Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Cell Therapeutics (NASDAQ:CTIC)

Q2 2012 Earnings Call

August 01, 2012 8:30 am ET

Executives

James A. Bianco - Principal Founder, Chief Executive Officer, President and Executive Director

Louis A. Bianco - Co-Founder, Principal Financial Officer, Principal Accounting Officer, Executive Vice President - Finance and Administration and Secretary

Steven E. Benner - Chief Medical Officer and Executive Vice President

Analysts

Michael G. King - Rodman & Renshaw, LLC, Research Division

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Cell Therapeutics Q2 Financial Results Call on the 1st of August, 2012. [Operator Instructions] I would now like to hand the conference over to Dr. James Bianco, President and CEO. Please go ahead, sir.

James A. Bianco

Good morning. Thank you for joining us today. Before I get started, I'd like to remind you, as is common with presentations of this type, that we'll be making forward-looking statements, and as such, I recommend you refer to our SEC filings for more information on the company.

Let me also remind you that this call is recorded and will be available for playback on our website. Any unauthorized recording of this call or use of this recording is prohibited without written consent of the company.

So on today's call, we're going to review the financial results for the second quarter, update you on our prelaunch activities and in-market research on a potential commercial opportunity for Pixuvri, talk about the status of the pacritinib Phase III program and review the strategy for tosedostat and briefly discuss the activities on OPAXIO and brostallicin. Let me start with the financial results for the second quarter.

For the quarter ended June 30, the total operating expenses were $49.4 million compared to $16.9 million for the same period in 2011. The increase is predominantly due to acquired in-process R&D expense of $29.1 million related to the acquisition of pacritinib from S*Bio, in addition to some expenses related to prelaunch activities for Pixuvri.

As announced in June, we focused our research -- resources on the commercial launch of Pixuvri in EU and the advancement of pacritinib to its Phase III trials. We believe pacritinib represents a high-value product opportunity, addressing an unmet medical need in the myelofibrosis market even in the post-ruxolitinib approval here, which is clearly Phase III ready.

We've instituted a number of cost-containing initiatives, with the goal of reducing our average net operating burn from an average of over $6.5 million per month to now an average of approximately $4 million per month for the remainder of the year.

At the end of the quarter, we had approximately $14.8 million in cash prior to the receipt of $14.3 million in net proceeds received from the same institutional investor that purchased $20 million of stock and warrants in May.

So let's talk about Pixuvri. In the first quarter, we worked with PricewaterhouseCoopers EU life science partners on building the work streams a for cost-effective go-to-market strategy and launch plan for Pixuvri. In the second quarter, we began engaging our partners, including Quintiles, who will be our vendor through which we will hire our sales force. We have also in place a third-party logistics provider for product distribution, pharmacovigilance, product call center and other vendors that are required for compliance and effective launch. We are on schedule to launch in Austria and the Nordic countries starting in September, with Germany targeted to launch in November, at which time we are planning to present our value dossiers to the German health agency and begin the process that we expect will lead to the assignment of an innovation score and potential reimbursement note negotiations. Needless to say, our near-term focus is achieving our goal of developing solid reimbursement strategy for the product in the reference countries like Germany and France.

We often get asked what the commercial opportunity for Pixuvri is in the EU. So to assess the market size in addition to our own internal forecast, we engaged Kantar research, who conducted what they call in-market research in the EU among 251 lymphoma specialists in the 5 major market countries, capturing data on their current treatment practices for patients who are third or fourth line who have aggressive B-cell non-Hodgkin's lymphoma, and how those practices would potentially change with the introduction of Pixuvri.

Now it's important to keep in mind, our labeled indication is in the third and fourth line B-cell aggressive NHL. And in that subset of 112 patients, the CR/CRu rate was 28% for Pixuvri versus 4% for comparator. The overall response rate was 48% for Pixuvri compared to 12% for comparative single therapy. And at 2 years of follow up, there was a 50% reduction in the risk of death or relapse, the so-called progression-free survival, with the median overall survival for Pixuvri on being 13.9 months versus 7.8 months for the comparative active chemotherapeutic agent.

So these are the data that we'll focus on with the help and payers -- health authorities and payers when considering the value proposition for Pixuvri in this patient population. And based on Kantar's research, their analyses, including their discounts, we're encouraged by the projected market opportunity for Pixuvri in the EU given the percentage of physicians who noted that they would integrate Pixuvri into their current treatment practices for patients with relapsed aggressive B-cell non-Hodgkin's lymphoma. And we look forward to updating you as we initiate market introduction and begin to get an indication of product demand.

