Sunesis Pharmaceuticals Management Discusses Q3 2012 Results - Earnings Call Transcript

Sunesis Pharmaceuticals (NASDAQ:SNSS)

Q3 2012 Earnings Call

November 08, 2012 11:00 am ET

Executives

Eric H. Bjerkholt - Chief Financial Officer, Principal Accounting Officer, Executive Vice President of Corporate Development & Finance and Corporate Secretary

Daniel N. Swisher - Chief Executive Officer, President and Director

Adam R. Craig - Chief Medical Officer and Executive Vice President of Development

Analysts

Eric Schmidt - Cowen and Company, LLC, Research Division

Adnan S. Butt - RBC Capital Markets, LLC, Research Division

Mara Goldstein - Cantor Fitzgerald & Co., Research Division

Marko K. Kozul - Leerink Swann LLC, Research Division

Thomas Yip - McNicoll, Lewis & Vlak LLC, Research Division

Operator

Good day, ladies and gentlemen, and welcome to the Third Quarter Sunesis Pharmaceuticals Earnings Conference Call. My name is Sue and I will be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Mr. Eric Bjerkholt, Executive Vice President of Corporate Development and Finance, and Chief Financial Officer. Please proceed, sir.

Eric H. Bjerkholt

Thank you, Sue, and thank you everybody for joining us today. With me from Sunesis are Dan Swisher, President and Chief Executive Officer; and Dr. Adam Craig, Executive Vice President, Development and Chief Medical Officer.

During today's call, Dan will review recent corporate events. Adam will provide an overview of the ongoing Phase III VALOR study and other clinical programs. And I will discuss third quarter 2012 financial results. Dan will then recap the company's upcoming milestones before opening call up for questions.

Before we begin, let me remind you that during today's conference call, we will be making forward-looking statements that represent the company's intentions, expectations or beliefs concerning future events. These forward-looking statements are qualified by important factors set forth in today's press release and the company's filings with the SEC, which could cause actual results to differ materially from those in such forward-looking statements. Furthermore, information discussed on today's call is accurate as of today, and we do not intend to update. With that, let me turn the call over to Dan.

Daniel N. Swisher

Thanks, Eric and good morning, all of you. Thanks for joining us today on our third quarter 2012 financial results and corporate highlights conference call. First, I'd like to recognize the good news of the definitive presidential race without any hanging chads or further uncertainty. I'd also like to express our hopes that our politicians can now come together to resolve our serious fiscal issues. All industries, in particular biotech, will benefit from more stable federal backdrop set by responsible lawmakers.

So alright, back to Sunesis. On to our third quarter. Sunesis has made significant progress with our lead vosaroxin program and with our regulatory financial and intellectual property strategies. Most importantly, following the conduct of the single preplanned interim analysis of VALOR, we have implemented a 225-patient sample size increase to our pivotal trial bringing target enrollment to 675 patients. This decision was made based on the unanimous recommendation by the trial's Data Safety Monitoring Board or DSMB. The prespecified sample size increase is designed to maintain adequate statistical power over a broader range of meaningful survival outcomes. This important milestone brings us one step closer to realizing vosaroxin's potential as a new treatment standard in acute myeloid leukemia or AML. In additional to a successful interim analysis, we made progress in a number of important areas during the third quarter. Thanks to the continued strong execution and investigative support of VALOR, we remain on track to complete the full enrollment of VALOR in 2013. As of yesterday, 453 patients have been enrolled.

With regard to our kinase inhibitor pipeline in oncology with Millennium Pharmaceuticals, and in immunology with Biogen Idec. Both programs continue to progress well. These collaborations allow us to leverage the resources of 2 leading bio-pharmaceutical companies to advance 2 high potential programs with no current expenditure of investment or resources required from Sunesis.

MLN2480, a pan-Raf inhibitor and the first Millennium collaboration compound in the clinic continues forward in a Phase I solid tumor trial. Importantly, Sunesis and Millennium were recently granted a U.S. composition of matter patent covering MLN2480, which lasts to 2031.

We remain well positioned from a capital standpoint as well to reach our goals. As announced today, we ended the third quarter with $76.6 million in cash, cash equivalents and marketable securities and we've raised an additional $3.6 million in early October through common stock sales and warrant exercises, which give us a pro forma cash balance of $80.2 million as of quarter end. Our cash resources are expected to fund our operation to the end of 2014. Eric will speak to this in greater detail later in the call.

