Cascadian Therapeutics, Inc. (NYSE:CASC) Q3 2017 Earnings Conference Call November 8, 2017 4:30 PM ET
Monique Greer - SVP, IR & Corporate Communications
Scott Myers - President, CEO & Director
Julia Eastland - CFO, Chief Business Officer & Secretary
Luke Walker - SVP, Clinical Development
Robert Hazlett - BTIG, LLC
Mara Goldstein - Cantor Fitzgerald & Co.
Huidong Wang - Barclays PLC
Boris Peaker - Cowen and Company
Good day, ladies and gentlemen, and welcome to the Cascadian Therapeutics Third Quarter 2017 Financial Results Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Monique Greer, Senior VP of Corporate Communications. You may begin.
Thank you, GG. Good afternoon, and thank you for joining on this conference call to review and discuss our financial results and corporate developments for the third quarter 2017. The press release reporting our financial results was issued following the close of the U.S. market and is available at cascadianrx.com.
On the call with me today are members of the Cascadian Therapeutics senior management team, including Scott Myers, President and Chief Executive Officer; Julie Eastland, Chief Financial Officer and Business Officer; Dr. Luke Walker, Senior Vice President, Clinical Development; and Dr. Scott Peterson, Chief Scientific Officer. Our discussion today will focus on tucatinib, which is an investigational oral, small molecule kinase inhibitor that is highly selected for HER2 and our lead product in development. Scott will start with a brief recap of key events during the quarter and Julie will follow with a summary of our third quarter financial results. We will then open the call for your questions.
Before we begin, I will remind you that various remarks we will make today constitute forward-looking statements based on current expectations. Such forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that may cause actual results to differ materially from those anticipated by the forward-looking statements. Additional information concerning these risks and uncertainties is contained in the Risk Factors section of our most recent quarterly report on Form 10-Q for the quarter ended September 30, 2017, and in the company's other periodic reports and filings with the Securities and Exchange Commission.
With that, I will now turn the call over to Scott.
Thank you, Monique, and welcome, everyone. We've had a very productive third quarter, which is outlined in today's press release. I do think it's worth highlighting a few accomplishments. As many of you are aware, the majority of the company's resources are focused on the execution of our global pivotal clinical trial of tucatinib for advanced HER2+ metastatic breast cancer with and without brain metastases, with a trial named of HER2CLIMB. Last quarter, we have reported the activation of additional sites for HER2CLIMB beyond North America and announced the first patients who are randomized in Western Europe and Australia. Enrollment continues to be on target in North America, and we like the trends, so far, in Western Europe and Australia.
Our goal is to have the remaining sites in Western Europe, Australia and Israel activated and able to enroll patients by the end of the year. As a reminder, we're planning on between 150 and 200 sites worldwide. We currently anticipate completing enrollment in mid-2019. However, if enrollment continues on its current positive trajectory, we may consider revising our guidance at some point in the first half of next year. It is important to understand that for patients who have been treated with pertuzumab either in the adjuvant or the metastatic setting and for those who have received T-DM1 and whose cancer has progressed there is currently no single standard of care. This is particularly true for patients with breast cancer that metastasized to the brain. For many of these patients, the HER2CLIMB trial is a welcome option.
As a quick reminder of previously discussed or presented information, the combination to tucatinib with trastuzumab and capecitabine was well tolerated in our Phase Ib studies. Most treatment emergent -- adverse events that we've observed were Grade 1 with few tucatinib dose reductions and no required prophylactic use of antidiarrheal agents.
HER2+ breast cancer has been associated with the high risk of brain metastasis. Historically, patients with HER2+ brain metastasis have demonstrated decreased survival compared to those patients without brain metastases.
At the recent ESMO Congress in Madrid, results from the pooled analysis of the Phase Ib combination studies suggested that patients with HER2+ brain metastases, including those with untreated or progressing disease had similar progression-free survival compared to those without brain metastases. These results further support the inclusions of patients with brain metastases in HER2CLIMB.
