SuperGen, Inc. Q2 2008 Earnings Call Transcript

SuperGen, Inc. (SUPG)

Q2 2008 Earnings Call Transcript

August 4, 2008 4:30 pm ET

Executives

Timothy Enns – SVP, Corporate Communications and Business Development

James Manuso – Chairman, President and CEO

Michael Molkentin – CFO and Corporate Secretary

Greg Berk – Chief Medical Officer

Michael McCullar – VP, Drug Discovery Operations

Analysts

Derek Jellinek – Susquehanna Financial Group

Ram Selvaraju – Rodman & Renshaw

Matthew Osborne – Lazard Capital Markets

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Second Quarter 2008 SuperGen Earnings Conference Call. My name is Marcia, and I will be your coordinator for today's call. At this time all participants are in a listen-only mode. We will conduct a question-and-answer session toward the end of this conference. (Operator instructions)

I would now like to turn the call over to Mr. Timothy Enns, Senior Vice President of Corporate Communications and Business Development. You may proceed.

Timothy Enns

Thank you, operator. Good afternoon, and thank you for joining us to discuss SuperGen's 2008 second quarter financial results. With me today on this call are Dr. James Manuso, President and Chief Executive Officer; Michael Molkentin, Chief Financial Officer; Dr. Greg Berk, Chief Medical Officer; and Dr. Michael McCullar, Vice President-Drug Discovery Operations. In a few moments, James Manuso and Michael Molkentin will deliver remarks on the 2008 second quarter financial results and provide a summary of our business outlook. After our prepared comments, we will open the line for questions. A copy of the earnings press release is available on the ‘Investor Relations’ section of our website at www.supergen.com. In addition, this call is being webcast and may be accessed via the ‘Investor Relations’ section of our website. A webcast replay will be available for 90 days.

During the call, we anticipate making projections and forward-looking statements that are based on management's expectations. Actual results may differ materially from these forecasts due to various factors. There are significant risks and uncertainties in biotechnology research and development. There can be no guarantee that our products or product candidates will progress in clinical trials as we expect or that we will ultimately obtain approvals for the indications that we seek. Moreover, if the 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 such factors as competitive developments, launches of new products, the timing of anticipated regulatory approvals or other regulatory action or patent disputes and litigation. 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, including reports on our most recently filed Form 10-K and Form 10-Q. The Company undertakes no duty to update forward-looking statements.

For those of you interested in learning more about SuperGen at an upcoming investor event, we will be presenting at the BMO Focus on Healthcare Conference tomorrow, August 5th, in New York, and the UBS Global Life Science Conference in September. These events will be webcast live and available for replay via the ‘Investor Relations’ section of our website.

I will now turn the call over to Dr. James Manuso, who will provide highlights of our 2008 second quarter. Jim?

James Manuso

Thank you very much, Tim. Good afternoon, and thank you for joining us today for SuperGen's 2008 second quarter financial results conference call. The quarter proved to be challenging for our stock, but very productive with respect to our core initiatives. With regard to our revenue generating partnership relating to Dacogen, in early July we commented on preliminary results from a Phase 3 clinical trial initiated in 2002 and conducted by the European Organization for Research and Treatment of Cancer, also known as the EORTC. This trial compared a three-day intensive Dacogen for injection regimen to best supportive care in elderly patients with myelodysplastic syndromes.

As we stated in early July, the data did not demonstrate a statistically significant advantage of Dacogen treatment on median survival compared to best supportive care. Although the details of the trial have yet to be presented, we note that the trial administered Dacogen on a three-day dosing schedule in which the number of treatment cycles was unfortunately limited. Subsequent to database lock and the completion of data analysis, comprehensive results of the study, including secondary efficacy end points and safety data, will be presented by the EORTC at an upcoming scientific forum.

During Johnson & Johnson's 2008 second quarter earnings call in mid-July, that company announced that it would not submit the European Union Marketing Authorization Application for Dacogen in 2008. J&J indicated it would continue to analyze the data, and later this year will meet with European regulators to discuss the comprehensive findings from the study.

