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Favrille: The Wall Street Analyst Forum Presentation Transcript

by: The Wall Street Analyst Forum September 20, 2007 | about: FVRL

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TRANSCRIPT SPONSOR

Favrille, Inc (FVRL)

The Wall Street Analyst Forum

September 20, 2007 9:10 am ET

Executives

Tamara Seymour - CFO
David Guy - CCO

Presentation

Moderator

Administratively, I would just remind the Analysts who are here and the Investors attending via the webcast, that the webcasts are all retrievable for 30 days following this live event and you can access them through the company's website which are linked to the webcast or if you want to find the entire conference schedule and all the links in one place, you can go analyst-conference.com.

As some of you know, we have a relationship with seekingalpha.com which is becoming an increasingly prominent website for institutional investors as an Institutional Investor Online Community. They do a transcript of our presentations out of Israel via the webcast, and these transcripts include both the presentation and the Q&A session, and are web searchable on Yahoo Finance, Google Finance or AOL Finance. So, for those who are present, you can either access the webcast post conference and hang on for 40 minutes, or if you are a quick reader you can probably go through a transcript and get everything you need in six or seven minutes and that’s why we do the transcripts.

Transcripts, years ago, you would have to mail them to somebody, but making them web searchable these days is a phenomenal way to extend the conference beyond a 40 minutes webcast. 40 minutes is the long time for a lot of people, a higher price to get me to sit down and do anything in 40 minutes, but with transcripts you can get it all in just a couple of minutes.

In any case, I would like to introduce the next company in this morning's program and for the second time in my life put my reading glasses on. Bought at Staples a little while ago, I would like to introduce Favrille, which is a biopharmaceutical company focused on the development and commercialization of targeted immunotherapies for the treatment of cancer and other diseases of the immune system. The company’s lead candidate FavId, pronounced FavId, is based upon - the biotech companies, you always have to review your introductions because there are usually about half a dozen terms that will throw you, if you are not in the biotech industry yourself.

FavId is based upon unique genetic information extracted from a patient's tumor. It is currently under investigation in a pivotal Phase 3 clinical trials for patients with follicular B-Cell NHL, and Phase 2 clinical trials in other B-Cell NHL indications. The company is developing additional applications based on its immunotherapy expertise and proprietary cost-effective manufacturing technology, including a second product candidate, FAV-201, for the treatment of cutaneous T-Cell lymphoma and recently acquired lymphoma and recently acquired a series of optimized anti-CD20 monoclonal antibodies.

So, without any further introduction, I would like to introduce Tamara Seymour, Chief Financial Officer of the company who will introduce a couple of people accompanying her and just reminder during the Q&A session, to repeat the question for the benefit of webcast attendees.

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Tamara Seymour

Thank you, and thank you for the opportunity to present Favrille to you today. I am going to review our proprietary technology, the clinical development plan and show you some clinical development, clinical data from FavId our lead product. And then I am going to turn the presentation over to David Guy, our Chief Commercial Officer, and he will review our commercialization plans for FavId and talk about portfolio expansion.

We will be making forward-looking statements today, and I invite you to read our SEC filings for the risk associated with those statements.

As we said FavId, is a personalized active immunotherapy for B-cell non-Hodgkin's lymphoma; the initial perceived target is indolent a slow growing form of the disease. And we are developing this as a complement to the current standard of care which is Rituxan, if you were here for the last presentation you heard them mention this antibody also.

We still own, all the worldwide commercialization rights to this product and development is at a very late stage, we have some very encouraging Phase 2 data that, I'll show you today, I'll show you 3-year follow-up data that was presented last December, and then we plan to present 4-year follow-up data on the patients in this trial in December at the Hematology Meeting.

We also have an ongoing Phase 3 registration trial and we anticipate analysis of the primary end-point from that trial in the first half of next year.

We have a management team, who is very experienced. They have clinical development, biologic manufacturing and product launch experience in oncology and hematology products.

FavId, is specifically manufactured for each patient, based on genetic information that’s taken from that individual's tumor so to start manufacturing out of the therapy we will begin with patients biopsy tissue.

