Curis Management Discusses Q2 2013 Results - Earnings Call Transcript

| About: Curis, Inc. (CRIS)
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Curis (NASDAQ:CRIS) Q2 2013 Earnings Call August 5, 2013 9:00 AM ET

Executives

Mani Mohindru - Vice President of Corporate Strategy and Investor Relations

Daniel R. Passeri - Chief Executive Officer and Director

Ali Fattaey - President and Chief Operating Officer

Michael P. Gray - Chief Financial Officer, Principal Accounting Officer and Secretary

Analysts

Simos Simeonidis - Cowen and Company, LLC, Research Division

Joseph Pantginis - Roth Capital Partners, LLC, Research Division

Jim Birchenough - BMO Capital Markets U.S.

Brian Klein - Stifel, Nicolaus & Co., Inc., Research Division

Edward A. Tenthoff - Piper Jaffray Companies, Research Division

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

Gene Mack - Brean Capital LLC, Research Division

Operator

Good morning, ladies and gentlemen, and welcome to the Second Quarter 2013 Curis Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded for replay purposes.

I will now turn the call over to Mani Mohindru, Vice President of Investor Relations and Corporate Strategy. Mani, you may begin.

Mani Mohindru

Thank you, Shannon. Good morning, and thank you for joining us. During today's call, we'll provide you with an update on corporate plans and developments and also discuss our second quarter 2013 financial results. I also want to refer you to the updated corporate overview presentation on our website that represents much of what we will discuss today.

Before we begin, I would like to advise you that this conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, without limitation, statements relating to our plans and expectations for advancing CUDC-907 and CUDC-427 in the clinic; and the potential therapeutic benefits of these development candidates; our and our collaborator Genentech's expectations concerning the commercialization and market opportunity for Erivedge in various territories; the timings and outcomes of the ongoing regulatory reviews for Erivedge; and the timing and the potential outcome of ongoing clinical studies of Erivedge; our and our collaborator Debiopharm's expectations regarding the advancement of Debio 0932 in presently ongoing clinical trials as well as into additional clinical trials in the future.

Actual results may differ materially from those indicated by forward-looking statements in this conference call as a result of various important factors, including those risk factors described in our quarterly report on Form 10-Q for the quarter ended March 31, 2013, and in other filings that we periodically make with the SEC. And we encourage you to review these risk factors carefully. We caution that we're making these forward-looking statements only as of today, and that we may not update any of these statements even if events and developments subsequent to the date of this call cause these estimates and expectations to change.

I'd now like to introduce Dan Passeri, Curis' Chief Executive Officer, who will provide brief introductory remarks. Following these remarks, Dan and Ali Fattaey, our President and Chief Operating Officer, will provide an update on our programs and pipelines. Following Dan and Ali's remarks, Mike Gray, ouir Chief Financial Officer will review our financial results for the second quarter of 2013, and we'll then open the call for Q&A. [Operator Instructions] Dan?

Daniel R. Passeri

Thanks, Mani. Good morning, everyone, and thank you for joining us today.

During the second quarter, we've made significant progress as we've continued to focus on advancing our proprietary and targeted cancer drug candidates, including the launch of our development campaign for clinical studies with our IAP antagonist, designated CUDC-427, and continued to progress with our ongoing trial of our dual PI3 kinase and HDAC inhibitor, designated CUDC-907, currently being evaluated in a dose-escalation study in patients with multiple myeloma and lymphomas. We remain on track to initiate several other trials in the coming months, both with CUDC-427, as well as CUDC-907. Ali will provide additional details and plans regarding upcoming trials.

The second quarter was also important for the continued commercialization of Erivedge by our collaborator, Genentech-Roche. Importantly, Genentech and Roche secured marketing approvals in key territories worldwide, including the European Union, Australia, Canada and Switzerland, among others. Within the United States, Genentech continues to accomplish steady sales growth each quarter, including approximately 22% sequential growth in Q2 net sales versus the first quarter of 2013.

We're very pleased with the progress being made by our partner Debiopharm as well with our Hsp90 inhibitor, designated Debio 0932, and anticipate that Debiopharm will advance this drug candidate into the Phase II portion of the non-small cell lung cancer study and we also expect to see a new trial initiation in renal cancer in the coming months.

Strategically, our cash position continues to be strong, supported by the milestones from our partners. We ended the quarter with approximately $57 million in cash, and that excludes the July $6 million milestone payment associated with Erivedge's EU approval, which we believe provides us with ample runway to fund our operating plans well into the second half of 2015.