Last Thursday, Eisai reported Dacogen sales for the fiscal year 2008 first quarter of approximately $42 million, an estimated 17% increase from the prior quarter Dacogen sales of approximately $36 million. Eisai is firmly committed to the future development and marketing of Dacogen. A Dacogen submission is in preparation for the five-day dosing regimen for MDS in the U.S. In addition, Johnson & Johnson continues to register Dacogen in countries where it is appropriate to register an FDA-approved drug.

While we are disappointed with the preliminary results of this Phase 3 trial, our focus remains unchanged. We continue to invest in an organization that is capable of creating value outside of Dacogen. Our business model continues to focus on the discovery of novel assets and their opportunistic monetization conducted within a framework of fiscal discipline.

With respect to controlling costs, we have initiated actions to close our European subsidiary, known as EuroGen Pharmaceuticals Limited, based in the United Kingdom. Closure is anticipated to reduce operating expenses in future periods by up to $1 million annually. We expect this closure to be completed by year end and to have no major impact on our core business or productivity.

Although the EORTC preliminary survival trial results for Dacogen did not demonstrate a survival advantage for treated patients, we are pleased to report that Dacogen royalty revenues for the second quarter were $8.1 million, and we ended the quarter with nearly $88 million in cash, cash equivalents, and marketable securities. Moreover, Eisai, our worldwide licensee of Dacogen, has not altered Dacogen sales guidance of approximately a 30% increase over 2007 sales, or approximately $157 million. This represents a potential royalty revenue stream for SuperGen this year ranging from $32 million to $35 million.

With regard to business development as it impacts our long-term corporate strategy, we expect to manage our expenses and especially our product development costs by monetizing our assets through strategic partnerships. This strategy is intended to sustain our discovery efforts while minimizing our committed costs for later stage development. Over both the short and long terms, we believe this strategy will sustain a growing and diverse pipeline to create enhanced shareholder value within a framework of fiscal discipline.

During the second quarter, SuperGen's product pipeline has advanced significantly and was highlighted in six poster presentations and two oral presentations between the American Association for Cancer Research Annual Meeting and the European Hematology Association Conference. I will provide additional color on these presentations at the end of the conference call.

In April, we hosted a well-attended Analyst Day event in New York City. This provided investors and analysts with broader access to SuperGen management and greater detail on our product pipeline. Slides from this presentation are available on our website for your review.

Moving on to the product pipeline, our most mature compound in the clinic is MP-470, an orally bioavailable Rad51 suppressor and selective tyrosine kinase inhibitor. Phase 1 single agent and Phase 1b combination therapy trials are currently ongoing in patients with solid tumors. Phase 1 interim results have been favorable and demonstrate that MP-470 as a single agent appears to be safe and well tolerated at daily doses up to 1200 milligrams. There were no dose limiting toxicities observed, and dose escalation is continuing on a twice daily schedule. Clinical activity has been noted in patients with neuroendocrine and small cell lung cancer in the Phase 1b combination trials and in the single-agent setting in a refractory gastrointestinal stromal tumor or GST patient. As a reminder, the DNA repair mechanism that MP-470 affects has drawn substantial commercial attraction and is believed to represent a broadly applicable therapeutic strategy for treating cancers.

Looking ahead, we're on schedule to successfully complete two MP-470 milestones later this year or early next year. First, a Phase 1b trial in a lethal type of brain cancer called glioblastoma multiforme. We'll examine MP-470 in combination with radiation therapy plus Temozolomide, the current standard of care. Second, we anticipate initiation of a Phase 2 combination trial of MP-470 in lung cancer patients.

SuperGen's most advanced preclinical compound is SGI-1776, a PIM kinase inhibitor. PIM is an important and novel target for cancer drug development as it is implicated in a variety of critical processes known to be important for cancer cell growth, including suppression of program cell death, or apoptosis; regulation of transcription; regulation of cell cycle progression; and drug resistance through pathways such as mTOR and BCRP.

SGI-1776 is a highly potent and potentially a first-in-class inhibitor of PIMs 1, 2, and 3. Activity has been observed in a broad range of human xenograft models, including solid tumors and leukemias and lymphomas. This is consistent with the potentially broad applications of PIM inhibition. We expect to file with the FDA an Investigational New Drug, or IND, application for SGI-1776 during the second half of this year.

