Allos Therapeutics Q3 2007 Earnings Call Transcript

Allos Therapeutics, Inc. (ALTH

Q3 2007 Earnings Call

November 5, 2007 8:30 am ET

Executives

Derek Cole - Vice President, Investor Relations

Paul Berns - President and Chief Executive Officer

Pablo Cagnoni - Senior Vice President and Chief Medical Officer

Jim Caruso - Executive Vice President and Chief Commercial Officer

Analysts

Mark Monane - Needham & Company

Charles Duncan - JMP Securities

Presentation

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Allos Therapeutics 2007 Third Quarter Results Conference Call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session, and instructions will be given at that time. (Operator Instructions) As a reminder, this call is being recorded today, Monday, November 5, 2007.

And I would now like to turn the conference over to Mr. Derek Cole. Please go ahead, sir.

Derek Cole

Good morning and thank you for joining us on today's call. With me this morning are Paul Berns, President and CEO; Dr. Pablo Cagnoni, Chief Medical Officer; Jim Caruso, Chief Commercial Officer; and David Clark, Vice President of Finance.

Following this introduction, Paul will provide a summary of third quarter activities. Pablo will then provide an update on the company's product development program. Jim will provide a brief commercial planning update. And David will review the company's financial results for the third quarter of 2007. We welcome your questions, following David's remarks.

As a reminder, this conference call is being recorded and webcast. The call may be accessed live on our website and will be available in our event archives for the next several weeks.

Before we begin, please be advised that during the course of this call we may make forward-looking statements concerning our company that are not historical facts. These forward-looking statements may include, but are not limited to, statements concerning our future financial performance, our future product development plans, timelines relating to our clinical trials, timelines for regulatory actions, and the potential safety and efficacy of our product candidates. Such forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that may cause actual results to differ materially from those anticipated by the forward-looking statements. Additional information concerning these risks and uncertainties is contained in the "Risk Factors" section of the company's Annual Report on Form 10-K for the year ended December 31, 2006 and in the company's other periodic reports and filings with the Securities and Exchange Commission. The company cautions investors not to place undue reliance on these forward-looking statements. All forward-looking statements are based on information currently available to the company on the date hereof, and the company undertakes no obligation to revise or update these forward-looking statements to reflect events or circumstances after the date hereof, except as required by law.

I will now turn the call over to Paul.

Paul Berns

Thank you, Derek, and good morning. It is a pleasure to update you this morning on the events of the past quarter and share our outlook for the balance of the year. We have continued to make important progress on the development of PDX across multiple indications, including hematologic malignancies and solid tumors.

Our clinical development organization, led by Dr. Pablo Cagnoni, is doing a notable job of executing the pivotal Phase II PROPEL trial of PDX in patients with peripheral T-cell lymphoma. We recently announced that patient enrollment in the trial is ahead of schedule with completion of enrollment now expected in the second quarter of 2008.

In addition to PROPEL, we have four other PDX studies underway in multiple indications with two additional solid tumors studies scheduled to begin in the near future. We believe we have established a product development and commercialization plan to effectively evaluate the therapeutic potential of PDX across multiple indications.

Let me now turn the call over to Pablo to provide more details on these development programs.

Pablo Cagnoni

Thank you, Paul, and good morning. Allow me to begin my highlighting recent progress with PROPEL, our pivotal Phase 2 trial of PDX with concurrent vitamin B12 and folic acid supplementation in patients with relapsed or refractory peripheral T-cell lymphoma, or PTCL.

In September, we announced the outcome of pre-planned interim analysis of patient response and safety data from the PROPEL trial. The source of the interim analysis of patient response data exceeded the pre-specified threshold for a continuation of the trial, which required a minimum of four responses, either complete or partial, out of the first 35 evaluable patients, as determined by Independent Oncology Review.

In addition, an independent Data Monitoring Committee completed an interim analysis of the safety data from the first 35 evaluable patients and recommended that the trial continue per the protocol.

In accordance with the PROPEL protocol, the Data Monitoring Committee will conduct another interim analysis of safety data from the first 65 evaluable patients. We expect to report the outcome of the 65-patient safety analysis by the end of 2007.

We are pleased with the execution of this study and the progress achieved to date. Thanks to support from our PROPEL investigators and leading patient advocacy groups, enrollment in the study is ahead of schedule and expected to be completed in the second quarter of 2008.

Importantly, this trial is being conducted under a special protocol assessment, which indicates that the protocol design, including endpoints and statistical analysis, are acceptable to the FDA to support a regulatory submission, if warranted by the results of the study.

