Acceleron Pharma (XLRN) John Knopf on Q1 2014 Results - Earnings Call Transcript

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Acceleron Pharma Inc. (NASDAQ:XLRN) Q1 2014 Earnings Conference Call May 15, 2014 8:30 AM ET


Stephanie Ascher - Stern IR

John Knopf - President and Chief Executive Officer

Kevin McLaughlin - SVP and Chief Financial Officer

Matthew Sherman - Chief Medical Officer

Steve Ertel - SVP and Chief Business Officer


Kenan Najafov - Citigroup

Marko Kozul - Leerink Partners

Mike King - JMP Securities


Good morning and welcome to Acceleron's First Quarter 2014 Conference Call. At this time, all participants are in a listen-only mode. (Operator Instructions). Please be advised that this call is being recorded at Acceleron's request. I would now like to turn the call over to Acceleron. Please proceed.

Stephanie Ascher

Good morning. This is Stephanie Ascher with Stern Investor Relations. And welcome to Acceleron's first quarter 2014 conference call. You can listen to a live webcast or a replay of today's call by going to the Investors and Media section of the website

The agenda for today's call is, John Knopf, Acceleron's Chief Executive Officer will provide an update on the Company's pipeline, clinical plans and R&D efforts. Then Kevin McLaughlin, Chie Financial Officer will review the Company's financial results and we'll open the call for Q&A. Matthew Sherman, Chief Medical Officer and Steve Ertel, Chief Business Officer will also be available for Q&A at the end.

Before we begin, I would like to remind you that today's discussion will include statements about the Company's future expectations, plans and prospects that constitute forward-looking statements for purposes of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995.

I would now like to turn the call over to John Knopf.

John Knopf

Thanks, Stephanie. Good morning, everyone and thanks for joining us today. The company made great progress during the first quarter of 2014 laying the foundation for exciting advances across all of our programs during the rest of the year. Last night we released exciting data from an ongoing Phase 2 study with dalantercept in renal cell carcinoma which I will often refer to as RCC. The combination of dalantercept plus axitinib generated a 25% objective response rate in second through four line patients. By comparison in the axitinib AXIS Phase 3 study in second line patients who progressed after receiving sunitinib, the objective response rate was 11.3%. Over the past several months we have released positive data from our emerging hematology franchise and I am very pleased now to be able sharing encouraging data from dalantercept our proprietary Phase 2 oncology program as it shows the breadth and depth of our pipeline. \

I'll discuss this dalantercept RCC results in more detail in just a few minutes. First, I'll summarize the few of the additional highlights then give a preview of clinical and preclinical data that we'll present at medical conferences later this month in June.

So now on to the highlights. In January, we reported interim data from an ongoing Phase 2 study of ACE-536 in beta-thalassemia patients demonstrating dose dependent increases in hemoglobin across three lowest dose levels of 0.2, 0.4 and 0.6 mg/kg. At the 0.6 mg/kg dose level the mean hemoglobin in change was 1.4 grams per deciliter after two months of treatment. Though this increase nearly achieved our target hemoglobin increase of roughly 1.4 grams per deciliter, we are continuing with the ongoing dose escalation. Since that time we have dose escalated to 0.8 mg/kg and are now enrolling patient at 1.0 mg/kg.

We've also generated positive data for ACE-536 in a mouse model of sickle cell disease and I will describe this in more detail in just a bit.

Last month FDA has granted orphan designation for sotatercept for the treatment of patients with MDS. So now we have FDA orphan designation sotatercept for MDS and beta-thalassemia. ACE-536 has orphan designation for both MDS and beta-thalassemia. Our partner Celgene presented data from ongoing Phase 2 study of sotatercept in patients with end stage renal disease on hemodialysis at the National Kidney Foundation Spring Clinical Meeting. An interim analysis shows that the sotatercept produces dose dependent increases in hemoglobin in end-stage renal disease patients on hemodialysis.

Now indicative of the amount of clinical and nonclinical data we generated we published seven papers so far this year. Two papers in the journal Nature Medicine provide the rationale for sotatercept and ACE-536 as potential novel therapies to correct anemia, including the EPO-resistant anemias, in diseases such as beta-thalassemia and MDS. Importantly in beta-thalassemia models treatment with either of these agents normalize the ratio of the alpha and beta globin genes which is the fundamental defect in beta-thalassemia. We also had a paper in the American Journal of Hematology on the phase 1 results for ACE-536. A paper in Clinical Cancer Research on the phase 1 results for dalantercept. A paper in Blood on the effects of ACE-536 in a mouse model of beta-thalassemia. And two papers in the British Journal of Hematology on clinical and nonclinical sotatercept data.