I'm now going to turn the call over to Ali Fattaey, our President and Chief Operating Officer, who will provide further details on our internal drug candidates. Ali?

Ali Fattaey

Thank you, Dan. I also would like to reiterate our excitement with the R&D progress that we've been making. I believe this is the first time that Curis has had 2 drugs in the clinic at the same time. And this is an exciting time for us. And as Dan indicated, our partners as well making great strides with Erivedge and Debio 0932. So at the moment, we really look forward to all 4 of these programs, 2 our own and 2 from our partners, progressing in the clinic, which is very exciting for us.

I'd like to start today with an update on our fully owned IAP antagonist drug candidates, CUDC-427, which as we've discussed before, targets mechanisms of evasion from programmed cell death or apoptosis. During the second quarter, we presented the results of the Phase I trial of CUDC-427 that was conducted by Genentech at the ASCO Annual Meeting in June. In this trial, encouraging clinical activity was seen, including complete responses in 1 ovarian cancer patient and 1 multi-lymphoma patient. We also believe this is the first time that responses, certainly complete responses, have been seen with monotherapy of any IAP antagonist that has gone into the clinic.

In addition to the responses, stable disease was experienced by 8 of the 42 patients that were enrolled. Four of those patients have stable diseases longer than 3 months and 1 patient with upwards of 10 months of disease stabilization. CUDC also -- CUDC-427 also demonstrate a very favorable safety profile and was tolerable in the study. The PK profile of the drug was linear across all doses that was tested from 500 to 600 milligram dose on a daily basis, and biomarker modulation was also seen at nearly all doses in blood cells from patients and the available tumor tissue specimens that were examined.

These results and the extensive preclinical data package that we got from Genentech are the basis for our development plans for CUDC-427, which includes trials focused on the ovarian and fallopian tube cancers, breast cancer and lymphoma, including evaluation of mild lymphomas. In this regard, we recently announced the initiation of a Phase I single-agent study in advanced malignancies to determine the maximum tolerated dose and the recommended Phase II dose of CUDC-427 using a continuous twice-daily regimen. Importantly, this trial is designed to enroll ovarian and fallopian tube cancer patients in its expansion cohort.

Supported by the extensive preclinical data, we are also projecting initiation of the Phase Ib2 study with CUDC-427 in combination with gemcitabine or Xeloda in patients with HER2-negative breast cancer during this third quarter. This trial is expected to enroll patients that are both triple negative breast cancer, as well as estrogen receptor positive breast cancer patients. Lastly, we expect to initiate a third trial with this drug using the CUDC-427 to treat advanced lymphomas, which will include patients with known alterations in the IAP pathway, such as certain MALT lymphomas, as well as certain forms of aggressive lymphomas. We look forward to providing further updates regarding the study designs and specific subpopulations of patients for the upcoming trials in the coming months.

Now I'd like to turn to our second proprietary drug candidate, CUDC-907, which by design is a dual targeted agent with potent PI3 kinase alpha, delta and to some extent beta inhibitory activity, but spares PI3 kinase gamma. The drug also targets the key HDAC enzymes 1, 2, 3, specifically 6 and HDAC10. CUDC-907 is being tested in an ongoing Phase I dose escalation trial in patients with advanced lymphomas and multiple myelomas. We've seen very encouraging drug exposure and also a unique metabolism profile of CUDC-907 in patients. This profile is very similar to what we observed in rodent animal models but we did not observe in dog models. Namely in all patients, the dual inhibitory parent molecule, CUDC-907, is metabolized into 2 forms, M1 and M2 forms, with the M2 metabolite retaining potent PI3 kinase inhibitory activity.

Interestingly, whereas the parent CUDC-907 molecule appears to be relatively short-lived in the plasma from patients, with a half-life in order of a few hours, the M2 metabolite appears to have a rather long half-life, in the order of at least a day, possibly longer. Based on this PK and metabolism profile, the current emerging picture for us is that the administration of CUDC-907 orally to patients should result in a potent but relatively brief period of HDAC inhibition, which could provide prolonged PD effect, and at the same time, a sustained inhibition of PI3 kinase activity through the buildup of the potent and stable M2 metabolite.

