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Executives

Timothy L. Enns - Senior Vice President of Investor Relations, Business Development & Corporate Communications

James S. J. Manuso - Chairman and Chief Executive Officer

Michael Molkentin - Chief Financial Officer, Principal Accounting Officer and Corporate Secretary

Mohammad Azab - Chief Medical Officer

Analysts

Boris Peaker - Oppenheimer & Co. Inc., Research Division

Robin Davison - Edison Investment Research Limited

George B. Zavoico - McNicoll, Lewis & Vlak LLC, Research Division

John W. Wieland - Middleton & Company Inc.

Astex Pharmaceuticals (ASTX) Q2 2012 Earnings Call July 30, 2012 4:30 PM ET

Operator

Good day, ladies and gentlemen, and welcome to the Astex Pharmaceuticals Quarter 2 2012 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to your host for today, Mr. Timothy Enns, Senior Vice President, Corporate Communications and Marketing. Sir, you may begin.

Timothy L. Enns

Thank you, operator. Good day, and thank you for joining us for Astex Pharmaceuticals 2012 Second Quarter Financial Results Conference Call. With me today are Dr. James Manuso, Chairman and Chief Executive Officer; Dr. Harren Jhoti, President and member of the Board of Directors; Dr. Mohammad Azab, Chief Medical Officer; Dr. Martin Buckland, Chief Business Officer; and Michael Molkentin, Chief Financial Officer. In a few moments, Jim Manuso and Michael Molkentin will deliver remarks on the 2012 second quarter financial results and our business outlook for the year. After prepared comments, we will open the line for questions. Earlier today, we issued a press release with our financial results. A copy of the press release is available in the Investor Relations section of our website at www.astx.com.

In addition, this call is being webcast and may also be accessed via our website. A webcast replay will be available for 30 days.

During this call, we will make projections and forward-looking statements that are based on management's current expectations. Actual results may differ materially from these forecasts and projections due to various factors. There are significant risks and uncertainties in biotechnology research and development. There can be no guarantee that our projects, products or product candidates will progress preclinically or clinically as we expect or that we will ultimately obtain approvals for the indications that we seek. Moreover, even if our products or product candidates are approved in the future, we cannot guarantee they will be commercially successful. The company's results may also be affected by a variety of factors such as competitive developments, launches of new products, the timing of anticipated regulatory approvals or other regulatory action, the actions of our strategic partners and collaborators with respect to the products we license or codevelop and patent disputes and litigations.

For additional information and discussion concerning the risk factors that affect the company's business, please refer to the company's filings with the Securities and Exchange Commission. The company undertakes no duty to update forward-looking statements.

Our upcoming investor conference presentations will include the Stifel Nicolaus Healthcare Conference Seminar -- excuse me, in September on the 5th through the 6th in Boston; Newsmakers in Biotechnology Industry on September 7 in New York; and the Rodman & Renshaw Annual Global Investment Conference, September 9 to 11 in New York.

I'll now turn the call over to Dr. James Manuso, who will provide highlights of our accomplishments during the 2012 second quarter. Jim?

James S. J. Manuso

Thank you, Tim. Good afternoon, and thank you for joining us for Astex Pharmaceuticals 2012 Second Quarter Conference Call.

The past quarter was particularly successful for Astex. Our financial position continued to remain strong, and included a 25% increase in Dacogen royalty revenue over the prior year. We ended the quarter with $121 million in cash and marketable securities, and we posted net income of $1.2 million. Additionally, for fiscal year 2012, we are increasing royalty guidance to up to $70 million.

Operationally, we are in Phase II with 4 clinical products. By year end, we expect to initiate additional Phase II clinical proof-of-concept trials in solid tumors for our prioritized products, SGI-110 and AT13387.

We're especially pleased that the European Union's Committee for Medical Products for Human Use, or CHMP, recently recommended that Dacogen be approved for the treatment of elderly acute myeloid leukemia or AML patients aged 65 and above who are not candidates for induction chemotherapy. The CHMP is the committee responsible for the scientific assessment of products seeking marketing authorization throughout the European Union. The CHMP's positive opinion is now referred to the European Commission for its approval. As Dacogen is approved in the EU, it would be the first drug ever approved for the treatment of elderly AML and, as an orphan drug, Dacogen would have 10 years of market exclusivity for the elderly AML indication in the EU.

