Trubion Pharmaceuticals, Inc. (TRBN)

Q3 2008 Earnings Call Transcript

November 10, 2008, 5:00 pm ET

Executives

Jim DeNike – Senior Director of Corporate Communications

Peter Thompson – Chairman, President, CEO and Treasurer

Scott Stromatt – SVP and Chief Medical Officer

Michelle Burris – SVP and CFO

Analysts

Joel Sendek – Lazard Capital Markets

Steve Harr – Morgan Stanley

Presentation

Operator

Good afternoon, ladies and gentlemen, and welcome to the Trubion third quarter 2008 earnings conference call. My name is Millicent [ph], and at this time, I’d like to turn the program over to Trubion’s Senior Director of Corporate Communications, Mr. Jim DeNike. Please go ahead, sir.

Jim DeNike

Thanks Millicent, and thanks everyone for joining us today. On the call today from Trubion are Dr. Peter Thompson, President, Chief Executive Officer and Chairman; Dr. Scott Stromatt, our Chief Medical Officer, and Michelle Burris, Senior Vice President and Chief Financial Officer.

Earlier today, we issued our financial result for the third quarter and nine months ended September 30, 2008. A copy of the press release can be found on our website at www.trubion.com. I’d like to remind each of you that today’s conference call may contain forward-looking statements based on our current expectations. These statements are only predictions and actual results may vary materially from those projected. Please refer to Trubion’s documents filed with the SEC concerning factors that could affect the company, copies of which are also available on our website.

I’d now like to turn the call over to Peter.

Peter Thompson

Thank you, Jim, and thanks to all of you who are here joining us today.

During the call today, I’ll provide a review of our third quarter milestone and outline our continued progress on initiatives that are advancing our pipeline. Scott Stromatt will then provide a detailed review of our clinical progress, and Michelle will conclude with the summary of our third quarter financial result and advice 2008 guidance.

In Q3, Trubion continued to focus on the development of our pipeline candidates for autoimmune and inflammatory diseases, and cancer; including our lead product candidate, TRU-015 for rheumatoid arthritis. Wyeth and Trubion are developing TRU-015 for RA. A product candidate for this indication that we believe will provide a more convenient and tolerable alternative to other CD20 direct therapy. In addition to TRU-015 for RA, Wyeth and Trubion are also developing SBI-087, a next generation CD20-directed SMIP for SLE and RA.

In October, we announced positive data from two ongoing re-treatments studies demonstrating that repeat administration with a single dose of TRU-015 continues to produce persistent responses and significant improvements in the signs and symptoms of rheumatoid arthritis based on the American College of Rheumatology criteria. Scott will provide more detail on these results, as well as an update on TRU-016, our proprietary first-in-class CD37 directed SMIP in a moment.

In addition to our current SMIP-based product candidate, we continue to develop our SCORPION and TRU-ADhanCe technology. We first introduced these technologies during our Q1 earnings conference call in May, and they have been the subject of presentations at multiple scientific conferences this year. Presentations from these conferences are available on our newly redesigned website. These technologies comprised the expanded foundation for Trubion product development, and we believe they will provide the basis for the development of additional first-in-class and best-in-class product candidate. We’ll provide additional information on this exciting preclinical program, as IND candidates are selected in timelines or finalized.

Before I turn the call over to Scott, I want to take a moment to update you on two additional corporate milestones announced earlier in the quarter. In August, we announced the appointment of Dr. Scott Stromatt as Senior Vice President and Chief Medical Officer at Trubion. Scott is responsible for leading our clinical development activity and has extensive experience in the areas of rheumatology and oncology drug development. Most recently, he served as Executive Vice President of Clinical and Regulatory Affairs which sell therapeutics here in Seattle, where he managed global clinical research programs for several product candidates in a variety of oncology indications.

Some of you may have already have the good fortune of meeting Scott, either at the Morgan Stanley conference in September or more recently at ACR. We are delighted to have Scott on board.

In September, we announced the opposition division of the European patent office revoked the European patent owned by Genentech and Biogen Idec related to the use of an anti-CD20 antibody for the treatment of RA. We were one of several parties who’ve filed an opposition proceeding and believe that patent revocation supports the continued development of new therapies that has the potential to improve patient outcome for autoimmune and inflammatory diseases. Genentech and Biogen Idec has the right to appeal the EPO’s decisions, and we will continue to provide updates if new development weren’t.

At this time, I would like to turn the call over to Scott for a detailed update on clinical progress in the third quarter. Scott?

Scott Stromatt

Thank you, Peter.

