Progenics Pharmaceuticals Inc. (NASDAQ:PGNX) Q4 2017 Results Earnings Conference Call March 8, 2018 8:30 AM ET
Melissa Downs - Senior Manager, IR
Mark Baker - CEO
Pat Fabbio - SVP and CFO
Tim Chiang - BTIG
Mara Goldstein - Cantor Fitzgerald & Co.
Jonathan Aschoff - National Securities Corporation
Chad Messer - Needham & Company
Good day ladies and gentlemen and welcome to the Progenics Fourth Quarter and Year End 2017 Earnings Conference Call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded.
I would now like to hand the floor over to Melissa Downs, Senior Manager of Investor Relations. Please go ahead.
Thank you, Karen. On behalf of Progenics management team, thank you for joining our conference call to review our fourth quarter and full year 2017 financial results and provide a business update. Joining the call today are Mark Baker, Chief Executive Officer; and Pat Fabbio, Senior Vice President and Chief Financial Officer.
Before we begin, I'll remind you that remarks made on this call that are not historical in nature may be forward-looking statements and are subject to a number of risks and uncertainties. Our actual results may differ materially. Such remarks may include, but are not limited to, those involving regulatory actions, clinical development, and other matters related to our prostate cancer pipeline, AZEDRA, RELISTOR, and our other product candidates; our business and commercialization strategies and expectations of future growth; revenues and assessments of our competitive position.
Please see our most recent forms 10-Q and 10-K, which we'll -- we will be filing later today and other filings with the U.S. Securities and Exchange Commission for additional information on the risks that could cause our actual results to differ. As a reminder, statements we make today are as of March 8th, 2018, only.
I will now turn the call over to Chief Executive Officer, Mark Baker. Mark?
Thank you, Melissa and good morning to everybody joining us today. 2017 was a year of strong progress for Progenics' targeted oncology pipeline programs capped by the FDA's acceptance for review of our new drug application for AZEDRA at the end of December. This represents some major milestone for our growing company and the AZEDRA program.
We are working to prepare for a launch, following a potential approval as we approach the FDA's PDUFA action date, which is April 30th. AZEDRA has the potential to be a breakthrough treatment option for patients with malignant, recurrent and/or unresectable pheochromocytoma and paraganglioma, or pheo and para, which are rare and life-threatening neuroendocrine tumors, for which there are no approved therapies in the United States.
Pheo and para tumors produce catecholamines, which can damage the cardiovascular system and other organ systems. Therefore, morbidity among patients is driven not only by tumor burden, but also by the harm these hormones cause to their surrounding environment.
AZEDRA is designed to deliver highly targeted therapy directly to the site of these tumors, while also minimizing the acute cardiovascular symptoms associated with them. Our innovative, rationally designed treatment has demonstrated efficacy in addressing the multiple challenges associated with these cancers.
Our NDA is supported by positive data from our pivotal Phase 2b open-label multicenter trial conducted under a Special Protocol Assessment, or SPA agreement with the FDA. This pivotal trial exceeded its primary endpoint, which evaluated the proportion of patients who achieved a 50% or greater reduction in all antihypertensive medication for at least six months.
The endpoint was determined by the lower limit of a two-sided 95% confidence interval, which needed to be above 10%. This meant that a minimum of 12 of the total 68 evaluable patients needed to meet this objective. The trial beat the primary endpoint by an impressive margin, with 17 patients meeting the objective.
The trial also showed favorable outcomes with respect to tumor response as measured by Response Evaluation Criteria in Solid Tumors, or RECIST criteria, which was a key secondary endpoint.
Of the 64 RECIST evaluable patients, who received at least one therapeutic dose of AZEDRA, 92% of patients achieved disease control. And of those patients who received two therapeutic doses, 30% achieved a partial response and 68% had stable disease for a notable combined 98% disease control.
The KOLs and experts who've reviewed these results have been very impressed with the survival data in this population, particularly since five-year survival rates are as low as 12%.
We have reported median overall survival data of 36.7 months from first AZEDRA therapeutic dosing and the overall study population with overall survival of 48.73 months among patients who received two therapeutic doses.
Importantly, the data showed that AZEDRA has the potential to address the dual goals of therapy in this indication that both reduce the symptoms associated with the excess hormone production and produce favorable tumor responses, thereby potentially improving patient outcomes.