In this trial, so far, from the safety perspective, common adverse events that we've observed have included reversible thrombocytopenia and gastrointestinal effect, including diarrhea, which are known side effects associated with HDAC and some PI3 kinases as well. There's been no unexpected toxicity thus far in the trial. In terms of preliminary clinical activity, one patient each from the initial 2-dose escalation cohorts continue on treatment with disease stabilization, and this includes 1 patient with multiple myeloma in treatment cycle 9 that's beyond 6 months of treatment at this point, and a patient with diffuse large B-cell lymphoma or DLBCL in treatment cycle 5.

I would like to caution that these are early PK, safety and activity results represented by a small number of patients and also indicates that multiple myeloma and DLBCL were predicted as potential cancer indications of interest for us based on our preclinical results prior to the trial start, and they fit very nicely with the mechanism of action of this drug as well.

As I indicated earlier, drug exposure is very encouraging for us and the half-life of the M2 metabolite is relatively long. Therefore, based on this observed PK profile of the M2 metabolite and parent and some of the observed side effect profile, we've now implemented certain modifications to the trial protocol. This includes examination of other dosing schedules to fit the M2 metabolite's half-life better and in parallel, with the original continuous dosing regimen.

Therefore, the study will now also enroll patients on either 3x or twice-weekly dosing regimens, and all 3 regimens will be ongoing in parallel. The PK profile of the parent CUDC-907 drug and the M2 metabolite, as we indicated, appear to be well-suited for intermittent dosing and may also allow us to maximize the dual activity of the drug and hence, provide greater anticancer activity while minimizing the potential occurrence of adverse events. Given the current status of enrollment, we expect to report preliminary data from this trial at a scientific conference later this year.

I would, once again, like to caution that all the clinical observation we discussed today are based on a very small number of patients enrolled in the Phase I trial thus far and they need to be further analyzed in larger groups of patients. Also as a reminder, CUDC-907 is being developed in collaboration with the Leukemia & Lymphoma Society, or LLS, and during the second quarter, we earned a $550,000 milestone under our collaboration for the achievement of clinical development objective.

Finally, we are also planning to start another Phase I trial with CUDC-907 in solid tumor patients in the coming months. We will provide additional details regarding this trial as we get closer to its initiation.

I'll now turn the call back to Dan, to provide an update on our partnered programs. Dan?

Daniel R. Passeri

Yes. Thanks, Ali. I'm now going to discuss our partnered programs beginning with Erivedge. And under our collaboration with Genentech and Roche, which is both Genentech and Roche are responsible for the development and worldwide commercialization of Erivedge, and Curis is entitled to royalty on worldwide sales, as well as certain development commercialization milestones. The adoption of Erivedge by physicians continues to be what we consider highly positive as reflected by the sustained growth in quarterly sales since its U.S. launch in February 2012. During the second quarter of 2013, Roche reported net sales for Erivedge of approximately $16.2 million, representing a quarter-over-quarter increase of approximately 22%. Importantly in the second quarter, Erivedge also received marketing authorization on Australia and a positive opinion from CHMP in Europe for approval.

Consequently in July, Erivedge received conditional approval from the European Commission, making it the first licensed treatment in Europe for advanced BCC. Curis received milestones for both Australia and European approvals that totaled $10 million. And based on the early market launch metrics, we continue to expect that the advanced BCC market represents significant value for our shareholders and anticipate Erivedge's growth continually in 2013 and beyond. I'd like to remind everyone that so far the data has just been based on U.S. sales. We now have other approvals in global markets, so we expect to see continual increase in that rate.

Genentech has recently completed a separate Phase II trial of Erivedge in patients with new -- that's nonrecurring operable modular BCC, which is a less severe form of the disease. Genentech and Roche are currently analyzing data from all 3 cohorts of the study and expect to present the results either in Q4 of this year or possibly early 2014. And we look forward to providing updates on Erivedge's ongoing and upcoming studies, as well as our continued commercialization in various territories as they become available.

Regarding Debio 0932, which is our oral Hsp90 inhibitor partnered with Debiopharm. Based on the updates we received from -- recently from Debiopharm, we continue to be encouraged by progress and there were no significant changes in the conduct or outcome of the trials being conducted by our partner, Debiopharm. We expect to provide further updates in the next quarter. As a quick reminder, at present, Debio 0932 is being studied in combination with 3 different chemotherapy regimens in the Phase I portion of a Phase I/II lung cancer study. Once a recommended Phase II dose is established for Debio 0932 in combination with standard of care chemotherapies, the randomized Phase II portion of the study will begin, which Debiopharm has advised us is potentially in 2014. We're entitled to our next milestone payment upon the fifth patient to be enrolled in the Phase II study. Also with Debio 0932, we expect a trial to be launched in renal cell carcinoma sometime this year.

