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Executives

Meghan Fitzgerald - Chief Business Officer

Alan Kessman - Chief Executive Officer

Ann Cahill - Vice President, Clinical Development.

Aileen Ryan - Vice President Regulatory Affairs

Karen Schmedlin - Vice President of finance

Analysts

Lia Hartmann – CRT Capital

[Jeremy Resnick] – First Option Financial

Rene Benjamin - Kauffman Winchell

Vion Pharmaceuticals (OTC:VION) Q4 2007 Earnings Call March 18, 2008 8:30 AM ET

Operator

Good day ladies and gentlemen and welcome to the fourth quarter 2007 Vion Pharmaceuticals earnings conference call. (Operator Instructions) I would now like to turn the call over to Ms. Meghan Fitzgerald, Chief Business Officer, please proceed.

Meghan Fitzgerald

Thank you very much. Good morning everyone. I will now read the Safe Harbor Statement. This conference call will contain forward-looking statements. Such statements are subject to certain risks which may cause Vion’s plans to differ or results to vary from those expected, including Vion’s potential and ability to obtain regulatory approval for it’s products particularly Cloretazine; delayed or unfavorable results of drug trials; the possibilities that favorable results of earlier preclinical trials or clinical trials, are not predictive of safety and efficacy results in later clinical trials; the need for additional research and testing; the potential and ability to secure external sources of funding; to continue operations; the inability to access capital and funding on favorable terms; continued operating losses and the inability to continue operations as a result; and a variety of other risks set forth from time to time in Vion’s filings with the Securities and Exchange Commission, including but not limited to the risks attendant to the forward-looking statements included under item 1A, Risk Factors in Vion’s Annual Report on Form 10-K for the year ended December 31st, 2007.

In particular, there can be no assurance as to the results of any of Vion’s clinical trials, that any of these trials will continue to full accrual, or that any of these trials will not be discontinued, modified, delayed, or ceased altogether except in special circumstances in which a duty to update arises under law when prior disclosure becomes materially misleading in light of subsequent events.

Vion does not intend to update any of these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. And now I will turn over this conference call to Alan Kessman, Chief Executive Officer of Vion Pharmaceuticals.

Alan Kessman

Thank you, Meghan. Good morning everyone, welcome to our 2007 fourth quarter and year-end results conference call. With me today are Meghan Fitzgerald, our Chief Business Officer, Ann Cahill, our Vice President, Clinical Development, and Aileen Ryan, our Vice President Regulatory Affairs, as well as Karen Schmedlin, our Vice President of Finance, Howard Johnson, our President and CFO could not be here today, so Karen Schmedlin will present the financial results.

Before I turn you over to Karen, let me update you on the progress we are making with our main corporate goal for 2008, which is filing a new drug application or NDA with the FDA for our lead product candidate Cloretazine for the treatment of acute myelogenous leukemia, and older patients with poor-risk disease.

We have made substantial progress on the NDA. The chemistry, manufacturing and control, preclinical, and toxicology sections are now taking form with numerous supporting documents completed. Additionally, we have begun to publish those documents in the ECTD or electronic format for filing. The clinical section of the NDA will of course be the final piece to come together. We continue to compile the final data from CLI-043 our phase two pivotal trial and expect to complete the data gathering shortly. We will then be able to complete the clinical section of the NDA including preparation of the integrated safety and efficacy analysis and draft labeling.

With the complexity and volume of information required for the NDA filing, it is difficult to set an exact timeframe for filing, but our current plan is to file in the fall of 2008. Based on the data from our clinical trials in AML we continue to believe in the utility of Cloretazine in the treatment of patients over the age of 60 with de novo poor-risk AML.

Cloretazine has fast tracked designation in this unmet medical need population. We met the criteria for success in our pivotal trial for our primary end point; the overall response rate. We reported a 35% overall response rate in 80 patients in our presentation of preliminary data at the AS conference in December 2007. We consider this overall response rate impressive, and that these patients have multiple objective risk factors that make them less likely to receive or respond to available therapy.

We are especially pleased the majority of our responders achieve their remission after just one 60-minute infusion of Cloretazine which could be a market advantage if we are approved. We believe that this dosing schedule will have advantages in a treatment community, appealing to physicians, patients, and payers, vis-à-vis the alternatives.

So in summary, we believe in Cloretazine’s use in AML and are making progress on the NDA. From a personnel standpoint, literally 100% of our efforts are focused on completing the NDA on a timely basis. We will continue to update you on this progress as we get closer to filing.