And on the financial side in January we closed the follow-on offering with net proceeds of $125 million ($129 million, see press release) providing us with fund to support the company into the second half of 2017.

I would now like to discuss the dalantercept data from the ongoing RCC trial that we announced last night. But before I review that data I will provide a brief overview of the program and an opportunity for dalantercept along with our clinical development strategy. Dalantercept is a novel anti angiogenesis product candidate designed to block the ALK1 pathway and thereby inhibit blood vessel maturation in tumors. We are developing dalantercept primarily for use in combination which with VEGF pathway inhibitors which is the predominant anti- angiogenic therapies on the market. These VEGF pathway inhibitors act by preventing the growth of immature blood vessels by blocking the progression of blood vessels from an immature state to mature state dalantercept therefore renders tumor blood vessels more sensitive to VEGF pathway inhibitors creating a synergistic effect on blocking tumor blood supply. More over safety findings from clinical studies with dalantercept do no overlap with those of VEGF pathway inhibitors suggesting that these classes of drugs are suitable for combination. We believe this combination strategy will provide better outcome to cancer patients and allow us to leverage the large established base of approved anti VEGF therapy for the treatment of several different tumors.

Yesterday's press release provides the clinical data supporting this dual anti angiogenesis approach. These were new interim data from an ongoing Phase 2 clinical trial of dalantercept in combination with axitinib in patients with advanced RCC. Axitinib is a VEGF pathway inhibitor of a class refer to as tyrosine kinase inhibitor or TKI and is the most commonly used second line therapy in these RCC patients. The interim data from the open-label Part 1 dose escalation and expansion cohorts will be presented during a poster session at ASCO on Monday June 2.

And this ongoing study eligible patient must have received at least one prior line of therapy with an approved VEGF receptor TKI such as sunitinib, and could have received up to three prior lines of therapies. So this is an ambitious study we're treating second, third and fourth line patients. About half of 20 evaluable patients we treated with one prior therapy and about half we treated with two or more prior therapy before coming on to study. All patients were treated with the combination of dalantercept plus axitinib. On the 20 evaluable patients treated with the combination there was 25% objective response rate, 5 of the 20 patients and an addition of 10 patients 50% achieved stable disease. While preliminary this response rate compares favorably to the previously published axitinib AXIS Phase 3 study in second line patients. In the large group of sunitinib-refractory patients treated with axitinib, the objective response rate was only 11.3%.

In yesterday's press release we provided the detailed higher treatment history of patients that achieved a partial response. I won't go through all of these patients' results in detail but it is encouraging to see these responses in this heavily treated patients. I would like to briefly review the data from the field of more heavily pretreated patients that showed a partial response.

One 4th line patient had received previous treatment with IL-2, sunitinib and everolimus. This patient's best response to their last line of therapy was stable disease for 4.9 months. This patient received dalantercept at 0.6 mg/kg and axitinib and achieved a partial response for seven months.

One 4th line patient had received previous treatment with sunitinib, temsirolimus and bevacizumab. This patient's best response to their last line of therapy was progressive disease after one month. This patient received dalantercept at 0.9 mg/kg and axitinib, achieved a partial response and remains on treatment for 10.4 months to date.

One 3rd line patient had received previous treatment with sunitinib and the checkpoint inhibitor nivolumab. And this patient's best response to their last therapy was stable disease for seven months. This patient received dalantercept at 1.2 mg/kg and axitinib and achieved the partial response and remains on treatment for 6.2 months to date.

So additionally so far dalantercept and combination with axitinib appears to be well-tolerate and no dose-limiting toxicities were observed in the dose escalation cohorts. I think these data helps evaluate our new approach to inhibiting tumor supply and we look forward to beginning Part 2 which will be a randomized placebo controlled study comparing the combination of dalantercept at dose levels of 0.9 mg/kg plus axitinib to placebo plus axitinib in patients with advanced RCC. Eligible patients with advanced renal cell carcinoma must have progressed following treatment with the VEGF receptor tyrosine kinase inhibitor. Patients may have also received prior immunotherapy.

What we are more excited about the potential of dalantercept in combination with our anti angiogenesis approach we also have a few exploratory study of dalantercept as monotherapy that will be presented at poster presentation at ASCO.