And to conclude, we are focusing our resources on the further development of our clinical -- our proprietary clinical stage oncology candidate, CUDC-427 and CUDC-907. In the next several months, we expect to initiate a number of studies in cancer types driven by strong scientific and clinical rationale. We believe Curis represents an attractive investment opportunity by providing investors with significant upside potential from our wholly owned assets, and these are very promising drug candidates, while benefiting from the growing value prospects in Erivedge, as well as from our Debiopharm partnership.

I'd like to now turn the call over to Mike for his discussion of the financial results, and we'll return on the Q&A session. Thank you.

Michael P. Gray

Thanks, Dan. We reported a net loss of $1.3 million or $0.02 per share on both the basic and fully diluted basis for the second quarter of 2013, as compared to a net loss of $2.9 million or $0.04 per share on both the basic and fully diluted basis for the same period in 2012. We reported a net loss of $6.3 million or $0.08 per share on a -- again, on a basic and fully diluted basis for the 6 months ended June 30, 2013, as compared to a net loss of $661,000 or $0.01 per share for the same period in 2012. Revenues for the second quarter of 2013 were $5.4 million, as compared to $4.4 million for the same period in 2012.

This increase in revenue is primarily the result of an increase in royalties earned from Genentech and Roche's net sales of Erivedge during the second quarter of 2013. Royalty revenues recorded on net sales of Erivedge increased to $805,000 for the second quarter of 2013 as compared to $253,000 during the same period in 2012. In addition to the increase in royalty revenue, we are in the $550,000 milestone payment from the Leukemia and Lymphoma Society related to the achievement of certain clinical objectives in our ongoing Phase I clinical study of CUDC-907.

Operating expenses for the second quarter of 2013 were $6.1 million as compared to $6.8 million for the same period in 2012. Research and development expenses were $3.2 million for the second quarter of this year as compared to $4.5 million in the prior year. We incurred $200,000 in R&D expense during the second quarter of 2013 related to the marketing approval of Erivedge in Australia in May of 2013 as compared to $650,000 in research and development expense during the same period in 2012 related to sublicense fees paid to our university licensors in connection with regulatory filings in Australia.

We also decreased our spending on CUDC-101 and discovery research programs to $370,000 during the second quarter 2013 from $2.2 million in the same period in 2012 as we continue to focus our capital resources on the development of CUDC-907 and CUDC-427. During the second quarter of 2013, we spent $1.2 million on CUDC-427, which we licensed from Genentech in November of last year.

G&A expenses were $2.9 million for the second quarter of 2013 as compared to $2.3 million for the same period in 2012. The increase was primarily due to increased expenses for personnel, legal services and professional services during the quarter. Other expense was $588,000 for the second quarter of 2013 as compared to $460,000 for the same period in 2012. The increase in other expenses is primarily the result of $958,000 in interest expense and amortization of debt issuance costs related to our debt transaction between BioPharma II and Curis Royalty, which is a wholly owned subsidiary of Curis. This interest expense is partially offset by $333,000 in other income that we recorded as a result of the decrease in the fair value of a warrant liability during the second quarter of 2013. Other expense during the prior year period primarily represents the change in the same warrant liability. As of June 30, our cash, cash equivalents, marketable securities and investments totaled $57.1 million and there were approximately 81.7 million shares of our common stock outstanding.

I'll just update the financial guidance as a result primarily of some milestone payments received. This year, we currently anticipate that we'll end 2013 with cash, cash equivalents and investments of between $49 million and $54 million. This includes the $6 million milestone payment that we earned in July related to the conditional approval of Erivedge in the European Union. This projected estimate excludes any other payments, including future milestones or royalty payments in excess of amounts paid to BioPharma under the royalties. We expect that 2013 R&D expense will be in the range of $11 million to $15 million, and this expense includes between $800,000 and $900,000 of stock-based comp.

That concludes our prepared remarks, and we'd like to open the call for questions, please. Operator?

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is from Simos Simeonidis of Cowen and Company.

Simos Simeonidis - Cowen and Company, LLC, Research Division

So the launch in Europe and Australia have both taken place?

