Tesaro's (TSRO) CEO Lonnie Moulder on Wells Fargo Global Healthcare Conference (Transcript)

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Tesaro (NASDAQ:TSRO)

Wells Fargo Global Healthcare Conference Call

September 7, 2016 3:30 PM ET

Executives

Lonnie Moulder - Chief Executive Officer and Co-Founder

Mary Lynne Hedley - President, Chief Operating Officer and Co-founder

Analysts

Nick Abbott - Wells Fargo Securities

Nick Abbott

Delighted to introduce our next company that clearly have been one of the shining biotech stars of the year, TESARO. I think up 66% here today versus NBI down 15%. So that’s a very good performance. I think, it reflects the strength and depth of the company and the way they’ve approached drug development.

So I’m delighted to have Lonnie Moulder, the CEO, and Mary Lynne Hedley, President and COO and general scientific genius behind the company. So TESARO has made a business of, I won’t say taking distressed assets, but taking assets that have been developed by other companies. And not necessarily finding a niche, but developing them in the right way, but in a way that has critical go/no-go questions built in. We saw that with the TRK inhibitor early on, the ALK/TRK inhibitor early on that got killed off despite having some quite promising data.

So maybe to introduce, we – the big news obviously is in the PARP landscape. That was a drug that was not discovered or developed by TESARO. It’s not a development stage -- not a discovery organization. So why don’t you give us a quick, you know your view of the PARP landscape and what got you excited about PARPs and the development strategy you took?

Lonnie Moulder

Yes. Why don’t I start out here, Nick. Some people may know the history here that when we led a company called MGI Pharma many years ago, we actually had a PARP inhibitor. It was not an ideal PARP inhibitor from a – probably from a pharmaceutics perspective, which is interesting, because even some of the current PARP inhibitors that were originally synthesized, designed as intravenous agents don’t behave so well orally.

And I think the PARP inhibitor we had at that time was like that. But a lot has transpired since that time and we are very fortunate to have this very special molecule that’s performed in an outstanding manner in a randomized Phase 3 trial that we brought in from Merck back in 2012. Obviously, there is a lot of interest in the field.

The field had a great deal of interest a number of years ago. But I think at that time some of the development activities around the class were not ideal. We’ve learned a lot since then, and we took what we learned and obviously applied it to the design of our various clinical trial programs.

And the first output is the – are the results from the NOVA trial that really address a number of scientific questions, explored different patient groups, and ultimately delivered upon an outstanding benefit for ovarian cancer patients who are platinum sensitive in the recurrent setting as a maintenance therapy.

But I’ll turn it over to Mary Lynne here that may – and she can share her thoughts about how the field has evolved a bit and where we stand now.

Mary Lynne Hedley

Thank you, Lonnie. So, I guess, I would start by saying that, if we go back to the history of PARP inhibitors, many people felt that it was – they were first actually created to be used in combination with chemotherapy. They were thought to be great chemo sensitizers and radio sensitizers.

And over the last 10 to 15 years, many people have tried to combine full dose PARP inhibitors with full dose chemotherapy and it’s never worked out, because the toxicities are overlapping and that’s myelosuppression.

So the field lost a lot of interest, because if you think about it, the market opportunities, you could combine with every chemotherapy was just huge. And then it became clear from literature that the PARP inhibitors had an opportunity as monotherapy to be used in patients who had specific types of genetic mutations in their tumors, in particular, BRCA mutations. And so the field really started to move in that direction, which was sort of happening in parallel with the concept of targeted agents, which was relatively new at the time.

So when we came along, and as Lonnie said, we had worked on a PARP inhibitor previously. We had all of those previous experiences and had seen the multiple failures of combination chemotherapy work, and had seen the promise in the monotherapy setting.

And so when the Merck PARP inhibitor became acceptable to us, let’s say, our theory behind development was to keep your eye on the prize, go for the population, where you think there really could be benefit based on other agents in the class, clinical activities, scientific soundness. But keep your eyes on the – or don’t miss out on the opportunity to potentially expand beyond that.

So protect the prize, which was the BRCA mutant, because that was the most likely to benefit, but follow the science. Follow the trails. Follow all of the earlier work that suggested that the population who could benefit might actually be broader, if you could find some way to enrich them. And that’s why we designed the NOVA trial the way we did.

BRCA mutation population separated, segregated. If it worked, it was an NDA, but give us the opportunity to broaden the patient population. And if that worked, well, it did, then of course the opportunities for patients becomes much, much larger. And the opportunity to take that science and what we learned from that and translate it into other indications becomes so much more powerful. So that’s how we think about development of the PARP inhibitors.