As Paul mentioned, we are implementing a multifaceted clinical development plan for PDX. Earlier this year, we initiated patient enrollment in a Phase 1/2a, open-label, multi-center study of sequential PDX and gemcitabine with vitamin B12 and folic acid supplementation in patients with relapsed or refractory non-Hodgkin's lymphoma and Hodgkin's disease.

Up to 54 evaluable patients will be enrolled in the Phase 1 portion of the study with the objective of determining the maximum tolerated dose, safety, tolerability and pharmacokinetic profile of sequential administration of PDX and gemcitabine. In the expanded Phase 2a portion of the trial, up to 30 additional patients with relapsed or refractory PTCL will be enrolled with the established MTD to assess preliminary efficacy of PDX and gemcitabine.

In August of 2007, we announced initiation of patient enrollment in a Phase 1, open-label, multi-center study of PDX with vitamin B12 and folic acid supplementation in patients with relapsed or refractory cutaneous T-cell lymphoma.

Up to 56 evaluable patients will be enrolled in the study with the objective of determining the optimal dose and safety profile of PDX in this population. A total of 20 of these patients will be enrolled to determine optimal dosing schedule. The expansion of our development program is expected to provide further insight into the clinical and commercial potential of PDX in hematologic malignancies.

Now, in addition to starting these new trials, we were also pleased to announce the presentation of data from three PDX studies at the 2007 AACR-NCI-EORTC conference in San Francisco, last month.

Data was presented from our Phase 1 dose ranging study of PDX with vitamin B12 and folic acid supplementation in patients with previously treated advanced non-small cell lung cancer, in which a total of 22 patients with relapsed or refractory non-small cell lung cancer were treated at doses of 150 to 325 mg/m2 of PDX.

The maximum tolerated dose was determined to be 270 mg/m2, which is nearly twice that observed in a previous Phase 1 study, in which PDX was administered without vitamin supplementation.

Clinically, significant radiologic responses were observed, and greater than 50% of the patients in the study received two or more prior treatment regimens. Based on our PDX clinical experience to date, we plan to initiate a randomized Phase 2 study of PDX in patients with previously treated non-small cell lung cancer in the near future.

Additional interim data from our ongoing Phase 1/2 study of PDX in patients with non-Hodgkin's lymphoma and Hodgkin's disease were also presented at the conference. As you may remember, interim data from this study was presented at ASH 2006. At that time, responses were observed in 10 out of 22, or 45%, of evaluable patients with T-cell lymphoma.

According to the most recent interim data, responses were observed in 14 of 26, or 54%, of evaluable patients with T-cell lymphoma, with the duration of response typically exceeding the previously administered line of chemotherapy. No major safety concerns were identified in this heavily pre-treated population.

Also presented at the AACR conference were results from an Allos-sponsored pre-clinical study that investigated the mechanism of action of PDX and its differences from other antifolates and compared the in vivo activity of PDX, methotrexate and Alimta against two non-small cell lung cancer models.

The results suggest that PDX is mechanistically different from methotrexate and Alimta and that these differences may be due to enhanced uptake of PDX into the tumor cell and/or greater intracellular accumulation and polyglutamylation, resulting in greater inhibition of dihydrofolate reductase.

In addition, in the study, PDX induced greater tumor regression compared with methotrexate or Alimta in two human non-small cell lung cancer xenograft models, including the highly aggressive H460 model. We continue to be encouraged by the progress in our PDX development program and the results obtained, thus far.

To conclude our clinical development update, RH1 is a novel small molecule chemotherapeutic agent that was recently the subject of a Phase 1, open-label, dose-escalation study in patients with advanced solid tumors. We plan to initiate a company-sponsored Phase 1 trial in the fourth quarter of 2007 under a US IND.

With that, I will now turn the call over to Jim.

Jim Caruso

Thank you, Pablo. As Paul mentioned at the start of the call, we are focused on detailed product development and commercialization planning and execution. Based on our understanding of the oncology marketplace, input from key oncology opinion leaders and feedback from varied segments within the oncology community, we continue to develop and execute a detailed TD&C (ph) plan. This work, combined with PDX's differentiated clinical profile, gives us confidence that PDX has significant clinical and commercial potential in multiple indications.

While the oncology space remains highly competitive, our market research continues to indicate that patients with T-cell lymphoma are clearly in need of new treatment options. This is especially true for patients with recurrent or refractory disease who typically have a limited response to existing therapies and poor overall survival.

Based on PDX's biochemical features of efficient transport into tumor cells and effective intracellular drug retention, along with clinical data observed to date, we believe PDX has the potential to play a clinically meaningful role in the treatment of these patients.