Daniel R. Passeri

Yes. Yes, I mean, the reimbursement is going to be ongoing. I think, right now, Simos, there's this drug that's being reimbursed in the U.K. under a National Cancer Drug Fund that extends through the end of Q1 2014. Germany, I think, is either -- is very near-term to having reimbursement, and then a couple of small territories. But for on a country-by-country basis, obviously, it will take some months for the reimbursement to be worked out. But the drug is available for private payers.

Simos Simeonidis - Cowen and Company, LLC, Research Division

Okay, great. And then second one, still on Erivedge, any visibility on when we have data from the Gorlin study? And secondly, on the operable BCC study that you mentioned, Dan, I think in the past you -- I guess you've add-in, is always through Roche, but they had talked about 3Q, this time you said 4Q, potentially early '14. Anything we can read into that in terms of potential clinical benefit that's in the trial? Or is it just -- it's taking longer to enroll?

Daniel R. Passeri

Go ahead.

Michael P. Gray

Do you want me to, actually --

Daniel R. Passeri

No, it's okay.

Michael P. Gray

Okay, this is Mike. On the Gorlin study, I think, that you're referring -- we don't really have a great read-through on timing for the studies that are being run by NCI investigators. So that's run outside of a direct study run by Genentech. On the operable BCC study, I can give a little bit of color. The original plan was actually to have this presented at EADV, which is just at the very beginning of October. Speaking with the Hedgehog team over the last few days, or a week or so, they're going to see this data for the first time in the next week or so. EADV has unusually long poster lead time. So it's just -- it's really a logistical timing issue. I think there's another opportunity at a skin cancer conference in November where this data should be presented and an abstract has been submitted. If not, there are a couple of opportunities in early Q1. So it's really logistics, not really anything else.

Operator

Our next question is from Joe Pantginis of Roth Capital Partners.

Joseph Pantginis - Roth Capital Partners, LLC, Research Division

First, a quick question on 907. Can you provide a little more detail with regard to the advanced nature of the patients? Maybe, specifically, how many prior treatments they might have seen, median?

Ali Fattaey

This is Ali. The patients are relapsed/refractory from a multiple myeloma patients. And on average, they've had 2 to 3 rounds of prior treatments that have been enrolled. So they're true Phase I patients that have come in, exhausted their standard treatment opportunities and have come on to it. As you know, depending on the disease, of course, whether it's a multiple myeloma or different lymphoma patients, they would have had different treatments. But they would have had at least 2 other rounds of treatment before coming onto a Phase I trial.

Joseph Pantginis - Roth Capital Partners, LLC, Research Division

Okay. And then just quickly on Erivedge. Beyond the reimbursement landscape, which you just described, I guess, are there any geographical differences, even if your broader -- from a broader sense, say U.S. versus E.U. on how Roche might be marketing the drug or identifying patients?

Daniel R. Passeri

I think the only difference is, as we understand it in Europe, there are patients maybe more concentrated than they are in the U.S. In the U.S., Genentech is marketing the drug to primarily the dermatologists, also to oncologists, with more severe cases of advanced basal cell. In the U.K. -- in Europe, generally, these patients are served by dermato-oncologists and there are far fewer centers to call on and probably many more patients per center to be seen, but that's the expectation.

Operator

Our next question is from Jim Birchenough of BMO Capital.

Jim Birchenough - BMO Capital Markets U.S.

I might have missed it earlier, but on 907, could you just discuss any activity against HDAC6? Specifically, whether you see synergy with REVLIMID and how much you will leverage an HDAC PI3 kinase inhibitor versus with those attributes and how it might be positioned against either pure HDAC6 inhibitors or PI3 kinase inhibitors?

Ali Fattaey

Sure. Jim, this is Ali, again. Just to reiterate, at least from a target perspective, the drug certainly targets, on the PI3 kinase side, a PI3 kinase isoform alpha and delta most potently, to some extent targets PI3 kinase beta and spares PI3 kinase gamma. On the HDAC side, the drug targets, biochemically, is HDAC Class 1, which are 1, 2 and 3 enzymes, and also Class 2b, which includes HDAC6 and HDAC10. In all cases, the drug is very potent against this. Both in vitro, in cell-based and in vivo models, we've seen ample modification of acidulation, modifications of turbulent, which is the primary target that is looked at for HDAC6 in that case. So we can show that the drug is certainly active against HDAC6. We don't have at the moment clinical data. Biomarker data is not mature enough for us to discuss the events that are happening there. One thing I can point to, as I indicated from an adverse side effect perspective, we have seen thrombocytopenia, drop in platelet counts, which is based on published results, usually -- with the HDACs, is usually due to HDAC6 modifications and inhibition as well. In terms of the question that you asked with regards to Revlimid, we do have some preclinical data and testings conducted an ongoing with looking at the potential for the drug with REVLIMID. As I mentioned, the 2 patients that we've seen some benefit in, including a multiple myeloma patient, as well as a DLBCL, diffuse large B-cell lymphoma patient. We had predicted, based on our preclinical studies, that those 2 -- specifically those 2 cancer types would be cancer types of interest and things that we may want to expand more into. In the case of the multiple myeloma, where they are at this point is a monotherapy or combination with other treatments, including REVLIMID, is yet be seen. We do need to allow more patients to be enrolled and mature. But those are all of interest for us. I hope that answered your question, Jim.