Nick Abbott

So we’ll come back to the data in a minute. But obviously the clinical data is the ultimate arbiter of a drug, but in the absence of that the literature is replete with all sorts of different comparisons between the different PARP inhibitors that don’t take into account any of the pharmaceutical properties that you elaborated to early on, whether that’s in vitro testing, whether it’s PARP-trapping activity, whether it’s enzyme inhibition activity. How do you view those data, and is there just a lot of confusion? And does it really matter if you have the most potent PARP inhibitor in the test tube?

Mary Lynne Hedley

Apparently not. Yes, your point is a very good one, and one that’s often lost on people, I think is there is so much focus on the non-clinical data, and all of the things that the drug does in the test tube or in a cell culture dish. But at the end of the day, that drug has to be put into a human, and if it’s an oral agent, has to be bioavailable. It has to be distributed widely throughout the body. It has to get to the tumor. It has to stay in the tumor and inhibit PARP in this case in the tumor, and do that for a reasonable period of time and inhibit a significant amount of the PARP in the tumor, not having off-target toxicities related to other things it may interact with, and do all of those things in addition to being potent in vitro.

So sometimes the focus often becomes just on the in vitro assays, and people forget about what the drug has to do in vivo to actually translate to clinical benefit. And we saw this with our ALK/TRK inhibitor, to just go back to what you said, great in vitro properties. All the things that we thought would translate clinically actually did translate, but we could never – the therapeutic index could never be teased out. And I think we see that with some of the other PARP inhibitors, where we see these off target toxicities coming up and being higher than – and inhibiting dosing, so that you can’t perhaps get to full activity.

So it’s got to be a combination of both things ultimately that are important. And whether it’s PARP-trapping or PARP enzyme inhibition, nobody in the field would tell you they know which specific assay translates to clinical benefit. So you have to look at clinical benefit. And at this point, we are the only ones with Phase 3 clinical data in any setting of a PARP inhibitor, where you’ve demonstrated in a randomized controlled trial activity like we’ve seen.

And if you want to do a comparison, the only fair comparison, and it’s back to Study 19 with olaparib in the BRCA mutant patient population, where there was a seven-month difference, and we have a fifteen-and-a-half month difference.

Nick Abbott

In terms of perhaps class effect versus molecule effect, do we know now enough to differentiate the different inhibitors? And so what is the class effect of PARP inhibition versus what are perhaps the drug-specific molecule effects?

Lonnie Moulder

Are you speaking of activity in general or tolerance?

Nick Abbott

In terms of the safety profile?

Lonnie Moulder

The safety profile.

Nick Abbott

Sorry.

Mary Lynne Hedley

Yes, I think for all of the PARP inhibitors you are thinking about at this moment, they inhibit PARP-1, 2. And we all know that, at least, inhibiting those two PARP members of the PARP tankyrase family are very important for activity. Some of the other agents also hit other targets within the PARP tankyrase family that are known to be associated with toxicities that are manifest in the clinic.

So as a class, the PARP-1, 2 inhibition is going to bring you myelosuppression, because PARP-2 is involved in building bone marrow cells. The other off-target toxicities that might be associated with extending beyond PARP-1 and PARP-2 are manifest as individual toxicities associated with individual PARP inhibitors.

Nick Abbott

And what is the activity of niraparib outside of PARP-1, 2?

Mary Lynne Hedley

PARP-1, 2 selective.

Nick Abbott

That’s handy.

Mary Lynne Hedley

All right, of course.

Nick Abbott

So let’s just – so just review the data, because I know having participated in many of the quarterly earnings calls, now we know the data is a very simple trial design, but it was somewhat complicated. I know there was a lot of questions to you, Mary Lynne, about sort of which population again, and what do we have to see. And so maybe just quickly review the data for us that we have, since it’s such nice data?

Mary Lynne Hedley

Sure. so I think just starting in with the basic trial design. So the trial is designed and essentially two studies in one. So we have a germline BRCA cohort and we have a non-germline BRCA cohort. And the germline BRCA cohort – and within each cohort, patients are randomized two to one niraparib to placebo.

So we planned 180 patients in the germline BRCA cohort and 310 patients in the non- germline BRCA cohort. The endpoint was, of course, PFS. And what we had powered for was actually a 4.8 versus 9.6-month delta, so a hazard ratio of 0.5. And the data, as you know, in the germline BRCA cohort far exceeded that. We had a hazard ratio of 0.27.

In the non-germline BRCA cohort based on the clinical data that we had seen, we thought there was a population that might benefit even more. Could we tease out the population in the non- germline BRCA cohort that might have strong benefit? And that’s where the HRD test became important.