Further, if Dacogen is approved in the EU, Astex would earn a $5 million milestone payment upon first commercial sale of the drug. As the market develops further in the EU, we could earn another one-time $5 million milestone payment when annual sales for Dacogen in the G5 countries exceed $100 million.

In addition, royalty revenues payable to Astex will continue to be in the range of 20% to 30% of net sales, consistent with the original license terms.

It is expected that Janssen, the licensee for Dacogen in territories outside of the United States, Canada and Mexico, will receive the final regulatory decision from the European Commission by the end of the third quarter of 2012.

As a reminder, the CHMP opinion is based on data from the DACO-016 trial, the largest elderly AML trial ever conducted. This randomized open-label multicenter Phase III clinical trial compared Dacogen versus patient's choice, with physicians' advice of either supportive care or low-dose cytarabine in patients 65 years and older with newly diagnosed de novo or secondary acute myeloid leukemia and poor or intermediate-risk cytogenetics.

Key results from the study were published in the Journal of Clinical Oncology in June of 2012.

On the clinical front, during the second quarter, we presented Phase I data on SGI-110, a novel hypomethylating agent, at the American Association for Cancer Research or AACR meeting. SGI-110 inhibits DNA methyltransferase, the same enzyme targeted by Dacogen and Vidaza. The Phase I data showed that a low-volume, subcutaneous administration of SGI-110 had a differentiated pharmacokinetic profile and good tolerability when compared to the IV formulation of Dacogen.

Specifically, SGI-110 has a half-life of up to 4x longer than what is achieved with Dacogen infusions. Furthermore, there was excellent hypomethylation in the daily treatment regimen, and preliminary complete responses were observed in relapsed and refractory AML patients.

Most encouraging was that these responses were evident in those AML patients, who achieved the greatest magnitude of hypomethylation, demonstrating that greater hypomethylation induced by SGI-110 was correlated with disease response. This is the first time that a specific correlation between a hypomethylator's biological effect and disease response has been reported.

In June, we initiated the Phase II dose expansion segment of the SGI-110 trial in patients with refractory AML and treatment-naïve MDS or AML.

This segment of the trial is expected to enroll approximately 90 patients on the 5-day subcutaneous dosing schedule to better evaluate efficacy and safety of SGI-110. By year end, at the December meeting of the American Society of Hematology, or ASH meeting, we plan to present more data for SGI-110 in MDS and AML on the dose escalation phase of this trial.

In the third quarter, based on the preclinical profile of SGI-110, and clinical observations of the drug to date, the next stage of the SGI-110 program is expected to begin. At that time, we will initiate testing of the drug in solid tumor applications.

During the third quarter, AT13387, our second-generation potent HSP90 inhibitor, will enter additional Phase II clinical trials to investigate its effects in solid tumor applications.

Last month, we reported data from 2 Phase I trials of AT13387 at the American Society of Clinical Oncology or ASCO conference. We reported that AT13387 was safe and well tolerated on 3 different dosing schedules, and a clinical response was observed in patients with gastrointestinal stromal or GIST tumors. A Phase II trial studying AT13387, in combination with amuvatinib, is ongoing in patients with tyrosine kinase inhibitor-resistant GIST tumors.

Looking ahead to the fourth quarter, we expect to report data from the amuvatinib Phase II clinical proof-of-concept trial in patients with small cell lung cancer. Within the fourth quarter, we also expect to report data from the Phase II trial of AT7519 or CDK inhibitor in combination with bortezomib in patients with multiple myeloma.

Finally, 3 of our drugs being developed by partners are advancing in Phase I clinical trials in oncology indications. LEE011, a CDK4 inhibitor licensed to Novartis, AZD5393, a PKB/Akt inhibitor licensed to AstraZeneca, and an FGFR inhibitor licensed to the Johnson & Johnson company, Janssen.

