Oncothyreon Inc Management Discusses Q3 2012 Results - Earnings Call Transcript

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Oncothyreon Inc (ONTY) Q3 2012 Earnings Call November 7, 2012 4:30 PM ET


Julie Rathbun

Julie M. Eastland - Chief Financial Officer, Principal Accounting Officer, Secretary and Member of New Employee Option Committee

Robert L. Kirkman - Chief Executive Officer, President, Director and Member of New Employee Option Committee


Simos Simeonidis - Cowen and Company, LLC, Research Division

Joel D. Sendek - Stifel, Nicolaus & Co., Inc., Research Division


Good day, ladies and gentlemen, and welcome to Oncothyreon's Third Quarter 2012 Financial Results Conference Call. [Operator Instructions] I would like to introduce your host for today's conference, Julie Rathbun with Investor Relations. Ms. Rathbun, you may begin.

Julie Rathbun

Thank you. Good afternoon, and welcome to Oncothyreon's financial results conference call for the third quarter of 2012.

With us this afternoon are Dr. Robert Kirkman, Oncothyreon's President and CEO; and Julie Eastland, Oncothyreon's Chief Financial Officer and Vice President, Corporate Development.

In the first part of the call, Ms. Eastland will review Oncothyreon's financial results for the third quarter of 2012. After that, Dr. Kirkman will provide a brief corporate and pipeline review and discuss upcoming milestones. We will then open the call to questions.

Before I turn the call over to Ms. Eastland, let me first remind you that during this call, we will be making a number of forward-looking statements. These forward-looking statements include Oncothyreon's expectations regarding the use and adequacy of cash resources, future expenses, the clinical development and commercial outlook for Stimuvax, the expected timing of the release of data related to Stimuvax, and the clinical development activities and expected data related to PX-866 and ONT-10. Forward-looking statements involve risks and uncertainties related to Oncothyreon's business and the general economic environment, many beyond the company's control. These risks, uncertainties and other factors could cause Oncothyreon's actual results to differ materially from those projected in forward-looking statements.

For a detailed description of these risks and uncertainties, you are encouraged to review our annual report on Form 10-K and quarterly reports on Form 10-Q filed with the SEC and other corporate documents filed with the securities regulators in the United States and EDGAR and in Canada on SEDAR.

I would now like to introduce Julie Eastland, Oncothyreon's Chief Financial Officer and Vice President, Corporate Development. Julie?

Julie M. Eastland

Thank you, Julie. As reported in our press release this afternoon, our loss from operations increased in the third quarter of 2012 to $7.7 million from $6.4 million in the third quarter of 2011, and to $21.5 million in the 9 months ended September 30, 2012, compared to $18.1 million for the comparable period in 2011. This increase in loss from operations for the 3 and 9 months ended September 30, 2012, compared to prior year periods was primarily the result of increased research and development expenses due to the increased development activity for Oncothyreon's product candidates, and an increased general and administrative expenses. Net loss for the 3 months ended September 30, 2012, was $8.6 million or $0.15 per basic and diluted share compared with net income of $9.9 million or $0.24 per basic share, and $0.15 loss per diluted share for the comparable period in 2011.

Oncothyreon reported a net loss of $7.7 million or $0.15 per basic, and $0.41 loss per diluted share for the 9 months ended September 30, 2012, compared with a net loss of $31.2 million or $0.85 per basic and diluted share for the comparable period in 2011. The net loss for the 3 months ended September 30, 2012, compared to the prior year period's net income was primarily attributable to noncash income of $16.6 million as a result of the change in the fair value of warrant liability in the prior year and increases in research and development expenses and general and administrative expenses. The decrease in net loss for the 9 months ended September 30, 2012, compared to the prior year period, was primarily attributable to noncash income of $14.3 million as a result of the change in the fair value of the warrant liability in 2012, compared to the non-cash expense of $12.8 million in 2011, offset by increases in our research and development expenses and G&A expenses.

As we have discussed in previous calls, our net income or loss is subject to significant variability as a result of these changes in warrant liability. This arises because some of our outstanding warrants have provisions that, under certain circumstances, could potentially require us to settle the warrants with cash. These settlement provisions require us to carry these warrants as a liability on our balance sheet. Changes in the value of this liability arising primarily from changes in the price of our common stock flow through the income statement, causing these fluctuations. Because this change is all noncash, we think it makes more sense for investors to focus on our operating results, which I discussed at the start of my talk.

Turning to our cash position. As of September 30, 2012, Oncothyreon's cash, cash equivalents and investments were $91.2 million compared to $66.4 million at December 31, 2011. The $24.8 million increase was attributable to the closing of an underwritten public offering in April of 2012 of 13,512,500 shares of Oncothyreon common stock, which generated net proceeds of approximately $50.3 million. This increase was offset in part by $19.8 million in cash used in operations, $4.1 million cash used in repayment in full for a term loan with General Electric Capital Corp. and $0.9 million used for principal payments on notes and lastly, $0.7 million used in capital expenditures during the 9 months ending September 30, 2012.

