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Executives

Dr. Steven Deitcher - President and CEO

Craig Carlson - Senior Vice President and CFO

Analysts

Richard Mueller - Private Investor

Bob Matheron - Private Investor

Talon Therapeutics, Inc. (OTC:TLON) Q2 2012 Results Earnings Call August 13, 2012 12:00 PM ET

Operator

Good day, ladies and gentlemen, and thank you for standing by. And welcome to the Talon Therapeutics Reports Second Quarter 2012 Financial Results and Business Update. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. (Operator Instructions)

As a reminder, today’s conference may be recorded. And it’s now my pleasure to turn the call over to Dr. Steven Deitcher, President and CEO and Board member of Talon Therapeutics. Sir, the floor is yours.

Dr. Steven Deitcher

Good day to everyone on the call. It has been one entire business day since our last call and I will provide some brief remarks and update. Here with me today is Craig Carlson, Talon’s Chief Financial Officer and Senior Vice President.

I’d like to start by indicating that we will be making forward-looking statements and I’d like to refer you to our website, www.talontx.com, where you can review our most recent SEC filings and press releases, and also I would like to refer you to www.marqibo.com for any questions, or if you would like to review our package insert.

I would like to start by noting, as I did on the Investor Call last week that we are extremely heartened and enthusiastic about the receipt of accelerated approval for Marqibo, last Thursday August 9, 2012.

This is the greatest accomplishment for this company to date and has been used as a catalyst to drive our momentum forward, as we continue with important and hopefully value generating company activities.

These activities include, first and foremost, continuation of the Marqibo program. The approval is in adults with Philadelphia chromosome and negative, acute lymphoblastic leukemia in second or greater relapse or whose disease has progressed following two or more prior lines of leukemia therapy. But beyond that indication, we have additional indications being investigated.

We have two ongoing active and enrolling Phase 3 clinical trials. One trial is in the front-line adult ALL setting, namely individuals with newly diagnosed Philadelphia chromosome negative ALL. This trial known as the HALLMARQ trial is a randomized multi-national trial.

This trial will serve to confirm the observed clinical benefit from our Phase 2 rALLy trial, which served the basis for the accelerated approval, but also provides Talon with a near-term potential for an additional labeling for Marqibo.

Our other Phase 3 active enrolling clinical trial known as the OPTIMAL>60 trial is currently being conducted in Germany by the German High-Grade Lymphoma Group. This is a randomized trial in adults with newly diagnosed aggressive histology non-Hodgkin's lymphoma.

These are two unmet medical needs in the hematology oncology realm, very important areas to improve care and we are thrilled to have such significant attention and enthusiasm to evaluate the potential role Marqibo could play in enhancing the care of these patients.

Third and certainly not last, is our ongoing pediatric program being conducted at the U.S. National Cancer Institute where we're nearing completion of the Phase 1 dose-identification trial and are making plans for the late stage development program in pediatric ALL.

Beyond this, we have ongoing and mounting commercial preparedness, taking place at Talon with a target commercial launch of Marqibo in our initial indication in the United States, targeted for the first quarter of 2013.

A parallel track for us, are ongoing partnering discussions regarding Marqibo. These are discussions taking place for ex-U.S. commercial rights but also other forms of transactions are being evaluated. These areas are being explored by company’s both with and some without existing oncology presence.

I'll close by mentioning that the Menadione Topical Lotion randomized Phase 2 trial continues to enroll, this is a trial being run by the Mayo Clinic at several sites. This trial will help us advanced our lead development compound into the Phase 3 development realm. We’re excited about this since this Topical Lotion addresses an extremely important mounting and relatively new toxicity observed in the oncology realm.

At this point, I’m going to turn the call on over to Craig to go over the financials and then we would be happy to address any questions during the Q&A portion of the call. Craig?

Craig Carlson

Thanks, Steven, and thank you to all of you participating in the call today. To echo Steven’s remarks, the approval of Marqibo is indeed a game changer for the company. We will -- we have begun our transition from being a 100% focused on the approval of Marqibo to adding the commercialization of Marqibo to our priority list. And of course, as Steven indicated, we remain focused on the Marqibo clinical development program, as well as for Menadione Topical Lotion.

Let’s begin with a statement of operations. I will discuss the current quarter. I’m not planning to discuss the six-month period but if questions come up during the Q&A, of course, I’ll be happy to answer them.

So for the three months ended June 30, 2012, we reported a net loss of $60.8 million and deemed dividends attributable to preferred stock of $1.5 million, which resulted in a net loss applicable to common stockholders of $62.3 million or $2.85 per share. This compares to a combined net loss of $7 million for the three months ended June 30, 2011.

Of our net loss this quarter, $55.5 million or $2.54 per share reflected the change in fair value of the preferred shareholders right to purchase additional shares of preferred stock and the primary driver of change in fair value was the increase of Talon’s common stock.