At this time, I will turn the call over to Michael Molkentin, our Chief Financial Officer. Michael will provide details on our 2012 second quarter financial results, as well as provide an update on our fiscal guidance for 2012. Michael?

Michael Molkentin

Thank you very much, Jim. We continue to be pleased with our quarterly operating performance. The company reported net income for the 2012 second quarter of $1.2 million, or $0.01 per basic and diluted share compared with $903,000 or $0.01 per basic and diluted share for the same prior-year period. The company also reported net income for the 6 months ended June 30, 2012, of $5.5 million or $0.06 per basic and $0.05 per diluted share, compared with a net income of $6.4 million or $0.11 per basic and $0.10 per diluted share for the same prior-year period.

I would like to remind the listeners on today's call that the acquisition of our U.K. discovery operation was completed during July 2011, and is therefore included in our 2012 second quarter operating and financial results, but is not reflected in the same prior-year period.

Total revenues for the 2012 second quarter were $19.9 million compared with $11.7 million for the same prior-year period. Total revenues for the 2012 second quarter include royalty revenue of $14.4 million compared with $11.5 million for the same prior-year period. Our royalty revenue is earned pursuant to a worldwide license agreement for Dacogen, and is generally recognized when received.

Total revenues for the 2012 second quarter also include development in license revenue of $5.4 million compared with $127,000 for the same prior-year period. The increase in development and license revenue for the 2012 second quarter is due to revenue earned from a collaborative drug discovery program with Janssen Pharmaceutica that was triggered with Janssen -- when Janssen received clearance to commence a Phase I clinical trial of a FGFR kinase inhibitor.

Total operating expenses before gain on sale of products for the 2012 second quarter, were $21 million compared with $11.5 million for the same prior-year period. The primary reasons for the increase in total operating expenses for the 2012 second quarter when compared with the same prior-year period are the consolidation of research and development and general and administrative expenses related to the acquisition of Astex Therapeutics Limited, that was effective July 20, 2011, increasing research and development activities for our programs associated with SGI-110, AT13387, and amuvatinib, and an expense for amortization of intangible assets. The gain on sale of products for the 2012 second quarter was $700,000 compared with an identical amount for the same prior-year period. The gain on sale of products relates to the receipt of the last contractual payment resulting from the 2007 sale of a worldwide commercial franchise for Nipent to Hospira.

For the 2012 second quarter, the noncash expense for amortization of intangible assets was $1.9 million. We had no similar expense for the same prior-year period while stock-based compensation expense, also a noncash charge, was $810,000 for the 2012 second quarter compared with $744,000 for the same prior-year period.

Included in our 2012 second quarter net income is an income tax benefit of $1.6 million compared with an income tax provision of $6,000 for the same prior-year period. The income tax benefit for the 2012 second quarter was primarily due to the recognition of a tax benefit associated with the amortization of deferred tax liabilities resulting from the acquisition and the utilization of a foreign research and development tax credit related to the U.K. subsidiary.

As indicated, the company continues to report a strong financial position. At June 30, 2012, we had approximately $121 million in unrestricted cash, cash equivalents, and current and noncurrent marketable securities compared to approximately $126 million at March 31, 2012.

The company's financial guidance for 2012 has been revised based on trending of our actual reported operational results and anticipated activities forecasted for the remainder of 2012.

We have increased our anticipated royalty revenue from $67 million to $70 million for 2012, reflecting federal product sales growth for Dacogen by our partners. Development and license revenue has been increased to $6.9 million, reflecting a revenue earned from collaborative drug discovery program with Janssen that was triggered after they received clearance to commence a Phase I clinical trial of a FGFR kinase inhibitor. Though we anticipate earning additional development and license revenue from our partner programs, we do not guide to such revenue due to the general uncertainty around, and timing of, milestone achievements and payments.

As indicated earlier though, Dacogen received a positive regulatory recommendation in the EU for the treatment of elderly AML. If approved, the company would earn additional revenue of $5 million upon first commercial sale of the drug. Currently, this incremental revenue is not reflected in our guidance since Dacogen for the treatment of elderly AML is still pending approval.