So this is a good point to transition to our U.S. strategy for Pixuvri. As you may recall, the CHMP, or the Committee for Human Medicinal Products had accepted our proposal that the PIX306 study be utilized to fulfill our requirements on the conditional marketing authorization regulations. And as previously noted, we plan on opening approximately 18 sites in 5 EU countries starting next quarter to assist in our enrollment targets.

In the U.S., we intend to meet with regulatory authorities to discuss the inclusion of PIX306 in our NDA resubmission. Once we have feedback from the agency, we're planning to put together a more definitive plan with regards to our U.S. registration strategy for Pixuvri.

So let's move on to pacritinib. You may recall, unlike the JAK1/JAK2 inhibitors, pacritinib is a highly selected JAK2 inhibitor, which also has the added activity against another important activating mutation common in AML and certain lymphomas called FLT3. So in addition to its potential application in the myeloproliferative neoplasms, it has also shown encouraging single-agent activity in lymphoma and in preclinical models in AML.

We acquired pacritinib at, what we believe, is an attractive valuation for a product, which is reported by principal investigators in the Phase II studies, to lack the treatment of our myelosuppression that is commonly observed with other JAK1/2 inhibitors including the currently approved product, ruxolitinib. It is this feature, a lack of treatment-emergent thrombocytopenia specifically, that we believe differentiates pacritinib from the other JAK inhibitors approved or the ones in development.

Severe thrombocytopenia, according to the MPN Research Foundation, occurs in nearly 1/3 of patients with myelofibrosis, and that doesn't consider the patients who may develop thrombocytopenia from treatment with ruxolitinib. So we're currently completing protocol development on the first of 2 anticipated studies, which will be managed by the same CRO that manage the COMFORT-II trial for ruxolitinib. We anticipate this study to begin in the fourth quarter. We'll enroll approximately 270 patients predominantly in the EU sites, and enrollment is currently estimated to take 12 months, and we'll have a more detailed assessment -- with a more detailed assessment of feasibility underway currently.

We expect the second study would start in the first half of next year following our discussions with the FDA, and the second study is planning to focus on specifically the thrombocytopenic patients, including patients who develop treatment-emergent thrombocytopenia on ruxolitinib. We anticipate this to be a predominantly U.S. study and should similarly take approximately 12 months for approval. We look forward to updating you on the status of the Phase III studies, as well as 2 publications which are in press; one in The Journal Blood, which examine the effect of pacritinib as a bifunctional JAK2 FLT3 inhibitor in FLT3-resistant AML, and a study also to be published in the Journal of Clinical Oncology, examining the effects of pacritinib in a Phase I/II study in the treatment of lymphoma.

With Pixuvri advancing to its international Phase III trials, pacritinib about to enter its pivotal trial program in the fourth quarter and next year readying tosedostat for its Phase III program, the need for additional leadership experience in oncology drug development was obvious. And as we've reported, as a result of our assembling an attractive late-stage diversified oncology drug portfolio, we brought in additional management experience in cancer drug development, including Steve Benner as our Chief Medical Officer and more recently, the addition of Dr. Matt Plunkett as our EVP for Corporate Development who will start full time in September.

Steve, as you may have seen from our press release, is a clinical oncologist who started his professional career at Bristol-Myers Squibb, and he is hard at work establishing the product teams, the Phase III product teams, while developing life cycle management plans for these products. Matt brings with him a wealth of experience in the biopharmaceutical and investment banking industry, where he was the Managing Director for West Coast Biotechnology at CIBC. He has over $4 billion in equity-linked transactions and $1 billion in M&A advisory. Matt will be responsible for establishing product partnerships, initially focusing on pacritinib and brostallicin, as well as being CTI's senior representative on the Novartis OPAXIO steering committee. And Matt, I'd bet you didn't know that.

Let me move on to update you on tosedostat. The initial development plan in the agreement contemplated a Phase III trial in combination with Ara-C in relapsed AML, as well as a study in combination with a hypomethylating agent in relapsed MDS. With our partners at Chroma, we also considered other potential trial designs, including a single-agent placebo-controlled trial in relapsed or refractory MDS/AML. Because of U.S. treatment practices, however, there was little interest in a placebo-controlled control arm. And as such, we evaluated a controlled trial of low-dose Ara-C, the common second or third line treatment option in the U.S., plus or minus tosedostat.

And based on feedback from our international advisory panel and the contract research organization we engaged to perform a feasibility analysis on enrollment of these different trials, we are currently reevaluating the tosedostat Phase III clinical trial design and reviewing the pros and cons of studies in either the relapsed/refractory setting versus in a front-line treatment setting.