So we tested everybody, tested their tumor with the myChoice HRD test offered by Myriad Genetics, and then we looked at in the statistical analysis, the primary endpoint was, do we have PFS benefit in the HRD positive patient population? That represented about 50% of the non-germline BRCA cohort. And what we saw was a hazard ratio of 0.38.

So obviously, and all of these key values are less than 0.0001, so obviously highly statistically significant. And then we looked at – because we had passed that statistical test, we were able to look at the overall non-germline BRCA cohort, and we looked at that cohort. The hazard ratio was 0.45.

So we were able to demonstrate benefit in the germline BRCA cohort, and the overall non-germline BRCA cohort. And from our perspective, very meaningful benefit in both of those cohorts, which collectively represent the entire patient population.

Nick Abbott

So now I recall seeing the very elegant xenograft data where you defined 42 as the cutoff for the HRD test. I believe it’s 42. So you have this overall population. There will be more than one PARP inhibitor on the market. How do you balance the potential competitive advantage of having an HRD restriction that’s specific to your product versus treating a larger population of patients, where perhaps there could be some off-label use of other approved PARP inhibitors?

Lonnie Moulder

I guess from a commercialization perspective, if you look at the use of the current PARP inhibitor in the marketplace, so Lynparza is approved in the fourth line and greater setting for treatment, not for maintenance. And the dataset that we look at and then also what the company has reported, it looks as if something greater than 50%, maybe 60% of the use of that PARP inhibitor is in that labeled indication. And there’s substantial penetration in what is a smaller market opportunity.

The off-label use is a bit earlier line for treatment in some other tumors, prostate and breast cancer. But there is not a lot of use, and we really don’t detect use in the maintenance setting with that PARP inhibitor, even though there is some data available. So responding to your question about off-label use, I think what’s important to support the use of any drug, of course, is a strong dataset.

So we have, of course, as Mary Lynne just reviewed, across all the populations evaluated that were part of the primary analysis, germline BRCA and non-germline BRCA very powerful data, meaningful data for patients. I think the answer to your question really comes with when we see the data generated from the other PARP inhibitors.

So if we look at one that will report out in the recurrent maintenance setting shortly, it’s only in the germline BRCA patient population. That’s where the data will be, and I think oncology is very data driven. Without having a dataset in a broader population, it’s hard for me to picture how it will be utilized when our data is so strong.

And then another PARP inhibitor, the only other PARP inhibitor even looking at the recurrent maintenance setting, that dataset is about a year-and-a-half behind ours. I think there is a real opportunity based on these data to establish what could potentially be a best-in-class drug. And I use the phrase best-in-class based on randomized Phase 3 data.

So whether we’ll have a competitive pressure on our broad possibility with niraparib, I think we need to look at the data that comes from the other agents, but it’s going to be limited inherently in the one trial since it’s only germline BRCA and the other one is fairly far behind.

Nick Abbott

But we’re also awaiting the ESMO update on the non-HID positive patients, where the clinical data would suggest there should not be a response.

Mary Lynne Hedley

The clinical data would suggest…

Nick Abbott

So the xenograft data, it was very bimodal…

Mary Lynne Hedley

Having xenograft…

Nick Abbott

And the 42…

Mary Lynne Hedley

So why did the xenograft

Nick Abbott

[Multiple Speakers]

Mary Lynne Hedley

Yes. So why did the xenograft data suggest that only benefit in HRD positive tumor in the mouse versus what we saw in the clinic?

Nick Abbott

Yes.

Mary Lynne Hedley

A great question. So – a really good question. So if we go back to the mice, the way we did the PDX models, we actually take the – somebody takes the tumors out of the patients and they put them in the mice, and these are first line patients. What we don’t have, we haven’t pre-selected those tumors for platinum responsiveness.

And what I think we’re seeing in the NOVA data, if we go back to what does every patient have in that trial, who comes into that trial, they all were platinum sensitive, and they all had a response to platinum. And that enrichment, that clinical enrichment that we actually talked about four years ago when we first talked about the NOVA trial design, I think is what has enabled us to see activity in the overall non-germline BRCA cohort. And we don’t have that pre-selection in the PDX model. We just put them all in. So in that case, the only thing that’s going to fall out are the HRD positive.

Nick Abbott

Right.

Mary Lynne Hedley

That’s a hypothesis at this point. But it is very interesting to look at – if you then look at okay, how is that data supported? How is that hypothesis supported? We know in the class of agents and this is based on the literature from another PARP inhibitor that platinum responsive patients have a higher response rate than platinum resistant patients.