We have received the last payment of $700,000 this year relating to the sale of a commercial franchise in a prior-year period. No further revenue will be reported for this transaction in future periods.

We have modestly reduced our anticipated research and development expenses for 2012 from $67 million to $65 million for the year. The noncash charge related to amortization of intangible assets remains unchanged at $8.5 million for the year, as does general and administrative expenses for 2012, which remain unchanged at $15 million for the year.

Our estimated income tax benefit associated primarily with the amortization of deferred tax liabilities resulting from the acquisition, and a foreign research and development tax credit related to the U.K. subsidiary remains unchanged from our prior guidance at approximately $6 million for the year.

Considering the impact of the operational items influencing our guidance, the forecasted net loss for 2012 has been reduced from $15 million to a revised net loss of $5 million for the year.

In addition to the amortization of intangible assets, included in total operating expenses are other recurring noncash operating charges, such as stock-based composition expense and depreciation that are estimated at $3.5 million for 2012. Therefore, we estimate that total noncash charges for 2012 would be approximately $12 million, which when considered with our revised annual net loss guidance, could position us to be operationally cash flow positive.

This concludes the review of our financial results for the 2012 second quarter and comments on our updated annual financial guidance for 2012. I will now turn the call back to Dr. Manuso for closing remarks.

James S. J. Manuso

Thank you, Michael. Our company has achieved numerous financial and clinical milestones during the first half of 2012, and we expect to achieve many more during the second half. Financially, Astex Pharmaceuticals continues to be one of the strongest biotechnology companies of its size. Our financial resources have provided a runway for operational execution that has permitted us to avoid raising money in the markets for 8 years. We've been profitable for 4 out of the last 5 years. As stated previously, we have no plans to raise money in the foreseeable future. If, later in the third quarter, the EMA approves Dacogen in the elderly AML indication, making it the first medicine ever to be approved for this disease, we will benefit considerably. We have a deep pipeline of wholly-owned drugs and our partnered assets for which we have no financial responsibilities are advancing in the hands of our licensees.

Operationally, in the third and fourth quarters, we will start initiating new Phase II clinical trials studying our lead drugs, AT13387 and SGI-110 in solid tumor indications. We look forward to updating you on our financial, clinical and discovery milestones in the coming months.

Thank you for your support. Dr. Harren Jhoti, Dr. Mohammad Azab, Dr. Martin Buckland, Michael Molkentin, Tim Enns and I are now ready to answer your questions. Operator, we'll take questions at this time, please.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question today comes from the line of Boris Peaker of Oppenheimer.

Boris Peaker - Oppenheimer & Co. Inc., Research Division

I have a couple of questions. Maybe let's start with AML, elderly AML. Could you give us a sense of if and how much use of Dacogen there may be in elderly AML in Europe at this time?

James S. J. Manuso

At this time, it would only be on a named patient basis and perhaps Dr. Azab can address that.

Mohammad Azab

Well, the drug is not approved in the AU and AML or MDF or an indication, said they're only used with probably named patient basis as for mainly for MDF, we assume. But that's very little.

Boris Peaker - Oppenheimer & Co. Inc., Research Division

Okay. I see. And in terms of reimbursement, I guess it's probably a little too early to just say in Europe, but have you had any feedback from J&J or your partner Janssen in terms of how they see positioning this drug in the European Union?

James S. J. Manuso

No, we have not, Boris. It's early on as you point out in this process and typically negotiations will occur on a country-by-country basis. And that will take up a period of time that is unknown to us at this juncture. What we can certainly say is that Janssen is highly experienced in such negotiations and will proceed expeditiously.

Unknown Executive

Yes. And just an addition to that, as you know, elderly AML in general and particularly elderly AML is a very deadly disease for which there is no drug that currently approved anywhere. So -- and first line. So this is an indication where there is a desperate need for new treatments. And therefore, from a medical perspective, we would not expect that this would be a difficult reimbursement process, particularly that the trial, as the CHMP had provided survival benefit to those patients.

Boris Peaker - Oppenheimer & Co. Inc., Research Division

Okay. Just a question on 110. Could you maybe factor us on walking through the rationale for hypomethylation in solid tumors and maybe in the same kind of context, what do we know about the drug schematics in terms of getting and staying in solid tissue?