I am pleased to report that several patients from our ongoing Phase Ib study, including those with brain metastasis, have been receiving tucatinib in combination for over 2 years now. Please watch for an abstract at the San Antonio Breast Cancer Symposium, the first week in December where we plan to provide even more information on these long-term patients.
Tucatinib was granted orphan designation by the FDA for the treatment of HER2+ colorectal cancer. Recall that tucatinib was also granted orphan designation for breast cancer with brain metastases last quarter, so we are very pleased with this additional indication. We are also pleased to announce that during the quarter enrollment was started in a Phase II investigator-initiated study of tucatinib in combination with trastuzumab for patients with HER2 amplified metastatic colorectal cancer, this physician-initiated study named MOUNTAINEER is being conducted at Duke University and is designed to enroll 35 patients in a Phase II study evaluating tucatinib and trastuzumab for patients with HER2+ metastatic colorectal cancer.
Overall response rate, or ORR, will be the primary outcome measured in this study. At ESMO we reported nonclinical data that demonstrated tucatinib is active in HER2+ colorectal patient derived xenograft tumor models supporting the clinical evaluation of tucatinib in the MOUNTAINEER study.
According to the lead investigator, the study is enrolling very well. If enrollment continues at this rate, we would hope enrollment in this study can be completed in 2018, with potential interim data readout at some point late in the second half of 2018 or early 2019.
We believe that tucatinib has the potential application or broad range of HER2-expressing cancers, and we plan to expand the study of tucatinib into other select indications either through partnerships or on our own.
From a regulatory standpoint, we believe we are well positioned with the FDA, the EMA and now Health Canada. All of these regulatory agencies have validated the potential for the ongoing clinical and nonclinical programs to be sufficient for tucatinib registration if, of course, the data is supportive.
In summary, we're very pleased with what we've been able to achieve this quarter and believe that we are well positioned for moving tucatinib closer to market. And as you'll hear from Julie, we expect that our cash position will be able to support all of our planned activities.
I will now turn the call over to Julia Eastland, our CFO, who will walk you through review of our financials for the quarter. Julie?
Thank you, Scott. For the third quarter ended September 30, 2017, our net loss was $14.1 million or $0.28 per share compared to a net loss of $11.8 million or $0.52 per share for the same period in 2016. The slight increase in year-over-year R&D expenses for the quarter was primarily due to increases in contract manufacturing expenses and clinical development-related expenses for our ongoing clinical studies.
We ended the quarter with cash, cash equivalents and investments totaling $113 million compared with $62.8 million at the end of 2016. The increase was primarily related to the net proceeds from our $88 million financing in January of 2017, less the cash used in operations of $37.2 million year-to-date.
Cash on hand is intended to support the tucatinib development plan including tucatinib investigator-initiated studies, the current planned enrollment of HER2CLIMB and top line data results from HER2CLIMB with a runway thereafter. This runway is dependent on the speed of enrollment in HER2CLIMB. As Scott mentioned, the enrollment in our ongoing HER2CLIMB trials continues to be robust. And we have realigned our preclinical resources to support this trial and the tucatinib development plan overall. Therefore, even though our enrollment has been higher than original expectations, our use of cash over the past 9 months is in line with our original estimates outlined at the beginning of the year.
We reaffirm our guidance for this year, and expect cash used in operations to be approximately $50 million to $54 million. On the business development front, we continue to discuss potential partnerships for our preclinical assets and explore interests for tucatinib in key regions outside of North America for both breast cancer and other oncology indication. We plan to provide additional details when appropriate.
Scott, back to you.
Thank you, Julie. We have had a very productive quarter and year-to-date, and this has set us up very nicely for 2018. Before opening the call for questions, I want to commend the team on the tremendous progress we've made over the last 18 months. The company's focus, direction and foundation for the future is very different. And I'm very proud of our team's commitment to getting tucatinib to market in a rapid, high quality and capital efficient manner. Our success is very dependent on the investigators, nurses, study coordinators, patients, advocacy groups, everyone involved with HER2CLIMB. I want to personally thank you for all your efforts. And of course, to our shareholders, we appreciate your continued interest and support.