Now, our rationale for considering a front-line application in combination with hypomethylating agents in this disease is the following: Several drugs have failed to show an improvement in overall survival in relapsed/refractory setting. There are 4 different competing trials in this population, all of which have been reporting slower-than-projected enrollment.

There was clearly significantly more interest amongst investigators in a first-line application in combination with hypomethylating agents. And with only one planned cooperative group trial in that target population, there is much less competition for patients. And then lastly, we believe that in the front-line setting, target enrollment could be achieved faster, the market size is clearly larger in first line than it is in the second or third-line relapsed setting.

So with the 2 -- we have 2 Phase II investigator-sponsored trials that will examine the activity of combining tosedostat with hypomethylating agents, and we should have those data to make an evidence-based decision on the appropriate trial design that will provide us with the highest probability of both regulatory and commercial success by early next year.

Now, we have had discussions with Chroma management regarding adopting this development direction. I'm mentioning this because Chroma and CTI are not in agreement about the decision-making processes in the agreement. We believe we have worked diligently with Chroma senior management on evaluating these critical development decisions based on our expertise at this stage of product development and always with the best interest of the product in mind, both in terms of the highest probability of success, both enrollment success and endpoint achievement, and in terms of maximizing the commercial profits for the product. We look forward to continuing to work with Chroma on the development of tosedostat.

So let me just touch briefly on OPAXIO and brostallicin before we open for questions. We previously mentioned that the GOG has informed us that they have modified the statistical analysis plan to take an earlier look at the survival data of OPAXIO in their trial of monthly maintenance, OPAXIO for 12 months in patients with advanced ovarian cancer who achieved a complete remission after front-line therapy. We believe the first interim analysis will take place in January 2013. In addition with over 900 patients enrolled to date, we anticipate that they should complete the target enrollment of 1,100 patients late next year.

Let me move on to just mentioning briefly about the combination study of brostallicin and cisplatinum in triple-negative breast cancer. We understand from the Mayo Clinic's North Central Cancer Treatment Group, a well-respected breast cancer cooperative group, that they have submitted their data from a Phase II study in 52 patients, which combined brostallicin with cisplatinum in women with relapsed triple-negative breast cancer for consideration at the San Antonio Breast Cancer Conference.

Triple-negative breast cancer is a subset of breast cancer, which is notoriously difficult to treat and associated with very short survivals. And as you may have seen from the recent press, a disease of interest recently noted by the FDA, given the lack of active agents. And we look forward to seeing those data and updating you on those milestones as they occur.

So at this point, operator, we'd like to open the call to any questions.

Question-and-Answer Session

Operator

[Operator Instructions] The first question comes from Mike King from Rodman & Renshaw.

Michael G. King - Rodman & Renshaw, LLC, Research Division

Just had a couple of quick ones. Jim, just with regard to go-forward spending guidance, the $4 million per month burn is a good estimate now for, I'd say what, the remaining part of the year into '13? Or will you expect things to ramp up as other trials get going like with pacritinib?

James A. Bianco

It's $4.5 million a month. And, Louis, you want to answer this?

Louis A. Bianco

Yes, $4.5 million net operating burn per month through the end of the calendar year.

James A. Bianco

And he asked if you expect that to go up next year.

Louis A. Bianco

We're not expecting it to go -- to increase next year. That's based on -- well, we're hopeful to the product sales that were from the EU launch to offset any increase on the development side for pacritinib, for example.

Michael G. King - Rodman & Renshaw, LLC, Research Division

Okay, fair enough. And then with regard to Pixuvri, Jim, you gave some good color on the response rates, overall survival PFF. Can you talk a little bit about your reimbursement strategy? I mean, are you going to go sort of into the maw of i-CLIC [ph] first to try to hit the horse or will you sort of take a path of least resistance? Or maybe give us a little bit of better understanding of the strategy for your reimbursement strategy.