First, I would like to review the recent TRU-015 for RA re-treatment data announced in late October. The objective of the ongoing Phase 1/2a and Phase 2b re-treatment studies is to evaluate the safety, tolerability and pharmacodynamics, specifically, the B-cell depletion overtime, pharmacokinetics and immunogenicity of repeat doses of TRU-015 for RA following initial administration. We presented re-treatment data from the Phase 1/2a or Study 15001 on October 26, on a poster session at the ACR 2008 annual meeting in San Francisco, and feedback has been positive. Patients treated with a single dose of TRU-015 at 5 mg/kg or higher in the previously conducted Phase 1/2a portion study were eligible for re-treatment. Patients given an initial dose of 5 mg received a single infusion of 5 mg/kg upon re-treatment. And those given higher doses of TRU-015 received a single infusion of 15 mg/kg upon re-treatment. Patients were eligible for repeat therapy at 24-week intervals.

Thirty patients entered the Phase 1/2a re-treatment study with some patient receiving as many as seven courses of TRU-015 at the time of this assessment. At 24-weeks, the ACR 20, 50, and 70 response rate for 18 patients had received their third re-treatment of 5 mg/kg or 15 mg/kg of TRU-015 where 50%, 70% [ph] and 11% respectively. Ongoing patient evaluation demonstrated maintenance of the ACR responses following administration of single dose of TRU-015 at six months intervals, along with B-cell depletion and recovery following re-treatment. This was comparable to results seen after initial treatment.

Results from the Phase 1/2a re-treatment study, also indicated total serum IgG level were relatively preserved. In addition, subjects treated with three or more courses of therapy experienced treatment decreases in rheumatoid factor and IgM levels. Re-treatment with TRU-015 did not result in an increase in any adverse events compared with initial infusion, and the re-treatment infusions were well-tolerated.

Finally, no neutralizing antibody to TRU-015 had been detected at the time of this assessment. We also announced positive results following preliminary analysis from the Phase 2b or Study 15002, which subjects received their first course of re-treatment with 800 mg of TRU-015. Re-treatment data from this study were not available in time to present at ACR but will be permitted for presentation in a future peer-reviewed form.

Two hundred forty patients entered the open label re-treatment portion of the Phase 2b study and received 800 mg of TRU-015. Data was available for all 240 patients at the time of this evaluation, of which 204 patients are rheumatoid factor positive. Under the study protocol, the efficacy endpoint was based on all randomized rheumatoid factor positive subjects who received any portion of study drug. Based on initial treatment results from Study 15001 and 15002 of selected dose for re-treatment in 15002 and additional study is 800 mg.

Preliminary analysis of the Phase 2b re-treatment data demonstrate that a 24-weeks, the ACR 20, 50, and 70 response rates for patients in the initial 800 mg dose group who were subsequently treated with 800 mg of TRU-015 were 70%, 40%, and 23% respectively. Re-treatment with TRU-015 was generally well-tolerated and the safety and PD effects after re-treatment were comparable to those seen after initial therapy.

After two years of re-treatment, data from these studies continue to demonstrate that a single dose of TRU-015 for RA produces robust, clinical responses with integral [ph] B-cell recovery after initial treatment. We believe these results combined with the results from our ongoing Phase 2b dose regimen finding study rule out to further identify TRU-015 potential competitive differences.

As a reminder, the Phase 2b study is designed to help identify an optimal induction or initial dosing regimen, and we look forward to showing additional data with you next year. In addition to TRU-105, we are also pleased with the clinical advancement of our proprietary drug candidate, TRU-016 for the treatment of B-cell malignancies, including chronic lymphocytic leukemia. You may recall that we initiated patient dosing for our Phase 1/2 clinical trial in March. This study is evaluating the safety, tolerability, pharmacokinetics, and estimated clinical activity of TRU-016 for the treatment of chronic lymphocytic leukemia (CLL).

There are two parts to this study: A Phase 1 dose escalation study designed to evaluate the safety, tolerability and pharmacokinetics of TRU-016; and a Phase 2 expansion cohort designed to further evaluate the safety and to estimate the clinical activity of TRU-016 in patients with previously treated CLL or small lymphocytic leukemia. We are currently in the dose escalation phase of the study and are pleased with the progress today. We believe we may be in a position to report initial data on the study as early as June 2009 at ASCO.

As we announced at the ASCO meeting of 2008 early this year, TRU-016 preclinical data continues to demonstrate the ability to kill tumor cells through powerful apoptotic signaling, as well as potent ADCC-mediated activity. This, combined with the activity or synergy of TRU-016 with chemotherapies and anti-CD20 therapies, adds to our confidence that the drug, either alone or in combination with other effective therapies, may offer meaningful benefits to patients with this disease. As a reminder, Trubion currently retains all development and commercialization rights to the TRU-016 program.

That concludes my update and I look forward to meeting more of you in the coming months. Before we open the call for questions, I would like to turn the call over to Michelle for a summary of our third quarter and nine months financial results and a review of our revised 2008 guidance.

Michelle Burris

Thanks, Scott. I’ll take a few minutes to review financials for our third quarter and the nine months ended September 30, 2008, and we’ll then review our revised guidance for the year.

