Ladies and gentlemen, welcome to the Cell Therapeutics Q3 2012 Conference Call on the 1st of November 2012. [Operator Instructions]
I will now hand the conference over to James Bianco. Please go ahead, sir.
James A. Bianco
Thank you. Good morning. Before we get started, let me remind you, as is common with presentations of this type, we will be making forward-looking statements. And as such, we recommend that you refer to our SEC filings for certain risks and uncertainties associated with such statements and more information about the company. Let me also remind you that this call will be recorded and available for playback on our website, and that any unauthorized recording of this call or use of this recording is prohibited without written consent from the company.
So today, we're going to review the financial results for the third quarter, and we'll update you on our commercial activities, including the product rollout and reimbursement-related activities for Pixuvri in the EU. Steve Benner, our Chief Medical Officer will cover our primary product development focus, namely getting the Phase III trials for pacritinib up and running, and then I'll briefly touch on tosedostat, some upcoming events for OPAXIO, as well brostallicin before we open it for questions. Oh, and then lastly, Matt Plunkett, our EVP of Corporate Development, will review his activities and give you some feedback on preliminary interest in pacritinib.
Let me start with financial results for the third quarter -- for the quarter. Total operating expenses were $14.7 million compared to $15.3 million for the same period in 2011, which is in line with our guidance. Our net loss for both the quarter and the 9 months ended September 30 continued to decrease compared to the prior year. Excluding the $29.1 million for the acquisition of pacritinib from S*BIO, the net loss for the 9 months decreased to $67 million compared to a net loss of $103 million for the same period in 2011.
We ended the quarter with approximately $14.3 million in cash and cash equivalents, and that was prior to raising $55.6 million in net proceeds from the underwritten public offering which we completed in October.
Let me move on to updating you on Pixuvri. In the first quarter, as you may recall, we worked with PricewaterhouseCoopers, the European Life Sciences partners on developing a cost-effective go-to-market strategy. In Q2, we started working with our vendors, both in completing end-market research, pricing reimbursement analyses, third-party logistic provider relationships and then we entered into a contract with Quintiles for hiring our sales force.
In Q3, we began hiring, through Quintiles, our sales force, initiated training the sales personnel and began product introductions in Sweden, Finland and in Denmark. In this quarter, we continued the product rollout in Austria and Norway, and this month in Germany, U.K. and the Netherlands. And this month, meaning November.
We had our preliminary meeting with the GBA, the German health regulatory body that determines reimbursements. The feedback we received at that meeting reaffirmed our strategy, and the approach for our value dossier development. They know that's a critical document, which is reviewed by both IQWiG and GBA when determining innovation scores and the ability to achieve pricing and reimbursement.
We had similar preliminary feedback from NICE, the U.K. agency critical for reimbursement. Once we launch in Germany later this month, we will begin submissions in France, Italy and Spain. Product rollout in these latter countries will take place once reimbursement and pricing discussions have been completed because, unlike the other countries, they are not free-market access countries.
With regards to just Spain and Portugal, we're also exploring the possibility of revenue and establishing a field force for Quintiles there, but rather working with a Spanish pharmaceutical company to be a partner in that region given some of the issues surrounding the timing of payments.
But we really want to underscore that we're not looking to build infrastructure or incurring related cost and liabilities as we bring on a commercial organization in the EU. We're following a model that worked well for the EU in production of Celeris [ph], ABRAXANE and Yondelis, to name a few, all of which were conducted initially through a relationship similar to the one we have established with Quintiles. As each country comes online, we identify, train and deploy experienced oncology sales personnel, but they're hired through Quintiles, but they're solely dedicated to the Pixuvri product.
And this allows us the ability to control the timing and the cost of the field force ramp-up and deployment while not having the costs associated with developing the legal entity status, the labor law requirements and associated liabilities cost, as these are not CTI employees, but rather, Quintile employees. To give you a sense of the size of that organization by the end of next year, we expect to have 31 field-based personnel, and by the end of 2014, approximately 40 field-based personnel.