In terms of safety, of the 74 patients who received any dose of AZEDRA, the most frequently reported SAEs were hematologic in nature. In this heavily -- highly pretreated patient population and consistent with the risk profile for radiopharmaceuticals, two deaths occurred during the long-term follow-up that were deemed to be treatment-related, one due to a secondary malignancy of MDS and the other due to a secondary malignancy of AML.
We've received positive feedback from investigators on the totality of the data set, which represents, we believe, the largest prospective clinical trial in pheo and para to-date. We are looking forward to presenting the data, including new biochemical tumor marker data in an oral presentation at the upcoming ENDO Meeting on March 17th.
The data from our study were submitted to the FDA as part of our NDA filing, and we were pleased to report on December 29th last year that the FDA had accepted our application. We're confident in the high quality of our NDA and believe that we are well-positioned to deliver this important therapy to the pheo and para patients, who are in need of an effective treatment option. As a reminder, AZEDRA holds breakthrough therapy in orphan drug statuses as well as fast-track designation and was granted priority review.
As we near potential approval of our NDA, we've been readying our commercial organization for launch. Treatment guidelines recommend that pheo and para patients be referred to multidisciplinary centers with specialized resources. As a result, the majority of patients are treated at approximately 20 to 25 centers across the country, which we can cover with our own small dedicated salesforce.
Over the last year, we have built our internal and field-facing teams with the exception of a few remaining positions. Our medical affairs team has been laying the groundwork for launch with presentations at medical meetings as well as increasing AZEDRA's profile with KOLs.
Pheo and para often go undiagnosed or misdiagnosed, a trend compounded by the lack of treatment options. We recently launched a disease awareness campaign to help educate key stakeholders on the science and symptoms of these rare tumors. You can visit the website we've created for health care professionals and patients at know, that's K-N-O-W, knowpheoparahealth -- knowpheopara.health.
In addition, our marketing team has conducted extensive market research on pheo and para with physicians, patients and caregivers, and they've been developing the AZEDRA brand positioning and messaging.
Furthermore, our market access team has been working to help ensure a pathway to access for patients by conducting payer market research on AZEDRA's value proposition and by developing communications for commercial insurance companies. We're confident that these strategic commercial initiatives will leave us in a strong position to execute a successful launch of AZEDRA upon approval.
Turning now to our portfolio of prostate cancer theranostics. We continue to build momentum in advancing our development stage PSMA-targeted radiopharmaceutical programs, which are designed to find, fight and follow prostate cancer. These products employ precision medicine to improve the detection, monitoring and treatment of prostate cancer.
We believe they represent the future of oncology. And indeed, the growing interest among prostate cancer researchers and the medical community underscores the transformative potential of targeting imaging agents, in particular.
At the recent ASCO GU Meeting, we were highly pleased to see how PSMA-targeted agents were being used almost exclusively at some institutions to diagnose prostate cancer. Our recent JAMA article highlighted the urgent need to develop new ways to diagnose prostate cancer. And recently, NCCN guidelines have evolved to include imaging earlier in the process of staging prostate cancer.
Together, these signal a shift in how experts are turning to imaging to address the challenges of accurately diagnosing and staging prostate cancer. We believe that we're well positioned to ushering a new era in prostate cancer imaging with our two PSMA-targeted agents, 1404 and PyL.
Let me turn to our efforts here at Progenics with our imaging programs. In January, we announced that we had completed enrollment in our Phase 4 study of 1404. The study enrolled approximately 450 patients in the U.S. and Canada with newly diagnosed or low-grade prostate cancer. We anticipate the topline results of the study will be released in the third quarter.
KOLs have been expressing strong interest in 1404 because of its potential to expand prostate cancer diagnosis beyond health care facilities equipped with expensive CAT machines and to more broadly reach those with SPECT/CT equipment.
Turning to PyL, our PSMA-targeted PET/CT imaging agent that is designed to help physicians identify early evidence of metastatic and/or recurrent prostate cancer. We expect to complete our current Phase 2/3 study in PyL later this year.
In the fourth quarter of 2017, we met with the FDA to discuss the path forward for PyL. As a result of that meeting, we plan to initiate a second Phase 3 study in biochemical recurrence of prostate cancer.
In support of our imaging agents, we are also advancing our efforts with artificial intelligence to help automate and improve the reading of both PET and SPECT/CT images.
To that end, we launched our PSMA CADx program, which stands for Computer Automated Diagnostics. We are using the data from our 1404 Phase 2 clinical study to help validate the approach this year.