James A. Bianco

Absolutely. And we've been working with UBC on the health care economics and pharmacoeconomics modeling that's required for Nice and a few of the other EU nations, and then with the smart step in Quintiles in developing the global value dossier and the German value dossier. So specifically since Germany is considered a free market for the first 12 months, we would need our German value proposal at the time that we launch, and that would set the clock for I-CLIC [ph] to determine an innovation score and make their recommendation to the GBA, and then the GBA to decide on whether or not we enter into negotiations for pricing and reimbursement. Obviously, our target is to get a score of 4 or lower, which we are cautiously optimistic that based on the fact that there are no addition -- no other products approved in this area, that it is an orphan-like size market in Germany in particular. And given the strength of the data and the correlation of the primary endpoint with survival in this population and that's a literature-based -- not literature-based assumption, a literature-based fact. And therefore, we're supporting that with our own data. So we will go -- we've already requested -- what you do initially, Mike, is that you request a consultation with members of the GBA. We have already indirectly, through our consultants, essentially gone out with Simon-Kucher & Partners where they test the proposition in front of several of the payers and get their input as well, as well with the KOLs. And when you collate all that information and feedback from the GBA consultation process, you then finalize your German value dossier, and you submit that at the time of launch, which we anticipate will be November. So we will go to Germany first. We will initiate that process. We anticipate that France would be the second EU nation that we would submit to for reimbursement, and that should come online by mid-year next year just given the usual negotiation and timelines. We would then see Italy come online potentially at the end of third quarter next year. And then lastly, it would be the U.K. As you know, the U.K. in the NICE process takes the longest or certainly amongst the EU nations, it's about 9 to 12 months. And that's how we would phase in the ramp-up in our sales force. I mentioned that we would use Quintiles. These are employees that we would interview, we would train them and we would direct them. But Quintiles actually hires them and so that we don't have the infrastructure and legal HR-related expenses in each of the various different countries that will have employees in the field, if you will. And they do that, Quintiles does that at a very effective, very reasonable upcharge to their direct expense, meaning that's a cost effective way to go to market.

Michael G. King - Rodman & Renshaw, LLC, Research Division

Great. I just -- just to follow on regarding i-CLIC [ph]. One of the catch-22s that companies often find themselves in with i-CLIC [ph] is when you're the pioneer in an indication where nothing else is used, they often ding you because they said that there's nothing to compare to. So how do you prepare for that inevitable argument that you'll get from them?

James A. Bianco

It's that -- you're absolutely correct. I mean, so what is the appropriate comparator agent? If you look at and we have this -- Kantar did research for us, if you look at treatment practices in Germany in this third- or fourth-line treatment setting for B-cell NHL, it is a multitude of various drugs, none of which are approved in combination, alone, monotherapy, double therapy, DHAP, R-ICE, et cetera, are choices that physicians are doing. So The first thing that one could argue is, what is best available therapy? And so if you go to the experts, what do you do in the third- and fourth-line treatment setting and you look at what they're practicing, well, best available therapy will be toxic multiagent regimens that do not give a CR rate of 28%. And if you look at a DHAP or a R-ICE regimen, they typically require 5 days of hospitalization, 7 days of growth factor support, and then they do that again in 2 weeks and that's a cycle. So it's twice a month and typically they'll do that for 2 months. So the cost of therapy, "the best available therapy" if they choose multiagent comparators, is more expensive than what we would be proposing as a potential reimbursement amount, and secondly, less effective. If they stick to the letter of the law, if you will, monotherapy, the only drug approved in Germany for lymphoma in the third-line treatment setting, is rituximab. And we think that rituximab would be a very fair and, what do say, attractive comparator. The reason is that rituximab is relatively expensive in Germany. And more importantly, the literature supports no response, no CRs with rituximab as single agent in a third-line treatment setting. And so that's the kind of approach that our consultants are taking with regards to testing those 2 arguments, both with the payers, with the KOLs, the advice of i-CLIC [ph]. And then ultimately as I just mentioned, we would submit that for a consultation meeting with the i-CLIC [ph] authorities. And then they would provide us their preliminary feedback before we finalize our documentation and then take that to them. And typically, their feedback, it's highly recommended that you go with what they believe the appropriate comparator, the appropriate direction should be. So that at the time you submit, you already have some of the insights of their thinking at the time that they meet as a formalized panel.

Operator

There appear to be no further questions at this time. Please continue with any of the points you wish to raise.

James A. Bianco

I don't know. Mike, if you wanted to jump back on or we can just wrap it up at this point.

Michael G. King - Rodman & Renshaw, LLC, Research Division

So if I could just get a little bit more color on the strategy with pacritinib. So it sounds like, if I understood you correctly or reading the tea leaves properly, it sounds to me like what you're thinking of is perhaps a more of a first-line study in myelofibrosis in the EU. And then the second line, obviously, in patients that have been treated with ruxolitinib but developed thrombocytopenia in the U.S. So is that a fair summation?

James A. Bianco

Let me turn it over to Steve, our Chief Medical officer. And I think he's the project leader in this, particularly, so he can fill you in.