With that, overview, I will turn the call over to Dave Clark for a third quarter financial summary.

David Clark

Thanks, Jim. For the third quarter of 2007, we recorded a net loss of $9.3 million or $0.14 per share; this compares to a net loss of $8.1 million or $0.15 per share for the third quarter of 2006.

Our R&D expenses for the third quarter of 2007 were $4.4 million as compared to $4.2 million for the same period last year. Increases in R&D expense for PDX, RH1 and general activities were partially offset by a $1.1 million decrease in cost for EFAPROXYN.

Our clinical manufacturing expenses for the third quarter of 2007 were $1.5 million as compared to $0.5 million for the same period last year. This increase was driven by increases in third party manufacturing costs for clinical trial material and pre-commercial scale-up activities for PDX and RH1. Our cash position at the end of September 2007 was $63.4 million. For the first nine months of 2007, our cash used in operations was $22.5 million. We expect that our cash use in operations for 2007 will be in the range of 34 to $35 million.

Now I will turn the call back to Paul.

Pablo Berns

Thank you, David. As I'm sure you can appreciate, we are very excited about our recent progress and look forward to several important near-term milestones, including the 65 patient interim analysis for PROPEL and the expansion of our clinical development efforts for PDX in solid tumors. We look forward to keeping you apprised of our progress.

And now we'd like to turn the call over to the operator for your questions.

Question-and-Answer Session

Operator

(Operator Instructions) And our first question comes from the line of Mark Monane from Needham & Company. Please go ahead.

Mark Monane - Needham & Company

Thank you. Good morning and thanks for taking my question.

David Clark

Good morning, Mark.

Pablo Cagnoni

Good morning.

Mark Monane - Needham & Company

Good morning. Good morning from New York City. First question has to do with the AACR abstract for Pablo, please. There was an increased incidence in stomatitis in the expanded cohort. Are there any risk factors, which lead patients to be more likely to get stomatitis or not get stomatitis?

And importantly, like -- I know you worked on Tarceva, is stomatitis potentially an indicator of who will get better on this therapy?

Pablo Cagnoni

Okay. So a couple of questions into one. First of all, the incidence of stomatitis was different in the first part of that cohort. The cohort initially treated six patients at 270, only one of those patients had grade 3 stomatitis, when further patients were added to that expanded cohort there were an additional four cases of stomatitis.

The second part of the cohort apparently had patients with more extensive prior therapy, which could or could not have something to do with the incidence of stomatitis. So we're reviewing the data in more detail to try to understand that. Regarding the second part of your question, I don't think we have sufficient data to speculate whether stomatitis is a predictor of efficacy.

As you mentioned, Tarceva and the rash and just by Tarceva that seems to be able to predict patients that will benefit from the drug. I don't think the same is true with PDX, but certainly we don't have enough data to speculate either way.

Mark Monane - Needham & Company

Okay. Thank you. And one more question for Jim. It's relatively rare to see a drug that has potential in both liquid tumors and solid tumors. In doing a market research, are you investigating both? You announced some more solid tumors studies today. What are your insights so far from research and thinking about a drug for both types of tumors?

Jim Caruso

That’s a great question, Mark. We are obviously very excited about the potential clinical utility that PDX could have in both hemalignancies as well as solid tumors and could be one of a hand full of compounds that have the capacity to be effective and to help patients across a broad spectrum of cancer types.

Our market research, as well as, primary market research Mark and secondary market research indicates that there’s clearly an appetite for a cytotoxic agent of this nature. Obviously, there is targeted therapies and there appears to be a transition back to cytotoxics as the backbone of treatment for cancer.

Targeted therapies perhaps have not reached the full level of expectation when they were originally entered into the market space. So there appears to be a very significant appetite for an agent of this type, it has the capacity to be effective in both solid and hemalignancies. When you look a little bit further down stream in hemalignancies in particular PTCL, right now there are no agents indicated in either a first or second line setting.

When you look at treatment regimens, highly-respected treatment regimens such as the National Comprehensive Cancer Network or the NCCN, they recommend for PTCL and both a first line and second line setting clinical trials, as opposed to existing regimens on the market and those are basically your chemotherapeutic suits, your CHOPs, your (inaudible).

Second line, it goes a little bit deeper into DHAP and ESHAP and then you have some single agent using a third or second line opportunity. Transitioning back over and obviously we believe based on some of the preclinical data we’ve seen to-date that we have significant opportunity in B-cell as well.