Our next compound in the preclinical stage is S-110, a second generation highly potent DNA hypomethylating agent, a proprietary prodrug of decitabine. As a reminder, DNA hypomethylation is a commercially validated therapeutic approach, as evidenced by the FDA approved agents, Dacogen and Vidaza. As expected with a DNA hypomethylator, we have shown that S-110 in vitro up-regulates genes known to serve protective functions in cancer, such as tumor suppressor genes. Most notably, however, it has improved stability and a longer half-life compared to existing formulations of decitabine. It exhibits significant activity in animal models with less toxicity than existing formulations of decitabine. We expect to initiate a Phase 1 trial for S-110 in the first half of 2009.

Finally, SGI-1252 is our JAK2 inhibitor, currently in the preclinical stages of development. SGI-1252 is oral. It is highly selective for JAK2, and has low nanomolar potency. Notably, this compound inhibits the V617F JAK2 mutant kinase which plays a causal role in myeloproliferative disorders. SGI-1252 may have potential applications in solid tumors. It is our intention to seek a commercial partner for SGI-1252.

At this time, I would like to turn the call over to Michael Molkentin, who will provide details of our 2008 second quarter and an update on our 2008 annual financial guidance. Michael?

Michael Molkentin

Thank you, Jim. As today's press release indicates, SuperGen's total revenues for the 2008 second quarter were $8.1 million compared with $4.6 million for the same prior year period. Total revenues for the current and prior year second quarters consisted entirely of royalty revenue and represents a 76% increase over the same prior year quarter.

Excluding the gain on sale of products, total costs and operating expenses for the 2008 second quarter were $11 million compared with $19.6 million for the same prior year quarter. The primary reason for the decrease in operating expenses were lower acquired in-process research and development costs, a reduction in general corporate expenses, and lower stock-based compensation expense, offset in part by higher research and development costs related to product development activities, including ongoing clinical operations, and accrual of estimated severance costs in the amount of $322,000, relating to the anticipated closure of our European operation in the second half of this year. We anticipate the closure of our European operation will reduce operating expenses by up to $1 million annually in future periods.

Total operating expenses for the 2008 second quarter include stock-based compensation expense of $670,000, compared with $1.1 million for the same prior year period. The gain on sale of products for the 2008 second quarter was $560,000 compared with $25.8 million for the same prior year period. The gain in the current year quarter represents receipt of an annual payment in the amount of $400,000 paid by Mayne Pharma and also a reversal of a residual product returns reserve in the amount of $160,000 related to Nipent that is no longer required due to the expiration of the contractual return period. The gain on sale of products for the same prior year period relates primarily to the initial recognition of the deferred gain on sale of products to Mayne Pharma, and to a lesser extent, the recognition of a gain on the sale of other products to another entity.

The Company reported a net loss for the 2008 second quarter of $4.9 million or $0.08 per share compared with net income of $11.1 million, or $0.19 per share, for the same prior year quarter. The net loss for the 2008 second quarter includes a non-operating charge of $3.1 million reflecting other than temporary decline in the value of our equity investment in AVI Biopharma. There was no similar non-operating charge in the prior year.

Total revenues for the six months ended June 30th, 2008 were $16.3 million compared with $9 million for the same prior year period. Total revenues for the six months ended June 30th, 2008, consisted of $16.3 million in royalty revenue compared with $8.4 million for the same prior year period and represents a 93% increase over the prior year. There was no net product revenue for the six months ended June 30th, 2008 compared with $621,000 in the prior year. The decrease in net product revenues during 2008 is due to the sale of the Company's worldwide rights for Nipent to Mayne Pharma in a prior period.

Excluding the gain on sale of products, total costs and operating expenses for the six months ended June 30th, 2008, were $22 million compared with $28.5 million in the prior year. The primary reason for the decrease in total costs and operating expenses were lower acquired in-process research and development costs and a reduction in stock-based compensation expense, offset in part by higher research and development costs related to product development activities, including ongoing clinical operations and accrual of estimated severance costs related to the anticipated closure of our European operation.

