Sirtris Pharmaceuticals Inc. Q4 2007 Earnings Call

Sirtris Pharmaceuticals (SIRT)

Q4 2007 Earnings Call

February 25, 2008 4:30 pm ET

Executives

Christoph Westphal, M.D., Ph.D. – Chief Executive Officer and Vice Chair

Garen Bohlin – Chief Operating Officer

Analysts

Charles Duncan, Ph.D. – JMP Securities.

Bret Holley, Ph.D. – Oppenheimer & Co.

Cory Kasimov – JPMorgan

Mike King – Rodman & Renshaw

Presentation

Operator

Welcome to the Sirtris Pharmaceuticals year-end 2007 financial results investor conference call on February 25, 2008. (Operator Instructions) I would like to introduce Dr. Christoph Westphal, the Chief Executive Officer and Vice Chair.

Christoph Westphal, M.D., Ph.D.

Welcome and thank you for joining us to discuss Sirtris Pharmaceuticals' financial results and corporate highlights for the year end 2007. My name is Christoph Westphal, and I am the Chief Executive Officer and Vice Chair of Sirtris Pharmaceuticals.

I am joined today by Garen Bohlin, Chief Operating Officer, Dr. Peter Elliott, Senior Vice President of Development; Dr. Michael Jirousek, Senior Vice President of Research; Paul Brannelly, Vice President of Finance; Dr. Michelle Dipp, Senior Director of Corporate Development; John Lacey, Associate Director of Corporate Communications; and Dr. David Sinclair, Co-Founder, Board member and Co-Chair of Sirtris' Scientific Advisory Board.

I hope you have had the opportunity to review the year-end 2007 results press release we issued earlier this morning. Before moving into discussion of the year-end results, please note that in this call, we will be making forward-looking statements within the meaning of the Safe Harbor provisions of Section 21-E of the Securities Exchange Act of 1934.

All forward-looking statements involve risks and uncertainties that could cause actual results to differ materially. The forward-looking statements we make on today's call are based on our beliefs and expectations as of today only and are subject to potential change.

We refer you to the risk factors in our most recent quarterly report on Form 10-Q for a discussion of the company's risks and uncertainties that could affect these forward-looking statements. We caution listeners not to place undue reliance on any forward-looking statements, as there are no assurances that the matters contained in such statements will be achieved.

With that said, I will make some summary comments on the company's activities, and then ask Garen Bohlin, Chief Operating Officer, to comment on our financial results. We will conclude this morning's call with a question-and-answer session.

On the clinical side, our first new chemical entity, NCE, which is structurally unrelated to and more potent than our initial product candidate SRT501, is expected to enter the clinic in the first half of 2008. We have shown in vivo that our NCEs lower glucose and improved insulin sensitivity and therefore have the potential to be orally available front-line therapy for Type II diabetes.

With regard to SRT501, our proprietary version of Resveratrol, we continue to advance SRT501 in multiple clinical trials. In January 2008, we announced positive Phase 1b clinical trial results with SRT501 in patients with Type II diabetes. SRT501, which targets the SIRT1 enzyme, was found to be safe and well tolerated.

On the last day of this 28-day study, there was a trend towards lowering of fasting plasma glucose and a significant lowering of glucose levels at the two-hour time point in an oral glucose tolerance test.

With regard to preclinical progress, we published NCE data for the first time in the scientific journal Nature in November 2007. We showed that in both diet-induced obese and genetically obese mouse models of Type II diabetes, our NCEs improve insulin sensitivity, lower plasma glucose levels, and increase the function of mitochondria, the powerhouses of all cells.

In another well-established preclinical model of Type II diabetes and insulin resistance, the Zucker fa/fa rats, these SIRT1 activators improved whole-body glucose homeostasis and insulin sensitivity in adipose tissue, skeletal muscle, and liver. These rodent models of diabetes are considered to be highly predictive of efficacy in humans.