Mohammad Azab

These are excellent questions. There has been several publications linking hypomethylations of certain tumor genes, particularly tumor suppressor genes, linking those to both progression of tumors, poor survival and resistance to chemotherapy, particularly the platinum resistance. So all these criteria provide a very strong rationale for the use of hypomethylating agents in solid tumors. Indeed, there has been anecdotal evidence of clinical responses at single agents for hypomethylating agents, and there have recently been also publications on the responses for Dacogen, for example, in ovarian cancer, that was published in Cancer Research this year. And also this year, there has been publication of activity of hypomethylating agents in lung cancer published in Cancer Discovery. So there is a strong rationale for the use of these drugs in solid tumors. Now of course, the whole challenge would be, what kind of solid tumors would have the highest probability of success and what kind of combination, and that's something that we are currently basically implementing to be -- what we've learned from the different solid tumors into 2 programs that we will be announcing shortly. We have indicated that one of them would be ovarian cancer, that follow up from the cancer research paper that will establish the work from University of Indiana, and another solid tumor that we have not disclosed yet.

In terms of going into solid tumor, we are currently generating tissue distribution and tumor distribution data, but we know that the level of the drug is high in tumors and in pre-clinical models, and in all our solid tumor trials, there will be an initial stage in which we are looking at the hypomethylation of the tumor suppressor genes in the actual solid tumor pre- and post-treatment. We are looking at that tumors where we have accessible biopsies, of course. And so we will be disclosing all of these activities and the rationale and the trial designs as we launch these trials towards the end of the year.

Boris Peaker - Oppenheimer & Co. Inc., Research Division

And will this data you think be at any kind of upcoming medical meetings?

Mohammad Azab

Which data are you referring to?

Boris Peaker - Oppenheimer & Co. Inc., Research Division

Specifically, any of these for clinical studies where you're looking in terms of tissue exposure within the solid tumors. Or maybe, if you have any kind of a development in looking at specific tissue type or tumor type or genetics of a particular tumor, I guess anything to further expand the understanding of 110 in solid tumors.

Mohammad Azab

Yes. Absolutely. We're looking at presenting these in the upcoming conferences. We haven't disclosed one of our plans for those, but there has been already published data on the ovarian cancer preclinical models that we're presented at the ACR, and some were presented, for example, on the immunotherapy combination last year in the triple meeting. So we'll continue to present the preclinical data as we generated on those solid tumors.

Operator

Our next question comes from the line of Robin Davison of Edison Investment.

Robin Davison - Edison Investment Research Limited

Greetings from London. [indiscernible] to see the [indiscernible] production in the EU. I think that changes the sort of financial outlook for the company. I wonder of you have had the chance, really, to consider how -- what might affect your future investment in 13387 and 110. Obviously, you're sort of focusing your investment in those 2 projects. And I'm just wondering whether you're able to say yes. I mean, you're obviously ahead of phase approval, but whether you might take those products further given that you have a strong -- given the strong financial position of the company and [indiscernible]?

James S. J. Manuso

A very good point. Most assuredly, as we have greater color on the exact impact of the revenue streams emanating from Dacogen sales in the EU, taken together with the existing sales in more than 30 countries worldwide, we'll have a much better handle on the runway that the revenue streams would thereby provide. And that in turn will drive decisions relative to how far we might take one or both products, the prioritized products, 110, and 387 off the line. And to the extent that we are in a position to give guidance going forward on exactly how much we anticipate in the way of our revenue stream, of course, we'll do that. We do believe that there is, at this point, a treatable, potentially treatable population in the EU of around 9,000 patients that would qualify based on the definition that has been given for proposed approval. Given also as Mohammad had mentioned, that there's going to be in all likelihood, a fairly rapid review process and potentially also launch of the drug, given the dreaded disease of AML, it might happen sooner than later. But until we get news of the approval on the one hand and emerging guidance from Janssen on the other, we're not going to be in a position to give you numbers yet, but we certainly hope to do that as soon as possible.

