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Lorus Therapeutics Inc. Wall Street Analyst Forum Presentation Transcript

by: The Wall Street Analyst Forum September 11, 2008 | about: LRP

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Lorus Therapeutics Inc. (LRP)

Wall Street Analyst Forum

September 10, 2008 9:00 am ET

Executives

Gerry Scott - President, Wall Street Analyst Forum

Saeid Babaei - VP, Business Development

Presentation

Gerry Scott

My name is Gerry Scott, I am President of the Wall Street Analyst Forum, and I will be the host for today’s Biotechnology, Life Sciences and Healthcare program.

Before, I introduce the first company in this morning's program. I would just like to review one or two administrative details especially with today’s program. Most of you have attended our conferences in the past, but for those of you that haven’t, each company conducts a 40 minute Presentation and Question-and-Answer session in this room. So it's usually about 30 minutes or so; 25 to 30 minutes of presentation, 10 to 15 minutes of Q&A.

If you want to re-attend the meeting or attend a meeting perhaps from yesterday that you missed, they are all retrievable in a webcast that's both live and retrievable. It is an audio presentation combined with the PowerPoint presentation. It is retrievable for 30 days, so you can re-access certainly in that way.

Beyond the 40 minute Presentation and Q&A session, here each company will conduct a 40 minute breakout session. Each company will be available for 40 minutes for any follow-up questions that you may have.

So without any further introduction, I would like to introduce the first company in this morning's program, Lorus Therapeutics, is an oncology biopharmaceutical company. They have a new management team in place which is currently undergoing a turnaround situation. They have a robust pipeline with seven anticancer drugs and discovery to advance Phase II stages. The company retains the rights to most of its drug candidates, while consistently developing new partnerships.

They are anticipating a number of critical milestones and corporate partnerships within the next 18 months. Our speaker today will be Mr. Saeid Babaei, who is the Vice President of Business Development. But I see accompanying him in the back is the Chief Executive Officer of the company, Aiping Young as well. Thank you.

Saeid Babaei

Good morning ladies and gentlemen, thank you very much for attending our presentation. We would like to thank Gerry and his team opening such an excellent venue.

I would like to present to you, Lorus Therapeutics, an oncology company based in Toronto. We are publicly traded since 1993, trading both on TSX as well as in AMEX. Our focus is entirely in oncology. We develop novel and targeted and safe efficacious drugs, for treating patients with cancer.

So far our portfolio consists of three lead compounds, plus four other additional anticancer compounds at a pre-clinical stage. We have an experienced team of executive, directors and researchers. As I mentioned, we are based in Toronto with a research and development facility and about 30 people in headcount.

So why Lorus? An overview is a good investment opportunity to convince you . As I mentioned, we have seven anticancer drugs. We retained their rights for most of our drugs. So, obviously when we do a partnership, we do expect [achieving] our revenue and milestones and their royalties based on that. We have a number of important clinical and corporate milestones in partnership within the next 18 months.

So what is our financial snapshot? We have been around obviously for a long time. We have accumulated a number of shares, about 280 million shares outstanding. Our stock is at all times low and partially due to the capital market, trading around at $0.09 on both exchanges. Market cap around $20 million, around average volume of 100,000, and we have relatively a strong cash position about $10 million, and this will take us, actually this number does not include the rights offering which we recently raised about $3.71 million through our existing shareholders.

So, we have finance and cash for the next 15 to 18 months enough to take us to achieve our major milestones. Our burn rate is quite modest, ranges from 1.8 million to 2.1 million, too happy about this. The team is led by Aiping Young who is a co-founder of GeneSense Technologies which in 1999 merged with Lorus and brought a whole series of RNA target technologies in to Lorus. She had a progressive position at Lorus, and led to her positions as its Chief Executive Officer and President in 2006, when she served a number of companies, one of them is Pias Corporation in Japan.

I lead the Investor Relation and Business Development at Lorus, have experience in biotech and healthcare sector for a number of years, as previously at Northern Therapeutics in cell-based gene regenerative medicine and [Virulizin] in cardiovascular, both in Toronto.

We have Dr. Yoon Lee, Vice President of Research. A very accomplished Scientist in RNA biology and recently small molecule area, and he is leading the R&D team. Peter Murray, 30 years experienced with Big Pharma such as Parke Davis and Pfizer leading the Clinical Development; and Elizabeth Williams, Acting Chief Financial Officer previously with Ernst & Young.

Our team is complimented by accomplished Board of Directors, and these are independent directors led by Dr. Denis Burger, the Former Chairman and CEO of AVI BioPharma with also expertise in RNA biology. Two of our major shareholders Mr. Herbert Abramson and Georg Ludwig sit on our Board of Directors. Herbi, the Chairman and CEO of Trapeze Capital is a continuous supporter of Lorus; and Georg Ludwig is the Managing Director of HighTech, which is venture capitalist based in Germany. Then he came to Lorus about two years ago investing over $10 million in our company.