The gain on sale of products for the six months ended June 30th, 2008 was $1.6 million compared with $25.8 million in the prior year. The gain on sale of products for the six months ended June 30th, 2008 represents the receipt of multiple payments totaling $1.4 million paid by Mayne Pharma relating to the sale of Nipent and SurfaceSafe and the reversal of a residual product returns reserve. As previously indicated, the gain on sale of products for the prior year relates primarily to the initial recognition of the deferred gain on sale of products to Mayne Pharma and the recognition of a gain on the sale of other products to another entity.

The Company reported a net loss for the six months ended June 30th, 2008 of $5.9 million, or $0.10 per share compared with net income of $7.7 million, or $0.14 per share in the prior year. The net loss for the six months ended June 30th, 2008 includes the non-operating charge for an other than temporary decline in the value of our equity investment in AVI BioPharma. We had no similar non-operating charge in the prior year.

The Company had approximately $88 million current and non-current unrestricted cash, cash equivalents, and marketable securities as of June 30th, 2008.

At this time, I will provide an update on our annual financial guidance for 2008. We have not changed significantly our guidance since the 2008 first quarter conference call. Our royalty revenue remains unchanged and is forecasted to range from $32 million to $35 million during 2008. We are also forecasting additional receipts related to the sale of products to Mayne Pharma estimated from $1.6 million to $2.6 million. Research and development expenses remain unchanged for 2008 and are expected to range from $34 million to $36 million, with the growth over 2007 continuing to be influenced by anticipated costs related clinical trial programs such as MP-470, ongoing preclinical product development efforts, and investment in the discovery, preclinical, manufacturing, regulatory and clinical development operations within the organization.

We expect to record a non-cash charge during the second half of 2008 of approximately $5.2 million for acquired in-process research and development resulting from a milestone payment to the former Montigen stockholders. This potential payment, made in the form of equity, is contingent on the filing of an IND with the FDA of a second drug emanating from the acquired technology.

Selling, general, and administrative expenses have been reduced slightly from our previous guidance, and are now estimated to total approximately $13 million for the year. Included in total operating expenses for 2008 is a reduction in non-cash stock-based compensation expense from our previous guidance to approximately $3.5 million annually.

Based on the Company's revised financial guidance for 2008, the estimated loss from operations has decreased from our prior guidance to a current range of $16.6 million to $18.6 million. Lastly, the Company's revised weighted average shares outstanding for 2008 is expected to be approximately 58.1 million common shares.

This concludes the review of our financial results for the 2008 second quarter and a revised annual financial guidance for 2008. I will now turn the call back to Dr. Manuso for closing comments.

James Manuso

Thank you very much, Michael. Before we open the line to questions, I would like to provide an update on our participation at two important scientific conferences during the second quarter, and touch briefly on future presentations. In April, our pipeline was highlighted in five poster presentations, and an oral presentation, at the American Association of Cancer Research Conference in San Diego, California. First, with regard to MP-470, we presented data demonstrating that this compound effectively sensitizes prostate and breast cancer cells to erlotinib, known commercially as Tarceva. MP-470, in combination with erlotinib, effectively suppressed the HER pathway, suggesting that concurrent administration of both compounds could represent a new approach to the treatment of prostate and breast cancers.

Second, we highlighted Phase 1 clinical trial data indicating that MP-470 is bioavailable and safe in humans.

Third, we highlighted the activity of MP-470 against synovial sarcoma cells. MP-470 inhibits the in vitro growth and migratory capacity of synovial sarcoma cells, blocking tyrosine phosphorylation of several receptor tyrosine kinases known to be expressed in synovial sarcoma. Studies are ongoing with MP-470 in combination with several chemotherapeutic regimens to define active dosing that might lead to improved clinical efficacy.

Fourth, we highlighted data that showed S-110 improves the in vivo profile of decitabine. S-110 demonstrated robust anti-tumor activity in prostate and cisplatin resist ovarian carcinoma xenograft models. Additionally, S-110 restored sensitivity to cisplatin in the ovarian cancer model. Notably, reduced toxicity was observed, along with an increased half life compared to decitabine.