Transferring or back to solid tumors, obviously, the original pre-clinical data for solid tumors, for lung in particular, as well as the clinical data out of MSK with a 10% response rate in a very highly treated patient population, which certainly is at a minimum equivalent to existing agents in that space such as Alimta and Taxotere, which I believe are approximately 8%, 9% in that same range in terms of efficacy.

We really like the potential opportunity that PDX has certainly in the near term in lung. As Pablo had mentioned, we will be initiating a solid tumor lung study in the very near future. And as part of that TD&C (ph) planning, there appears to be, as I mentioned earlier, a significant appetite for other solid tumor programming as well based on the rich history, as an example, of MTX.

Mark Monane - Needham & Company

Thanks very much for the added information.

Jim Caruso

Okay, Mark. Thank you.

Operator

(Operators Instructions) Our next question comes from the line of Charles Duncan from JMP Securities. Please go ahead.

Charles Duncan - JMP Securities

Hey, good morning, folks. Congratulations on a good quarter of progress, and thank you for taking my question. I wanted to ask a question regarding the special protocol assessment for PTCL.

I’m wondering if you can give us any additional insights as to the kind of efficacy hurdles that are either explicitly or kind of implicitly applied in that SPA, if you think that say, a 20, 25% response rate would be enough to get over the hurdle?

Pablo Cagnoni

Good morning, Charles. This is Pablo. The response rate is not explicitly established in the SPA. I think precedent suggests strongly that in similar setting refractory or relapsed hemologic malignancies Phase 2 data, response rate in the range of high teens to mid-20’s are sufficient for approval.

I think this will be a review issue from the agency and I think that that information that is going to be taken into consideration as the response rate itself, duration of response and the safety profile of the agent together with the fact that there are no good available therapies for this population. I think putting all that together will determine the approvability of the drug.

Charles Duncan - JMP Securities

And then, Pablo, also you mentioned the statistical analysis plan being well outlined in that SPA. Can you give us some additional color as to not only the primary but more perhaps the secondary analysis that you think are going to be key to look at with this drug?

Pablo Cagnoni

I think actually in this case the statistics analysis plan is not a critical document. We clearly have a very well explained plan in the protocol and a separate SAP was filed with the agency. But there is no true statistics here.

The response rate will be calculated and in addition to that duration of response will be calculated, safety data will be reported. Yes, in addition to that we have from pharmacokinetic data that will be part of the submission. But the key here is going to be the response rate, the duration of response and the safety profile of the drug.

None of those require any sophisticated statistical analysis to be honest with you. I don’t think anything beyond that will have critical importance in the approvability of the agency.

Charles Duncan - JMP Securities

So it’s a pretty straightforward situation, its sounds like.

Pablo Cagnoni

Absolutely.

Charles Duncan - JMP Securities

One additional question, with regard to the enrollment schedule, you say that it’s ahead of schedule. It’s moved quicker than we anticipated. I guess my question is how would you interpret that?

Is that a function of increasing awareness of PTCL and physicians’ ability to deal with it? Is it because the protocol is relatively straightforward? Or is it because physicians’ enthusiasm for the drug either because it’s available, it’s a drug something to use or early signs of efficacy?

Pablo Cagnoni

So there’s a couple of things here. Enrollment has picked up because more sites came on board in the first half of this year as opposed to when the study started at the end of last year.

I think in addition to that, it’s very likely that the reason why physicians are enrolling more patients over the last few months is because they’re seeing good signs of activity in the patients that they’re treating. Okay? Obviously, the fact that there is absolutely no good treatment options in this disease, if it continues to be an unmet medical need has to be part of the story as well.

So I think when you put those two things together that probably explains why sites that have experience with the drug are trying to put more patients in this study and that has accelerated our accrual.

Charles Duncan - JMP Securities

Okay. Thanks. That’s consistent with our diligence as well. Looking forward to seeing you at ASH, Pablo.

Pablo Cagnoni

Likewise.

Jim Caruso

Thank you, Charles.

Operator

(Operator Instructions) And I’m showing that we have no further questions at this time. Please continue with any closing remarks.

Derek Cole

Thank you, operator. And to conclude this morning’s call, I’d like to summarize our three key operating principles. First, focus on excellence and innovation in the development and execution of our clinical programs.

Second, to proactively evaluate opportunities to grow our business through potential product acquisition, partnerships and others strategic initiatives. And third, lead with ethics and integrity to ensure quality business decisions that create value for our patients, employees and stockholders.

As always, we appreciate your participation and look forward to keeping you apprised of our progress in the months ahead. Have a good day.

Operator

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: [e-mail]. Thank you!