The approach is to activate the immune system, against a specific protein its called idiotype that’s found on a surface of a patient's tumor, so it’s a highly targeted therapy. As I mentioned, the standard of care is Rituxan, and it's what's known as a passive immunotherapy, I'll talk more about that in a moment. But the unmet medical need in this indication is really the duration of remission, patients treated with Rituxan tend to see a 12 to 24 months duration of remission and we will try to improve on that.

So, Rituxan is an antibody which recognizes a protein that's found on all of our B-cell's, it is called CD20, and the result of administrating Rituxan is that, that it depletes all the B cells in our body but the healthy B cells in the B cell tumors, and it works as long as the agent is in the body, so all the B cells are repopulated including the B cell tumors.

But Rituxan is very effective at reducing the existing tumor mass in the body. So, FavId being an active immunotherapy, teaches the immune system to recognize a protein that's only on the patient's tumor, so it's much more specific than Rituxan. It results in immune memory and should keep the tumor at bay longer. So, the goal is to reduce tumor mass with Rituxan, and then use FavId to prevent relapse.

We all know the old adage, give someone a fish today and they eat today, teach someone to fish and they eat for lifetime. So, that’s what we are trying to do with the immune system.

The issue here is that it's patient specific, so it requires recombinant manufacturing of an idiotype protein that's unique to each patient. And always, from early studies back in the late 80s and early 90s at Stanford University in the National Cancer Institute they showed very promising results. They used what was known as the hybridoma production, and it was state-of-the-art at the time, but it was very labor intensive, therefore very costly, and it took about 9 to 12 months to make each patient’s therapy. So, at that level it really wasn’t commercially viable. What we bring to the table is the proprietary manufacturing process that makes patient-specific production cost effective. We use the tools that were developed during the human genome project, specifically, some equipment that allows the automation of identification and cloning of genes. We have our own propriety baculovirus insect cell system for making the protein rapidly.

And then finally, we have developed a computerized tracking system that allows for accurately tracking each patient through the manufacturing process. As you can imagine our primary concern would be to make sure you get the right patient’s tumor to the right patient, we don’t want cross contamination there. And it also allows for efficiency in the quality release of the product.

So, given all of these tools, we can make this therapy for each patient in only eight weeks. So, from 9 to 12 months there is also a competitor out there, who use mammalian cell system, which can produce the protein in about 4 to 6 months, so, 8 weeks, time is money, so we believe that we have the most cost effective therapy out there. And with each manufacturing run, we make three years worth of product for each patient.

Our approach is to use Rituxan, followed by FavId. These earlier studies that I mentioned with similar active immunotherapies showed great extension in progression, for its survival it was 8 years. And this was following putting the patients into remission with chemotherapy, back then chemotherapy was the standard of care. And patients would see 18 to 24 months of remission. So, this was giving them an additional 6 years.

However, they did not use Rituxan, which today is the current standard of care. We didn’t want to ignore a product that was selling $2 billion in the marketplace.

We had some early studies that showed the patients who were relapsed from prior therapies, as well as treatment naïve patients benefited. So, our approach is to use this idiotype specific immunotherapy by treating with Rituxan to reduce the tumor mass, begin treating with FavId to prevent relapse, and we are treating all patients who were treatment naïve as well as relapsed from prior therapy. And we are also treating patients who were stable after their Rituxan therapies. Stable, meaning that the tumors are essentially the same size as before they began their Rituxan therapy, and patients who have been put into remission, that’s either a partial remission which is 50% reduction in tumor mass or complete remission which is essentially not a detectable tumor.

This is the treatment protocol for all the patients in our Phase 2 and Phase 3 trials. We received a biopsy and began producing FavId for that patient, while the patient is treated with Rituxan according to the label which is four weekly IV infusions. And then in month three, if the patient is stable or in remission, we begin treating with FavId which is just a subcu injection, monthly for 6 months that’s administered with GM-CSF which is marketed as Leukine, and that is to enhance the immune response. At the end of 6 months, if the patient is still stable or in remission then they go onto a maintenance therapy, which is every other month for a year and in quarterly thereafter until relapse.