Robin Davison - Edison Investment Research Limited

Just a quick follow up. I wonder if you might be able to give any further color on the Phase I results you got for 13387 in GIST, most -- particularly the [indiscernible]. I mean, I know you've noted that you've had 3 responses in this space. And so obviously -- in the statement, I think it said you had 3 of 5 people who have been enrolled in that space -- I was wondering if -- the qualitative, it doesn't seem very good. Is that your reading of that?

James S. J. Manuso

Mohammad?

Mohammad Azab

Well, there's certainly very promising activity in GIST and part of that, in addition to preclinical data provided the rationale for that Phase II ongoing trial in GIST. We do just a clarification, we did enroll 7 GIST patients in the Phase I trial that was reported at ASCO. And 3 of the 7 patients had either a partial response or stable disease for more than 6 months, that usually compared favorably with some of the even recent data that had been shown in resistant patients who are refractory to imatinib and sunitinib by some of the third-line agents that had been studied. So it looks in the ballpark of activity as a third-line agent, but we're certainly looking for further data from the Phase II trial, as you know.

Robin Davison - Edison Investment Research Limited

Okay. Can you tell me, on SGI-110, you -- I think you said that the dose expansion phase would be just of the 5-day dosing schedule. That's what you mean by, perhaps, that you've had better results than its once-weekly dosage that you're also testing up but that period is the logical assumption, is that right?

Mohammad Azab

Yes, correct. We have presented that actually at the AACR in April, showing that the hypomethylating effect with the 5-day schedule was far superior to the once-weekly schedules. So that's why we are taking the 5-day schedule to the dose expansion. Having said that, we are also currently exploring other schedules in addition to the once weekly that we have now stopped. So we are progressing with the Phase II expansion with the 5 daily schedules and exploring other types of schedules in the meantime as well.

Operator

[Operator Instructions] Our next question comes from the line of George Zavoico from MLV & Co.

George B. Zavoico - McNicoll, Lewis & Vlak LLC, Research Division

Congratulations on a great quarter and continuing ramping up of the Dacogen sales. I'm sure it defied everybody's expectations going back a few years. It's really a good trend for sure.

James S. J. Manuso

Well, drugs that work seem to do that.

George B. Zavoico - McNicoll, Lewis & Vlak LLC, Research Division

Good point. With regard to Europe and AML, by data that is approved therefore MDS, is it being used in AML or am I off base on that?

James S. J. Manuso

Well, the definitions in the EU are pretty strict relative to approvals. And whereas there might be some named patient use, our sense is that it's highly restricted and restricted to MDS, just as there would be a restriction on Dacogen and elderly AML as defined. And yet, I think all of us acknowledge that there are -- there's a little fuzziness at the edges and that's really where I think we'd come out on that.

George B. Zavoico - McNicoll, Lewis & Vlak LLC, Research Division

So the environment there obviously is very different obviously in the U.S., whereas we even heard at the FDA at the ODAC meeting that their physicians are already using Dacogen for AML in this country. Which brings us to the next question. Did you get any sense from Janssen or J&J what they may have done differently than Eisai did with regard to EMA versus how they submitted the presentation to the FDA? I mean, they have the advantage of seeing what happened at the FDA? I'm just wondering if you had heard anything about how that exchange went -- and, of course, there's nothing like an ODAC meeting in Europe, right?

James S. J. Manuso

No, there really isn't. What I think we can say is that the clear and steady focus on the part of the Janssen team was on clinical benefit and also acknowledging that it's better to take a look at a larger group of patients at a later point in the course of the trial irrespective of the fact that, that was not a prespecified analysis. We believe consistent with past practice in the EU, the focus is generally on the clinical benefit and as perceived by physicians, and the weight that the repertoire and co-repertoire placed on the clinical data, I believe, is greater. Mohammad, do you have any views on that?