Jim Birchenough - BMO Capital Markets U.S.

Yes. And Ali, just a follow-up, incrementally what data should we expect heading into the ASH meeting in December or even into ASCO next year. Just trying to get a sense of how much more mature the data will be that we should look ahead to?

Ali Fattaey

Yes. On purpose, I think I tried to walk through the update today and I think that's the way that we would potentially update in our presentations ongoing as well, really presents potential data on the PK of the drug, which is important, that's on the exposure side, any side effects and adverse events that are seen, which we've discussed, and also importantly, any clinical benefit. So we do expect to present later on this year, on those 3 categories for that. Some of the data in terms of patient treatment would turn to be more mature by the time of ASH conference. Secondly, we would have a number of patients that would be -- hopefully a larger number of patients that would have been enrolled by that time as well. As I indicated, there will be 3 simultaneous dosing regimens that will go on, which will also increase the number of patients that we would be enrolling in the trial per unit of time at this point as well. So I would say more patient numbers and hopefully more mature data within the categories of PK, safety, tolerability, as well as potential clinical benefits.

Operator

Our next question is from Brian Klein of Stifel.

Brian Klein - Stifel, Nicolaus & Co., Inc., Research Division

A question on 907. Just wondering what the advantages of going to a less intense dosing schedule with the twice weekly or 3x weekly administration you mentioned? It seems that from your comments, the tolerability seems okay. So are you -- I don't understand what you would expect in terms of efficacy by lowering the dosage?

Ali Fattaey

Yes. Thank you, Brian. This is Ali. As I've tried to present and discuss, we do see the M2 metabolites that is formed in dosing the patients continue to go up during the daily treatment regimen. And there is a potential for accumulation of the drug. At the moment, we are trying to -- one of the things that we've implemented in the modification as well is to be able to get much longer extended period of PK measurements in this regard. So really, the primary trigger for that was the potential of accumulation of some of the metabolites, and in particular, the M2 metabolite, which is active. That led us there. Secondly, just from a mechanistic perspective when we look at the drug and marry that to the PK that we observed, I think the ideal scenario for us would be shorter duration of HDAC exposure and while we sustain the PI3 kinase exposure. We think certainly the longer half-life of the M2 allows us to do that and less intense dosing or intermittent dosing may allow us to get less HDAC activity, which could be advantageous and allow us to escalate to far higher dosage at this point. Brian, I think, rather than to continue enrollment on a daily basis and then later on examine other dosing regimens, we wanted to accelerate this and introduce the intermittent dosing at this point in order to look at them in parallel rather than in sequence, if you will.

Brian Klein - Stifel, Nicolaus & Co., Inc., Research Division

Okay, great. Then along those lines, just comparing to other HDAC inhibitors, Zolinza and others, it seems that those HDAC inhibitors always had issues with sufficient amount of inhibition of the target. Now that you are moving to a less intense regimen, how confident are you that you're going to have sufficient HDAC inhibition at those shorter doses to achieve your goals?

Ali Fattaey

Yes. So first of all, we think the HDAC inhibitor -- or the HDAC inhibitory moiety that's built into 907 is very potent. If you look at the -- from the biochemical side, it's certainly nanomolar -- single-digit nanomolar inhibition of the HDAC. So it's a very, very potent HDAC inhibitor. Secondly, as we've indicated and it was unusual but a very pleasant thing for us, to see the effects we've seen even within the first cohort of patients that were treated, that we saw already some adverse events that were related to what we would expect for HDACs, namely the potential loss -- drop of platelet counts or thrombocytopenia, as well as the fact that, as I indicated, at least 1 of the patients has had a good benefit, and that patient happens to be a multiple myeloma patient, which obviously are looked at as potential indications for treatment with HDAC. So the HDAC moiety that we have built into 907 is very potent. And again, that's -- I think the best evidence of that is the fact that we've seen already some of its, not necessarily biomarkers, but as I said, the biomarker data is not mature enough, but from the adverse events perspective, those are the ones we would have expected or that is the one we would have expected from the HDAC. So I think realistically, the potency of the drug on the HDAC side is very high. So I don't think we're going to have issues with enough exposure or enough inhibition of HDAC.