And so the data would, in fact, support the fact that platinum responsiveness is important for having PARP-related activity. So that may be what’s happening in the NOVA trial. And you can potentially then translate that even further to, well, what other indications then are platinum responsive outside of ovarian? And could that help guide where we go next with niraparib?

Nick Abbott

Correct. So I know we spend a lot on niraparib and I don’t want to lose the fact that VARUBI, the first commercial product that was launched. So update us on how VARUBI is going, prior to the launch, again you had a very well-choreographed launch plan, and how’s that going and what’s the reaction in the market to VARUBI?

Lonnie Moulder

Yes. So I’ll remind everyone of what we said not too long ago on our call, because that’s the most recent dataset that we have that, as we wrapped up the second quarter in the oral NK-1 receptor antagonist market for CINV, VARUBI, which is about – was about two quarters into its launch had obtained a 27 share, and there are three agents, oral Emend, Akynzeo, and VARUBI. And that we anticipate based on that trend that we’ll exit the year as the agent with the majority of the oral NK-1 market.

So we would expect entering into 2017 that for the oral market being number one in share. And I think that bodes well for the IV launch. As you know, the IV formulation ultimately has evolved in this category to being in the U.S. 90% of the market now. In Europe a little bit different, where the EMA is currently reviewing the oral VARUBI application. Our European organization will launch it in Europe, it’s about the reverse. IV is less than 20% of the market, so the oral is more important in Europe.

So the clinical profile is well accepted in the marketplace. And obviously those clinics, and we’re really in the clinic market right now, those clinics that have in-office dispensing pharmacies are actually able to dispense the product, because we only make it available through community oncology clinics that have in-office dispensing pharmacies and a single specialty pharmacy, Biologics, a division of McKesson.

There – those that are able to utilize it are driving us to the share that we have. But we’re not able to tap into the market yet that doesn’t have in-office dispensing or the hospital market, that’s where the IV will come in in a significant way.

Now, since we started our pre-launch activities back in 2014 and throughout 2015 then launched the drug, the NK-1 receptor antagonist market for CINV has actually increased over 20%. Still well short of where it needs to be, and we’ve described this before that when we were launching VARUBI, only about 20%, 25% of the eligible patients under the NCCN guidelines were actually receiving an NK-1 receptor antagonist.

Well we’ve now increased the utilization at 20% just with our oral. Interestingly, a lot of the increase is actually being benefited by the IV formulation of Emend. Yes, oral VARUBI is growing, but IV Emend is getting benefit, because we don’t have an IV formulation yet. And we have a PDUFA date for our IV formulation in the first quarter, and we look forward to launching it. So that regardless of the setting, whether it’s an oncology clinic that has in-office dispensing capability or not, we now have the solution.

So I believe our educational activities are going extremely well in the field, and we’ll see uptake, of course, with the formulation that really matches the practice of oncology in the US, the IV formulation, and intend to be market ready to launch VARUBI in Europe in the second quarter of next year, where the oral formulation is primary.

Nick Abbott

Now in the U.S., Lonnie, you sort of dusted your NGI playbook for the VARUBI launch. How about Europe? I mean that’s a very different situation, do you have a playbook?

Lonnie Moulder

I think it’s actually not as complex. People look at Europe, and of course, Europe isn’t Europe, Europe is multiple countries. You get approval pan-Europe, but your pricing all is local. Your pricing happens country by country via negotiations, and they benchmark you to the current product.

So our expectations are that we’ll probably have pricing similar to the current product. I think when you overreach, you have some challenges. So our expectations I think are appropriate. We have a meaningful product. It will have peak sales, probably north of $50 million, approaching $100 million, in that range. And that’s reasonable for a European product based on the size of our European organization. That’s substantially smaller than what the peak opportunity is in the U.S.

If we fully penetrated the NK-1 receptor antagonist opportunity in the U.S., the category is over $1 billion, oral and IV formulations combined. Europe is just much smaller. But in Europe, we are building the organization with both VARUBI and niraparib in mind. We’ll shortly be launching niraparib after the VARUBI oral launch, and we’ll have great leverage with it in that organization.

So there’s not a complicated playbook for VARUBI in Europe. It’s really a clinical sell based on the profile of the drug, and a pricing that we would anticipate is the current market pricing.

Nick Abbott

And the last thing is just come back – let’s come around to immuno-oncology. Obviously that’s the next franchise, so the PD-1 inhibitors in the clinic. Do you think that you can differentiate a PD-1 inhibitor or are they all the same? Mary?