And our therapeutics pipeline, 1095, our small molecule radiotherapeutic that selectively binds the PSMA, continues to be evaluated in a Phase 1 dose-ranging trial at Memorial Sloan Kettering. In addition, we expect our partner, Bayer, to initiate a Phase 1 study of PSMA-Targeted Thorium Conjugate or PSMA-TTC by the end of 2018.
Our robust pipeline of oncology products continues to be supported by our strong cash position and royalty revenues from the RELISTOR franchise, which Pat will now discuss in greater depth, as well as review our financials. Pat?
Thanks Mark. You can review details of our financials in the press release we issued this morning and in the 10-K that we'll file later today. Fourth quarter 2017 revenue totaled $3.9 million, down from $4.7 million in the fourth quarter of 2016, which included milestone revenue of $2 million from Bayer for the collaboration of our PSMA antibody technology in combination with Bayer's alpha-emitting radionuclides. Revenue for the fourth quarter of 2017 reflects RELISTOR royalty income of $3.7 million compared to $2.4 million for the corresponding period of 2016.
Full year revenue for 2017 totaled $11.7 million, down from $69.4 million for the full year of 2016. The decrease resulted primarily from the $50 million in milestone revenue recorded during 2016 related to the July 19th, 2016 FDA approval of RELISTOR tablets and the recognition in 2016 of $7 million in upfront and development milestone payments from Bayer.
Fourth quarter worldwide RELISTOR net sales were a record $24.6 million and full year 2017 worldwide net sales totaled $73.1 million as reported by our partner, Valeant. The fourth quarter 2017 net sales translated to $3.7 million in royalty revenue for Progenics, while the full year net sales resulted in $11 million in royalty revenue. RELISTOR oral scripts were up 19% over the preceding quarter, showing good continuous growth one year after launch.
Fourth quarter research and development expenses increased by $300,000 and full year research and development expenses increased by $5 million compared to the corresponding period in 2016. The full year increase resulted primarily from higher clinical trial cost for PyL and higher consulting expenses for AZEDRA, offset by lower clinical cost for AZEDRA.
Fourth quarter and full year 2017 general and administrative expenses increased by $2.2 million and $1.6 million respectively compared to the corresponding prior period -- year periods, primarily attributable to higher cost associated with building commercial capabilities in preparation for potential AZEDRA approval and launch.
Progenics also recorded noncash adjustments of $700,000 and $2.6 million in the fourth quarter and full year 2017 respectively related to changes in the fair value estimate of the continued consideration liability.
For the three months and year ended December 31, 2017, Progenics recognized interest expense of $1.2 million and $4.8 million respectively related to the RELISTOR royalty-backed loan.
Net loss attributable to Progenics for the fourth quarter was $2.7 million or $0.04 per diluted share compared to a net loss of $7.2 million or $0.10 per diluted share in the corresponding 2016 period. Net loss for the full year 2017 was $51 million or $0.73 per diluted share compared to net income of $10.8 million or $0.15 per diluted share for the full year 2016.
In terms of our cash position, we ended the year with cash and cash equivalents of $90.6 million. This reflects a decrease of $7.7 million in the fourth quarter and $48.3 million from 2016 year end.
We have recently strengthened our cash position, raising net proceeds of $14.5 million from the sale of common stock under our at-the-market, or ATM facility. Of that, $5 million was achieved in the fourth quarter with the balance received in January 2018. We believe we are in a strong financial position as we look forward to the AZEDRA launch.
And now, I'll turn the call back over to Mark to conclude.
Thanks Pat. The next month and a half will be filled with eager anticipation here at Progenics as we await the FDA decision on AZEDRA. In the meantime, we will be busy continuing to build the infrastructure for a successful launch upon its potential approval, while continuing clinical development of our prostate cancer theranostics. I'd like to thank the entire Progenics team for their persistent dedication and hard work.
With that, I'll open the call for questions. Operator?
Thank you. [Operator Instructions]
Our first question comes from the line of Tim Chiang with BTIG.
Thanks. Mark, given the fact that AZEDRA, you've got a FDA action date coming up in the end of April, maybe you could talk a little bit about your expectations for reimbursement assuming the product is approved. You -- do you think reimbursement will come this year? Or do you think it will take longer than six to nine months to get? Thanks.
Yes. I -- based on the research and the discussions we're having with payers, yes, we're not anticipating a substantial delay in that. So, it's definitely something that we would expect for commercial payers will definitely happen in the first year of launch. And the feedback we've gotten from our market research is good feelings around the potential that patients will be able to get good access to AZEDRA.