On the corporate front in October, we strengthened our management team with the well-deserved promotions of Debbie Thomas to Vice President, Regulatory Affairs; and Gene Jaimeson, Vice President of CMC.

So with that, I'd like to turn the call over to Adam to discuss our clinical programs in more detail.

Adam R. Craig

Thank you, Dan. Good morning, everyone. We believe vosaroxin is one of the most advanced and promising therapies in development for AML today. AML is a rapidly progressing cancer of the blood, characterized by the uncontrolled proliferation of immature blood cells in the bone marrow. Treatment standards for this disease have not changed appreciably in the last 40 years and the prognosis for adult patients diagnosed with AML, remains quite poor, with a 20% 5-year survival rate that drops to just 5% amongst patients 65 years and older.

When treating AML, it can often be challenging to find the appropriate balance of response to therapy, durability of response and safety. As a first-in-class treatment, vosaroxin has a promising clinical profile. Data collected from our prior AML studies point to a profile characterized by good remission rates, single-digit early mortality rates, long-duration of response and encouraging survival outcomes. In addition, vosaroxin therapy has provided a bridge to stem cell transplantation for many responders, a key treatment goal for AML patients.

This quarter, our pivotal VALOR program successfully completed one of its most important milestones. As you know, VALOR is a Phase III randomized, double-blinded, placebo-controlled pivotals trial of vosaroxin plus cytarabine in patients with first relapse or refractory AML. The primary endpoint of this study is overall survival. We believe that VALOR offers an efficient design that capitalizes on vosaroxin's promising clinical profile while overcoming the challenges that have limited the success of other AML candidates, notably study under pairing and the use of non-randomized pivotal trial design. VALOR features an adaptive trial design with the opportunity to prospectively increase the sample size.

In September, the planned interim analysis was performed by an independent Data and Safety Monitoring Board or DSMB, who examined unblinded data to decide whether to stop the trial early for efficacy or futility, continue the study as planned or implement a onetime sample size increase. Based on the DSMB's recommendation, Sunesis implemented a onetime 225-patient sample size increase in order to maintain adequate statistical power across a broad range of survival outcomes. It was the DSMB's first and only interim look at VALOR's unblinded XE data, to which we as a company remain blinded. Thanks to the continued strong execution and investigative support for VALOR, we remain on track to complete our new target enrollment of 675 patients in 2013, with unblinding of the trial expected in the first half of 2014, upon reaching 562 events in the final database log. As of yesterday, 453 patients have been enrolled in VALOR. We are currently enrolling patients at more than 100 sites in the U.S., Canada, Europe, Australia and New Zealand and we plan to open additional -- 2 additional sites in Europe and 4 new sites in Seoul, Korea, at leading teaching hospitals that have been involved -- previously involved in pivotal Phase III leukemia studies.

As we complete site approvals at these centers, we expect to begin enrollment at these sites in early 2013. I'd like to sincerely thank the DSMB for their comprehensive analysis, the trial investigators, study sites and the entire VALOR team for their hard work and continued support. Most importantly, I'd like to thank the patients and their families for their participation in the trial.

Now, I'll update you on the other vosaroxin study, the LI-1 trial. The owned refractory AML, the vosaroxin pivotal program, has expanded into newly diagnosed LD AML and high-risk MDS patients in a trial that is less intensive 1 or LI-1. This trial has been conducted by the United Kingdom National Cancer Research Institute under the direction of Professor Alan Burnett, Head of Hematology at the University of Cardiff; enclosed a "Pick a Winner" design to evaluate a number of promising investigation treatments versus low dose cytarabine in patients who are considered too high-risk or frail to be candidate for intensive standard induction in chemotherapy. Selection of vosaroxin for 2 of the experimental treatment arms in this international quartet group trial, speaks to its growing regard within the hematology community. It also builds upon the promising results from our Phase II REVEAL-1 trial, a single agent vosaroxin in newly diagnosed LD AML patients with poor prognostic factors. The LI-1 trial enrolled its first patient in March and as of October 4, a total of 25 patients have been treated with vosaroxin. We look forward to updating you on the progress of this trial.

Let me now turn the call over to Eric.