We also have accomplished executives such Mr. Kevin Buchi, the Chief Financial Officer for Cephalon; Susan Koppy, former SVP of Idenix Pharmaceuticals, previously Global Business Development Director at Novartis. Mark Vincent an oncologist by training is the CEO of Sarissa, and Jim Wright the previous CEO of Lorus and now the CEO of NuQuest Bio.

So what is the strategy? At Lorus, we believe that oncology needs to be treated with the cocktail of drugs. So we cannot add toxicity already associated with the chemotherapy compounds. Therefore we need to come up with a more novel way of approach, with a target approach, we developed a safe drug that can be used in wide range of cancers.

We have an ability to move very rapidly from discovery stage into advanced stage of clinical development into both Phase II and Phase III, and we compliment that by in-licensing programs that makes us more robust and more in tune with the markets, and we developed a strong partnership, and once the product get into more mature stage of development.

As you both are aware, all of you, that the oncology market is a very attractive area. First of all, one in three transactions are normally done in oncology, and you can expect much higher growth in revenues through the partnerships on oncology drugs as you can see here.

Lorus has been very successful in establishing partnership and complement the drug development strategy. The panel on the left shows our corporate partners, Sumitomo and Koken. They are working with us for a number of years on some of our antisense portfolio on both drug delivery and targeted therapy.

Cyclacel, we have licensed of one of our small molecule library series of the new compound, the NC 381 to Cyclacel Pharmaceuticals. ImmunoGen is working on our lead compound in immunotherapy, Virulizin which I will talk about in a minute. BioVectra are manufacturing for Virulizin, and then recently in multinational global deal on Virulizin with Zoticon Bioventures, a private equity based actually headquarters' in Israel, but offices throughout the United States.

And obviously academic partnerships will be very important for vitality of any biopharmaceutical company, and we are very happy to be associated with these organizations.

As I mentioned, our focus is to focus on novel and validate cancer target. So far we have two, three targets that are highly validated, one of them extensively in the clinics. We used that by using both RNA and small molecule platform technology.

Our pipeline addresses both unmet medical needs as well as a targeted therapy with a high safety profile. And as an example of that we have two compounds LOR-2040 and LOR-253, [we can speak to that].

Our pipeline on a clinical drug development focus, there are two candidates. Two drugs as a matter of fact; Virulizin as we have invested a lot of money and resources and we have completed a Phase III, which I’ll talk about in a minute and LOR-2040, our lead compound in the RNA targeted therapy has been explored in advanced Phase II in AML, and exploratory trial in a bladder cancer, and LOR-253 which is about to get into the Phase I and we’ll file an IND for that shortly. We also have an interesting series of compounds coming from our small molecule library that implores an extensive attractive opportunity for licensing in an early stage.

So let me start with our lead immunotherapy compound, Virulizin. I would not get too much into signs by, by just saying that it’s an Immunomodulator. It activates your immune system and macrophages and natural killer cells and the targeted cancer cells. So it is very interesting compound, as it is a biologic.

We have done a number of series of clinical trials in various indications. Based on the excellent data in a Phase II we had this compound approved in Mexico for attributing of malignant melanoma, and we sell that till the distributor pull out from their markets.

At the same time we have concluded a Phase III trial. This was a global multinational double-blinded control study in pancreatic cancer. We completed that in 2005, and basically the top line data shows that even though we did not meet the primary end point, which was increasing overall survival, we had an very interesting sub-group analysis. As you know pancreatic cancer, 70%, 80% are (inaudible) patients. These are the patients that have more intact immune system and (inaudible) population in Virulizin obviously had clinical activity, but did not exist or was significant. So what we did, we partnered with Zoticon Bioventures which has a clinical regulatory and more importantly financial power to conduct further clinical trials and to get this drug approved.

So this is not a global deal. This is only for the major markets; U.S., Europe and Israel, and we retain the rights for the rest of the market. We do expect upfront and relatively near term milestone of $10 million, very tier royalty ranging from 10% to 20% based on sales achieved in Virulizin, and finally we own quarter of the new co. which was formed to commercialize Virulizin and called Zor Pharmaceuticals. This equity position is not dilutive up to $5 million in financing.

So there is a lot of upside with Virulizin and we will be part of that without incurring any cost and compromising other compounds that we have. So I am going to switch here a little bit and talk about out lead antisense compound, which is LOR-2040. This is the most advanced RNA approach in cancer in the world. We are exploring that for AML. It is 20mer phosphorothioate oligonucleotide. What it does, it inhibits activities, expression of R2 sub units of ribonucleotide reductase.