Fifth, SGI-1776 was highlighted in an oral presentation describing tumor regression in acute myologenous leukemia, or AML, xenograft models.

In June, our pipeline was highlighted in one poster presentation and one oral presentation at the European Hematology Association meeting in Copenhagen, Denmark. At this scientific conference, we highlighted SGI-1776 and its effects on tumor regression in AML xenograft models. In addition, our JAK2 kinase inhibitor was featured in an oral presentation, demonstrating that it prevents tumor cell proliferation in vivo.

Looking ahead, in the second half of 2008, we anticipate presenting new data on our pipeline at the following scientific conferences

The European Society for Medical Oncology, or ESMO during the second week of September; the American Society for Translational Research and Radiation Oncology & Radiology, or ASTRO, during the second week of October; the EORTC-NCI-AACR meeting in the third week of October; and the American Society of Hematology Annual Meeting, or the ASH Meeting, during the second week of December.

In closing, SuperGen has a growing pipeline of novel and proprietary oncology drugs, and a robust discovery platform to sustain pipeline growth. With a strong financial position and a relatively low net cash burn rate, we remain financially sound. We are committed to creating enhanced shareholder value by deploying a business development strategy that creatively monetizes our assets while maintaining fiscal discipline. I look forward to updating you as the milestones are reached and goals are met in the remainder of 2008 and beyond. And as always, we thank you for your interest in and support of SuperGen.

This concludes our prepared remarks. At this time, Dr. Greg Berk, Michael Molkentin, Dr. Michael McCullar, Tim Enns and I are happy to answer your questions. Operator, we'll take questions at this time, please.

Question-and-Answer Session

Operator

(Operator instructions) Your first question comes from the line of Derek Jellinek. You may proceed.

Derek Jellinek – Susquehanna Financial Group

Great, thank you. Thanks, guys. Good afternoon. Just a couple questions, if I may. I know it's purely speculation, but could you guys comment on Dacogen's trial failure, what you believe was the causative reason for that? And at what specific sci-tech forum is EROTC going to present the Dacogen results? And further to that, do you think Eisai is a little optimistic given that they're going to file on the five-day dosing regimen based on an open-label single arm study, and what is your take of their $157 million '08 guidance?

James Manuso

Okay. Well, let's start with speculation regarding the Dac failure. As you know, this was the – this trial was designed during the year 2000. It was the three-day intensive regimen. Since that time we've learned a great deal about how to deploy decitabine in both of its forms, and also with respect certainly to S-110. It's our belief that the number of cycles of treatment, as well as the intensity of treatment, is probably in retrospect suboptimal. Hence the reason for the development of the five-day regimen. And after I answer a couple of other of your questions I will (inaudible). As far as when the EORTC results will be presented has not yet been announced, although it certainly is our belief that it would most likely occur at the ASH conference in December.

And finally, with respect to Eisai's submission of the five-day regimen to FDA based on the Phase 2 open-label study, last representation, it is certainly their intent, based on the results from that trial, to (inaudible) application with supplemental NDA to the agency, although, of course, we will have to refer you to Eisai on that one.

And as far as their guidance is concerned, as you know, Derek, I perceive Dacogen as a variable annuity from a revenue perspective for us. So we track that on a real-time basis, and certainly based on the results that we've presented to you today, it's our belief going forward that for certainly this year – and we've reiterated in effect our guidance for this year – that we'll hit the numbers that had originally been intended. And going forward, I certainly believe that Eisai's intent is to undertake the sales and marketing war that will be necessary in order to assure the maximization of revenues from the drug.

But getting back to your first question about speculation as to why Dacogen may have failed in the trial, I'd like Greg Berk to address that. Greg?

Greg Berk

Hi, Derek. I really would be totally speculating without seeing the results, so we all look forward to seeing that when it's presented, probably at ASH.

Derek Jellinek – Susquehanna Financial Group

No, no, I can appreciate you guys. But I was just looking to kind of follow on from Jim's comments. I mean, it seems like the number of cycle times for these drugs is very, very important. And we all kind of speculated that given the four to eight cycle times on the drug's design that they would be actually getting into patients, it seems from what Jim's comments were that those cycles may have not been that high. Is that correct?