Mohammad Azab

Yes. I mean, I think that, Jim, you're right. This -- the MD&A, most of the precedents, the main focus on the -- how strong the clinical data are. Of course, statistics is an important part of the robustness of the clinical data but they are not the only part that there's difference between trying to be extremely rigorous on some of the fiscal rules and also try to be understanding of the total trend in the trial, the events that are not just to the primary endpoint, but to the secondary endpoint. And one particular endpoint here in AML is that it's undisputedly a clinical benefit of future remissions. As you know, even in the FDA review at ODAC, they stated that the drug produced doubled the complete response rate in patients treated with Dacogen versus low-dosed AraC, and that was highly statistically significant. So I think if you look at the overall data and even if you look also at the conclusion from that data when it's published, the reviewed publication, they said they conclude that there is a treatment benefit. So I think they look at all of that and took that decision.

James S. J. Manuso

Yes. And in fact, George, to follow up on that. We were very taken by the CHMP's reference to the impact of Dacogen on overall survival in elderly AML. And they specified that in their note following the meeting, vis-à-vis, the opinion that they rendered. So I think they accepted the fact that there was a survival impact, although there was not a prespecified hit in that regard.

George B. Zavoico - McNicoll, Lewis & Vlak LLC, Research Division

Yes. I mean obviously, that worked out very, very well for you. I mean, I think even at the ODAC meeting, there wasn't any doubt that the drug works. So, one last...

James S. J. Manuso

I think you remember -- sorry, George. I mean if you remember at ODAC, I mean, the FDA stated that they have not just come to ODAC because they couldn't make up their mind in terms of the benefit, and they were looking at the advice of ODAC. It was -- as you know from the outcome, it was unfortunate that the group that presented ODAC at that time came to a different conclusion from the [indiscernible] that reviewed the data of VMA.

George B. Zavoico - McNicoll, Lewis & Vlak LLC, Research Division

Right. And one last question regarding Montigen and the assets that were transferred or were going to be transferred to Montigen. What is the status of that now? And is that spinoff still going to happen? And if so, do you have any timeline for it?

James S. J. Manuso

At this point, we're abandoning the spinoff as defined. However, we have rendered a variety of assets from Montigen in Utah to another company called Tolero and in exchange, we received 60% -- sorry 6% of that company's equity. It's an early-stage company that actually is being developed in advance by Dave Bearss, our former Chief Scientific Officer. So that was the outcome. We elected rather to go with an existing company that is Utah based rather than a reverse merger and effectively a startup in the form of Montigen. So we've disposed of the assets, we've garnered some consideration in return in the form of equity and a very small amount of cash, and that's really where those -- some of those assets will find an expression. That does not include 9283 or 7519, by the way.

George B. Zavoico - McNicoll, Lewis & Vlak LLC, Research Division

I'm sorry, doesn't include which ones?

James S. J. Manuso

9283 or 7519. It includes the projects that were being worked on in Utah to include the PIM kinase inhibitor and select others that we had shelved in terms of our development.

George B. Zavoico - McNicoll, Lewis & Vlak LLC, Research Division

Okay. So there's been still a little bit more [indiscernible] of the assets.

James S. J. Manuso

Yes. No, exactly. Yes.

George B. Zavoico - McNicoll, Lewis & Vlak LLC, Research Division

And all right, so that means that obviously, now that Tolero has full control over it, you have no more carrying costs at all for any of those assets. I presume that's the main conclusion of this?

James S. J. Manuso

That's exactly right, George. We have, at this point, completed the process of shutting down operations in Utah and also in Pleasanton. All of those responsibilities that formerly resided there relative to programs of interest to the company are now under Dr. Jhoti's jurisdiction in the U.K.

Operator

Our next question comes from the line of Jack Wieland from Middleton.

John W. Wieland - Middleton & Company Inc.

Just a follow up on George's comment. In your revised guidance, the R&D number comes down a couple of million, is that at all related to the Montigen spinoff?

James S. J. Manuso

In part, Jack, it's also a result of the rate at which certain programs are advancing, and it's not as if the $2 million per se accrues to a specific program. Michael, would you care to comment on that?

Michael Molkentin

Yes. We've always had anticipated that Montigen would be accounted for in one form of transaction or another. And so the decrease in R&D expenses, as Jim was referring to, are more timing related of the various programs that we're anticipating at initiating later on this year. Because it's always difficult to forecast when exactly you're going to start incurring expenses. And as we get further in the year, and get a better perspective on the timing of when these different programs will start. We can, of course, do a better job of forecasting when and at what amount we'll be incurring expenses. So that's a primary driver behind the decrease.