Mary Lynne Hedley

I think that they are all fairly similar. And I think what you want to do is come in with a dosing schedule that is, at least, as good as where the field is headed, and that’s what we would intend to have when we announce what our dosing schedule is. And then the goal would be to get the PD-1 approved as quickly as possible, so that we can use it in combination studies in particular with our TIM-3 and our LAG-3 antibodies. And the reason that we’re so excited about the TIM-3, which is also in the clinic in the dose escalation process right now is for two reasons. One of them – and primarily they’re related to – well, primarily related to resistance of PD-1.

So we know PD-1 resistance either exist initially, or it’s generated over time. And when it’s generated over time, one of the mechanisms and this is all published literature now with either CAR-Ts or with patients treated with PD-1 is, if you take those T cells out and you look at them, they can still have PD-1 antibodies bound to them, but they are not active, because they’re in part, and probably mainly, because they’re now expressing TIM-3. And if you block the TIM-3, you now reactivate the T cell.

So TIM-3 may, in fact, be a dominant signal over PD-1, and once the T cell expresses it, you’ve got to block that. So that’s created acquired resistance. Inherent resistance might be well, you might ask yourself well, why is it that some tumors don’t respond at all to PD-1? One possibility is they don’t have T cells. But if you know they have T cells, because you have lots of samples and you can look, you might say well, do they have PD-1 on the surface and they might have PD-1 on the surface, but still PD-1 antibodies aren’t working. Well, do they have TIM-3 on the surface and they might have TIM-3 on the surface and that would then suggest they won’t respond to a PD-1.

But if you could put a PD-1 and in combination with TIM-3, or maybe even TIM-3 monotherapy into those patients, you might now be able to see responses where you couldn’t see responses before. And you can think of what those tumor types might be. So that’s one potential how a TIM-3 antibody could potentiate the activity of PD-1 or standalone. The other thing we know about TIM-3 is it’s expressed on TRegs in the tumor, specifically in the tumor. And it’s expressed on myeloid-derived dendritic cells, so suppressor cells.

So there’s – TIM-3 seems to be inactive for many of the different immune cells that are present in the tumor microenvironment. So if you can suppress that TIM-3, binding to its ligand and the negative signal that TIM-3 causes into these cells, that might be a way of actually enhancing immune responses, or creating them where we don’t see them today. So that’s our next, hopefully next…

Nick Abbott

Excellent. So when we might we see some [Multiple Speakers].

Mary Lynne Hedley

When are the data coming?

Nick Abbott

The TIM-3 program and what will you be able to look at it from [Multiple Speakers]

Mary Lynne Hedley

So obviously the beginning is dose escalation and that’s in all comers right now, because for obvious reasons is to move quickly. So we’ll probably finish that up towards the middle of next year and then start the combination PD-1/TIM-3 study. And at that point, we will tell you what the cohorts will be, but we’ll go into a cohort expansion into the patient populations, where we think based on all of the work that we’ve done non-clinically with human T cells that we think will have the most opportunity to see benefit. And so if the benefit is strong then just like PD-1s, you would expect after 20 or so patients you will be able to define whether or not you have some activity.

Nick Abbott

And are you still as excited about LAG-3 as you were when you licensed that?

Mary Lynne Hedley

I’m, it’s just farther behind. So LAG-3 actually will enter the clinic next year. I don’t think LAG-3 has as many access points as TIM-3. The more we learn about TIM-3, there is more potential opportunity for it to be suppressing T cells in the microenvironment. But LAG-3 is still, the preclinical data all are very parallel to what we knew about PD-1 and TIM-3 when those molecules entered the clinic. So time will tell.

Nick Abbott

And I think at one time you might have said, around every 18 months expect us to do something interesting. So we must be coming up to the 18-month timeframe.

Mary Lynne Hedley

We’re past it. We’re overdue. I’ll just say that.

Nick Abbott

So, obviously, you’re targeting inhibitory pathways. There are accelerator pathways that might be interesting. Should we expect something to broaden the IO franchise, or are you looking at something else, or are you just open to what’s interesting?

Mary Lynne Hedley

Well, we’re always open to what’s going to make a difference for patients. I mean that’s our mission. And we aren’t – we’re agnostic in some respects as how to get there. Obviously, if we can complement what we already have in the pipeline, that makes the most sense. Where we see the IO field going and this isn’t – everybody sees it going there is combinations, of course.

I think people are becoming more sophisticated about how they think about combinations and are actually applying some thought and reason to it as opposed to just throwing the kitchen sink at it. And that’s what you will see us doing. And more specifically a multi-targeted type of approach, where you can hit two or three axis at the same time within a single agent would be our preference ultimately.

Nick Abbott

Great. Well, we’ve run out of time. Thank you very much.

Question-and-Answer Session

Q -

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