This is data that was presented last December at the Hematology Meetings from our Phase 2 trial which had 89 patients, 65% of those patients were relapsed from prior therapy and 35% were treatment naïve. So, on the left you are looking at a subset of those patients who were treatment naïve or relapsed/refractory who responded to their Rituxan therapy at month three with either partial or complete remission, and then at this point month three they began their FavId injection.

So, this graph is plotting time to relapse, so every drop up here is a patient that is relapsing and coming off study. And what we are seeing is that about month 20, 55% of the patients were still in remission, each of these will hash marks represents a patient and they are at this point last December there have been no more relapses with patients out as far as 3 years.

If you were to look at this same population of patients treated with Rituxan, what you would see is that 50% of the patients would have relapsed between 15 and 18 months. The relapses would continue until about 20% of the patients remained in remission and that’s really where the tail on the graph develops. So, these patients appear to be doing better. And then on the right the treatment naïve patients alone, who responded to the Rituxan therapy with a clinical remission, and you can see that these patients have done better if there is fewer progression, and at 18 months is where you would see it leveling off with patients in remission out through three years.

Based on this Phase 2 data, we designed our Phase 3 Registration Trial, and all the patients where treated with Rituxan, the same treatment protocol that is equated for weekly IV infusions and if they were stable in remission, then they were randomized one-to-one to FavId plus GM-CSF or placebo plus GM-CSF.

This trial is being conducted under a special protocol assessment which is a written agreement with the agency that they have lesser treatment protocol, and they have blessed the statistical analysis plan and they agree with our control and which is Rituxan alone.

We initiated this trial in July of 2004 and we closed the two enrollments in January of 2006 just 18 months later with 349 randomized patients in the trial. 18 months is very fast for an oncology trial, and our investigators tell us that, essentially patients were self enrolling into this trial because they really like the concept of two biologic therapies and being able to avoid chemotherapy at this point.

There were about 80% of patients in the trial were treatment naïve, with the remainder being relapsed/refractory. And as you saw in the previous slides, treatment naïve patients do appear to be benefiting more from this therapy. So, we believe this is a good thing for this trial. The primary end-point is time to tumor progression or time to relapse and its statistically powered to show a 50% improvement over Rituxan plus placebo, and we have estimated that the controller on at this trial would be about 18 months from randomization, or 21 months from the start of Rituxan and we are looking for a 50% improvement over that.

We do have Fast Track designation by the FDA, so that means that when we are filing our application for approval. We can file it in a rolling process, we can file the Chemistry and Manufacturing controlled section first, and then, files the clinical section when the data is available and also asks for a 6 month priority review after the clinical section is filed.

This is an interim look that we performed on the Phase 3 trial in November of last year on the first 226 patients, who have been on the trial for at least one year. And what you are looking at is blinded data, so the controller and the treatment arm are combined. We looked only for response, how much were the tumors shrunk during the time they were on therapy, and what we saw is after the Rituxan therapy at week 11, 19% of the patients were in complete remission and then best response following FavId 47% of the patients were in complete remission.

Now, why is this important? Well, let’s go back to the Phase 2 trial and look at the group of patients who had attained complete remission at sometime while on therapy. Three of the patients were in complete remission following with Rituxan and then another 13 improve to complete remission at sometime after their FavId treatment. So, out of this group of 16, what you can see is there were only four patients who had relapse, so 25% of the population and 75% are still in remission, out with the patient out as far as about 41.5 years at this point. So clearly, this is the group that appears to be benefiting the most.

So, what we had for this trial? Is the final endpoint analysis time to tumor progression in the first half of next year and then based on positive data from that trial, we will apply for FDA approval to market FavId and we would file that application in the second half of next year.

Take a look at the finances to see how we have funded all of this work. We took the company public in February of 2005 and raised $42 million, in last year we completed a private placement for an additional $45 million, and earlier this year, we did a Registered Direct for $10 million. Also we have committed equity financing facility with Kingsbridge Capital for up to $40 million or 5.8 million shares and that really gives us the right to put to them stock at a predetermined discount to market at any time over the next three years, and most of that is available to us still today, and we have about 33 million shares outstanding.