Furthermore, in December 2007, we presented data showing that one of our SIRT1 activator NCEs lowers plasma glucose and improves insulin sensitivity in a preclinical model of Type II diabetes better than sitagliptin, a DPP-4 inhibitor. In contrast to DPP-4 inhibitors, which lower glucose, SIRT1 activation appears to both lower glucose and improve insulin sensitivity in various preclinical models. SIRT1 activation also does not cause weight gain, a side effect associated with certain other diabetes drugs.

We are also initiating additional clinical studies with SRT501 for the treatment of other diseases of aging, such as cancer. Our first Phase 1b study with SRT501 in an oncology indication is scheduled to begin in mid-2008. This month, we announced that we are initiating preclinical studies with SRT501 and certain NCEs in collaboration with the National Cancer Institute.

We believe that the Sirtuins are a broad platform of therapeutic targets for diseases of aging. The company's focus to date has been on SIRT1, the founding member of the seven-member Sirtuin family. Now recent data provides support for expanding into other members of the Sirtuin target platform.

SIRT3 is our next target of interest for a metabolic disease. We have in-licensed SIRT3 screening technology from the lab of Professor Eric Verdin, M.D., Associate Director and Senior Investigator of the Gladstone Institute of Virology and Immunology, and a Professor of Medicine at the University of California, San Francisco, (UCSF).

Now, turning to business development, we may consider pursuing a strategic partnership in the next 12 to 18 months. Finally, with regard to our scientific advisory board, in February, we announced that Leonard Guarente, Ph.D., Novartis Professor of Biology at the Massachusetts Institute of Technology, signed a new exclusive consulting agreement with us. We believe that we now have the most significant key opinion leaders in the Sirtuin field on our scientific advisory board.

I will now hand the call over to Garen Bohlin, Sirtris' Chief Operating Officer, to discuss our year-end financial highlights.

Garen Bohlin

As of December 31, 2007, Sirtris had cash, cash equivalents and short-term investments of $118.1 million compared to $50 million on December 31, 2006. This is just above the top end of our financial guidance estimate provided at the conclusion of the second quarter of $115 million to $118 million.

Net loss for the fourth quarter of 2007 was $9.1 million or $0.32 per share, as compared to $4.4 million or $4.60 per share for the fourth quarter of 2006. Net loss includes stock-based compensation of $307,000 and $259,000 for the quarters ended December 31, 2007 and 2006, respectively.

Net loss for the year ended December 31, 2007 was $31.1 million or $1.74 per share, as compared to $17 million or $18.48 per share for the year ended December 31, 2006. Net loss includes stock-based compensation of $2.9 million and $758,000 for the years ended December 31, 2007 and 2006, respectively.

Research and development expense for the fourth quarter of 2007 was $8.3 million compared to $3.6 million for the fourth quarter of 2006. For the year ended December 31, 2007, research and development expense was $29 million compared to $14.2 million for the prior year.

The increase in both periods is due primarily to increases in external clinical trial costs, preclinical studies costs, formulation expense for our product candidates, sponsored research costs, allocated occupancy and information technology costs, and personnel costs related principally to increases in research and development headcount.

General and administrative expense for the fourth quarter of 2007 was $2 million, compared to $1.1 million for the fourth quarter of 2006. For the year ended December 31, 2007, general and administrative expense was $6.2 million compared to $4.3 million for the prior year.

The increase in both periods is due primarily to increases in professional fees associated with being a public company, stock-based compensation expense, personnel costs, and allocated occupancy and information technology costs.

In terms of 2008 financial guidance, based on current operating plans, we expect to end 2008 with cash, cash equivalents and short-term investments of between $70 million and $75 million. We expect our total loss for 2008, excluding stock-based compensation, to be in the range of $44 million to $47 million. Stock-based compensation, which is non-cash expense, is projected to be in the range of $3.5 million to $4.5 million in 2008.

With that, I will turn the call back to Christoph.

Christoph Westphal, M.D., Ph.D.

I will now ask the operator to open up our call for questions, and we would be happy to answer any questions you might have.