James Manuso

Well, what I'm saying is that it appears, based on the earlier trials, that Dacogen was typically administered in fewer cycles per patient than has recently been the case. As you know, since we've learned a great deal more about how to deploy the drug, the number of cycles has gone up markedly. As you know further, the number of cycles in the Vidaza trial was nine, whereas at a maximum the number of cycles in the Dacogen EORTC trial could only have been eight. And so it is speculation. Let's be clear about that.

Derek Jellinek – Susquehanna Financial Group

No, I can appreciate that. A quick other question before I jump back into queue. Given that the press release by Eisai actually pointed out the response rate seen in the trial were comparable, I'm not really sure what that means. I mean, obviously we've seen that CRs are not really deterministic for Dacogen. We've seen that in the pivotal, we saw it in ADOPT. We've actually seen it for Vidaza. So what does it mean that the response rates were similar across trials? Obviously, that it didn't give survival benefit. Can you help me kind of understand that?

James Manuso

Greg, would you care to comment on that?

Greg Berk

Yes, I mean, obviously, Derek, it's always good to get a response; but I think that it's become very clear, primarily from the Vidaza data that has been presented that you don't need a response to have a clinical benefit and, in fact, a survival benefit. In fact, patients from that trial who did not technically respond, based on whatever criteria you use for response rate, still live longer. So I'm not sure what maintenance or response rates mean other than the fact that the drug has activity.

Derek Jellinek – Susquehanna Financial Group

No, I can appreciate that. And just quickly, on MP-470, switching gears a little bit, when will we see data from the combo studies in solid tumors? And the Phase 2 you talked about in non small cell lung, I'm taking that that's in combination with erlotinib given the AACR data?

James Manuso

Greg?

Greg Berk

Yes, the – we have – one of the arms in the five-arm Phase 1b trial, Derek, is a erlotinib plus 470 arm. We will be presenting interim Phase 1b data at the fall EORTC-AACR meeting. We'll have data from the single agent Phase 1 trial at the ESMO meeting. Both of those abstracts have been accepted. So, we actually have accrued quite a number of patients on that arm, and we look forward to presenting data. There's a lot of interest, obviously, in overcoming erlotinib resistance. It's an important area of research now and there's a lot of drugs being evaluated, primarily the MET inhibitors that seem to have some activity in overcoming erlotinib resistance. Clearly 470 can help overcome erlotinib resistance, we've shown that pre-clinically. It just so happens that the investigator's model that he was using for that particular presentation that Jim referred to was in breast and prostate, but we think that will apply to other areas, and obviously the clinical data will be the most important and most telling data.

Derek Jellinek – Susquehanna Financial Group

Okay, thanks. Thanks, Greg, on that. But on the Phase 2, and then lung, can you tell us about the trial design quickly?

Greg Berk

We are just planning that now. We are still quite interested in small cell lung cancer. We actually have seen activity in our Phase 1b trial in small cell patients receiving platinum and etoposide, and this is a specific target that's captured a lot of our interest because Rad51 plays an important role in chemotherapy resistance to small cell lung cancer. 470 is quite synergistic with platinums and helps overcome the Rad51 promotion by platinum. So our Phase 2 strategy in small cell would be frontline small cell lung cancer in a randomized frontline setting. Platinum, etoposide plus or minus 470.

Derek Jellinek – Susquehanna Financial Group

Okay, great. Thanks, gentlemen, for answering my questions.

Greg Berk

Sure.

Derek Jellinek – Susquehanna Financial Group

I'll jump back in queue.

Timothy Enns

Next question, please.

Operator

Your next question comes from the line of Ram Selvaraju from Rodman & Renshaw. You may proceed.

Ram Selvaraju – Rodman & Renshaw

Hi, thanks very much for taking my questions. I just wanted to go over again the list of the conferences at which SuperGen is expected to present clinical and/or preclinical data from its pipeline over the second half of the year. You mentioned ASCO, the EORTC conference in Switzerland, and one other one?

