Pan Pacific meeting was conducted in Hawaii with the University of Nebraska, and we had a little bit less than 10 meetings with investigators. This emerging resistance with ibrutinib is really becoming an issue as more and more patients are treated with it and they all seem very excited at the prospect of having a non-covalently bound BTK inhibitors that might be able to address those potential unmet needs as patients start to process on the currently marketed BTK inhibitors.

Eric Schmidt

Okay, great. And then moving over to Vosaroxin and the EMA review, it sounds like you've been off the clock now about three months working on these questions. Is there a single-specific issue or topic that you're focused on or maybe to hung up on I don’t know you sounded like this is sort of standard cycle. But are you getting feedback from the EMA during that cycle as well, so you know exactly what they're looking for?

Daniel Swisher

It’s a good question Eric and I will have Debbie give a little more elaboration here, but now it's consistent of what we said. The comments and questions were similar to what we expected, justification of the subgroup indication, the robustness of the data and that understanding all of the transplant and other confounding factors. And so just some of that work takes additional postdoc analyses that take time to program and run and make sure we're analyzing and interpreting correctly. So we're in the midst of all that, we're making very good progress.

We look to have a response in the fall timeframe and that would restart the clock and I think we're airing more toward sort of a comprehensive response and kind of the fastest response because if we can make significant progress then the backend will be more certain and more quick. So Debbie do you want to say a word about interactions that we've had since day-120 and…

Deborah Thomas

Sure. Yes, we had the opportunity to have meeting with EMA to clarify questions that we received today 120. So during that meeting we were able to gain greater clarity on what was expected and so that then of course added into the work that we're doing to address the questions.

And as Dan indicated, the questions are across the Board and there's not a particular focus there just being with a very in-depth evaluation of our [indiscernible] and there are many, many ways that you can approach any given issue and they have kind of come out of it with a lot of questions around the pretty standard issues that we're working on addressing those now.

Eric Schmidt

And maybe one last one for Eric, if you on Vosaroxin hoping to have a partner in place to be ready for time of launch, does that put you on a specific timeline in terms of when we should expect an announcement?

Eric Bjerkholt

In our guidance as you are seeing in this press release on this call is we're progressing the partnering discussions very actively in parallel with the prosecution of day-120 question and we expect the partnership could be completed around the time of CHMP opinion whether it's a little before or not remains to be seen, but in parallel as you’ll also see, we are spending money on market access and preparing for market launch and Par and his team are doing a phenomenal job and we're making a lot of good progress which the partners are also appreciating. And so it's important that we continue those investments, so that when we do have a partner in place we don't miss a beat and can launch very quickly after approval.

Eric Schmidt

Great. Congrats on the progress.

Daniel Swisher

Thanks, Eric.

Operator

[Operator Instructions] At this time, I am showing now further questions. I would like to turn the call back over to Dan for any closing remarks.

Daniel Swisher

Yes. Thank you. Thanks everyone for joining us this Friday morning. You can tell we're very excited about the second half of 2016 and the potential to unlock significant value from both our SNS-062 kinase portfolio and Vosaroxin. We look forward to providing future updates and we thank you for your ongoing support and interest and look forward to upcoming interactions. Thanks.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program. You may all disconnect. Everyone, have a wonderful day.

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