The first monotherapy studies of dalantercept in patients with advanced squamous cell carcinoma of the head and neck and is heavily pretreated recurrent, metastatic head and neck cancer population dalantercept monotherapy demonstrated modest dose dependence single agent activity with an overall disease control rate of 45%. We are pleased with disease control rate and overall favorable safety profile of dalantercept in these patients; our efforts are likely to be focused on combining dalantercept with VEGF antagonist in setting where VEGF inhibitors are commonly used.

Now the second monotherapy we will report on ASCO is in endometrial cancer investigated from the Gynecological Oncology Group, the GOG, sponsored an exploratory clinical trial of dalantercept monotherapy in patients with recurrent or persistent endometrial carcinoma and will present data showing that dalantercept did not produce results sufficient to justify further development as a single agent in these patients.

Now there is an additional ongoing dalantercept monotherapy Phase 2 that is also being conducted by the GOG. This one in patients with advanced ovarian cancer. And the second half of 2014, we expect the GOG to determine whether or not open Part 2 of the study to evaluate additional ovarian cancer patient with dalantercept as a single agent based on the safety and efficacy of Part 1.

In the meantime we are considering the possibility of initiating a Phase 2 combination study of dalantercept with either bevacizumab and or platinum-based therapies in ovarian cancer patients.

Now beyond our dalantercept combination trial on RCC we are continuing to implement our strategy to combine dalantercept with anti VEGF treatment across a variety of tumors. We plan to initiate an ascending dose study of dalantercept in combination with sunitinib, in patients with first line chemotherapy naïve hepatocellular carcinoma in the second quarter.

Now I would like to turn our studies with sotatercept. I will start with the review of the promising data with sotatercept in patients with end-stage renal disease on hemodialysis. End-stage renal disease patients experience a number of health complications including anemia, significant bone loss and elevated risk of heart disease accompanied by calcified deposits in the cardiovascular system. Because of the demonstrated effects on the red cell production in bone formation, sotatercept is well positioned to correct the red cell and bone deficit and possibly the vascular calcification in these patients. Now while erythropoietin can address the anemia in DSRD patients, it is critical unmet need with regard to the bone loss along with the vascular calcification and accelerated and devastating cardiovascular disease. We and Celgene are developing sotatercept to address both the anemia and the bone loss and the vascular calcification affecting these patients.

At the National Kidney Foundation meeting in April Celgene presented data demonstrating sotatercept produces dose dependent increases in hemoglobin across the placebo sotatercept at 0.3 mg/kg and sotatercept at 0.5 mg/kg cohort. Celgene will present these results on the anemia effects at the European Renal Association European Dialysis and Transplantation Association meeting in June in Amsterdam. Celgene is currently enrolling patients at the 0.7 mg/kg cohort and plans to present data on the effects of sotatercept on hemoglobin bone mineral density and vascular calcification most likely at the American Society of Nephrology annual meeting in November.

Now moving on to our study in beta-thalassemia and MDS. During our last earnings call I provided detail overview of these two indications and the rationale for the potentially improved clinical benefits of our products. So I will go straight to some guidance and what you can expect here at the annual meeting of European Hematology Association, EHA in early June.

First I am pleased to say that we, Celgene and our investigators submitted three abstracts. The first was sotatercept and beta-thalassemia, the second for ACE-536 and beta-thalassemia and the third was the ACE-536 and MDS. And that all three were selected for oral presentation at the conference.

Now next week the EHA will publish online the abstracts for the conference. At that time, we will be able to discuss the data included in those abstracts and describe what additional information would be presented at the conference in the June. For now I can tell you that we, Celgene, and our investigators will give three oral presentation on data from longer term treatment of transfusion dependent and non transfusion dependent at dose levels previously disclosed as well as new data from the next higher dose level. These apply to both sotatercept and the ACE-536 Phase 2 clinical trials in beta-thalassemia. For MDS, this will be the first time we present interim data from ongoing ACE-536 Phase 2 clinical trial.

So we are on track to initiate health agency meeting this year to start a Phase 3 study late this year or early next year with either sotatercept or ACE-536 in thalassemia patients.