This is a very important enzyme for cell division and synthesis, and basically there is no redundant in that half way. So it can do a good job in blocking that enzyme that still officially would not divide. So far they are concerned with the chemotherapy compounds going after this target, because they were too toxic and they were not effective. So therefore our primary scientists, they came with their RNA based approach directly, and so far we see a profound inhibition in the clinics.

So as I mentioned it inhibits the R2, is a validated target. A very important thing is that, once you reduce the expression of this target, the cells and the patients become more sensitive to anti-cancer drugs, and that is what works very well in the combination of therapy. So far we have lot of preclinical data that shows a broad spectrum of activity and in the clinic that we show, yes indeed there is a target down-regulation associated with clinical activity. So it is an excellent target, it is quite specific, and in the clinics we see all that.

So how does it compare first of all to other antisense compounds. As you now are aware, compounds developed by our colleagues or you call them competitors Genentech, ISIS. In our belief and actually in the studies that we did the head-to-head comparison with some of the animal studies and also cell lines, we found that there is more inhibition of R2, it is more efficacious in inhibition of cell growth and cell division using our targets such as compared BCL-2 or (inaudible).

Basically one rational to that is the loss of redundancy in the R2 pathway. We have validated the importance of this target with more novel approaches or you can call the second generation antisense siRNA, and we can see efficacy in the middle panel and might see a significant growth inhibition by the ejection of LOR-1284 which is the sRNA approach.

So LOR-2040 has been extensively studied in the clinic. We were one of the very few companies in Canada who were awarded an extensive partnership and collaboration with the United States NCI. This was a significant investment on their part to take LOR-2040 explore it in (inaudible) various indication.

So we started with five solid tumor indication of prostate, lung, breast, colon and solid tumor in various Phase I and Phase II trials, and one in leukemia in acute myeloid leukemia. Based on those data we concluded that, yes, indeed we want to pursue that in a more advanced stages, and we selected AML as a lead indication for a number of reasons, one of them for the data that we received and also the leukemia cancers tend to be shorter and lesser costly to develop, and for a small company like us that seems a good strategy.

Recently we started a pilot program in myelodysplastic syndrome and acute leukemia again with U.S. NCI, and this is the only trial that explores 2040 as a single agent. All other trials that we have done about seven other ones they are all in combination of strategy. So I will talk about the top line data in the lead indication AML in a minute, and recently we are also trying to embark a pilot program in bladder cancer that uses the delivery of this compound locally in the tissues of the bladder.

So 2040 is an exploding AML. AML is a significant medical need, in a very heterogeneous population. So what we have done, we are specifically looking at the population that is most relevant for our drug. We are looking at the patients of 60 years of health age or younger in refractory and relapsed. Based on the top line data from the Phase Ib, first of all we establish the safety of 2040, which is obviously very important in a manner of the company, we achieved about 35% complete response rate. When you compare that to the historical control which is cytarabine which is part of the standard care is obviously a superior data.

With cytarabine alone in this patient population maximum you can achieve about 20% but mostly about 10% to 15%. Also the down regulation of the target was correlated with the clinical response. We developed in collaboration with Ohio State University a sophisticated ELISA method to measure the inter-cellular concentration of our drug in the tumor cell that are relevant. In this case is bone marrow blasts cells or specifically CD34 a positive cell population. We found that there is a much higher concentration of our drug in the cancer cells versus the non-tumor cells.

Based on this study, we found that 5 milligram per kg is an optimal dose to move to the next step which we are exploring now. Another piece of data I will share with you today is which is really interesting. On the slide on the left you can see these are the patients that responded to 2040, but what is really interesting about them, these are the patients at already high R2 expression. As you can see the first bar the blue one, this has got the highest R2 protein expression and those kind of patients they have a time dependent decrease in R2 expression with 2040. The bars on the right it shows that the patients already if they do not have a high basal R2 expression obviously they did not respond to the drug. Basically this tells you that we are making this more tailored and targeted for the patients that most likely would benefit with this kind of therapies.

I share with you in this slide the design of the current Phase II study that is under way. We are using the same principal investigators as a previous trial. Dr. Klisovic and Dr. Marcucci. Dr. Marcucci is one of the key few leaders in AML. We are happy to be associated with him. These are the refracted and relapsed AML patients of 60 years of age and younger. All these sites are in the United Stats going up to 60 patients. Treatment is LOR-2040 plus high dose Ara-C commonly know as HiDAC, and it will be measured in a number of key assessments, first one being the overall clinical response which is the primary end point, but also other important parameters such as the PK also intracellular response of the 2040, which is really showing that whether the target has been effected by this drug or not.