A few other points on our Cloretazine clinical program. Most of you know that in January we announced that the FDA lifted the clinical hold on our Phase III trial in relapsed AML. We plan to file a special protocol assessment for a revised Phase III trial of Cloretazine in combination of the cytarabine in relapsed AML. In this trial, the dose of Cloretazine will be reduced in the experiment alone and prophylactic antibiotics, antifungals, and growth factors for all patients will be added to the protocol.

It is our intention to file this SBA as soon as possible, with the understanding that the number one priority within our company is to make sure that the NDA filing timeline is not affected. Our Phase II trial of Cloretazine in small cell lung cancer is now closed to new patient accrual. We closed the sensitive disease arm of this trial early due to slow accrual. The refractory arm of the trial achieved its original accrual targets. We will now analyze all of the data and decide how to proceed in this indication.

Cloretazine trials continue in adult glioma and in combination with stem cell transplantation and advanced hematologic malignancies. We expect data to be available from these trials in 2009. And now I will ask Karen to present the financial results.

Karen Schmedlin

Thank you, Alan. Before we start I should remind everyone that all per share numbers I provide today reflect the 1 for 10 reverse split of our common stock affected in February 2008. Our 2007 net loss was $34 million or $5.05 per share compared to a 2006 net loss of $25.3 million or $3.83 per share. Total operating expenses reported for 2007 were $32.6 million versus $27.3 million for 2006. Reported expenses for 2007 included non-cash stock based compensation expense of $4.5 million as compared to $1.9 million for 2006.

Research and development expense was $24.2 million for the year ended December 31st, 2007 as compared to $21.5 million for the same period in 2006. The increase was primarily due to higher stock based compensation expense, higher development costs to support a potential registration filing for Cloretazine, and higher clinical trials expenses.

Marketing, general, and administrative expenses were $8.4 million for 2007 as compared to $5.8 million for 2006. The increase was primarily due to higher stock based compensation expense, higher cost for pre-commercial marketing activities for Cloretazine, as well as higher patent-related costs We had $5.1 million of non-cash interest expense during 2007, related to our convertible notes issued in February 2007. The interest payment related to our notes was made in shares of our common stock. Interest income for 2007 was $3.4 million as compared to $2 million for 2006 due to higher invested balances.

For the fourth quarter of 2007, our reported net loss was $8.2 million or $1.18 per share compared to a net loss of $6.1 million or $0.92 per share for the same period in 2006. Total operating expenses reported for the fourth quarter of 2007 were $7.6 million versus $6.5 million for the same 2006 quarter. Reported expenses for the fourth quarter of 2007 included non-cash stock based compensation expense of $1.1 million as compared to $0.6 million for the same period during 2006.

Research and Development expense was $5.5 million for the three months ended December 31st, 2007 as compared to $5 million for the same period in 2006. The increase was primarily due to higher stock based compensation expense and higher development costs to support a potential registration filing for Cloretazine partially offset by lower clinical trials expenses.

Marketing, General, and Administrative expenses were $2 million for the fourth quarter of 2007 as compared to $1.5 million for the same 2006 period. The increase was primarily due to higher stock based compensation expense and higher costs for pre-commercial marketing activities for Cloretazine partially offset by lower professional fees. We had $1.5 million of non-cash interest expense during the fourth quarter of 2007 related to our convertible notes issued in February 2007. Interest income for the fourth quarter of 2007 was $0.8 million as compared to $0.4 million for the same 2006 period due to higher invested balances.

As of December 31st, 2007, we had $61.1 million in cash and cash equivalents. We expect this cash position to fund the company based on our current operating plan through the third quarter of 2009. As you know, a cash forecast for a two-year period includes many different assumptions and variables, and is therefore subject to change.

Alan Kessman

Operator, we’re now ready to take questions.

Question-and-Answer-Session

Operator

Your first question comes from the line of Lia Hartmann with CRT Capital, please proceed.

Lia Hartmann – CRT Capital

Good morning everyone.

Alan Kessman

Good morning Lia.

Lia Hartmann – CRT Capital

First of all congratulations on the good cost control and I believe you had guided us to $60 million at the end of 2007, it’s so nice to see a number beyond that. I was wondering for clarification on the Phase II trial that you expect to conclude the data gathering shortly so have all patients now come off drug, and you need to lock the database?

Ann Cahill

Hi Lia, this is Ann Cahill. Well, in this trial the treatment is given on day one as you remember so patients get treated on day one for induction of remission and then are followed. There are no patients on the initial part of this study who are continued to get treated. However, we have kept this study open in EKG sub-study to fulfill an ICH guideline on the effect of the drug on the heart. So the answer to your question is two part. Number one, the patients on the initial part of this study have been treated and we’re just continuing to gather their response and duration of response data as well as status. Patients on the EKG sub-study continue to be enrolled at a selected number of sites.