John W. Wieland - Middleton & Company Inc.

Okay. So it's not really any change in the intensity with which you are pursuing a program? It's more a question of when a certain trial starts?

James S. J. Manuso

That is correct.

John W. Wieland - Middleton & Company Inc.

A couple of Dacogen questions. Do you have an update on Dacogen's market share in the U.S. particularly versus the competitor Vidaza in the MDS market?

James S. J. Manuso

Yes, we do. In North America, the most recent data from June was 42% of Dacogen and the remaining, Vidaza. So there has been a slow but -- slow gradual but increasing market share in favor of Dacogen in North America.

John W. Wieland - Middleton & Company Inc.

Have you detected any decrease in the promotional activity with Vidaza?

James S. J. Manuso

Vidaza is being harvested as it were. And yet as you may know, there has not been a finality in terms of they're going off the exclusivity, primarily because of the fact that bioequivalence must be demonstrated on the parts of any generic company wishing to enter that market. And the bioequivalence relates to a subcu and also to an IV version of the drug. It's a slurry formulation, a suspension, and it's difficult to achieve that bioequivalence. And that's what's been holding up the cessation of that exclusivity.

John W. Wieland - Middleton & Company Inc.

Okay. With the recent success here with Dacogen, a good news from Europe, the only major market then that would be left is Japan. Is there any activity that could lead to potential approvals in Japan or any thought about that?

James S. J. Manuso

That's something that is going to first take some time, and also we have no clarity on guidance from Janssen in that regard. Our belief is that they might well have been awaiting the European theater's decision. And now that it has been referred and recommended by the CHMP, that could be a driver going forward for their decision to enter the Japanese market. And yet, we don't have a final clarity in that regard. Janssen has not given a clear indication. Although to the extent that they believe they can get some traction there, based on their experience in the EU, I would certainly imagine that that's something they would actively consider. But I don't have real clarity on that for you, Jack.

John W. Wieland - Middleton & Company Inc.

Okay. Just a little follow up there. Any additional clinical trials required to do that or do they have sufficient information to go ahead if they could?

James S. J. Manuso

Mohammad?

Mohammad Azab

Yes. Typically, you're required. Japan had considered in the past few years accepting the Western data as part of the submission. Having said that, they still require to have a separate study done in Japanese patients. Usually the size and the design of those study is up to the discussion with the Ministry of Health there. But most of the time, it's usually a single-arm trial in a relatively small number of patients in Japan that would be on top of the Western data. So that would be the expectation that with the Western data, the whole package plus separate trial in Japan, you could submit, you could reasonably submit for approval in Japan.

James S. J. Manuso

After conclusion of that trial, with good results.

Mohammad Azab

Correct. Yes.

John W. Wieland - Middleton & Company Inc.

Right. Another question on the SGI-110. Could you comment on the effect of the participation of Stand Up With Cancer -- Stand Up To Cancer in the SGI-110 trials and development?

James S. J. Manuso

Yes, Mohammad?

Mohammad Azab

Yes. I think they have been very instrumental in terms of the design for the early trial and also providing the initial biomarker, biological activity for that trial, which mainly involved the Line-1 methylation, which gave us a very good indication of biological activity, and that's partly the reason why we are mainly progressing with the 5-daily regimen because we have seen a much better hypomethylation with that regimen. And they're also looking at gene expression. So most of the activity was in terms of the advice for the program plus the biomarker data on the Phase I program. Going forward, we expect some collaboration in terms of the selection of centers and the indications in solid tumors that they are interested in. As you may be aware that the big focus on the Stand Up To Cancer program is on solid tumors. So we are working with them in terms also of advice and guidance on the solid tumor program. Okay.

James S. J. Manuso

With that, we'll terminate the call today. Thank you very much for your support, and we look forward to updating you on an ongoing basis. Thank you, operator.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program and you may all disconnect. Have a great rest of the day.

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