Eric H. Bjerkholt

Thanks, Adam. I will recap financials announced this morning beginning with our cash position. We ended the third quarter with $76.6 million in cash, cash equivalents and marketable securities. Subsequent to the quarter end, the company raised $3.6 million through a combination of common stock sales and warrant exercises, bringing pro forma cash as of September 30, to $80.2 million. As of the end of October, the company had 51.5 million shares outstanding. Our current cash resources are expected to fund our operations to the end of 2014.

For the income statement, revenue for the 3 and 9 months ended September 30 were $0.3 million and $1.8 million as compared to $1 million and $5 million for the same period last year. Revenue in the 9 months ended September 30 was primarily due to a payment of $1.5 million in June for the advancement of preclinical work in the company's collaboration with Biogen Idec. Revenue for the comparable period last year was primarily due to an upfront payment of $4 million that we received in connection with the March 2011 kinase inhibitor agreements with Biogen Idec and Millennium. R&D expenses increased to $6.9 million and $21.6 million for the 3 and 9 months ended September 30 this year, as compared to $6.2 million and $16.2 million for the same period last year. The increases were due to increases in clinical, CMC and other expenses related to the VALOR trial. G&A expenses for the 3 and 9 months ended September 30 of this year were $2.3 million and $6.7 million, as compared to $2.2 million and $6.1 million for the same periods in 2011. The increases primarily being due to higher non-cash, stock-based compensation expenses.

We reported a net loss of $17.4 million and $39.9 million for the 3 and 9 months ended September 30, 2012, which included non-cash expenses of $8.1 million and $12.3 million, respectively, for the reevaluation of certain warrants to fair value.

Since the beginning of the third quarter, the company raised a total of $58.7 million net of fees as follows: $25 million from the previously announced royalty purchase agreement with Royalty Pharma, $15 million from the second tranche of the 2011 venture loan agreement, $17.3 million from the sale of 3.6 million shares of common stock, and $1.4 million from the growth exercise of 600,000 warrants. This additional funding ensures an operating cash run rate to the end of 2014 or well beyond the expected unblinding of VALOR in the first half of 2014, and provide sufficient capital to support ongoing and future CMC regulatory and commercial investments as we prepare for a successful launch of vosaroxin. Let me now turn the call back over to Dan.

Daniel N. Swisher

Thanks, Eric. So its an exciting time, as you can see, with the progress of these programs, in particular the VALOR trial. And so I'd like to just reiterate some of the upcoming milestones that we anticipate. One, is the ongoing progress of VALOR and the completion of full enrollment. Two, the progress of the LI-1 trial and the outcome of interim decisions on expanding the vosaroxin treatment arms with additional patients. Three, would be the initiation of additional vosaroxin investigator-sponsored clinical studies at leading treatment centers next year. Four, clinical updates on the MLN2480 pan-Raf program. And finally, a potential IND filing in our kinase collaboration with Biogen Idec.

So with that, I'd like to open the call now for questions. Operator?

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Eric Schmidt.

Eric Schmidt - Cowen and Company, LLC, Research Division

Dan, it looks like you've had pretty strong enrollment trends in VALOR since the last update. Is the -- do you sense that the interim analysis is helping you there?

Adam R. Craig

The interim analysis, I think, provided clarity for investigators on how the study is going to progress and we heard a lot of strong enthusiasm from -- in all regions since the study, since interim analysis. We took a lot of time communicating outcomes to our sites. And the response is being good enrollment since that time and I expect that to continue.

Eric Schmidt - Cowen and Company, LLC, Research Division

And then on the Millennium Ras program, I know that you're not in control here, but do you guys have any sense of when we'll see the Phase I data, I guess, at some point next year?

Daniel N. Swisher

Yes, Eric, we're -- we can't give specific guidance there. Millennium does have control of the disclosure and what I can say is we're in quarterly dialogue with them on deep project updates and we're enthusiastic to see the continued progress and the plans they have for the next wave of potential studies. But exactly sort of the timing and location of those clinical updates, we're not yet in a position to communicate.

Eric Schmidt - Cowen and Company, LLC, Research Division

Okay. And then a quick financial question for Eric. The 17-or so million you've raised in equity sales, is that under the ATM? And is there any left under that program or do you plan to raise any more equity that way?