Total operating expenses for the three months ended June 30, 2012 was $3.7 million, compared to $4.8 million for the three months ended June 30, 2011. The primary reason for the reduced expenses was lower R&D costs for the quarter. For the corresponding quarter last year, we had higher R&D expenses that were specifically related to the preparation of the Marqibo NDA.

Now, we’ll move over to the balance sheet. As of June 30, 2012, we have cash and cash equivalents of $3 million and total assets of $4.3 million. You will note that we announced in July that we raised an additional $3 million from the preferred stock financing vehicle.

Regarding liabilities, the two largest are the $24.4 million of notes payable net of discounts, and just so some -- folks at times get confused on that our total debt is $27.5 million, but there is a discount related to warrants that were issued at that time.

The other large liability, as I mentioned a moment ago, is the investors’ right to purchase future shares of Series A-3 and that liability is $89 million. And again, this reflects the increase in Talon common stock price. We have a total stockholders deficit today of just about $150 million.

Now, looking forward we expect to have cash usage of $12 million to $15 million for the second half of 2012. We have access to up to $57 million from the preferred stock financing vehicle and we expect to take down relatively small tranches when needed rather than a single large amount.

Now, the amount of cash we need to excess will be greatly influenced by the commercialization strategy that unfolds over the next several months. Should we launch Marqibo alone, our cash need to be greater than if we develop a strategic commercialization alliance.

That includes the summary of our financial update for the quarter. I’ll hand this back to Steven for Q&A.

Dr. Steven Deitcher

Thank you, Craig. We’ll now open the call up for questions.

Question-and-Answer Session

Operator

(Operator Instructions) Looks like we have, our first question on the phone line, our first question on the phone comes from [Richard Mueller], who is a Private Investor. Please go ahead. Your line is now open.

Richard Mueller - Private Investor

Yeah. Congratulations on the success of getting this thing through the FDA.

Dr. Steven Deitcher

Thank you.

Richard Mueller - Private Investor

And there’s always been a question of how many customers, how many patients will be needing this drug in the future, not only just in United States or Canada, Russia, East Asia, a combined number possibly going to need this?

Dr. Steven Deitcher

Well, all I’m really prepared to comment on in detail would be our strictly on-label indication and we’re looking at in the U.S., approximately 2,000 patients per year. If we expand that to include Europe, we could double that and when we go globally, there is limited epidemiologic data.

But we would assume that if we estimate that the rest of the world is half to a whole of the amount that the U.S. represents. We could be looking here, 5,000 plus potential patients on label in the world right now.

Richard Mueller - Private Investor

Okay. Fair enough.

Dr. Steven Deitcher

This doesn’t just obviously, does not take into account future indications, which are actually much larger than our initial indication and we could certainly provide guidance on that in the future.

Richard Mueller - Private Investor

Thank you for answering that for me. Appreciate it.

Dr. Steven Deitcher

Oh! Thank you.

Operator

Thank you, sir. (Operator Instructions) Looks like we do have another questioner in queue, [Bob Matheron], who is also a Private Investor. Please go ahead. Your line is now open.

Bob Matheron - Private Investor

Hey, congratulations gentlemen. Great win. At the conclusion of the HALLMARQ study, will you have to then submit a new NDA or is there are someway that because of Marqibo being already going through the process that HALLMARQ would not have to take that route?

Dr. Steven Deitcher

We would submit what’s called a supplemental new drug application, so it’s not starting from scratch as with the most recent new drug application.

Bob Matheron - Private Investor

Okay. So that could speed whole process up?

Dr. Steven Deitcher

That would -- our hope is to always have things happen as quickly as possible. Obviously, there are certain things such as review cycles at the FDA that are beyond mine or anyone else at Talon’s control.

Bob Matheron - Private Investor

Okay. Another question, is it possible that the current indication could be also used off-label?

Dr. Steven Deitcher

Well, the current, the approved indication is the approved label. If you’re asking, could the drug when it’s commercially available be used off-label that’s at the discretion of the treating physicians.

Bob Matheron - Private Investor

Okay. Hey, very good. Thank you.

Dr. Steven Deitcher

Thank you for your question.

Operator

Thank you, sir. And it appears to be no additional questioners on the phone lines. I’d like to turn the program back over to Dr. Steven Deitcher for any additional or closing remarks.

Dr. Steven Deitcher

Well, again, we appreciate everyone participation in the call. This is just the beginning of what we think is going to be an extremely exciting certainly six months and year if you are at Talon as we continue to advance the Marqibo program, which we are very fortunate to already have up and running and enrolling. But also with our commercial rollout, our ongoing business development related discussions and advancing our second compound Menadione Topical Lotion. So, again, we look forward to giving you updates in the future. Have a great day. Thank you.

Operator

Thank you, sir. Again, ladies and gentlemen this does conclude today’s program. Thank you for your participation and have a wonderful day. Attendees, you may disconnect at this time.

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