And Mark maybe just a follow-up in terms of pricing for AZEDRA. Do you think you'll get a premium price for the product? Obviously, it's an orphan disease product. Could you comment on that?
Yes, we've been working hard to build the facts around AZEDRA and to build a strong case for pricing of AZEDRA. This is a very rare indication and substantial investments have been made in AZEDRA. And we feel that great benefits can flow to AZEDRA patients that would justify premium pricing.
Our plan is to announce pricing with the launch and not to do it at this time. But we do expect that the pricing for AZEDRA will be in the premium range, as we've seen for other therapeutics that address these rare cancers.
And maybe just one last question if I may. Just -- could you just go back to -- and sort of highlight how many salespeople you guys have hired? What is the strategy? Are you going after a handful of key oncology centers in the U.S.?
So, our idea is to do the marketing and promotion of AZEDRA with our own team. I've long felt that this represented a great opportunity for Progenics to become a commercial company because the indication is small. Our total commercial team, including sales reps will be in the 20-person range.
As I mentioned in my remarks, we're targeting initially 20 to 25 centers. Roughly speaking there, we're using the 80/20 rule. We want to get to the centers that represent 80% or more of the patients with our initial focus and then we'll follow that up later in the year, targeting the remaining 20% or even less.
As I mentioned, the guidelines call for these patients to be treated in centers and we're familiar with almost all of these centers now and the fact that AZEDRA is a radiopharmaceutical and must be dosed in a timely manner, the medicine is tailor-made not only for the patient, but also for the time that the patient will be injected with it means that this is a very high touch and there'll be a lot of interaction with the hospitals, with the doctors who are treating the patients and with the patients themselves as they need to be scheduled to come for treatment.
So, it fits so much, Tim, of what we've built Progenics on. It's a precision medicine. It delivers great value. We are hoping to these patients and we're able to use a small team effectively to reach them and to the health care system. So, that's what I like about it.
Okay, great. Thanks.
Thank you. Our next question comes from the line of Mara Goldstein with Cantor Fitzgerald.
Thanks very much for taking my question. Just in relation to the lead up to this opportunity to have AZEDRA on the market from a capacity perspective and I don't actually mean manufacturing, it really just mean more personnel, how many -- as you think about the roll-up, conceivably speaking, with the personnel that you have, liaisons in place, how many patients do you think you -- can be treated with AZEDRA before really realistically you're at capacity?
Yes, I'm not seeing it, Mara, as a capacity issue. And the space is relatively small. As we talked about the patient population in the past, we've indicated that it's less than 1,000 patients would be treated with pheo -- with AZEDRA at peak.
So, I think that we have the capacity to deal with that population. If not, I think it's easy to add to what's needed. But I think that Bryce Tenbarge, our lead of commercial, has done a great job sizing this and I'm not expecting that to be a constraint.
Okay. And then if I could just ask a question on 1404. You'll have top line data in the third quarter of 2018. So, from a topline perspective, what can we expect that you will release? And from a regulatory perspective, do you feel that you have appropriate guidance to know exactly what could potentially be commercial ready for FDA to view?
So, obviously, the key endpoints there are the specificity and sensitivity of the drug to detect the difference between less aggressive prostate cancer and more aggressive prostate cancer. And so that's going to be the key topline data that's presented.
And as I mentioned in my remarks, we see continuing emphasis in the health care system around this moment of helping men with the decision of whether they can continue on active surveillance and avoid the terrible treatments -- side effects of treatment for primary prostate cancer and those with aggressive disease for whom treatment is warranted. So, I think you're going to see that be the primary emphasis of our topline data.
I think the other thing, Mara, that you're going to see is the first evidence of the impact that our artificial intelligence work is having on improving the reading of images. And so I'm hoping that data set there will be an interesting one and a compelling one.
Our discussions with the FDA were that they were prepared or would consider allowing us to submit based on a single Phase 3 trial if the data is robust. And so we'll be looking at it from that point of view. And with the data, I'm sure we'll be down to the FDA, talking to them about how they're seeing the data and whether it would be sufficient for submission or whether they would require an additional Phase 3 trial.
All right. Thank you so much.
Thank you. [Operator Instructions]
Our next question comes from the line up Jonathan Aschoff with National Securities.
Thanks. Mark I was wondering how many patients for AZEDRA are you currently actually aware of in the United States? And is there an ex-U.S. plan at all for AZEDRA?