There is a two-stage design, and since we cannot use the drug alone as a single agents, it would not ethical, because these patients already have a failed high dose Ara-C. So what we did is that we are delivering 2040 first and then high dose Ara-C 24 hours later so this would give you single agents activity, lot of input on PK parameters for the first 24 hours, and then the arm it would be the other way around, high dose Ara-C will be given first followed by our drug. The arm that is more applications, the next 30 patients will be repeated. So, this trail is coming along very well, and I will show you that some of the clinical milestones that you can expect from us in the near future. The trials that 2040 has been explored so far addresses the market of well over $1 million, and hopefully we can show data in some of these indications in a more advanced stages.

Finally let me share with you a new program relative to Lorus that we started about number of years ago, and that is our small molecule that we are very excited about. We have gained a very sophisticated medicinal chemistry and biology repeated there at Lorus and we are using a structured base drug design to come up with a very novel compound.

So far we have the three proprietary sub-library that has a lot of interesting medicines and biologists coming arising from that. We are obviously using a target based approach, focusing on important targets. I better show you. So the first library on top is the commercial library and based on that we have three sub-library that are proprietary. The sub-library 1 is a broad focus one and is more sort of a discovery platform. Based on what arises from that library, we have two other ones that they are more focused.

Number two is a tumor suppressing one. A good example of that is LOR-253, which expresses or induces a very important tumor suppressor called KLF4 I will show you in a minute, and in sub-library number 3 these are multi kinase inhibitors, Kinase Focus one, which are obviously both of this sub-library 2 and 3 are very much of interest and demand by larger players in the market. So basically we are using drug-based design and we use quantitative structure activity modeling, we call it QSAR modeling to come up with a best structures and fit probably docking around drug receptive reaction. We have a sophisticated and a wide range of in vitro and in vivo screening model that we can test in-house. We do that in preliminary toxicology, PK formulation all in-house, and we can do this quite rapidly and less expensively than outsourced to CRO. Finally, when these compounds go beyond these optimizations, we send it out for formal GLP toxicology.

A good example of this one is a lead compound LOR-253, is a novel chemical entity. We have a very strong IP around this compound, is an important selective growth inhibitor in number of cancer cell line, notably the non-small cell lung cancer, colon prostate and the new generation of this compounds and leukemia. The mode of action of this one is very well studied, and the reason we had to go beyond what was really required by the industry because this is a first in class. So far to our knowledge there is no compound that can activate this tumor suppressor. This is a first one. Basically what it does it accumulates labile zinc, these are the free zinc associated -- not associated with other enzymes and it activates (inaudible) that is one, and through that you get activation in important tumor suppressor Kruppel-like Factor 4. This arises in the inhibition of cyclin D1 which is a cell cycle arrest at the [G1] phase.

We are just finishing the GLP toxicology for this compound, and prepare for an IND hopefully by end of this year or early '09. As you remember this library that we showed you before. Other compounds are rising from that, an example is LOR-220 which is a PI3 kinase/mTOR inhibitor and LOR-500. I may have shared with you that (inaudible) mentioned earlier and another company based in UK called Pyramid, they had a similar compounds to the LOR-220 slightly more advanced, it just got into Phase I and got acquired by Roche recently earlier this year with very attractive deal turns of $160 million to acquire the company plus additional $50 million in milestone payments. There is another good example of oncology platform company based in Toronto, Arius Research, that again got bought out by Roche for a very attractive term for around $191 million.

So the appetite for the market for this kind of molecules and compounds is quite high despite lack of interest or the conditions in capital markets, the M&A acquisition market or licensing is very favorable, and we are very happy to be in that space.

So, let me share with you some of the achievements we had, the things that we promised last year and we had accomplished. On a corporate side, we did a corporate re-org that issued a non-diluted financing that gave us about $7 million financing.

We have secured a partnership for Virulizin for further clinical developments. On the 2040 front, we enrolled the first patient in Phase IIb. We initiated exploratory trials or program in the bladder cancer and we were granted by European Medical Agency an orphan drug status for the 2040 in AML, which obviously give us market exclusivity for 7 years and on the 253, we initiated a formal GLP.

So what can you expect from us in the next 18 months or so? We are planning to finish the pre-clinical studies for 2040 in bladder cancer and initiate a pilot program in that indication. The interim data from the advanced Phase II we are hoping for the first part of 2009 followed by the top-line data and finally we can share with you the top-line data from the bladder cancer. Our plans for 2040 is obviously to pursue in more advanced stages perhaps in the Phase III or a larger Phase II trial with a corporate partner that have the financial resources to take this one to the market and registration at the earliest.

On a 253, we are planning to finish the formal GLP, it is only few weeks away and file for an IND and hopefully embark on a Phase I trial. Already we have a tremendous number of interests in our 253 program from corporate partners and it would be a special event.

So in summary, we have a number of drug candidates that are very interesting and can pose a very good partnership for us. Our business model is to very rapidly move from a drug discovery to clinical stage and out-license up to Phase II and we have the expertise and track record to do this.

Thank you very much and I will be happy to answer the questions.

Question-and-Answer Session