Eric H. Bjerkholt

Yes, the sales were under our ATM arrangements and we really can't comment on any future plans for raising equity. We're well-funded at this point to the end of 2014, which provides a significant runway. We believe post-expected and blinding and we should leave it at that.

Eric Schmidt - Cowen and Company, LLC, Research Division

Well, could you just remind us if -- whether that ATM has any left -- any additional authorized shares or sales?

Eric H. Bjerkholt

There's a little bit left.

Operator

And your next question comes from the line of Adnan Butt.

Adnan S. Butt - RBC Capital Markets, LLC, Research Division

The enrollment update on LI-1 is pretty specific in terms of the date. Is that because there's no new information available since that date? Or you're not allowed to disclose it?

Daniel N. Swisher

Yes, Adnan. Yes, so the date that we're referencing back to for the LI-1 is the Analyst Event, at which point Alan Burnett shared that information. We're going to coordinate with Dr. Burnett to give periodic updates but it won't be as frequent as we have with VALOR. But we look forward to a further outdates.

Operator

And your next question comes from Mara Goldstein.

Mara Goldstein - Cantor Fitzgerald & Co., Research Division

Just on the LI-1 trial, can you remind us of what that decision tree looks like? You got 25 patients enrolled and over what period of time might that happen?

Daniel N. Swisher

Well, first, the first part objective is to enroll 50 patients in each arm. At that point, there's an analysis based on the CR noble survivor rate. And then, the data monitoring committee for the panel will then decide whether to expand the trial to potentially 200 patients per arm where overall survival will be the endpoint. And in this meeting, Dr. Burnett -- Professor Burnett said, that he thought the data for the first 50 would be available for us to review next year.

Mara Goldstein - Cantor Fitzgerald & Co., Research Division

Okay, but the trial, as I recall, has multiple, as explained, multiple compounds. And so, I guess my question is, is each decision made independent? Or is there a decision that is made comparing a spectrum of results you get from the different compounds that are in the trial?

Daniel N. Swisher

Each ARM is assessed independently, with respect to whether it should continue to the expansion.

Mara Goldstein - Cantor Fitzgerald & Co., Research Division

Okay, and I just had a quick question and it was on the commentary around the patent with Millennium as a joint ownership of patents. Does that change anything in terms of participation financially with them if [indiscernible] jointly?

Daniel N. Swisher

No, that's as per the agreement. So our economics in the program remain the same.

Operator

Your next question comes from the line of Jason Kantor [ph].

Unknown Analyst

Just a couple of little things, are you planning -- is it your policy to give enrollment update at all kind of quarterly calls? Is that something we can expect going forward until you're fully enrolled?

Daniel N. Swisher

Yes.

Unknown Analyst

Okay. And then in terms of the warrants that were exercised, I think you guys have a couple of different tranches of warrants. I'm not sure which ones did you guys clear out.

Daniel N. Swisher

They were related to the October 2010 financing we did.

Operator

And your next question comes from Marko Kozul.

Marko K. Kozul - Leerink Swann LLC, Research Division

So I have an LI-1 trial question. I believe the sapacitabine stage 1 data are close to being reviewed by the DMC. So I was wondering how you think about any read-throughs to vosaroxin or how various DMC recommendations for this arm might affect the vosaroxin prospects, either for the monotherapy or low-dose COC combination arms?

Daniel N. Swisher

Maybe I'll just say a word and then turn over to Adam. But obviously, in this area, they are now -- we're looking to -- it's big on that need and hopefully many new therapies are going to make it through. Whether it's isomethylating [ph] agents or other nucleoside analogs like cytarabine, there's no compound that is directly competitive with the Sunesis mechanism and, if anything, we see novel combinations as an opportunity going forward. So we wish them well and hope their review is successful and if they proceed forward, everything we've heard from Professor Burnett, there's plenty of patients in this LI-1 study to expand as many arms as he deems, or the DMC deems, worth going to the next stage. Adam?

Adam R. Craig

Yes, I would agree, Dan. It's a large study, Marko. It's in many -- it's expanding in a number of countries and its many sites. It's over 100 sites now and we're continuing to expand. Professor Burnett has developed over the last few years a very mature, very large network of sites. And I would agree with Dan. I think the study can tolerate a number of different treatment arms and enroll quite well with all the agents that are participating.

Operator

And your next question comes from Thomas Yip.