Operator, please open the call for questions.
[Operator Instructions]. Our first question is from Bert Hazlett from BTIG.
Scott, I don't mean to wordsmith here too much, but I do want to ask one point of clarification that's in the release and that you've talked about before. I guess, you referred to the notion that if data or supportive in terms of the EMA acceptance of HER2CLIMB versus the FDA. I guess, my question is, is that definition, the definition supportive data, does that differ between the EMA and FDA based on your discussions with each agency? Then I have 1 or 2 more.
No. I'll give you the short answer, Bert, and then I'll turn it over to Luke, she has been involved with all the regulatory matters. But, no, I wouldn't say the EMA's response was exactly in line with what the FDA said. I think in most clinical trials, of course, the data has to be supportive of the endpoints that we put forward in our plan. So that should be the only clarification. So in fact, the EMA did not come back with any material changes to our regulatory strategy in Europe versus what we had run by the FDA earlier. Luke, would you add anything or all to that anyway?
Yes. I'd agree with what Scott said. I mean, both agencies really gave us guidance that, of course, we have to meet the end point and that the data needs to be compelling and clinically meaningful. Beyond that, there is no specific difference between the guidance that either agencies gave on that point.
And specifically, Bert, the key pieces that one trial was sufficient, that was on a discussion of a conditional approval or anything like that, that the 1 trial HER2CLIMB could service the registrational trial. That was the most important.
Okay. Terrific. And then intriguing developments with HER2+ colorectal cancer. You talked about the enrollment and things going well there. Is there any chance for an expedited pathway for that indication?
Luke, do you want to take that one on?
Yes. I think that, one of the reasons that we are excited about the orphan drug designation. One of the things that it does allows for us to do is to engage with the agency for indications like this that affect a smaller number of patients, that would allow a more efficient way to market. Now exactly what that would be? We don't know just yet. But the orphan designation does allow for us to continue those types of discussions with the agency in the very near future. And certainly, we would be keen on taking advantage of that.
And then, again, sometime in the latter half of next year for initial data from the MOUNTAINEER study?
I think that's a reasonable guidance. Of course, the big caveat being there, this is an investigator-sponsored trial. And so a Dr. Strickler is really the person that's putting the data, and it depends upon his decisions as well as the enrollment of the trial.
Okay. Terrific. And then just one additional question with regard to San Antonio and the upcoming data. If you could maybe give a little bit more granularity about what might be expected coming in San Antonio?
Sure. In a same fashion, I should say, to what we did at ESMO where we looked a little bit more closely at a larger pool of patients that we have between our 2 Phase Ib studies. ESMO, we pooled, we have 100 patients together to look at our patients with brain metastasis. And what we'll be doing at San Antonio is looking at these very long-term responders to tucatinib combinations to try to sort out there something particular about these patients or I think, also, patients with, for instance, poor prognostic features can also still have a prolonged respond. And so that will be the focus of that presentation.
And our next question is from Mara Goldstein from Cantor Fitzgerald.
Operator, we're not able to hear the question if there is one.
Sorry, can you hear me now?
Yes, we can hear you now.
Great. Just to return to the statement that was made about possibly revising the expectation of completion of the trial based on enrollment. Can you just talk a little bit about sort of the dynamics enrollment. Obviously, you've had a lot of sites on that and that has helped a lot. But sort of the order of magnitude we're talking about, is it a quarter or is it half a year?
Mara, and you're specifically asking about HER2CLIMB, right now?
Okay. Yes. So we're very pleased with the enrollment rates in North America. They are ahead of our internal projections and because we're opening more sites in other continents, specifically Europe and Australia and Israel to come. We really want to see what those sites do in compare to the trends that we've seen in North America. If they were to hold to those lines, we would consider revising it in the early part of the year. We haven't given a guidance yet as to how much sooner the trial could enroll. Luke, anything to add to that?
No. I think that's fair, Scott.
