Bill Kaplan – VP, General Counsel and Corporate Secretary
Wendy Wee – VP and Controller
Michael Wick – Chairman, CEO and President
Mark Monane – Needham & Company
Glenn Hanus – Needham & Company
Telik, Inc. (TELK) Q2 2008 Earnings Call Transcript August 11, 2008 4:30 PM ET
Ladies and gentlemen, thank you for standing by. Welcome to the Telik 2008 second quarter earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. (Operator instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Mr. Bill Kaplan. Please go ahead.
Thank you, operator. I'm here today with Dr. Michael Wick, our Chairman and CEO and Ms. Wendy Wee, our Vice President and Controller. Cynthia Butitta, our CFO, is not available today because of a family medical emergency.
As you've seen, we've recently released our second quarter financial results and Dr. Wick will provide a Company update on our clinical development programs as well as our preclinical pipeline.
Please note the information to be discussed on this conference call and webcast including responses to questions will include forward-looking statements. Any statements that are not statements of historical fact may be considered to be forward-looking statements, including those related to anticipated enrollment in clinical trials, future clinical trials and future actions in our ongoing trials, results of our ongoing clinical trials, the timing of the release of results from our completed trials, and the potential for TELINTRA, TELCYTA or other drug candidates to treat one or more types of cancer.
There are a number of important factors that could cause our actual results to differ materially and adversely from those indicated by these forward-looking statements, including, among others, that none of our product candidates including TELINTRA and TELCYTA have been determined to be safe or effective in humans or received regulatory approval for marketing. It may take us several years to complete clinical trials of our product candidates. Success in preclinical testing and early clinical trials does not ensure that later trials will be successful. Interim results of clinical trials do not necessarily predict final results. If our competitors develop and market products that are more effective than our product candidates or obtain regulatory approval before we do, our commercial opportunity will be reduced or eliminated. And if we do not obtain regulatory approval to market in the U.S. and foreign countries, we will not be permitted to commercialize our product candidates.
For detailed information about the risks and uncertainties that could cause actual results to differ materially from those implied by or anticipated in these forward-looking statements, please refer to the Risk Factors section of our quarterly report on Form 10-Q for the quarter ended June 30, 2008. We do not undertake any obligation to update these forward-looking statements. This conference call and webcast is a copyright of Telik, Inc. No reproduction, retransmission or other copies of this webcast may be made without the express written permission of Telik.
I will now turn the call over to Ms. Wee.
Thank you, Bill. As you have seen in our news release, Telik reported a net loss of $13.6 million or $0.26 a share for the second quarter of the year compared with a net loss of $14.3 million or $0.27 a share in the second quarter of 2007.
The $13.6 million net loss for the second quarter includes a $3.1 million impairment charge related to auction rate securities reflected in interest and other income or expense.
Total operating expenses in the second quarter were $11 million, down approximately 30% from $15.8 million in the 2007 second quarter. The decline in operating expenses was primarily a result of reduced clinical trial and related expenses, lower stock-based compensation expense, and lower headcount. Operating expenses in the second quarter included stock-based compensation expense of approximately $2 million.
As of June 30th, 2008, Telik had $72.4 million in cash, cash equivalents, and investments including restricted investments compared with $93.2 million at December 31, 2007.
I will now turn the call over to Dr. Wick to provide a Company update.
Thanks, Wendy. Today I'll update you on our clinical development programs as well as our preclinical pipeline. Let me start with our progress on TELINTRA. As you recall, we are currently evaluating TELINTRA tablets in two indications – myelodysplastic syndrome or MDS, a form of pre-leukemia, and chemotherapy-induced neutropenia, a side effect caused by most common chemotherapeutic agents. We have initiated both studies and are currently in the process of enrolling patients.
The randomized Phase 2 TELINTRA study in MDS is expected to enroll 86 patients and will compare two dose schedules of TELINTRA tablets in low-to-intermediate risk one MDS patients. One group of patients is given TELINTRA daily for two weeks with one week off, as defining one cycle. The second group of patients receives the same dose of TELINTRA for three weeks with one week off therapy. The primary objective of this study is to determine and compare the hematologic improvement rate in the erythroid or red cell line in each group by the International Working Group 2006 criteria. The hematologic response is based on an improvement in hemoglobin or an achievement of transfusion independence in transfusion-dependent patients lasting at least eight weeks. Patient will receive treatment for up to six months.
The Phase 2 study with TELINTRA tablets in CIN is in non-small cell lung cancer patients, who are being treated with standard front-line combination chemotherapy. The study is randomized with one group receiving TELINTRA following chemotherapy and a chemotherapy-alone control group. Our objective in this study is to evaluate the effect of TELINTRA on accelerating hematopoietic recovery during the first two cycles of chemotherapy as measured by absolute white blood cell level recovery, days of absolute white cells less than 500, and the instance of febrile neutropenia or that is, fever accompanying the low white blood cell level.
We also continue to work with the Severe Chronic Neutropenia International Registry group on that clinical trial of TELINTRA in severe chronic idiopathic neutropenia, which may be initiated this year as well. Our principle investigators recommend this Phase 2 study consist of a 20-patient sample size for assessing the potential for TELINTRA for further development in this orphan indication.
We continue to follow the patients on the ASSIST-5 trial, which is evaluating TELCYTA in combination with Doxil versus Doxil in platinum refractory second-line ovarian cancer patients. We are currently in the process of closing this study and report the data once available. As we mentioned previously, we expect the data to be available late this summer.
We remain focused on partnering TELCYTA as the basis of furthering development and we believe this update data on TELCYTA may support our efforts in pursuing partnering opportunities.