Operator

Our next question is from Ted Tenthoff of Piper Jaffray.

Edward A. Tenthoff - Piper Jaffray Companies, Research Division

A lot of questions have been answered. I wanted to double check, maybe it was Simos, who had asked what the status was of launch in Australia and Europe. And maybe you can kind of walk us through how that plays out? And what you expect pricing might be in Europe versus the U.S.?

Daniel R. Passeri

To answer the latter question, we probably shouldn't speculate on pricing just yet. I think generally, it's going to be a country-by-country reimbursement approach and it will take some number of months. So our understanding from Genentech though is that Germany, just on their standard practice, will approve the drug or in the coming days here for reimbursement and so the drug will be reimbursed at the country level in Germany any day now. There's also a National Cancer Drug Fund in United Kingdom that runs through the end of Q1, which is reimbursing the drug or will reimburse the drug. A couple of smaller territories also reimbursements either has been approved or will be very close to being approved. I think beyond that there's not a whole lot that we can give other than on a quarter-by-quarter basis and where reimbursement stands on a country-by-country basis.

Operator

Our next question is from Adnan Butt of RBC Capital Markets.

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

A question on 907. So can you explain a bit more if enrollment in the first dose escalation, has that been slowed down or what state is that at at this time? I think at the last update, you were at 16x?

Ali Fattaey

Yes. Thank you, Adnan. I think -- what I think that we'd indicated, we're sort of refraining a little bit from giving a cohort-by-cohort or a patient -- as much as possible, patient-by-patient update. One of the reasons that we had originally discussed, going against a little bit our rules, discussed the first cohort and also the second cohort, was a tiny bit of that was historical. To set it into perspective, if you recall, we had originally started the first drug from this platform of dual inhibitors with CUDC-101 that went into clinic that had some issues with regards to oral viability. Certainly, we can give it IV. I think we were very pleasantly not surprised, but pleasantly the data from 907 is clearly showing us that the drug has a closure and we wanted to share that with the community and the investors to recognize that our exposure and oral exposure and availability of 907 was good. And certainly, we were able to dose it and escalate it. Beyond that, the only thing that I would like to comment on is that the dosing in the continuous daily regimen is ongoing and we have also implemented 2 additional regimens in parallel, really to support the patient numbers that we would like to enroll, as well as allow us to figure out which one is the ideal one for this specific drug in terms of dose escalation and reaching the recommended safety dose, right? So...

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

And if I can have a follow up. For 907, do you think infection prophylaxis is needed for 907? And then secondly in terms of genetically identifiable patient populations, can you give a bit more detail on that, please? That's it for me.

Ali Fattaey

Adnan, I think your first question was whether infection prophylaxis was required. We have not observed that in our study so far. And again, I want to reiterate that our drug from an PI3 kinase inhibitory site targets PI3 kinase set alpha and delta predominantly, some inhibition of PI3 kinase beta and no inhibition or sparing PI3 kinase gamma. So we are not a PI3 kinase gamma inhibitor. We have not seen infection nor do we project to have to deal with the issues of infection associated with our drug. Again, that's early but we have not seen and don't really expect to see that either. With regards to the second question, I apologize, I didn't quite catch it...

Daniel R. Passeri

Genetic.

Ali Fattaey

Oh yes, thank you. Actually, on that side of it, so since -- no, PI3 kinase delta mutations have not been seen yet in human cancers, I don't believe. And so with the current study, the way that we are looking at it in the hematologic tumors, including lymphomas and multiple myeloma, I don't think we will be looking, at the moment at least, a genetic predisposition or sensitivity to the drug. However, as I indicated, we are also initiating a solid tumor study with CUDC-907. And in particular, because it also targets PI3 kinase alpha at the same time as it targets HDAC. PI3 kinase alpha is mutated in human cancers, in particular, one of the cancer indications that we have been looking at and studying and planning for, and is potentially breast cancers, and those are the estrogen receptor-positive breast cancers, which predominantly show mutations in PI3 kinase alpha. I should also point out that the HDAC inhibitors separately have been tested in the ER-positive breast cancers that are in combination with tamoxifen and have shown some signs of clinical activity. Again, we see the dual activity of CUDC-907 potentially having benefit in that population, both from the HDAC side as well as PI3 kinase alpha inhibitory side. So those studies are in the planning phases at the moment.