Steven E. Benner

We anticipate doing 2 Phase III trials, both of which would really be in the first-line setting. The differences between the trials would be that the initial study that we hope to begin enrollment this quarter or -- I'm sorry, in the fourth quarter this year, is a randomized Phase III across all ranges of platelet levels in patients with myelofibrosis. So we would include patients with platelet counts of less than 100,000, which were excluded from the original registration trials for ruxolitinib. The second trial would be predominantly performed in the U.S., and that would be another randomized trial where we would specifically focus on the patients that are presenting with low platelet counts.

Michael G. King - Rodman & Renshaw, LLC, Research Division

Okay. So that would be the sole -- other than a confirmed diagnosis of myelofibrosis, the only other entry criteria, or the most important one anyway, would be platelets below 100,000?

Steven E. Benner

That would be a major feature of that second trial, yes.

Michael G. King - Rodman & Renshaw, LLC, Research Division

And is that 100,000 the cut-off or would it be lower?

James A. Bianco

There'd be no lower -- you're not planning on a lower limit, right?

Steven E. Benner

No. In the Phase II studies, pacritinib was given to patients presenting with severe thrombocytopenia and was able to be dosed without dose reduction or interruption in the vast majority of patients, with no further declines in platelet counts observed.

Michael G. King - Rodman & Renshaw, LLC, Research Division

How is severe defined, because thrombocytopenia means different things to different centers. So as to this one, how this be defined in that study?

Steven E. Benner

This would be using the CTC's grading criteria, which looks at absolute platelet counts.

Michael G. King - Rodman & Renshaw, LLC, Research Division

And what were the numbers?

James A. Bianco

50 and 20, 3 and 4.

Michael G. King - Rodman & Renshaw, LLC, Research Division

Okay. Because a lot -- if you talk to docs, a lot of them don't hear low platelet counts until they get really low. So if you do a study with those kind of numbers, is that going to be reflective of what I would term real world practice, or is this really more for a regulatory?

James A. Bianco

I think you have to put it in 2 context. I'll let Steve talk about the medical side of it. But from the market licensure side of it, ruxolitinib's label is in patients who have 100,000 or more platelets. And as you know, from treatment practice, as they reduce the dose because of the thrombocytopenia that occurs while on therapy, they lose the therapeutic effect. And so you'll have patients coming off of rux because of a side effect of therapy, and then you'll have that other 30% of the population who they don't give ruxolitinib to because it will drop their platelets. And that is the unmet medical need that we see. And so that target population would be both patients who are MF. And by virtue of their disease, their platelet counts are below 100,000 and then patients who are MF by virtue of their treatment with the current standard are falling below 100,000. And we think that, that profile, when you test it and if you look at -- Mike, I referred to the 2011 ASH slides from the principal investigator of the 003 trial, they have some conclusions there and then they go out to Dr. [indiscernible]. He has a little summary of what he believes, and he clearly feels that a product without treatment-emergent myelosuppression would address an unmet need in the market even after ruxolitinib is approved.

Michael G. King - Rodman & Renshaw, LLC, Research Division

Okay. Will all these patients come in, in remission? Or will some of them be progressing, or do you think you'll have a mix of remission and progression?

Steven E. Benner

These will be patients that will have splenomegaly and active symptoms at the time that they're enrolled in the study.

James A. Bianco

So like COMFORT, where they're getting some best available therapy, but the difference being unlike COMFORT, they'll have a platelet count of 100,000 or less, or I guess less than 100,000.

Operator

There appears to be no further audio questions at this time. Please continue with any of the points you wish to raise.

James A. Bianco

In summary, as we mentioned, we're on track to launch PIX in the EU in the fourth quarter. We're pleased with the progress we've been making on our go-to-market strategy, the prospects for the cost-effective launch, and certainly the prospects for potential sales and sales growth associated with the introduction of this product in the EU. We brought in, as you know, additional experienced management to manage the advancement of important Phase III programs, and as well as to help us seek nonequity-based sources of revenue through pharma-developed partnerships on assets like pacritinib and/or brostallicin. So the next 6 to 12 months should certainly be an exciting and potentially transformational time for the company. And as always, we thank you for your support of both our mission and of the company. Operator, that's the end of our conference call.

Operator

Thank you, sir. Ladies and gentlemen, this does conclude today's presentation. Thanks for participating. 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: transcripts@seekingalpha.com. Thank you!

Source: Cell Therapeutics Management Discusses Q2 2012 Results - Earnings Call Transcript
This Transcript
All Transcripts