Before I turn the call over to Bob, I'd like to provide financial guidance for the remainder of 2012, which remains unchanged from guidance provided in our 2011 year-end and Q1 and Q2 2012 conference calls. Please note that we believe this guidance to be accurate as of today, but that circumstances may change, and we assume no obligation to update this guidance.

Expenses in 2012 are expected to be higher when compared to 2011, primarily as a result of the more advanced clinical development of PX-866 and the ongoing Phase I clinical trial of ONT-10. Oncothyreon currently expects cash used in operations in 2012 to be approximately $30 million to $33 million. This guidance excludes $4.1 million in cash used to repay the General Electric term loan on June 29, 2012. As a result, we estimate that our existing cash, cash equivalents and investments will be sufficient to fund our operations for at least the next 12 months.

Now, let me turn the presentation over to Oncothyreon's President and CEO, Bob Kirkman, who will provide an update on Oncothyreon's pipeline. Bob?

Robert L. Kirkman

Thanks, Julie. And thanks, to all of you for joining the call today. I intend to make my prepared remarks quite brief today with a focus on upcoming data events. I think all of you who have been following us are aware that we are approaching significant milestones with respect to both Stimuvax and PX-866. And my goal today is simply to remind you of these events and their expected timing.

Let me first begin with Stimuvax. As you know, Stimuvax is our investigational, therapeutic cancer vaccine designed to induce an immune response to cancer cells at express MUC1. There are 2 Phase III trials for non-small cell lung cancer: START and INSPIRE; which are currently underway and are being conducted and funded by Merck Serono under our license agreement from us to Merck KGaA of Darmstadt, Germany.

The most advanced trial, the START trial, is a randomized, placebo-controlled trial that completed an enrollment of 1,514 patients approximately 1 year ago. Merck Serono has indicated that the event, which triggers the final analysis in the START trial is expected to occur before the end of this year with the primary efficacy analysis available in the first quarter of next year. Merck Serono has been consistent in providing this guidance since the second interim analysis result was announced last March. As of today, I cannot give you any more specificity with regard to when in the next quarter the results will be known. We are dependent upon our licensee for this information and I do not expect we will be able to provide further specificity until the results are announced, which again, we expect to be next quarter.

Stimuvax has been in clinical development for over 10 years now and the START trial alone is nearing the end of year 6. Obviously, we, like you, are eagerly awaiting these results. While we await results from the START trial, we remain focused on the progress of our internal product candidates including PX-866, our small molecule PI-3 kinase inhibitor. We currently have 4 open label Phase II clinical trials and one Phase I/II trial of PX-866 underway. Together, these trials are evaluating PX-866 in 6 different cancer indications. For 4 of these indications, we currently expect to have data before the middle of next year. One of these trials is a randomized Phase II trial of PX-866 in combination with a chemotherapeutic agent, docetaxel or Taxotere, versus docetaxel alone in 2 indications, either patients with locally advanced, recurrent or metastatic non-small cell lung cancer, who are receiving second or third line treatment, or patients with locally advanced recurrent or metastatic squamous cell carcinoma of the head and neck after failure of first or second line therapy. Each indication is being randomized and evaluated separately and the trial endpoint is progression free survival. In the non-small cell lung cancer indication, we've completed enrollment and are waiting for the data to mature. We currently expect to have the primary endpoint data sometime late in the first quarter of next year or soon thereafter.

In the head and neck cancer arm, enrollment is about half complete and we currently expect to complete it by mid-next year. The second randomized Phase II trial of PX-866 is in combination with cetuximab or ERBITUX versus cetuximab alone again, in 2 indications: patients with metastatic colorectal carcinoma, who have a history of progression or recurrence following prior treatment regimens containing irinotecan and oxaliplatin. In patients with incurable progressive recurrent or metastatic squamous cell carcinoma of the head and neck. The primary endpoint is objective response rate. Enrollment in the colorectal cancer arm of this trial is complete with primary data also expected late in the first quarter of 2013 or early in the second quarter.

Enrollment in the second group of patients with squamous cell carcinoma of the head and neck is ongoing and expected to be complete by mid-next year. In addition, we have 2 single agent Phase II trials of PX-866, being conducted by the National Cancer Institute of Canada Clinical Trials Group. One in-patient with glioblastoma multiforme, a type of brain cancer, which has recurred during our following primary therapy and another in-patient with recurrent or metastatic castration resistant prostate cancer prior to chemotherapy. The glioblastoma trial met the predetermined interim efficacy endpoint based on the first 17 patients as we reported at ASCO earlier this year, and the trial is now fully enrolled. We currently anticipate data from the full trial to be available by mid-next year.