At the end of June we had $30 million of cash on hand, and our projected cash needs for the whole of 2007 should be between $48 million and $52 million and we believe that the cash we have on hand, plus this equity line should be sufficient to fund operations through the first half of 2008, which should include the analysis of the primary end-point from the Phase 3 trial, so we should have cash beyond our data announcement which we'd expect to be the major valuation driver for the company.

At this point, I'll turn the presentation over to David Guy our Chief Commercial Officer.

David Guy

Thank you Tamara, I've joined you today mainly to share some of my excitement with you as we prepare this final phase of development, and getting ready for commercialization of this very exciting product.

So, as Tamara mentioned there are other manufacturers in this space, the concept of an anti-idiotype cancer vaccine or active immunotherapy has been well established in the literature, and a number of companies are pursuing it because the Phase 2 data using this approach was so compelling.

And however, our product offers a number of important competitive advantages, that I want to share with you, once FavId has been developed for administration following Rituxan the current standard of care, other approaches and the historic side of this has been developing the product after inducing remission with chemotherapy alone which is just not the way most patients are treated today.

The pivotal Phase 3 trial that we are doing includes the broad patient population, meaning we have the potential of having a label that includes both treatment naïve and relapsed/refractory patients. Other manufacturers are excluding the relapsed/refractory population and focusing strictly on the treatment naïve group, so we have potentially a broader commercial application of the product.

We completed patient enrollment of the Phase 3 trial in 18 months and I feel that’s an interesting fact but underneath that is this incredible activation of patients who were motivated to find a treatment that did not include chemotherapy and so some of the use -- so we are going to commercialize this product that excites me that there are patients who are very interested in finding this product and the idea of activating your own body to fight your own cancer is a very seductive message.

We have a Special Protocol Assessment for the Phase 3 trial in place with the FDA. Because of our manufacturing process you are seeing a baculovirus-insect cell expression system. We have the ability to manufacture & deliver to patients in 8 weeks.

Other manufacturers are using mammalian expression systems and because of the mammalian process it takes 4 to 6 months to produce product and that’s -- it's important because during that time when a patient could be waiting for their treatment, their disease could progress and they would become ineligible for the treatment. So, by being able to do this quickly in 8 weeks FavId remains a valid treatment option for the vast majority of patients.

The unique insect cell glycosylation patterns so by manufacturing an insect cell as they put on a different sugar moieties onto the protein different than what is achieved in mammalian cells. And if you are making a therapeutic antibody, you prefer the mammalian process because you want the protein to look as much as like something that you find in your own body. However, by manufacturing insect cells and having this different pattern your body sees the peptide as foreign and for an immunotherapy that’s what you want, you want the body to recognize it is foreign regimen and immune response to it. And in fact there has been Phase 2 data -- excuse me preclinical data that was presented at the American Association of Cancer Research and another abstract which will be published at -- presented at ASH this year that show that manufacturing an insect cell, manufacturing process create some more immunogenic product than mammalian manufactured Id-KLH.

A minor point stable formulation at 2-8 degree celsius, this is more convenience in the logistics chain, other products require -- product to remain frozen which puts the burden on the shipping and storing of the product at the physician's office.

About the size of the unmet medical needs and the treatable population here, the prevalence of indolent non-Hodgkin's Lymphoma is about 213,000 patients, 38,000 of which seek treatment annually. It's a reflection of the median survival time here, this particular reference is 6.9 years. It's probably 6 to 10 years and so patients going to remission, they get another treatment. They go into remission again, and it's a long indolent approach.

Rituxan is the standard therapy either is a single agent or combined with chemotherapy or as a maintenance approach. However, Rituxan is not a cure and new treatments that complement Rituxan are desperately needed.

This is just a reflection of that breakdown of numbers of how the different treatments for non-Hodgkin's Lymphoma for indolent non-Hodgkin's Lymphoma with more than 86% of patients receiving Rituxan in one form or another.

The 2006 US sales of Rituxan were $2.1 billion and the annual cost per Rituxan treated patient varies widely, but depending on the regimen used is between $15,000 and $35,000.