Okay. And If I could just ask. Are you within the scope of the enrollment of the trial and the women who are coming in per data experience, [indiscernible] experience. Are you stratifying by duration of treatment and different treatment types?
Luke, do you want to take that question?
No. I think the important main stratification factor that we have for the study is the presence or absence of brain metastasis. We've planned and it's borne out that we're having approximately half of these patients with brain metastasis you may have historically a different outcome. And so we have stratified for that as well as performance status and the location. But the remainder of the features that we're talking about, things like that you referred to with prior therapies, one would expect to be relatively balanced out in a trial of this size.
Our next question is from with Gena Wang from Barclays.
So the first one is for MOUNTAINEER trial. Scott, you mentioned that the ORR will be the primary endpoint. So what percentage of the overall response you would be looking for that you think this combination will be very viable going forward?
Yes. At a high level, the response rates in this population with what's available today is very, very low, especially around the PFS is very short. Now kick it over to Luke and let him answer the question about ORR.
Sure. Dr. Strickler hasn't released the physical assumptions around the trial. I think it's reasonable to look at, what we've seen apparently is in my pathway when we're talking 30%, 40% response rates. And it's reasonable to assume that those types of comparators would have been used as a way to make those statistical assumptions as well as the fact that response rates with current third line therapy is in the single digits.
Okay. And then maybe one question for Julia. So some financial questions. And I saw you're closing the internal lap operations, and I assume that will have some cost saving. Should we expect and also for the other 2 programs you tried to partner, maybe like first, if you can remind us or have you disclosed in the past, like, estimate costs for HER2CLIMB trial? And then since closing the internal labs have some rearrangement here. Should we expect the cash burn decrease in 2018 compared to 2017?
Gena, thanks for the question. So that's right. We have talked about shifting the focus to HER2CLIMB and that did mean that the preclinical programs and some of the lab activities, all the lab activities will be transitioned into the HER2CLIMB effort next year. We haven't quantified that for the market or provided guidance on 2018 and will do so, obviously, at next year's year-end conference call. But to suffice to say that it is our goal to limit our total cash burn by reallocating these resources to HER2CLIMB, so that we can manage our cash burn over the next 2 years.
[Operator Instructions]. And our next question is from Boris Peaker from Cowen.
Most of my questions have been answered already. But I'm just curious, just one question. As you expand enrollment for HER2CLIMB outside of the United States and bringing a lot of those centers. What do you anticipate the brain mets in those patients to be -- the brain mets rate to be compared to the patients you've enrolled so far?
Boris, it's Scott. Across all of HER2CLIMB is -- Luke somewhat mentioned before the assumption was it to have about 50% of our patients having brain metastasis or history of brain metastasis and to date that number has settled in pretty well in the -- between 45% and 50% have it. I don't think we expected the rates to be that different in other territories. But, Luke, would you clarify that?
Yes. I'm it's yet to be seen, but we certainly don't expect. And I think the main reason for that is that, we recall that we clarify our trastuzumab T-DM1 therapy as requirements for prior treatment for inclusion in the trial. And that has meant that we're really opening this in advanced Western European countries, first, Australia and Israel where health care systems and kind of algorithms for treatment for these patients [indiscernible]. I would expect that if we had done this in other countries, we might have the possibility of seeing different percentages of patients with unsuspected brain mets. But I suspect that given the strong similarities and the treatment algorithms in all these countries we are reluctant to see something very similar. But we'll to wait and see what the data shows.
At this time, I'm showing no further questions. I would now like to turn the call back over to Scott Myers for closing remarks.
Thank you, operator. I just wanted to close with showing our appreciation and your interest in Cascadian and thank you for participating in our call today. As I mentioned in my opening remarks, we are very proud of the accomplishments we had. We're definitely an execution story, and we're executing to the best of our ability right now and we feel like we're getting a lot accomplished in a very efficient manner. Looking -- look forward to seeing many of you at the upcoming scientific meetings and investor conferences. Enjoy the rest of your evening. Thank you.
Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect.