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Anthera Pharmaceuticals (NASDAQ:ANTH)

Q3 2012 Earnings Call

October 25, 2012 1:00 pm ET

Executives

Christopher P. Lowe - Chief Financial Officer, Chief Business Officer and Principal Accounting Officer

Paul F. Truex - Chief Executive Officer, President and Director

Colin Hislop - Chief Medical Officer and Senior Vice President

Analysts

Edward A. Tenthoff - Piper Jaffray Companies, Research Division

Whitney Ijem

Megan McCloskey - McNicoll, Lewis & Vlak LLC, Research Division

Heather Behanna - JMP Securities LLC, Research Division

Carol Werther - Summer Street Research Partners

Yaron Werber - Citigroup Inc, Research Division

John McCamant

Christian Glennie - Edison Investment Research Limited

Operator

Good day, ladies and gentlemen, welcome to Anthera's Third Quarter Conference Call. [Operator Instructions] I would now like to introduce Chris Lowe, Anthera's Chief Business Officer and Chief Financial Officer. You may now begin the conference.

Christopher P. Lowe

Great. Thank you, everyone, for joining us this morning. Welcome to Anthera's Third Quarter Earnings Conference Call. Yesterday, we issued a press release that provided the details of the company's financial results for the third quarter ended September 30, 2012, as well as an update on our corporate activities. This press release is also available on our website, as well as, for additional information, we have an updated corporate presentation, which is now available on our website as well, under the title Events and Presentations at www.anthera.com.

During the course of this conference call, we will state our beliefs and make projections and other forward-looking statements regarding future events and the future financial performance of Anthera. We wish to caution you that such statements or predictions and expectations and actual events or results may differ materially.

We refer you to Anthera's publicly filed SEC disclosure documents for a detailed description of the risk factors affecting our business, most recently our annual report on Form 10-K for the year ended December 31, 2011, and quarterly report on Form 10-Q for the quarter ended June 30, 2012. This document identifies the important risk factors that could cause our actual results to materially differ from our projections and other forward-looking statements. These risk factors include regulatory, operating expenses, intellectual property, clinical development and other risks relating to the business.

Joining me on the call today is Paul Truex, Anthera's Chief Executive Officer and President. During today's call, I will provide a brief update on our financial performance, and afterwards, Paul will provide everyone with a broader corporate update. We will then open the call to your questions.

So starting with our financial performance for the quarter, as expected, our total R&D expenses in the third quarter of 2012 were lower, at approximately $9.5 million for the quarter, compared to the second quarter of 2012, which was approximately $14.7 million. The primary driver is due to the completion of the PEARL-SC clinical study and the subsequent winding down of those clinically-related activities.

Looking at the G&A expenses for the third quarter 2012, they were slightly lower at $1.6 million, as compared to the second quarter of 2012, which was approximately $1.8 million. Again, this is our -- primarily due to our continued efforts to limit our overhead costs for business development, legal and accounting fees.

As of the end of the third quarter, we had approximately $42.5 million in cash, cash equivalents and short-term investments. I will now turn the call over to Paul, for a corporate update.

Paul F. Truex

Thanks, Chris. Yesterday, as part of our quarterly earnings release, we disclosed additional results from the Phase IIb PEARL-SC clinical trial with blisibimod in patients with Systemic Lupus Erythematosus or SLE. Data from the PEARL study and recent feedback from the FDA, which I will discuss shortly, provide us with a clear path in Phase III to evaluate blisibimod in patients who are not responding to corticosteroid use and continue to have autoantibody-positive clinically active SLE, defined as a SELENA/SLEDAI score of greater than 10 at baseline.

Previous results from the study indicate that in this population, the patients who are also receiving corticosteroid use displayed a statistically significant treatment effect on the predefined SRI-8 end point, which I'll discuss in a minute, at week 8, at week 16 through week 24 time points when treated with 200 milligrams weekly blisibimod compared to placebo.

Over the past quarter, we have continued to further analyze the data we garnered from PEARL. We have gained additional confidence from the results of PEARL when we look at the details of the SRI-8 response index. Specifically, when we eliminate scores for biomarker improvement, such as dsDNA improvements, improvements in complement, we find the treatment benefit is substantially maintained, indicating to us that 85% of the SRI-8 response was derived from clinical improvement such as improvements in joint pain, rash and oral lesions.

This clinical effect is reinforced by a 1.6-fold improvement in the time to severe flare compared to placebo. In fact, the majority of severe flares seen in the placebo group during the PEARL study occurred shortly after patient steroid treatments were restricted per the protocol.

Additionally, we also found a significant improvement in proteinuria over 24 weeks with the 200-milligram weekly dose of blisibimod. These decreases in proteinuria result in near normalization of the protein creatinine ratio compared to baseline in patients who received blisibimod. This is an important marker of renal function. Additional data from the PEARL-SC clinical study can be found, as Chris mentioned, on our corporate -- on our website via our corporate presentation under Events and Presentation.

Regarding our interactions with the FDA in Q3, we discussed these data with the agency, and are pleased not only with the outcome but with the confidence we garnered from our discussion. The agency has confirmed that the primary endpoint of SRI-8, the value of it at a 52-week time point is acceptable for a registration studies. The SRI-8 is a defined -- is defined as patients who respond to treatment and achieve an improvement in the SELENA/SLEDAI index of equal to or greater than 8 points. No new BILAG A or BILAG B -- 2 BILAG B organ domain scores and no increase in Physician's Global Assessment of greater than 0.3 on a 3-point scale.

Both CHABLIS studies will enroll approximately 400 patients and will be multi-centered, randomized, double-blind placebo-controlled studies designed to evaluate the efficacy, safety, tolerability and the immunogenicity of blisibimod in patients with clinically active SLE. Again, this is defined as patients with SELENA/SLEDAI of greater than 10 who are nonresponsive to corticosteroid therapy. We expect the CHABLIS-SC1 clinical trial to begin enrollment in some of the same geographies we use for PEARL-SC in Q1 of 2013.

As well, let me provide a quick update on our manufacturing progress. The FDA has confirmed the comparability of the drug substance manufactured by our contract manufacturer to the previously manufactured drug used in our Phase I and Phase II clinical studies as well as our GLP toxicity studies. We are pleased that the GMP manufacturing campaigns for prefilled syringes for Phase III has been completed successfully, and batches are currently undergoing release testing. Provided the product passes all specifications, we anticipate shipping these syringes to clinical sites for the CHABLIS-SC1 trial in Q1 of 2013.

Operator, at this time, we'll be happy to take any -- or a few questions.

Question-and-Answer Session

Operator

[Operator Instructions] We have a question from Ed Tenthoff of Piper Jaffray.

Edward A. Tenthoff - Piper Jaffray Companies, Research Division

Just want to touch base on sort of what the plans are for ACR coming up. And even beyond data presentations. Will you be meeting with KOLs and some of -- doing some kind of prep work for CHABLIS? And how long -- for Chris, how will long will that $14 million last you guys?

Paul F. Truex

Why don't we go to the second question first?

Christopher P. Lowe

Yes, Ted, it's Chris. So our current cash gives us at least 1 year's worth of cash on hand. So over a year, which we feel comfortable allows us to fully fund the startup phase of the Phase III CHABLIS-1 study. To complete and fully fund the development plan that Paul is speaking about today, we may end up doing some additional financing activity, whether that's in the form of non-dilutive partnering or in the form of equity or debt or some combination of those 3.

Paul F. Truex

With respect to ACR, Ted, Colin Hislop, our Chief Medical Officer, is here and can address that question for you.

Colin Hislop

Apologize for my voice, first of all. Hope you can understand me. We do have a very full calendar at ACR. We've got a reception -- private reception that we're hosting for potential investigators for the Phase III program, as well as the pro-investigators that are attending. And over and above that, we have a pretty full slate of one-on-one meetings with KOLs. So that's the investigator's side, if you like. Along with a presentation slide, we did submit the salient points, the highlights of the PEARL study, as a late breaker. We don't know the status yet of whether or not there will be a presentation because I think the closing for the submissions was very recent. But certainly, we've submitted and if it's not a late breaker, we're expecting we'll be putting up a poster of some description.

Operator

Our next question is from Ritu Baral of Canaccord.

Whitney Ijem

This is Whitney on for Ritu. A couple of quick questions. How long will the extension study last? And in addition to safety, will you be looking at any other efficacy measures?

Paul F. Truex

The extension study?

Whitney Ijem

Yes.

Paul F. Truex

The safety session beyond CHABLIS?

Whitney Ijem

Yes.

Colin Hislop

We actually -- it typically goes through either to the time of approval or the sponsor no longer continues development. It's a ways off in the distance yet, but I would expect that we would follow a typical development path.

Paul F. Truex

And Whitney, it's Paul. Again, the purpose of the safety study, as you can imagine, is to complete the -- to fill out the safety database requirement prior to submission. So the key here is to get the appropriate number of patients at least through a year so that they can count towards the total 1-year safety database requirement per FDA guidance.

Whitney Ijem

Okay. And so you won't be looking at any other efficacy measures during that time?

Paul F. Truex

What I'd tell you is that study isn't designed yet. While we may do assessments, it will not be a placebo-controlled element of the trial now.

Whitney Ijem

Okay. And then moving on to the IgA nephropathy and lupus nephritis trials, how much do you think those would cost?

Christopher P. Lowe

Yes. I would expect, Whitney, that those will be in the neighborhood of $5 million to $8 million per study.

Operator

Our next question is from Megan Dow of MLV & Co.

Megan McCloskey - McNicoll, Lewis & Vlak LLC, Research Division

I just have a couple of quick questions. And the data you put out today is pretty impressive. I was wondering if you could comment a little bit more on what we were -- what we can see in the specific Phase III subset of patients for proteinuria and antibody titers. It looks like there's pooled data. Have we just not done the analysis yet and whether or not that relates to the time to severe flare?

Paul F. Truex

So if we understand your question, I'll flip it to Colin. Have we looked at proteinuria time to severe flare in the SELENA/SLEDAI greater than 10 patients taking steroid population. Is that your question?

Megan McCloskey - McNicoll, Lewis & Vlak LLC, Research Division

That's it.

Paul F. Truex

Great. Colin?

Colin Hislop

Thanks for the question. We have done those analyses, but you have to understand here that the proteinuria population is a subset of the overall population. And when we start to cut it by dose, the numbers get small very quickly, so there's a lot of noise. But in general, the trends that you see for the pooled group are the trends that are manifest for the 200-milligram dose group. It's just that there is a lot more noise in the data.

Megan McCloskey - McNicoll, Lewis & Vlak LLC, Research Division

Is that true for the antibody titers as well?

Colin Hislop

Yes, yes. It's true for all the biomarker subsets. It's just that there's small numbers and a lot more variability, so that the lines don't look quite as clean, but the treatment effects are very, very similar.

Megan McCloskey - McNicoll, Lewis & Vlak LLC, Research Division

Perfect. So that kind of helps guide us on what to expect in Phase III. And then how are your partnership discussions going, moving forward, now that you've got more data here in hand?

Christopher P. Lowe

Yes, I think -- the partnership conversations remain active. We're certainly considering all the options that would extract the right value for the company. So we continue to look at all these options in parallel.

Operator

Our next question is from Heather Behanna of JMP Securities.

Heather Behanna - JMP Securities LLC, Research Division

Just a quick question. When we think about the CHABLIS study and the primary endpoint at 52 weeks, I'm just wondering what your expectations are? Do you expect that the efficacy has sort of plateaued by 24 weeks? Or do you think you'll see improvement? Or -- just wanted to get your thoughts on that.

Paul F. Truex

So we can only point to our PEARL-SC data. That obviously did have some patients out through 52 weeks, and we certainly seem to have seen a plateau in both the response rates for placebo and active beyond the 24-week time point. That data seems to be relevant as you get out to about 36 weeks where the patient numbers are again of a quantity that are meaningful. As you get to 52, that number falls off pretty quickly. So we do see a plateau of effect beyond 24 weeks. And we also point to other therapeutics that have recently reported data like this, where it does appear not only that the treatment effect plateaus around 6 months, but in general, both the placebo and active arms trended down numerically, probably not statistically, from 6 to 52 weeks. So the way we model that is to look at 24 weeks as the possible peak of efficacy, and then we bench our placebo and treatment response off both our own experience as well as that of other trials similar in nature.

Operator

Our next question is from Carol Werther from Summer Street.

Carol Werther - Summer Street Research Partners

So did you say the trials are going to be 2 400-patient trials?

Paul F. Truex

That's correct.

Carol Werther - Summer Street Research Partners

Okay. Because I thought it was 450?

Paul F. Truex

No. We -- our previous thought processes it would be 450, was when we were contemplating an endpoint of SRI-5 or 4, where the response rates are higher and the treatment effect isn't as dramatic. When we discussed with the agency the what we consider to be more robust endpoint of an SRI-8 clinical response in a more responsive patient population, the powering calculations work in our favor because response rates tend to be lower, and the treatment effect tends to be greater. So 400 patients per arm -- excuse me, 400 patients per study, gives us a greater than 92% power for each study.

Carol Werther - Summer Street Research Partners

For the primary endpoint?

Paul F. Truex

For the primary endpoint, correct.

Carol Werther - Summer Street Research Partners

And then are you going to be powered for any of these secondary endpoints or for individual parts of the composite?

Paul F. Truex

Certainly based on what we saw in our Phase II study from a trend point of view, that is the goal, that we would pick a cascade of secondary endpoints where the initial ones were intended to hit. We thought about that as we think about power, obviously. As we get further down the list, we would expect that again, that would tend to fall off as you do things that are more exploratory in nature. I don't believe it's active yet but the details of primary and secondary analyses will be on the ClinicalTrials.gov site as we get ready to start the trial.

Carol Werther - Summer Street Research Partners

And are you going to have an analyst meeting at ACR?

Paul F. Truex

We are not planning to have an analyst meeting. I think we're having a private event for investigators that will be involved in the CHABLIS-SC1 study, as well as a slate of KOLs. We'd also expect that various members of the DSMB that would participate in the valuation of the ongoing safety of the CHABLIS studies will be there, as well as individuals that will be involved in some of the interim analysis that will be occurring during the Phase III study.

Carol Werther - Summer Street Research Partners

Okay. So is there any particular secondary endpoint that you're hoping to hit with the CHABLIS trials?

Paul F. Truex

I shouldn't probably speak ahead of us getting it up on the clin trials at this point in time, but I think the presentation itself, if you go to the website, focuses on a couple of things that we think are pretty exciting in terms of the effect of the drug that goes beyond just biomarkers when you look at an SRI response. I think that -- I think again if you look at the presentation, you'll get a sense of where our heads are at.

Operator

Our next question is from Yaron Werber of Citigroup.

Yaron Werber - Citigroup Inc, Research Division

Can you speak a little bit about the differences between CHABLIS-1 and CHABLIS-2? And also regarding -- if the trial's international, what you'll do to make sure there's not a high placebo response that could confound your results?

Paul F. Truex

Sure. So CHABLIS-SC1 from a geographic -- so both studies from a design inclusion and end point were -- in the discussions with the FDA, were contemplated to be identical. The difference that you just articulated is, where are you going to do these studies? CHABLIS-SC1 will be done in studies where we have -- sorry, in countries where we have a lot of experience from PEARL. So predicting and understanding the PEARL placebo rate, we know where that's going to come out, or at least we have a good sense of where it's going to come out. CHABLIS-SC2 will be -- and so again, those countries for SC1, it's the Asia-Pacific, Latin America and now some Eastern European, call it CIS countries. On CHABLIS-SC2, we'll look at the European and U.S. geographies, North American geographies, as well as potentially some other Asian countries to help boost enrollment. As it relates to a high placebo rate, assuming the treatment effect is maintained, the 92% power, Yaron, gives us the potential to, again, differentiate to find that product treatment benefit even if the response rate of the placebo rates tend to be higher.

Operator

[Operator Instructions] The next question is from John McCamant of Medical Technology.

John McCamant

Chris and Paul, I see you have some blue boxes here underneath the partnering slide under business development. Can you provide us an update on a potential partnering and are there any ongoing limiting factors?

Paul F. Truex

Great. In terms of the partnering, again, it really -- it remains a very active option for us. We're truly considering looking at that as one of the financing tools, if you will, for the development program going forward in conjunction with the equity markets, the debt markets and as well as the partnering. In terms of any specifics beyond that, I really -- I probably couldn't offer you much more in terms of any specificity other than to say I think the regulatory feedback that we've recently received has been another informative touch point with the partners who have been engaged.

John McCamant

Maybe a quick follow-up on ACR. When do we expect the late breakers to be released so that we get an idea if there's going to be that presentation at ACR?

Paul F. Truex

We don't have any insight into that. We'd have to refer you to ACR for that question.

Operator

And the next question is from Christian Glennie of Edison Investment.

Christian Glennie - Edison Investment Research Limited

Could you just clarify whether, in your discussions with the FDA, you'll be seeking an SPA? And also, in terms of whether any consideration was given at all, either by yourselves or the regulators, about incorporating some sort of active comparator or head-to-head versus Benlysta?

Paul F. Truex

First question's first. Regarding the SPA, we did not discuss it with the FDA. The agency did not mention the SPA. We feel extremely comfortable in the feedback we got from our end of Phase II meeting, probably one of the better responses I've received in my career from the agency. So no, we don't anticipate proceeding with that path. And again, given all we've had -- all the dialogue we've had with the agency, don't see that as even a need. Your second question...

Unknown Executive

Comparator.

Paul F. Truex

We'd make the same response. The agency in the FDA asked the question of active comparator, but simply wanted us to provide a rationale for not using a comparator. And I can make the same comment about the EMAA as well. No need for an active comparator in this context. Having said that, please understand, the placebo group is on active therapy. They are receiving standards of care. Both groups in both arms of the study will receive standard of care, but nothing beyond that.

Christian Glennie - Edison Investment Research Limited

Okay. That's good clarification. And then just on the SC2, the anticipated start of that portion of the study?

Christopher P. Lowe

Right. So the second CHABLIS study or CHABLIS-2, we would expect to be about 6 to 7 months behind CHABLIS-1, and that's just more for operational management issues, if you will, to try to make sure we give perfect attention to both studies.

Christian Glennie - Edison Investment Research Limited

Okay. So sort of Q4 2013...

Paul F. Truex

I think that's a good, reasonable -- definitely second half of the year and yes, late Q3, Q4 timeframe.

Operator

There are no further questions at this time. I'd like to turn the conference over to Paul for any closing remarks.

Paul F. Truex

Well again, thank you everybody for joining our third quarter conference call and we'll look forward to seeing you after the new year. Take care.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect.

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