Lia Hartmann – CRT Capital

Okay. And yes, I wasn’t clear on asking my question because I knew about the EKG, a follow on the study so thank you for that, and then also for you Ann, is there update yet with respect to presentations, or abstracts, or papers that have been accepted or put to ASCO for presentation?

Ann Cahill

Yes. I’m pleased that our abstracts submission to ASCO has been accepted for the Phase II study, and will be part of a poster discussion at ASCO in this year.

Lia Hartmann – CRT Capital

That’s terrific news, thank you. And that’s most likely the next scientific conference at which we would see Vion’s pipeline having a presence?

Ann Cahill

Yes. We will be on this summer both at ASCO and at the large Hematology Conference in Europe, the European ash equivalent EHA which is in June, and we’ll have presentations of data at both those meetings.

Lia Hartmann – CRT Capital

Okay. Good luck to everyone at Vion.

Alan Kessman

Thanks.

Operator

Your next question comes from the line of [Jeremy Resnick] with First Option Capital, please proceed.

[Jeremy Resnick] – First Option Capital

Yes, good morning. I just wanted to ask if the number that the cash, I guess burn rate that lasted through the second quarter of ’09. Did that include paying the notes in more stock or does that include paying in cash?

Alan Kessman

First of all, the cash that we have talked about last for the third quarter of ’09, not the second quarter of ’09. And yes, it does assume paying the interest in stock.

[Jeremy Resnick] – First Option Capital

Okay. And then my next question is, we seem to see a huge increase in stock based compensation last year in relation we saw the stock price obviously not before where all of us would like. I was wondering if we’re going to see those two come in line anymore this year?

Alan Kessman

Well under the accounting rules, unfortunately the stock based compensation expense is based on the value of the stock at the time the restricted shares were issued, and then amortized over the vesting period. So, its not adjustable downwards so basically, by the end of this year, all of the expense will have been amortized, and so you know, its really just a…its a non-cash accounting situation, but at this point there should not be any significant addition. There will be charges in Q3 and Q4 as we run off the amortization.

[Jeremy Resnick] – First Option Capital

All right, well thank you and have a good morning.

Alan Kessman

Thank you.

Operator

And your next question comes from the line of Rene Benjamin with Kauffman Winchell, please proceed.

Rene Benjamin - Kauffman Winchell

Hi, good morning, and thanks for taking the question. I’m sorry I jumped onto the call a little late, maybe you covered this, and if you did I apologize. But can you be a little bit more specific regarding the timing for the filing of the NDA for [inaudible], and do you plan on having a meeting with the FDA ahead of that filing, to ensure that you have everything, all your ducks lined up in a row.

Alan Kessman

Rene as I said in my presentation which you may have not heard, it’s very hard to nail down an exact date with the amount of – I’m sure you appreciate the amount of work that’s going in to the NDA, and the volumes of information. So we’re basically leading people, to just basically tell you what – at this point we’re looking at the fall of this year. Then the answer to your second question is, yes we have multiple meetings with the FDA, they have had and will continue to have meetings with the FDA.

Rene Benjamin - Kauffman Winchell

Okay. And then I assume that when Ann mentioned that there will be data at ASCO, that’s the updated or final data from the Phase II trial, is that correct then?

Alan Kessman

I would use the word updated versus not so much final, because one of the issues that is very sensitive to us, depending on the timing of those conferences is that we don’t want to jumpstart the FDA. We want to make sure that the FDA has the final information before the public does, so that we don’t cause any problems with the FDA. So update yes, final probably not.

Rene Benjamin - Kauffman Winchell

Okay. Would it be fair to say, and correct me if I’m wrong, if I’m remembering this incorrectly, but would it be fair to say that we would see the median survival results by ASCO?

Alan Kessman

I’m not sure if we can, we can’t answer that at this point.

Rene Benjamin - Kauffman Winchell

Okay. And I guess finally and you may have mentioned this already but I did jump on the call late, what’s the burn for this year that’s expected? And I guess one last question is the debt repayments, when is the debt due?

Karen Schmedlin

The burn for this year – hi, this is Karen Schmedlin. The burn for this year is between $30 million to $35 million. And as far as the debt repayment the notes are due February, 2012.

Rene Benjamin - Kauffman Winchell

Excellent, thank you guys very much and good luck.

Operator

I show no further questions in the queue.

Alan Kessman

Thank you all for listening today. In summary, we believe Cloretazine is an active agent in AML. We have enough cash to last through the third quarter of 2009, which we believe sees us through the FDA review of Cloretazine in AML. We remain focused on completing the NDA on a timely basis. Thank you for listening today. Good bye.

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