Question-And-Answer-Session

Operator

(Operator Instructions) Your first call comes from Charles Duncan, Ph.D. - JMP Securities.

Charles Duncan, Ph.D. – JMP Securities

I had a question regarding your new chemical entity program. Can you give us a little bit more color, Christoph, on really what you are doing now to shore up that program and to get prepared to move it into clinical development?

Christoph Westphal, M.D., Ph.D.

We are quite excited about the potential of our NCE program. We believe that SIRT1 activation with our NCEs has the potential to be a front-line therapeutic approach for Type II diabetes, given that we have shown that this method lowers glucose and improves insulin sensitivity. We clearly are focused on moving several of our NCEs into preclinical studies, and have continued to articulate and have maintained the time lines of dosing our first NCE in man in a safety study in the first half of 2008.

Charles Duncan, Ph.D. – JMP Securities

On the 501 program with regard to Type II diabetes, you've done a lot to shore up the preclinical rationale for the program. But what is it that you really take out of the current clinical program that enhances your conviction on the target, particularly given that you only saw trends on the 28-day study but didn't really see statistical significance? Was that a surprise to you?

Christoph Westphal, M.D., Ph.D.

Yes, so, we frankly believe our data with 501 were a surprise to the upside, given it was a Phase 1b study. Our first product to enter the clinic, SRT501, was found to be safe and well tolerated, and significantly lowered glucose in an oral glucose tolerance test at two hours conducted as part of a 28-day Phase 1b clinical study.

These data demonstrate, in our mind, translation of preclinical data into the clinic and also validate our previously published human physiological and genetic SIRT1 data. We believe that these proofs of concept data significantly de-risk our approach of using SIRT1 activators as front-line therapy for Type II diabetes.

Charles Duncan, Ph.D. – JMP Securities

Christoph, regarding the statement about a strategic partnership, you said that you would perhaps pursue one. It seems like you have sufficient cash for a couple of years with your current activities. What would be the gating event? What would cause you to pursue such a strategic partnership?

Christoph Westphal, M.D., Ph.D.

We have shown that our NCEs lower glucose and improve insulin sensitivity in preclinical models of Type II diabetes as we published in Nature in November 2007. This has, in fact, driven significant interest in the Sirtuin space from pharmaceutical companies, some of whom have active Sirtuin programs. These NCEs are structurally distinct from and up to 1000 times more potent in vitro than Resveratrol, and given those characteristics have led to a lot of interest from pharma.

What we are attempting to do here is to balance opportunity versus risk. We are evaluating partnering our programs where we can receive significant value in return for investment to date and future required investment. We have reason to believe that pharma is certainly increasing its interest in the Sirtuins at this point.

Charles Duncan, Ph.D. – JMP Securities

Do you think that would be a molecule-specific partnership or more of a technology platform type partnership, Christoph?

Christoph Westphal, M.D., Ph.D.

We think, given the number of parties who are interested in the Sirtuins, there's a wide variety of potential opportunities. We do know that many pharmaceutical companies are increasingly believing that the Sirtuins are a drugable set of enzymes and that we are potentially here working on a product platform. As such, we've had very interesting discussions with pharma of late.

Charles Duncan, Ph.D. – JMP Securities

Garen, your guidance does not include an assumption of milestones from such partnerships.

Garen Bohlin

That's correct, Charles, that's correct.

Operator

Your next question comes from Bret Holley, Ph.D. - Oppenheimer & Co.

Bret Holley, Ph.D. – Oppenheimer & Co.

I had a general question on how you are kind of selecting amongst the NCEs, because you have so many distinct scaffolds, moving one over the other forward or accelerating one over the other. What kind of criterion in the preclinical models in specific is allowing you to move one ahead of the other?

Christoph Westphal, M.D., Ph.D.

I'm sorry, could you clarify that? Do you mean how do we select different NCEs or different compounds for different indications, or do you mean how do we prioritize our favorite NCEs?

Bret Holley, Ph.D. – Oppenheimer & Co.

The latter.

Christoph Westphal, M.D., Ph.D.