Lastly today I would like to update you on exciting new preclinical studies of ACE-536 in sickle cell disease which will also be presented at EHA next month. Because they have not talked about sickle cell disease previously I would like to start with the brief overview. Sickle cell disease disorder was about 100,000 symptomatic patients in the U.S. and 125,000 in Europe. Sickle cell disease is a hemoglobinopathy caused by a genetic defect in the gene that code for hemoglobin resulting in the variant hemoglobin that causes stiff and deformed blood cells known as sickle cell. These sickle cells have a significantly shorter lifespan than the normal red blood cell and undergo hemolysis which results in chronic anemia for patients. The sickle cells also adhere to blood vessels and block flow to organ, blood flow to organs resulting in excruciating painful crisis and end organ damage. Life expectancy for sickle cell disease patient is decade shorter than a healthy adult.

Now hydroxyurea, a chemotoxic agent is the only approved treatment for sickle cell disease. However, the label includes warnings that it is mutagenic, genotoxic and is potentially human carcinogen. For these and other reasons there is a limited use of hydroxyurea in the treatment of sickle cell disease and a significant unmet need exist for these patients.

We have studied ACE-536 and humanized mouse model of sickle cell disease. And these mice, the mouse globin genes have been replaced with human globin genes and the mice carry the human beta globin gene mutation that causes sickle cell disease. This model recapitulates most of the pathologies in the human disease notably increased red cell hemolysis leading to anemia, increased serum bilirubin, , increased expression of phosphatidylserine on the surface of red cell causing increased adherence to blood vessel, increased reactive oxygen species and importantly high level of irreversibly sickle red cells. At EHA next month will provide data showing that ACE-536 treatment of these mice correct these deficiencies including a several fold decrease in the level of irreversibly sickle cell. This preclinical data suggest that ACE-536 may be useful in treating patients with sickle cell disease and we and Celgene are considering this as a potential new indication in our emerging hematology franchise. We look forward to presenting this data in support of this option of this observation next months at EHA.

So we have a lot of new term data that we look forward to sharing from our ongoing Phase 2 study over the next six weeks. Additionally, finally we continue to expand our proprietary pipeline and plan to initiate a Phase 1 clinical trial with ACE-083, a locally acting agent designed to increase muscle mass and strength. As we approach the start of the Phase 1 clinical trial in the second half of this year, we will spend more time describing this program and the clinical and commercial opportunities.

Now I would like to turn the call over to Kevin McLaughlin, our CFO.

Kevin McLaughlin

Thanks, John. The company closed the first quarter ended March 31, 2014 with $214.1 million of cash and cash equivalents. This compares to $113.2 million at December 31, 2013. The net increase in cash of approximately $101 million during the quarter was driven by our follow-on public offering in January which provided for the company net proceeds of $129 million. This increase was offset by one time expenditure in March of $16 million for the early retirement of the company's venture debt line and approximately $12 million in ongoing net burn related to company operations. As we have discussed in the past our partner Celgene is responsible for 100% of all financial cost associated with the sotatercept and ACE-536 programs. The majority of net cash operating burn supports the company's fully owned dalantercept programs ongoing and planned clinical trials. Our fully owned preclinical ACE-083 program, our locally acting agent designed to increase muscle mass and strength which we plan to move into clinical trial late this year. And our operations including our research organization which has produced all of our clinical candidate. The decision to retire the company's venture debt ahead of the fourth quarter 2015 payoff schedule will lead to a cash savings of approximately $1 million. This early repayment does not affect the company's cash run rate which remains as John mentioned earlier during this call into the second half of 2017.

We will now open up the call for Q&A. Operator?

Question-and-Answer Session


(Operator Instructions).

And our first question comes from the line of Yaron Werber from Citi. Your line now is now open.

Kenan Najafov - Citigroup

Hi, this is actually Kenan in for Yaron. Just wanted to congratulate you on the terrific data and if I could work in a few questions here. So first I was wondering in head and neck your data look more or less in line with erbitux but may be with better survival. I was wondering if you could tell us how much you think we can read into this with no control.

Matt Sherman

Hi, this is Matt Sherman. And just to remind you this is a single arm study that was performed and now we have completed the Phase 1-- at Phase 1 where we did see activity a partial response in patient who was treated during the dose escalation Phase 1 study. We have -- our overall disease control rate is 45%, we do have data from the single arm study, the survivals comparable to what we are seeing in the Phase 2 study with sotatercept in platinum resistant patients. But we can't draw any conclusion that we are superior to that population. This was a more heavily pretreated population.

Kenan Najafov - Citigroup

Thank you. And then jus a couple timeline questions if I may. I was wondering if you could let us know when we might see bone mineral density data from your CKD trial. And when we might see higher doses there? And then also when we might see higher dose data from dialysis?