Operator

[Operator Instructions] Our next question is from Gene Mack of Brean Capital.

Gene Mack - Brean Capital LLC, Research Division

Two questions. First on Erivedge. Just wondering if you can remind us again what the value proposition is both from, I guess, a label and use perspective on the 2 cohorts that are going to be -- on the 2 operable cohorts that are going to be read out towards the end of the year?

Daniel R. Passeri

Yes, okay. So the operable studies, there were 3 cohorts, the first one is already read out, just to remind everyone on that data. That data showed a 42% complete histological clearance, with an additional 54% on top of that, that had the PR, so a 96% clinical benefit. So that's very encouraging if the drug is to be used as a possible neoadjuvant. We're hopeful that the current label, for instance, gives physicians discretion in how to use the drug. So our expectation is that, that drug -- those studies, that those readouts could be used to supplement the existing package from an education standpoint on the potential use of the drug as a neoadjuvant prior to surgery and what's designated as operable but clearly suboptimal patients, where if physicians had an alternative to improve outcome, this would be a great alternative follow to generate a better clinical outcome for patients. So that's our expectation on how those studies may affect the market coverage and expansion of Erivedge.

Gene Mack - Brean Capital LLC, Research Division

Okay. And then as far 427 goes, I think in the past, you folks have just described it as sort of a -- more of a combination agent and something that needed to be used probably in the presence of something that was promoting TNF alpha. And I'm just curious as to I guess 2 things: One, why all the -- why are you now moving towards a monotherapy strategy for the drug? And then two, maybe if you can explain a little bit more about why you're sort of -- it seems almost like you're moving back to Phase I or expanding Phase I at a time when with linear pharmacokinetics and kind of pretty decent activity, you might be able to go straight to Phase II and do that kind of dosing work there? Can you just give us a little bit more clarity on the strategy there?

Ali Fattaey

Yes, sure. Gene, this is Ali. So I'll take on the 427. I think the -- with regard to the development plan and the development strategy for it, clearly, we want to go into multiple different cancer types. And as you had indicated, we do see the drug as having great potential for combination treatment. And of course our breast cancer study that's going to get initiated very soon here is a combination with capecitabine. The results that the we also saw from the Phase I clinical trial that was presented from Genentech showed us that from a monotherapy perspective, at least it appears that some ovarian cancer patients can certainly have benefits. And secondly, MALT lymphoma patients, which have a high prevalence of gene alteration by their amplifications or translocations at the targets of our drug focus, the IAP gene itself, maybe very amenable to treatment with this drug and respond well. We wanted to make sure that we follow those signals both in the ovarian and the MALT lymphoma from the monotherapy side at the same time as we initiate combination treatment strategies, the first one being in the breast cancer with Xeloda. With regards to why some of it is being done in the Phase I setting and additional work on regimen, really, in this case, the ovarian cancer trial is -- that we initiated is in some respect trying to kill 2 birds with 1 stone. And that is to examine the possible use of the drug. The safety profile of the drug was very good and the half-life of the drug was around 6 to 8 hours. Therefore, with the investigators, we initiated this study in order to examine potential bi-daily dosing of the drug first, just to get that out of the way, and then expand into the ovarian and fallopian tube cancer patients, which -- as the appropriate dose for that one. So the potential for monotherapy of the drug may be a slightly different regimen than the combination treatment strategy that we take and we're trying to integrate all of those into the 3 trials that we are planning to start: The ovarian trial that's already started; the breast cancer combination with capecitabine that will start this quarter; and then later on in the year, the lymphoma study will be, as you indicated, more of that Phase II trial in that setting. We won't be trying to do additional Phase I work in that one.

Operator

Thank you. I'm showing no further questions at this time. I would like to turn the call back over to Dan Passeri for closing remarks.

Daniel R. Passeri

Okay. Thank you. We'd like to thank everyone for listening in today. I'd like to thank our employees, directors, investors and partners for their continued support. We obviously look forward providing you with further updates on our progress over the coming months. And again, thank you for your attention this morning and have a pleasant day.

Operator

Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day.

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