Yes, so you can imagine, given the share of our SAB, Tom Salzman used to run all of the preclinical for Merck, and our head of research ran the metabolic group in La Jolla for Pfizer, that we have a nice hybrid here between the Merck and Pfizer ways of developing small molecule NCEs.

So we have an extensive list of dozens of characteristics that we have to hit in order to prioritize a molecule to go into IND enabling talks. It's a very rigorous program that I think any pharma company who would talk to us I think would find is quite similar to what they would be using.

Bret Holley, Ph.D. – Oppenheimer & Co.

Then for the lead NCE being relatively near the clinic, has there been anything in the tox work, anything as far as potential safety concerns or any specific information that you can lend us there?

Christoph Westphal, M.D., Ph.D.

Well, frankly, the benefit that we think we are operating within here at Sirtris is the fact that we appear to be mimicking a natural process. We know from human genetics studies of individuals who appear to be over-expressing SIRT1 that it seems to increase health. We of course know from Dr. Sinclair's work that SIRT1 activation chronically seems to extend healthy lifespan.

Then preclinically with our compounds, we know that SIRT1 activation appears to be very safe. So I think it's fair to say that significant reason for the interest in our company is that we seem to be working on a safe mechanism. So we believe that SIRT1 activation is a very safe way potentially to treat diabetes.

Bret Holley, Ph.D. – Oppenheimer & Co.

On SIRT3, obviously I think there's pretty good evidence that SIRT1 is a drugable target. What evidence, at this point, given the fact that it's fairly early days, do you have that SIRT3 in fact shares that characteristic?

Christoph Westphal, M.D., Ph.D.

Well, I'm sure you will remember the cell paper that we published with David Sinclair from Harvard in September of this past year on SIRT3 and SIRT4. There is a lot of reason to believe that SIRT3 is a mitochondrial version of SIRT1. As such, it is quite an interesting target related to metabolic disorders as well. We believe that there will be further studies indicating that SIRT3 looks like an interesting target that will be published over the next several years.

Bret Holley, Ph.D. – Oppenheimer & Co.

Amongst the small molecule scaffolds that you have in-house, do you have any evidence yet that you have the kind of scaffolds that would be active as SIRT3?

Bret Holley, Ph.D. – Oppenheimer & Co.

We are not talking about SIRT3, the program and the time lines to move into the clinic, but we have spoken very clearly about the fact that we can find selective modulators of the various Sirtuins and we of course counter-stream against the various Sirtuins, so we have a lot of confidence that we can find selective molecules.

Operator

Your next question comes from Cory Kasimov - JPMorgan.

Cory Kasimov – JPMorgan

Regarding your partnering strategy, I realize you said this 12 to 18-month time line is a possibility, but when thinking about the NCEs, is it safe to assume that you would not partner them prior to human proof of concept data, or do you consider that kind of already accomplished in some regard with 501?

Christoph Westphal, M.D., Ph.D.

Based on the Nature publication from November, which was early preclinical data, but certainly it's dated by now regarding the advances of the company, there has been significant pharmaceutical interest in the NCEs. We're not commenting on what level of data we would need other than to say that, based on our current dataset, there is significant interest in pharma, in the Sirtuins.

Cory Kasimov – JPMorgan

As you go back to your experience, though, with 501 in the preclinical models you had and then what you saw with that early Phase 1b study, can you extrapolate that at all when you look at the NCEs and you have the preclinical data there? You start thinking about what you're early human data may look like, and use that a sort of the inflection point?

You're talking about trying to capture that point where you could maximize the value in any partnership you may sign. Is it trying to get back to how important human data is for an NCE when thinking about pharma's appreciation for this technology?

Christoph Westphal, M.D., Ph.D.

I think the good news is we have selected an indication, diabetes, where there is an extraordinarily high level of translation from the preclinical models into human data. Given our genetic evidence as published in the cell paper in 2006 in humans, our physiological evidence shown in JAMA in 2006 and PLoS in 2007, and then actually now with the initial indications of bioactivity of SRT501, we believe that there is very significant translatability from preclinical to clinical data.