Current accepted annual cost for treatment oncology is quite high. It's about $48,000 for Avastin in colorectal cancer and use of Herceptin is approximately $36,000. The point of this is to say that there are no significant barriers today to reimbursement for on-label or a compendia listed use of novel oncology therapeutics which will enable us to price at a relatively premium price for this product.

Commercial hurdles, we foresee them as being relatively low in context of this, is that finding something that can add to Rituxan to keep patients into remission longer is extremely important, and there's a large unmet medical need and that will certainly drive demand for the product.

In addition, there is a favorable reimbursement environment that I've mentioned, a relatively small target audience, meaning that we don’t need a large sales force to address it. We do not see Genentech as a competitor for Favrille, as we are a complement to Rituxan where extending the duration of remission achieved by Rituxan.

We can achieve typical margins for biologics at our anticipated pricing levels, and we have the clear competitive advantages I've mentioned versus other Id-KLH approaches and our approval time is similar.

Finally, there really isn’t a large change to current physician practice. We believe that FavId can be easily integrated into the current treatment with Rituxan. As Tamara mentioned, the starting of the process is the collection of biopsy material from the patient. We don’t think that is a huge burden on the physician as it is standard procedure to conduct confirmatory diagnosis of lymphoma by the treating oncologists, and so referral for collection of biopsy material for diagnostic purposes is nothing new. So, we don’t see that as a huge challenge.

We are going to distribute, and distribution is possible under current buy & bill or specialty pharmacy models, and we see that the product will likely be on a per vial pricing to fit J-code reimbursement, the standard reimbursement that exist today for oncology therapeutics.

In terms of broader commercialization strategy, we are going to have 10 regulatory approval for indolent B-cell non-Hodgkin's lymphoma, directly market or co-promote the product here in the United States and establish strategic collaborations to market outside the United States.

Expansion beyond FavId, we want to add candidates using the active immunotherapy platform, expand our oncology pipeline through acquisitions and in-licensing and licensed Favrille technology for fields outside of oncology.

The example of one of our in-licensing activities that occurred this year was the acquisition of the anti-CD20 program from Diversa, they had a humanized anti-CD20 panel of antibodies that we've acquired those -- that panel of antibodies have been shown to have those antibodies in that panel and have been shown to have biologic properties equal or superior to Rituxan in a number of cell-based assays, so we are going to choose candidates from that pre-clinical work to take into the clinic.

This program is also an extension of our commitment to developing next generation treatment approaches for non-Hodgkin's lymphoma. It's an area we are developing our expertise in and we want to explore combinations of active and passive immunotherapies in oncology and autoimmune diseases.

2007 highlights and some upcoming milestones: we signed an agreement with Berlex regarding the use of FavId in combination with Leukine. Leukine is GM-CSF. It’s a product that’s co-administered with each injection of FavId the purpose of that is that Leukine recruits dendritic cells to the side of injection of FavId and enhances the immune response or the patients who respond to the active immunotherapy. We saw that it was important to have a relationship with buyers and the manufacturer to make it easier upon commercialization for Leukine, for instance, to get reimbursement in this area and other areas of collaboration with them.

We reported data from additional Phase 2 trials, FavId following autologous stem cell transplant was reported at the ASBMT meeting FavId with maintenance Rituxan initial results from a Phase 2 trial with John Hainsworth were reported at this year's American Society of Clinical Oncology Meeting, and FavId for indolent B-Cell NHL in Europe, a small study that was reported at the European Hematology Association. This trial in large part was done to prove the concept that we can actually supply product for clinical trials in Europe from our manufacturing facility in San Diego and we were successful in doing that.

We completed construction of our commercial scale manufacturing facility. We acquired the anti-CD20 program that I mentioned. And upcoming we have four abstracts submitted to ASH in December of this year. Two clinical abstracts including 4-year follow-up data from the Phase 2 trial the result that Tamara showed you earlier and another year of follow-up will be presented, two non-clinical studies. One, I mentioned earlier, featuring the preclinical results of insect cell derive Id-KLH versus mammalian in terms of immunogenicity. And analysis of the primary end point in the pivotal Phase 2 trial FavId we anticipate in the first half of 2008.

So, with that, I would like to bring Tamara back up and take any questions that you might have. Yes.

Question-and-Answer Session