We continue to advance TLK58747 through IND-enabling toxicology studies. TLK58747 is a novel, small-molecule, orally and intravenously available cytotoxic that has been shown to have anti-tumor activity in multiple lines of human cancer, including leukemia and brain cancer. We have shown that TLK58747 does cross the blood-brain barrier in support of this indication.
As you may recall, our preclinical pipeline is generated through our proprietary TRAP discovery technology as we apply it to a variety of validated, biological cancer targets. In addition to TLK58747, we are advancing programs to develop small molecule inhibitors of four validated oncology targets. These include Aurora kinase, VEGFR2, Proteasome and PLK-1. In vitro data for some these programs were initially presented earlier this year at the AACR meeting. Each of these programs has now achieved in vivo anti-tumor activity, which means that we have reached proof-of-concept in relevant models of human cancer in preparation for further development.
The first program targets Aurora kinase and we plan to select a development candidate for this program by the end of the year. Our molecules are in fact dual inhibit both Aurora kinase and the vascular endothelial growth factor receptor called VEGFR2. Dual inhibition of these targets may provide an advantage in combating cancer by attacking both cancer cell replication through the inhibition of Aurora kinase necessary for the cell division and the formation of new blood vessels necessary for tumor growth by inhibition of the VEGFR2 receptor. These compounds are orally active and show significant anti-tumor activity in a variety of multiple tumor types in preclinical animal studies.
The second program targets VEGFR2 alone. As you know, VEGFR2 is the target of bevacizumab, a monoclonal antibody that's approved and marketed for the treatment of cancer in combination with chemotherapy regimen. Our small molecule inhibitors of VEGFR2 are orally-active in cancer mouse models and have been shown to work by inhibiting tumor blood vessels, also. An orally active small molecule may offer clinical advantage over a monoclonal antibody. We are currently working towards the selection of a preclinical development candidate in this program.
The third program targets the proteasome. Ubiquitin proteasome system plays a key function degrading proteins that are involved in cell division and proliferation, and proteasome substrates are found to be deregulated in cancer cells. Modulation of proteasome activity is an extractive strategy for fighting cancer and is a mechanism of action of an approved drug, bortezomib or Velcade. We have our discovery proteasome inhibitors that are novel, non-peptide-based and orally-active in multiple animal models. We are working towards the selection of a development candidate in this program as well.
The fourth program targets polo-like kinase 1, also known as PLK1. PLK1 is an oncogene and its over-expression has been observed in many tumor types. Inhibition of PLK1 would be expected to arrest tumor cells and cell division, leading to cancer cell death. In this program in which we have also demonstrated in vivo activity in animal models, we are also working at a selection of an orally active development candidate.
Success against a broad variety of validated biological targets is a testimony of the applicability and usefulness of our TRAP technology that we use to discover novel lead structure and inhibit these targets that generated these programs as various advanced stages of preclinical achievement. All of these programs, including access to the TRAP technology, offer a wide range of important partnering opportunities for our ongoing business development efforts, and the pace of the preclinical development will be closely coupled with our ability to obtain partnership arrangements.
We recently announced the addition of Dr. Stefan Ryser as Senior Vice President of Corporate Strategy. Dr. Ryser's extensive industry experience and knowledge of Telik, Inc. will be an important addition to our management team and strengthen Telik's ability to achieve its key business goals.
Operator, you may now open the lines for questions.
(Operator instructions) Our first question comes from the line of Mark Monane. Please go ahead.
Mark Manone – Needham & Company
Good afternoon. Thanks for reviewing the programs with us. Question for you on TELINTRA in MDS. Could you comment on the use of TELINTRA in combination with ESAs and/or Revlimid or approved drugs for this indication? Could this drug be used – do we know any – do we have any preclinical information on the utility of using two agents together?
No. In answer to your question I'll make really three comments. The safety profile, as reported at ASH last year on the oral formation and in previous meetings on the IV formulation, really support a drug that has a relatively favorable safety profile, certainly not overlapping with the drugs that you mentioned, number one. Second comment I would make is that TELINTRA does not operate through the erythropoietin receptor, so again it would both be either complementary to or at least not be involved in the current controversies about the stimulation of growth factor receptors in the treatment of certainly MDS. And the final question is as with most cancers we believe that the future is in combination chemotherapy and at least based on the preclinical data we have or available and on the methods of action that we have to date would suggest that certainly TELINTRA would be worthy of being tested in combination with those agents and that's an important part of our development program that would follow these Phase II studies.
Mark Manone – Needham & Company
That's helpful. And we have a financial question for you from Glenn.
Glenn Hanus – Needham & Company
Hi, it's Glenn. Two financial questions. One is what is the face amount of your auction rate securities and do you have any provisions for liquidity that you might use if you can't get them liquid, like, for example selling them or borrowing against them?
I would say, and as you know they've been in the news, they represent a relative small percentage of our overall assets. They've been marked down aggressively at this stage I think for a total of $4 million or $5 million. Clearly, they've been in the news recently and large institutions have indicated a willingness to arrange these. None of these are subprime mortgages. They're the highest quality auction rate securities. So we continue to explore all possibilities to liquefy them when we need to but clearly we're in a good position now without having to address that at this stage.
Glenn Hanus – Needham & Co.
Thank you for the added information and do you have an update on your cash burn for 2008?
We expect our cash to last until mid-2010 and we will manage to it.
Glenn Hanus – Needham & Co.
Mark Manone – Needham & Co.
Thanks for the added information.
(Operator instructions) No one else has queued up for questions. Please continue.
Good. Again, thank you again for joining us today. We look forward to seeing you. We will be presenting at the UBS Investor Conference at New York in September. Look forward to seeing you then. Thank you very much.
Thank you. Ladies and gentlemen, this concludes our conference for today and thank you for using AT&T Executive Teleconference. You may now disconnect.
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