In fact, as we speak to our friends in the pharmaceutical world, I think there's general agreement that SIRT1 activators have a high likelihood of lowering glucose and sensitizing to insulin in man. Of course, we are eagerly awaiting those data and we do not have those data for NCEs yet, but we believe there is a high translation and we feel that that's the general view in the field.

Cory Kasimov – JPMorgan

Can you review the design and expectations for the Phase 2a study with metformin with 501?

Christoph Westphal, M.D., Ph.D.

Yes, so you'll remember that we have two Phase 1b studies with 501. There's a once a day that we reported top line results, and then there's the twice a day that we plan to report top line results in the first half of this year. We have a history here of looking to report in scientific meetings and ultimately publish our data, so you should expect that ultimately as well for the Phase 1b studies.

Regarding the Phase 2a study, just to remind everyone on the call, it's 65 patients in each arm. One is metformin alone, the other arm is metformin plus 501. It's a three-month study, hence a Phase 2a study is once a day and the endpoints include glycosylated hemoglobin A1c.

Operator

Your next question comes from Mike King - Rodman & Renshaw.

Mike King – Rodman & Renshaw

I just wanted to have you give us your thoughts on how you think PGC1{Alfa} activation is protective in a cancer setting.

Christoph Westphal, M.D., Ph.D.

One of the major drivers of excitement in the Sirtuins and excitement about Sirtris in the field is the fact that PGC1{Alpha} also has been a target of great interest to the pharmaceutical world for many years now, since it was cloned by Pere Puigserver and Bruce Spiegelman's lab.

Bruce just had a wonderful paper coming out in Nature regarding PGC1{Alpha} showing that it looks like a very attractive cardiovascular target. Of course, that fits very well with the data we've generated with SIRT1 activation. It's been known, since the '20s and '30s, it was first postulated by a physiologist in Germany, Otto Warburg, that cancer cells have a different metabolism than normal cells.

So that's been an observation that's been quite consistent and physiologically validated for the last 70 or 80 years. It's really quite extraordinary, given our dataset and now the mechanistic understanding of SIRT1 and PGC1{Alpha}, that there is reason to believe that the number of published studies regarding SIRT1 activation and Resveratrol in cancer may tie into that.

Mike King – Rodman & Renshaw

So this is basically depriving them of the fuel that they need for their supernormal metabolism.

Christoph Westphal, M.D., Ph.D.

Yes, so basically it's a shift away from glycolitic metabolism and that's in normal cells. So we believe that we are shifting it in a direction where you selectively deprive cancer cells of their energy source.

Mike King – Rodman & Renshaw

I don't know if you have had an opportunity to look at a recent publication in Nature that talked about potentiation of angiogenesis through PGC1{Alpha}. I guess it activates an estrogen response element. Any thoughts on that work and what it might mean?

Christoph Westphal, M.D., Ph.D.

Yes, actually, it is important to note ERR{Alpha} has always been thought to a key regulator of mitochondrial biogenesis. In fact, Bruce Spiegelman we know very well, given our links to Pere Puigserver and I actually worked in his lab for six months. So the majority of the beneficial effects we think of PGC1{Alpha} activation and SIRT1 activation may be explained by its activity on mitochondrial activity.

So if you speak to Bruce directly, he would also point out that that looks like, and in fact it is the final sentence, I believe, of the abstract, indicating that makes it looks like a very attractive cardiovascular target.

Then you probably saw a recent press release that we put out related to David Sinclair's speaking at UCSF, showing that SIRT1 appears to be a tumor suppressor. So, I think the data to date, at least the published and the scientific meeting data, seems to argue that there seems to be a safe and attractive mechanism for various diseases of aging.

Operator

This will conclude the question-and-answer session portion of the call.

Christoph Westphal, M.D., Ph.D.

Thank you very much. I appreciate everyone dialing in and asking thoughtful questions. We look forward to speaking with each of you in the near future.

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