James Manuso

Yes. The European Society for Medical Oncology in September, and then ASTRO, the American Society for Translational Research and Radiation Oncology & Radiology, in the second week of October, then the EORTC-NCI-AACR, third week of October; and then ASH, of course in the second week of December. Those are four venues.

Ram Selvaraju – Rodman & Renshaw

Okay. And with respect to the timing on the IND filings expected for the second half of the year, you still expect to file an IND for the PIM-1 inhibitor first?

James Manuso

Yes, that is anticipated to be filed first. And indeed, we're very much advanced with respect to completing the IND package in that regard. We are moving very rapidly with respect to getting that in because, among other things, we're very excited about the preclinical data, and it appears still to date that we in all likelihood will be the first in man with a PIM inhibitor.

Ram Selvaraju – Rodman & Renshaw

Okay. And then with respect to the subsequent IND filings, I think you've originally guided for subsequently filing for S-110 to enter the clinic, and then SGI-1252?

James Manuso

What we have indicated is that S-110 is expected to enter the clinic within the first half of next year; and our JAK2 inhibitor, we're in a variety of discussions on that that could involve a deal on that. But in general, Ram, going forward, it's our intention to have partners before we enter into costly and expensive Phase 3 trials.

Ram Selvaraju – Rodman & Renshaw

Okay. So at this point, no decision has been made on the JAK2 inhibitor as to whether or not you would license it before an IND?

James Manuso

We typically take a dual track if we believe in the drug; so on the one hand we'll certainly complete the work for an IND package. In the same vein, we have a very high interest in licensing or otherwise monetizing that asset.

Ram Selvaraju – Rodman & Renshaw

Could you give us the expected time line again, assuming that Eisai has provided additional guidance on this, regarding the outcome of ongoing trials with Dacogen, particularly in the AML population?

James Manuso

The AML trial is believed to – it's accruing well at this point, and yet final results are not going to be available and in a registrational form until, we believe, 2010. We'll have added color to that going forward.

Ram Selvaraju – Rodman & Renshaw

Okay, thank you.

James Manuso

Thank you very much, Ram.

Operator

And your next question comes from the line of Matt Osborne from Lazard. You may proceed.

Matthew Osborne – Lazard Capital Markets

Hi, guys, and thanks for taking the question. Jim, just a question on S-110. Can you comment now with Dacogen and the EORTC data, has this taken on a new heightened role for the Company in terms of either commercial opportunities to out-license, or something you plan to take further, say, into – well into Phase 2 trials?

James Manuso

Okay. Good question. As you know, based on the preclinical data with S-110, and given that it is a prodrug of decitabine; and given further that decitabine, in both of its forms, has proven itself in the clinic and in patients, we certainly do perceive and have perceived that as a very important asset in our portfolio. As a result, we are finalizing the IND package. We are undertaking a series of comparative studies in order to assess the relative degree of myelosuppression compared to Vidaza and Dacogen. And based on the animal work that has been conducted to date, we're confirming that it is a drug with a greater half life, and we believe, therefore, a greater potential for deployment in solid tumor application. It certainly is something, as you know, further, that Eisai now has a right of first offer on S-110; and frankly, Matt, we've – from the beginning perceived that as a lower risk, higher potential drug, based on the fact that it is a prodrug. So we're aggressively pursuing the completion of the IND package on S-110, and we continue to believe that it has the potential for a fore-shortened clinical and regulatory development cycle, although this has yet to be confirmed. Obviously, we'll have to discuss that with the agency. I'd like to ask Greg to comment on this. Greg?

Greg Berk

Yes, Matt. I mean, the – once we get it into the clinic, and as you heard, the timelines would be the first half, hopefully the earlier portion of that – of next year. The Phase 1 trial will be pretty straightforward. It will be refractory MDS patients who have failed either Dacogen or Vidaza or both. It will be interesting to see if we actually can see activity in that setting, because that raises a whole new question, is that a potential registrational strategy, and that is second line MDS where there's no approved drug. But obviously, that's not the goal of the Phase 1. The goal of the Phase 1 is to establish the dose and safety profile. But we're planning a 12-month time line for that Phase 1 trial. We'll have a pretty good idea of what kind of starting dose, based on decitabine, where to go. So we don't think it's going to be a very long and extensive Phase 1. And then we would actually potentially go into, once again, either refractory relapse patients as a pivotal program or even, you know, a larger randomized trial against one of the approved drugs.