Matt Sherman

Okay, as John indicated we do expect that there could be additional data from the ongoing renal CKD patients, patients on hemodialysis that higher dose levels as well as data from bone density and vascular calcification presented later this year possibly at the ASM meeting renal week meeting that's held in November.


And our next question comes from the line of Marko Kozul from Leerink Partners. Your line now is open.

Marko Kozul - Leerink Partners

Hey, good morning and congratulation as well on progress. First question I have is on the dalantercept from your RCC program. Can you may be review for us qualitatively what may be presented at ASCO? May be with a focus on the expansion cohort?

Matt Sherman

Hi, Marko, this is Matt again. So the press release from last night summarized not only the information that was in the abstract that was submitted back in February but also data that will be presented in the poster in June. So that has fairly complete review of the information. And we are very excited; we are very encouraged about the overall response rate. This is both in the dose escalation and the expansion cohort patients. So there were 26 patients enrolled as of our data cut off and 20 of them are evaluable for response. And within that combined group of patients that we saw the overall response rate of 25% and additional 50% who achieved stable disease were disease control rate of 75%. And as we mentioned these are both patients who failed single first line regimen as well up to three prior lines of regimen so second and fourth line patients having partial responses.

Marko Kozul - Leerink Partners

All right, so there should be 26 patients with the data at ASCO, is that correct?

Matt Sherman

26 patients enrolled, 20 were evaluable for response, so the response data is based on 20 patients.

Marko Kozul - Leerink Partners

All right, terrific. And then just moving on to EHA, I didn't see an abstract for sotatercept and MDS and I wanted to ask for an update and when we might see data from that study?

Matt Sherman

Yes, and we expected that would be by ASH


Thank you. (Operator Instructions). And our next question comes from the line of Mike King from JMP Securities. Your line is now open.

Mike King - JMP Securities

Good morning, guys. Thanks for taking the question and let me add my congrats on the encouraging dalantercept data. My question was also on dalantercept. I was wondering and I don't know how much you can say within the context of the abstract and but let me know if we can look forward to seeing this at ASCO. I was just curious if you got information on the response rate by prior therapy, can you tell us whether patients who had -- just previously had an anti VEGF therapy or an mTOR inhibitor or some other, JK you mentioned also an immunotherapy if there were better responses based on the type of prior therapy and also if you got any data that we can expect on durability of response.

Matt Sherman

Yes, so some of the data summarized in the press release from last night but we really see activity across the board in terms of prior therapy. So patients, all patients had received the prior VEGF inhibitor either sunitinib or axitinib and which we saw partial responses, also patients who failed the tyrosine kinase inhibitor have both everolimus and temsirolimus responded as well as patients failed checkpoint inhibitor nivolumab also responded with a - had only stable disease after treatment. So really doesn't think these specifics what they feel the prior lines of therapy that showing excellent response. We really believe that this combination of ALK1 inhibitor also VEGF inhibitor can really provide a new paradigm performing a foundation for chemotherapy -- combination of chemotherapy in RCC. In that regard we are extending these to other tumor types and are about to initiate a second Phase 2 study in combination with sorafenib in first line patients with a hepatocellular carcinoma.

Mike King - JMP Securities

Now what about an extension cohort in combination with checkpoint inhibitor?

Matt Sherman

Yes, that's a very good idea. And we are considering that. What we are doing now is wrapping up the Part 1 of the study so there might be a few more patients who enroll over the next couple of weeks. But we have now plan to open up Part 2 of the study and as you know that's the randomized placebo control part of the study comparing dalantercept plus axitinib versus placebo plus axitinib and as we have done in the 130 patients. And so we will have that study kicking off in the upcoming weeks.

Mike King - JMP Securities

Okay, great and then just quickly the question on sickle cell. Where do you --where would you see 536, where would its clinical benefit be most apparent, do we know would it been crisis, prevention of crisis or just some other metric of normalization of the hemoglobinopathies?

Matt Sherman

We would expect it would be use prophylactically in the same way that hydroxyurea is used, it would not with -- we would anticipate ultimately would see changes reduction in painful crisis, but it will not be used in the hospital setting to reduce the time for painful crisis or reduce the duration of the painful crisis that sort of thing. So we expect efficacy across the board.


Thank you. And I am showing no further questions at this time. I would now like to turn the call back over to Mr. John Knopf for any further closing remarks.

John Knopf

Just like to thank everyone for their participation today.


Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. And you may all disconnect. Have a great day everyone.

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