Yes. The problem with -- thank you for that, Jonathan. The problem with AZEDRA is the lack of good data on patient populations. This is not like another cancer we're quite familiar with, prostate cancer, a cancer where we see significant research and data.
So, our indications of the number of patients are really coming from references in the literature and from our work around talking to the institutions that treat the patients and determining that.
So, it's not an area where we can speak about great specificity. And of course, we're looking forward to being able to get out into the market and begin to supply you with real-world information as we see -- as the number of patients that exist and how they will utilize AZEDRA. So, I think some of that, unfortunately, is information yet to come.
And your second -- the second part of your question, Jonathan, was?
Ex-U.S. plan, if any, for AZEDRA?
So, we know pheo and para, not to be Western diseases. They seem to be equally prevalent around the world. We've had discussions with potential partners, really, throughout the world. There's been strong interest in it. We are waiting for FDA approval because that significantly strengthens our hands in discussions with partners.
I think, in particular, as you focus on Europe, the important question will be, will the European agency accept the data from the trial that we ran here in the U.S.? And we don't know whether they'll be comfortable with the type of endpoints that the FDA thought were satisfactory and so we want to answer that question. And I think that will play an important role in determining how AZEDRA moves forward in Europe.
In countries, for example, in Asia, we're seeing good interest from potential partners in countries where there's a named patient approach to the treatment of cancers I think are also good marketplaces for the use of AZEDRA. So, we'll be exploring all of those opportunities.
Okay. And can you help us out with the -- what kind of difference there might be between -- what is the FDA looking for from this first 1404 trial? Help us understand when you tell us the data, if we're going to understand whether that's going to be enough or if you're going to need a second trial.
So, the 1404 trial, as I mentioned, is designed to draw this line, the line between less aggressive disease where active surveillance is something that patients should consider and more aggressive disease where treatment removal of prostate or other radical interventions are warranted.
So, it's pretty precise thing we're looking at. The endpoint is specificity and sensitivity. And the endpoint that we must achieve is the 95% confidence interval around 60% specificity and 60% sensitivity.
So, I think that that's what the agency is going to be looking at, right, what is our specificity and sensitivity as it comes out of the trial results. So, when I speak about a robust result, we're thinking of a result that comes in convincingly above that level and less convincing results, obviously, would be something that's closer to that 60/60 mark, and that might warrant the FDA saying an additional trial is needed.
As we think commercially about this and as I've been sitting in medical meetings, I'm seeing that the KOLs are quite impressed with agents that show detection rates, yes, as low as in the 60s, but in the 70s as well. And of course, for a doctor, this is the most important thing that the agent is able to detect, significant amounts of cancer. They don't want any cancer to go unseen, and that is what happens with current imaging and modalities and biopsy; significant number of cancers are missed.
So, if they can see a higher detection rate, I think the KOLs are going to find that of great interest. And I think that's how you'll be able to gauge whether the drug has good commercial potential.
Okay. Thank you, Mark.
Thank you. [Operator Instructions]
Our next question comes from the line of Chad Messer with Needham & Company.
Good morning and thanks for taking my question. Just wondering with the second PyL study if there are any details you can share with us at this time in terms of size endpoint -- endpoints and all of that. And can you just remind us what the data readout from the ongoing 2/3 will look like? Thanks.
Thanks Chad. So, on the ongoing 2/3, we're expecting to complete enrollment on that trial this year, so we'd be looking for a data readout early next year. We haven't yet given guidance on the exact timing of that readout, but I suspect we will be able to give you more detail about that soon.
With respect to the second trial, we -- as we mentioned, we're in discussions with the FDA last year. The FDA has a clear interest in having that trial be in the biochemical relapse space, which we were quite happy with because we consider that to be a major commercial opportunity and an area where we can provide great benefit to the patients.
We're in discussions with KOLs as we try to finalize the protocol, so we're not in a position quite yet to give definitive information around what will be the endpoints in that trial. But clearly, the focus will be the ability to detect biochemical relapse by imaging of metastatic disease, really, at its earliest stage. So, stay tuned, I think we'll have more details on that in the coming months.
All right. Well, we'll stay tuned for that. Thank you.
Thank you, Chad.
Thank you. And that concludes our question-and-answer session for today. I'd like to turn the floor back over to Mark Baker for any closing comments.
Thank you, operator. Thank you all, again, for joining us this morning to review our continued progress, financial results and upcoming milestones. We look forward to speaking to you again soon at the Needham Conference later this month.
Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program. And you may now disconnect. Everyone, have a great day.