Thomas Yip - McNicoll, Lewis & Vlak LLC, Research Division

I have a couple of questions about the LI-1 trial, specifically. You mentioned that there are 25 -- well, there were 25 patients treated with vosaroxin as of October 4. And from what I understand, there are 2 vosaroxin arms so far, one is vosaroxin monotherapy and one is vosaroxin combined with cytarabine. So are the 25 patients between 2 arms or on each arm?

Eric H. Bjerkholt

There are 23 on the single agent arm and 2 on the vosaroxin plus low-dose RC [ph] combination arm.

Daniel N. Swisher

And as we discussed at the analyst meeting, Doctor Burnett -- Professor Burnett initially opened the monotherapy arm to get experience in safety -- experience with that arm. And after a certain number of patients, they then opened the second ARM, so that's why there's a little bit of lag in the combination ARM. But those arms are open and enrolling and continue to enroll since the analyst event.

Thomas Yip - McNicoll, Lewis & Vlak LLC, Research Division

So how -- I guess more specific to the trial design of LI-1, how are patients accrued into the trial. Is it in parallel to each arm or is it kind of randomized?

Daniel N. Swisher

It's -- each of the individual drugs -- some of the individual drugs have some eligibility criteria. So a physician who's got a patient will look at the trial. And if the patient is eligible for 1 or more of the arms, then they'll be randomized accordingly. If they have an issue that prevents them going on the treatment arm, then they excluded that arm. So for example, if there was a cardiac issue, a patient had a cardiac problem and there was a drug with a cardiac -- potential cardiac toxicity, they wouldn't be able to go to in that arm.

[Audio Gap]

with eligibility criteria and compared to the other drugs on the study. And there are -- unlike the other drugs, there aren't really that many restrictions for us -- for our patients to go in the study. I think that's an advantage we have compared to the other agents on the study and that should help us in enrollment.

Eric H. Bjerkholt

And it's a very kind of organic living trial where arms are opening -- pausing for analysis and then expanding or closing. So at any given time, there can be a few arms or many arms. We know that with our 2 arms that are open, they're also accruing to an equal number of patients to a low-dose RC [ph] control arm. So we've got that cross-comparison so that when we get to the 50-patient analysis, which Professor Burnett anticipates reaching in 2013, you've got both the controlled data and the vosaroxin data to compare to. There'll probably will be 2 different decision points because of the timing. First will be the single-agent vosaroxin and then later in the year, will be the combination.

Thomas Yip - McNicoll, Lewis & Vlak LLC, Research Division

Okay. Also I guess staying on with the LI-1 trial, will the decision to move into Phase III independence of the entire -- of the other drugs' arm or will it be independently as they complete? Because you just mentioned there may be plans to expand into new arms as well.

Adam R. Craig

Yes, it's independent of the other treatments. And each of our treatment arms, vosaroxin alone and vosaroxin combination with RC [ph], will be compared back to the control arm, which is low-dose RC [ph]. And based on the comparisons to the control arm, the decision will be made to continue to a larger sample size or not. The data from the other therapies on the study had no impact on the comparison of vosaroxin or vosaroxin RC with RC.

Operator

You have no questions at this time. [Operator Instructions] And your next question comes from the line of Thomas Yip.

Thomas Yip - McNicoll, Lewis & Vlak LLC, Research Division

Just wondering if the LI-1 trial will include some kind of interim analysis after the Phase II is complete?

Daniel N. Swisher

There is -- the initial look is at 50 patients. The data monitoring committee can look again at 100 patients if they choose to. And it depends on the outcome of the analysis at 50. But there is an option there. The protocol is not rigid in that regard, so they may or may not look at 100 patients. They have the option to, though.

Thomas Yip - McNicoll, Lewis & Vlak LLC, Research Division

Okay. Will there be a formal data presentation at a medical conference?

Adam R. Craig

Yes, Professor Burnett has obviously an interest and a track record of presenting the data at medical conferences. And we would encourage and support that.

Operator

I would now like to turn the call over to Dan Swisher for closing remarks.

Daniel N. Swisher

Thanks, everyone, for joining us and we will be at a number of conferences and also at the medical conference, ASH. So I hope we'll see many of you in person. In the meantime, if any of you have questions, feel free to give us a call. Thanks for your participation.

Operator

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

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