Matthew Osborne – Lazard Capital Markets

All right, so we should think about the solid tumor opportunity as something further down the road, beyond the Phase 1 trial?

Greg Berk

There definitely is opportunity there. We're very interested. We're actually speaking to investigators. In fact, there's one investigator who has actually done a lot of work with – Dacogen, actually, in solid tumors, is published on – its activity with platinum in ovarian cancer just this past year. And, in fact, in the U.K. where they're doing those studies, they're doing actually large randomized trials in that setting. We're already working with that particular investigator and even have a Phase 1 solid tumor concept up and running; but our priority is to get it in the clinic in MDS patients first.

Matthew Osborne – Lazard Capital Markets

Great, that was very helpful. Thank you.

Greg Berk

Sure.

James Manuso

Thank you.

Operator

(Operator instructions) And we have a follow-up question from the line of Derek Jellinek. You may proceed.

Derek Jellinek – Susquehanna Financial Group

Great. Thanks for taking my follow-up, guys. Maybe this is for Greg. On SGI-1252 for the JAK2 inhibitor, obviously the competitive landscape has heated up quite a bit. We've seen a lot of activity in the JAK space. Maybe you can kind of talk to how that JAK2 is differentiated as well as the development and commercialization strategy for that compound. Thanks.

James Manuso

Derek, we might split that question into two parts. One having to do with its – the development of our JAK2 compared to others, which I'd like to you direct to Dr. McCullar; and then with respect to its clinical development, to Dr. Berk. So, Mike, could you comment on the differentiating features of 1252 compared to the four JAKs that are in the clinic and the what, 14 or 15 odd others that are in development?

Michael McCullar

Yes, sure. Thank you, Jim. So clearly, what you see in the clinic are oftentimes drugs from our competitors which were originally designed to be inhibitors of other targets. So they're not S-specific. So we always thought that to be in MTDs pp or inhibiting JAK2. You need to be specific and not take a lot of other targets. So ours is very specific for JAK2, against the (inaudible) type and the mutant type. We think that's important. Other programs like that might be targeted (inaudible) interesting. Of course, the inside has a very nice profile. We also think that other ones that are interesting might actually be (inaudible); but that's where the difference can be specific. Ours is very specific. Other programs we think are not. Does that answer your question?

Derek Jellinek – Susquehanna Financial Group

No, it did, that's helpful. That's helpful. Any on commercial opportunity then?

Michael McCullar

Honestly, we think the most interesting place to go with (inaudible) is solid tumors. Oftentimes, solid tumors (inaudible) stat pathway, where you can interrupt (inaudible). We think the real interesting area may actually be (inaudible) cytokines, and we think that (inaudible) we think that (inaudible) not specifically a company working in that area, but we think that (inaudible).

Derek Jellinek – Susquehanna Financial Group

Are you there?

Michael McCullar

Yes, can you hear us?

Derek Jellinek – Susquehanna Financial Group

Yes, yes, great. Thanks so much. That was really helpful.

James Manuso

And Greg, maybe you can (inaudible)?

Greg Berk

Yes. I think Mike pretty much covered it. Despite the competitive landscape, there's clearly still a lot of interest in several potential business development partners with this compound. So I think that, you know, we're just starting to see, obviously, the clinical data with the JAK2 inhibitors in myeloproliferative disease, and we'll see where they pan out in other indications.

Derek Jellinek – Susquehanna Financial Group

No, that's great, guys. Thanks again.

Operator

And we have no further questions on the line at this time.

Timothy Enns

If there are no further questions, I'd like to (inaudible) and wish you a good afternoon and say that we're looking forward to updating you further as time goes on. And, of course, please don't hesitate to access our website for frequent updates. Thank you very much.

Operator

Thank you for your participation in today's conference. This concludes the presentation and you may now disconnect. Good day.

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