We currently have 4 key commercial CTI employees that are based in the U.K. We have offices at the Regus Regent facility next to Heathrow Airport, and those positions include a general manager, who's actually currently residing in Seattle, but will be moving to the U.K. to head up the commercial organization. We have a director of reimbursement and market access, a head of medical affairs and a director of marketing there, and all of whom came to us from multinational pharma companies with previous commercial experience.
I just want to emphasize that we're not expecting meaningful sales in this quarter, nor have we or are we providing sales guidance at this time. We're in the market development phase of Pixuvri. In the EU, the launch is distinctly different, as you know, than the processes in the U.S. That's not to say that we don't think Pixuvri can be a commercially successful product for CTI. In fact, I can give you a sense of what the market potential in the EU could look like.
End market research was conducted by Kantar Research, amongst 250 lymphoma specialists in the 5 major market countries. And their data, after Kantar applies a 50% discount adjusted to the market feedback results, shows that at peak market penetration, the size of the market that Pixuvri should achieve in those 5 major market countries could exceed 8,000 patients per year.
Now, notably, these data do not include potential sales in other regions such as Turkey, Middle East, Eastern Europe and the Asia Pacific countries, which could take the total market potential closer to 10,000 patients per year.
With regards to pricing and reimbursement, Market Access research supports a price quarter for a potential net x factory price between $25,000 to $29,500 per patient, per year. This would equate to approximately $695 to $819 per vial, assuming the average patient will complete 4 courses of therapy which requires 36 vials.
With an expected gross margin of approximately 88% to 90%, we believe the market opportunity for Pixuvri in the EU is very attractive, both in terms of potential peak revenues and, equally importantly, in terms of the net product margin contributions to the company.
Let me briefly discuss some of our progress on our post marketing commitment trial, the PIX306 study. You may recall, this as a randomized trial of pixantrone-rituximab versus gemcitabine-rituximab in patients with aggressive B-cell NHL who failed between 1 and 3 lines of therapy.
Enrollment in the U.S. has tracked approximately to its 2012 forecast of an average of 4 patients per month, 4 to 5 patients per month, depending on which month. However, we are behind in our 100-patient enrollment target for 2012, and that was due to slowed and expected initiation of the x U.S. sites in the EU, partially initially as a cost management decision earlier in the year and, more recently, just with a vendor-related issue.
With both those issues resolved, we should be opening 40 sites within the first half of next year in the EU. This is valuable not only for meeting the enrollment goals for the trial, but increasing the visibility of pixantrone amongst the EU thought leaders.
Importantly, this trial not only fulfills the post-marketing commitment for the EMA, but given it is double therapy in second, third and fourth line, recalling that our conditional authorization is for monotherapy in third and fourth line, this trial could lead to expansion in the label for Pixuvri in the EU. And depending on the results, could potentially serve as the basis for an NDA submission in the U.S.
Right, so at this point, I'm going to ask Steve Benner, our Chief Medical Officer, to update you on some near-term plans for the pivotal trial program for our pacritinib JAK2 inhibitor.
Steven E. Benner
Thanks, Jim, and good morning. Pacritinib is a highly selective JAK2 inhibitor with potent low nanomolar inefficient of both wild-type and clonal V617F mutation. In addition, pacritinib also inhibits another activating mutation, important AML in lymphoma, FLT3.
As I will discuss shortly, this kinase inhibition profile presents potential application not only within the myeloproliferative neoplasms such as myelofibrosis, but across a spectrum of blood-related cancers; the most exciting aspect about pacritinib's clinical profile related to the minimal treatment-related myelosuppression associated with the drug.
In myelofibrosis -- myelosuppression, especially thrombocytopenia, has emerged as a limiting treatment-related side effect of JAK1/JAK2 inhibitors. Thrombocytopenia is also seen as a consequence of the disease process itself, which is associated with a poor prognosis.
As noted in the recent analyst surveyed this month, among USC non-physicians practicing in the community setting, the most important factor limiting the treatment duration of ruxolitinib, for example, was thrombocytopenia. This is consistent with what we have heard in our discussions with thought leaders and physicians who have participated in the COMFORT trials.
Avoidance of sever myelosuppression represents the clinical and market opportunity that differentiates pacritinib from other JAK inhibitors. Approximately 25% to 30% of myelofibrosis patients are thrombocytopenic with total counts below 100,000. As the myelofibrosis progresses and neural function worsens, thrombocytopenia develops, identifying a higher-risk population than patients with myelofibrosis and who also have a normal platelet count.
In the Phase II study, pacritinib did not induce clinically relevant degree of treatment-emergent thrombocytopenia. Importantly, comparable rates of reduction in splenomegaly when using the 50% reduction of baseline threshold for physical exam were observed in the 2 Phase II studies where the platelet counts were less than 50,000, 50,000 to 100,000 or greater than 100,000.
As such, we believe the drug can address an unmet need even in the post-ruxolitinib approval era. With that distinguishing feature in mind, I will discuss the 2 Phase III studies planned. Informed by earlier FDA correspondence with S*BIO during their SPA discussion for spleen, we've submitted to the FDA our first Phase III protocol for the PAC 325 study, which we conducted predominantly in the EU.
We've engaged the same CRO that monitored the COMFORT II trial and are set to open enrollment at approximately 80 to 90 sites. This trial is a randomized comparison of pacritinib to best available therapies, excluding JAK inhibitors. The study will employ a 2:1 randomization and allow crossover and is targeted to enroll 270 patients with intermediate to high-grade myelofibrosis.
The primary study endpoint will be the difference in the proportion of patients between the arms who achieve a 35% reduction in spleen volume, as assessed by MRI, and is read by a mass central radiology review.
There are a number of secondary and exploratory endpoints that we will assess, among others, the impact of treatment on patient symptoms, quality of life and transfusion dependence. We anticipate that the first patient will be enrolled before year end. Based on a feasibility study, we estimate enrollment will take 12 months after enrollment is initiated.
Our second study of pacritinib, we anticipated initiating in the second quarter of 2013 after having received feedback from both the FDA and EMA. As currently planned, this study will target patients with myelofibrosis, with study entry of platelet counts of less than or equal to 100,000, which is a population not included in the COMFORT trials.
There will also be a randomized trial of pacritinib versus best-available therapy. But this trial is expected to include patients on ruxolitinib, who have developed treatment-emergent thrombocytopenia and also have splenomegaly and symptoms. We anticipate this trial will also employ a 2:1 randomization that would be approximately the same size as the PAC 325 study. We anticipate the enrollment to be completed within 12 months after the enrollment is initiated. Interest in this study among U.S. investigators has been encouraging, and the primary endpoint is anticipated to be the same as in the PAC 325 study.
The most frequent treatment-emergent side effect of pacritinib is GI toxicity, which was likely due to the FLT3 inhibition. While these were predominantly grade 1 and 2 diarrhea, with only 9% experiencing grade 3 in the Phase II study, we believe that with early intervention at the first sign of GI symptom, these side effects will be readily manageable and will not lead to treatment interruptions or discontinuation. There's a good evidence that this approach of early intervention will yield the desired outcome.
The recent publication of the Phase I study for pacritinib and lymphoma, published in the JCO earlier this year, showed that even if dose is 50% higher than those used in myelofibrosis, there were no cases of grade 3 GI side effects. We look forward to getting these studies underway.
Let me now turn the call back to Jim.
James A. Bianco
Thanks, Steve. As you know from prior quarterly updates, we're primarily focusing our resources on what we believe are the 2 highest yield programs, that being the PIX-related revenue potential and the timely start and completion of the pacritinib Phase III studies.
With that noted, we do recognize we have an exciting novel pipeline of products, so how we advance them while minimizing spend until we have revenues sufficient to fund their development. So to try to meet that objective, we've been utilizing either investigator-sponsored trials or so-called ISTs or cooperative group studies.
For example, there's an ongoing European cooperative group trial called the HOVON study, which incorporates tosedostat into the front-line treatment of AML in combination with [indiscernible] and cytarabine.
In addition, an IST of tosedostat in combination with either decitabine or cytarabine in the front-line treatment of elderly treatments with AML is underway at the Seattle Cancer Care Alliance, while M.D. Anderson is initiating an IST of tosedostat in combination with 5-day Azacitidine in MDS. We anticipate that next year, the MRC, which is the leading European leukemia study group, will put tosedostat into its front-line Phase II pick the winner trial in AML. So collectively, we expect that these studies will provide us evidence to help us make decisions regarding the optimal Phase III trial design to advance tosedostat into AML or MBS, while at the same time, containing cost.
In parallel, we've been providing tosedostat to leading research centers who have expressed an interest in combining the drug proteasome inhibitors or HDAC inhibitors. Results from a combination of tosedostat and the Novartis HDAC inhibitor, panobinostat, in treatment for models in multiple myeloma, for example, will be presented at the upcoming ASH meetings in December.
Similar to the development of tosedostat, we have several ISPs underway for OPAXIO, either as a radiation sensitizer in head and neck, or in glioblastoma. In October, we announced, as you may recall, OPAXIO has been granted orphan drug designation by the FDA for glioblastoma, which is the most common malignant brain cancer. We anticipate that orphan drug designation could provide the company, as you know, a number of potential benefits, including 7 years of market exclusivity.
The designation was granted on the encouraging Phase II results of OPAXIO when added to temozolamide plus radiation in the GBM study, a study that was led by the Brown University Oncology Group. And that study has been accepted for publication in the American Journal of Clinical Oncology and should be published in the next several months.
Now, based on those encouraging results, a multicenter randomized trial is now underway for patients with glioblastoma, who have unmethylated MGMT comparing standard temozolamide and radiation to OPAXIO radiation. Now, MGMT expression is a poor prognostic feature and it's present in the majority of patients with glioblastoma. And some prior studies have been shown that render temozolamide ineffective.
So in our prior Phase II study, OPAXIO response and remissions were independent of MGMT status. So the current randomized trial has enrolled 30 of an initially planned enrollment of 60 patients. Per the protocol, the investigators will complete a planned interim analysis, which could result in the study being increased to a total of 120 patients. And we'd expect to see the preliminary data at ASCO next year.
Now lastly, with over 960 of its planned 1,100 patients enrolled in the cooperative group study of monthly maintenance OPAXIO versus observation in women with ovarian cancer who are in complete remission, we have been informed by the GOG that an adequate number of events will be reached by year end to conduct the first planned interim analysis as early as -- at the GOG's annual meeting in January. Now the GOG statistical plan for that protocol contains stopping criteria for futility or for success. And obviously, given the duration that the study has been ongoing, we look forward to learning the outcome of those analyses early next year.
And then lastly, the alliance, now the Mayo Clinic's breast cancer cooperative group, which was formerly known as the North Central Cancer Treatment Group, or NCCTG, they will present data in December at the San Antonio Breast Cancer Conference on the initial result of brostallicin plus Cisplatin in women with relapsed or refractory triple-negative breast cancer. So that's a good example of a group of IST studies which are very low cost to the company that can generate a sufficient amount of data while we focus on resource [indiscernible] and on [indiscernible].
Now, before we turn it over to Matt on some of his VD activities, let me just touch briefly on 1578. Now, that was the second drug that was part of our acquisition from S*BIO. This is an earlier stage Phase II candidate. It has a unique multikinase profile that makes it a potential valuable asset for the treatment of rheumatologic, immunologic-related diseases like rheumatoid arthritis, psoriasis, et cetera.
That unique profile was underscored in a recent publication in the Journal of Immunology. It is the only multikinase inhibitor under development that targets JAK2, FLT3 and c-Fms, which are 3 of the most central kinases underlying the pathogenesis of these rheumatologic diseases like rheumatoid arthritis. Now the preclinical study that was reported demonstrated the ability not only to prevent the development of rheumatoid arthritis, but also, in its treatment and reversal, which was considered impressive, the reversal of bone and joint destruction after the onset of rheumatoid arthritis.
So on that note, I'm going to turn the call over to Matt Plunkett, our EVP of Corporate Development.
Matthew J. Plunkett
Thank you, Jim. With the completion of the equity financing earlier this month, we believe we have the financial resources to advance pacritinib in both the United States and Europe. And as Steve described, we are working hard on the pivotal clinical program in these regions. We believe that pacritinib is an attractive asset, and we have received a number of inquiries about the availability of the drug for regional licensing.
Accordingly, we started a process to find a development partner in Asia and, potentially, other territories as well. We anticipate that such a partnership could provide us with non-dilutive capital and external validation for the programming -- for the program. Biotech licensing typically requires a year or more to conclude an agreement. We're in the early stages of this process, and we are encouraged by the strong interest so far.
Let me turn it back to Jim.
James A. Bianco
Okay. At this point, I'd be happy to open up the call to any questions you may have. Operator?
[Operator Instructions] The first question comes from Bert Hazlett from Roth Capital.
Robert Cummins Hazlett - Roth Capital Partners, LLC, Research Division
In terms of -- I have 3 questions: one, operations; one, pacritinib; and one Pixuvri. On the operations side, you were able to achieve the general guidelines of about $5 million in expenses per month. Do you still expect, Jim, that, that goal is achievable, given you've got the new trials enrolling and the launch upcoming in Europe?
James A. Bianco
Yes, I'll let Lou get into a little bit more detail. But per our forecast for 2013, it's obviously going to be somewhat reliant, to some extent, on meeting certain revenue targets that we have internally, so that the net cash contribution to the development organization will offset the increase in costs associated with the pacritinib studies. Lou, do you want to add to that?
Louis A. Bianco
Yes. I think it's also important to mention that we are still holding to our guidelines for this year as well. And considering through the end of this year, we are still holding just about $4.5 million to $5 million a month in actual operating expenses, so, I think, that's consistent with what we've been guiding the Street on.
Robert Cummins Hazlett - Roth Capital Partners, LLC, Research Division
Just in terms of the Pixuvri question, you've indicated the -- you have 31 field force reps, I think, by the end of 2013 and 40 by 2014. What will you consider kind of a fully loaded field force or fully established field force? And can you describe the timing of the reimbursement decisions that you are discussing?
James A. Bianco
Certainly. So in terms of a fully loaded field force in 2014, we don't see it going above all-in 50 personnel, including the field force and then the "management, the sales management personnel" that are based in the U.K. And that overall expense is actually relatively modest, based upon what the potential for sales would be. It's about -- in terms of indirect expense for comp and benefits for that field force, it will be somewhere in the magnitude of $10 million to $11 million. With regards to reimbursement timing decisions, it's -- there's a pretty classic calendar for it. So with regards to Germany, as soon as we submit our value dossier, we can then launch in Germany. And that starts the clock for an IQWiG review. IQWiG typically takes a 3-month review cycle, and they provide that information publicly about their recommendation on an innovation score. Then there is a 2 to 3 week delay, there's a public hearing period where the GBA will listen to patient advocacy groups about whether or not that innovation score was appropriate. And then, within a 3-month period of time, GBA will render its final decision, or I should say its decision whether overturning IQWiG or agreeing with IQWiG on the innovation score assignment. And then, of course, if it's an assignment that you don't agree with, the company has, within the next 6 months, the ability to appeal the GBA decision and then you have this so-called 12 months of free-market pricing. So from November -- let's say we launch mid-November, from mid-November of this year to mid-November of next year, we will have then reimbursed that market at our go-to-market price, which, in Germany, has a list price of 35,000, so a net x factory to us in Germany would be about 29,500. With regards to the U.K., they've already -- they're looking to calendar their first public hearing in Q1 of next year, and that decision would come out in Q2. We moved the U.K. submission up. Typically, companies would like the NICE decision to come out after they've had France and Germany, which would be the 2 highest probabilities of having closest to your ideal price quarter, if you will. And then those could become -- even if NICE gives you a recommendation that you're not satisfied with, you can then reference price off of the France and German price. So that -- the reason we move the U.K. up was the pharmacoeconomic, health economic modeling was very favorable for Pixuvri within the NICE guidelines of what their thresholds are for quality-adjusted life years and incremental cost benefit. So that will potentially be our second reimbursement decision actually in front of France. And then France and Italy, well, France is typically within 6 months. So if we initiate in November, we'd have a decision from the HAS in second quarter of next year. Italy will take 9 months, that's a third quarter decision. And then Spain and Portugal, it's jump ball. It's likely in the fourth quarter. I think the right strategy we've been talking about is finding a family-based Spanish company, and there are a number of -- there are 2 in particular that are very good in oncology drugs in Spain; that that's the best way that you'd give up a little bit on your margins, but you're assured of having adequate accounts receivable in terms of getting paid from that jurisdiction.
Robert Cummins Hazlett - Roth Capital Partners, LLC, Research Division
That's always a good thing. In terms of just shipping the pacritinib, obviously, the near-term focus is on a myelofibrosis Phase III program. But in general terms, I realize that it's early days, but can you talk about maybe early thoughts on teasing out the FLT3 activity, how you might go about that, either in AML or in some type of lymphoma, and when you might consider that type of a program with pacritinib?
James A. Bianco
Sure, let me turn it over to Jack. As you know, Jack Singer's our EVP of Global Medical Affairs and Translational Medicine. So he's been...
Jack W. Singer
Thanks for the question. We were just in the U.K. last week, and we're working with the head of the leukemia research committee of the MRC, who is very enthusiastic about putting pacritinib into front-line AML. He'll be -- they'll be starting looking at well-characterized fresh AML cells, but probably be doing an all-comer study in front-line, higher-risk AML. Not only FLT3 positive, but basically, all-comers so that we can determine, retrospectively, whether the FLT3 is indeed important, because it -- it may -- this is a drug that affects JAK signaling, which is also important in AML. And I think until the answer is in clinically, we don't know whether this needs to be restricted to FLT3 positive AML. So the answer is it is probable that we will have a front-line AML study up and running with the MRC leukemia group some time in 2013. And I'd also add that this will be, essentially, at almost no cost to the company.
[Operator Instructions] There appear to be no further questions. I will now hand the conference back to James Bianco for closing comments.
James A. Bianco
Okay, thank you. So in closing, we're encouraged by the progress we're making on the market introduction for Pixuvri and preliminary feedback on the reimbursement strategy. We were certainly pleased by the oversubscribed investor interest in the recent public offering, which, as you know, was underwritten by Jefferies & Company. Pacritinib clearly led the majority of those discussions in terms of investors' interest. With new experienced additions to the senior management and commercial, clinical and regulatory functions, we've really repositioned the company to try to maximize, a, the commercial opportunity of Pixuvri, while supporting, quickly advancing the pacritinib through its final stage of settlement.
Before we close, I'd like to take a moment to pay respect to the passing away of an amazing individual, who was not only a mentor to Jack and I in, certainly, my clinical training at the bone marrow transplant program, but someone who encouraged and supported our starting the company and provided valuable advice to us over the years. I'm talking about Dr. E. Donnall Thomas, who you may know pioneered not only the field of marrow transplantation, but opened up a whole new area of immunobiology whose benefits can be seen across a variety of scientific and therapeutic disciplines.
In 1990, Dr. Thomas was awarded the Nobel Prize in medicine for his pioneering work. Today, his legacy lives on, not only at the Fred Hutchinson Cancer Research Center, but at transplant programs around the world, where over 70% of those physicians running those programs, were trained at the Hutch. Don taught us never to lose sight of the patient when thinking of new therapies and when conducting clinical trials. He was instrumental in our mission to making cancer more treatable, and he will be missed.
So thank you again for your support and interest in the company. And that will conclude our call for today.
This concludes the Cell Therapeutics Q3 2012 Conference Call. Thank you for participating. You may now disconnect.
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