The prostate cancer trial has nearly completed enrollment of the initially planned 40 patients, and we expect to know the primary endpoint data in this part of the trial by mid-next year. This quarter, we announced the expansion of the prostate cancer trial to include an additional group of up to 25 patients whose disease has begun to progress while receiving abiraterone or Zytiga. We anticipate enrollment of this additional cohort will begin shortly when we complete the first part. The primary endpoint of each part of this single arm screening trial is the proportion of patients with lack of disease progression at 12 weeks from the initiation of therapy with PX-866. The fifth clinical trial underway is a Phase I/II trial of PX-866 in combination with vemurafenib being conducted in collaboration with the Melanoma Research Foundation Breakthrough Consortium. This trial is currently enrolling the Phase I portion and it remains too early to predict timing for data.

In summary then, our broad Phase II development program for PX-866 is progressing well. We expect data for PX-866 in non-small cell lung cancer, colorectal cancer, glioblastoma and possibly prostate cancer in the first half of next year. Altogether then, as this short review makes clear, the first half of 2013 is a very exciting time for Oncothyreon with Phase III data for Stimuvax and Phase II data in several trials of PX-866 expected in that timeframe.

We approach these data points with a strong balance sheet. Based on the financial guidance Julie provided to you earlier in this call, we expect to end the year with something over $80 million in cash, cash equivalents and investments. This provides us with financial resources to support our current internal programs through these significant data points. We look forward to sharing these upcoming milestones with you over the months to come. Please note that we are scheduled to present at the Lazard Annual Healthcare Conference and the Piper Jaffray Annual Healthcare Conference in New York in November, and we look forward to seeing many of you there.

Thank you for joining the call today. Operator, I would now like to open the call to questions.

Question-and-Answer Session


[Operator Instructions] The first question comes from the line of Simos Simeonidis with Cowen and Company.

Simos Simeonidis - Cowen and Company, LLC, Research Division

Bob, can you speak to the enrollment of INSPIRE, the Asian study?

Robert L. Kirkman

That trial is actively enrolling patients. It's probably not quite half-enrolled at this point and I don't have timing for data from that trial. Merck hasn't provided any guidance with respect to that but it still a ways away.

Simos Simeonidis - Cowen and Company, LLC, Research Division

Then on 866, are you talking to potential partners? Is this one, where you are thinking about partnering or given the balance sheet, you want to keep it in-house, at least until you see the Phase II data?

Robert L. Kirkman

I certainly think we'll be keeping it in-house til we see the Phase II data. I think those data are essential to a successful partnering of this product. We do think that we will need a partner for commercialization and late Phase III development of this product. But our intention is to base that partnership on the data that we'll be getting in the first part of next year.

Simos Simeonidis - Cowen and Company, LLC, Research Division

Okay. And then last question, I will jump back on the queue. Just to make sure I heard correctly, the time -- the timeline you gave, so you think if everything goes according to plan, the first data you'll see from 866 might be late Q1 in lung from the docetaxel trial, and then the next one might be colorectal late Q1, early Q2?

Robert L. Kirkman

That's correct.


Next question comes from Joel Sendek with Stifel, Nicolaus.

Joel D. Sendek - Stifel, Nicolaus & Co., Inc., Research Division

All right, I'm going to my best with this one, Bob. On the START trial, I know that Merck's guidance is first quarter. But do you personally have any gut feel as to when within the first quarter you'll see and we will see the data?

Robert L. Kirkman

No, I don't have any guidance beyond what I've said in the prepared remarks. I'm totally dependent at this point on my partner for this information, and what I've conveyed to you is what they've conveyed to me. And I really have no way to go beyond that.

Joel D. Sendek - Stifel, Nicolaus & Co., Inc., Research Division

Okay. Well, that's fair. On 866, when I compare what you said to my notes in the last call, it looks like there might be a slight delay, it seems like the lung and the glioblastoma data you're originally projecting for the first quarter -- is there any kind of meaningful delay there or is this just times past and you can give us a better -- and you're better able to tell us precisely when the data might come in?

Robert L. Kirkman

I think it's more the latter than the former. Just the trials progressed farther and it's just easier to predict when the last patients will be mature in that trial than it was before. So it's only a matter of a few weeks. We had said earlier in the first quarter, but I think it's going to be late in the first quarter before we have the data for the lung trial. In the case of the glio trial, we're dependent on the NCIC clinical trials group to provide those data to the public. I don't control the data release in quite the same way I do for our internally managed trials. That trial, very quickly, enrolled the second part after the ASCO data were available to the investigators. They were enthused by those data. But again, the endpoint there is based on how long those patients go and when they're prepared to make that public, and I can only say at this point I think that'll be before the middle of the year.


At this time, I'm showing no further questions. I'd like to turn the call back over to Mr. Kirkman.

Robert L. Kirkman

Well, thank you, all, very much for your attention this afternoon. We appreciate all the support we've had from our investors over the course of the last year. And we're looking forward very much to sharing these data points with you as they become available in the next few months. Thanks a lot, and that's the end of our call for today.


Ladies and gentlemen, thank you for your participation in today's conference. You may now disconnect.

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