Revenue for the third quarter and nine months ended September 30, 2008 was $3.8 million and $12.2 million, respectively. That compares with $4.6 million and $14.5 million, respectively, in 2007. Revenue in the third quarter and nine months ended September 30, 2008 was earned through our strategic collaboration with Wyeth, including research and development services. The three and nine months decreases in earned revenue were due to decreases in reimbursement revenue related to the Phase 2b clinical trial for TRU-015 for RA, and an extension of the recognition of the upfront fee from Wyeth. Currently, Trubion’s clinical development obligations under the agreement are limited to conducting ongoing re-treatment studies for TRU-015. The ongoing second Phase 2b study and future studies will be conducted by Wyeth.

The $12.2 million recognized in the nine months ended September 30, 2008 is comprised of $4.1 million for the amortization of the $40 million upfront fee received from Wyeth and $8.1 million for collaborative research funding from the Wyeth partnership. This is compared to revenue of $14.5 million recognized in the nine months ended September 30, 2007. That was comprised of $5.5 million for the amortization of the $40 million upfront fee received from Wyeth and $9 million for the collaborative research funding from the Wyeth partnership.

Total operating expenses for the third quarter and nine months ended September 30, 2008 were $10.4 million and $32.3 million, respectively, compared to $11.5 million and $35.9 million, respectively, in 2007. The decrease in operating expenses in the third quarter and first nine months of 2008 were primarily due to decreased costs related to our Phase 2b clinical trial for TRU-015, lower outside manufacturing costs for TRU-016, lower lab supply costs, and lower contract licensing fees. The decreases in operating expenses were partially offset by an increase in personnel-related expenses.

Net loss for the third quarter and nine months ended September 30, 2008 was $6.6 million or $0.37 per diluted common share and $19.2 million or $1.07 per diluted common share, respectively. That compares with a net loss of $5.9 million or $0.33 per diluted common share and $18.4 million or $1.04 per diluted common share, respectively, in 2007. Trubion had $61.6 million in cash, cash equivalents and investments as of September 30, 2008. It compares to $65.4 million as of June 30, 2008.

As we announced in the earnings press release, we have revised our 2008 guidance after taking steps to reduce our operating cash requirements. As a result, we have lowered our anticipated annual burn rate from $35 million to $40 million to $23 million to $28 million, and our anticipated operating expenses from $53 million to $58 million to $44 million to $49 million.

The revised guidance is as follows: Trubion anticipates 2008 revenues to be in the range of $15 million to $20 million, earned through the company’s Wyeth collaboration; total operating expenses are now expected to be approximately $44 million to $49 million for 2008, down from the prior guidance of $53 million to $58 million; and revised operating cash requirements in 2008 are now expected to be approximately $23 million to $28 million.

That concludes my update on the financials and I would, once again, like to thank all of you for joining us today, and we look forward to updating you again on our next earnings call. Millicent, can you please go ahead with any questions?

Question-and-Answer Session

Operator

(Operator instructions) Our first question this afternoon will come from Joel Sendek with Lazard Capital Markets.

Joel Sendek – Lazard Capital Markets

Hi, thanks. I have two questions. First of all, can you just go over what your registration strategy is for TRU-015 at this point?

Peter Thompson

Joel thanks for the question. I’ll let Scott Stromatt address that.

Scott Stromatt

Thank you. The current registration strategy is within the conjunction with our partner, Wyeth. The initial indication would be an RA. Phase 2b study has started, which is referred to as 2203, and that is on going. And after that, we will be probably starting on the Phase 3 trial in about 2010.

Joel Sendek – Lazard Capital Markets

And can you – might the 2b be a pivotal trial? You’ve mentioned that in the past or is that a –?

Scott Stromatt

Yes, it would absolutely be a supporting trial.

Joel Sendek – Lazard Capital Markets

Supporting? Would that be enough or would you need the Phase 3 as well?

Scott Stromatt

I think it depends on the quality of the results. Potentially, it could be enough, but I think from a registration standpoint in RA, you’ll need two trials.

Joel Sendek – Lazard Capital Markets

Okay, thanks. And then just on the burn rate. This would give you a little bit more runway, so what do you have, about two years at this point? Is that a fair estimate?

Peter Thompson

I’ll let you take that question.

Michelle Burris

Well, I think, obviously, the – if you look through our SEC filings, we say we have an excess of 12 months. Obviously, how aggressive we are in pursuing our clinical development plans for 016 as well as our other research and preclinical activities will drive that burn rate.

Joel Sendek – Lazard Capital Markets

Okay, that’s it. Thanks.

Operator

(Operator instructions) We move now to Steve Harr with Morgan Stanley.

Steve Harr – Morgan Stanley

Hi, good afternoon, guys. So this re-treatment, it was every six months with – were you seeing B-cells replete in between each treatment? Or how did you treat patients whose B-cells remained low at six months?

Peter Thompson

Steve or Dr. Harr, thanks a lot for the (inaudible). Scott, answer that.

Scott Stromatt

The B-cells, we didn’t announce those results in the press release, and so I think basically, we’ll have that in the poster that we’ll probably present at EULAR in the summer in June. Suffice it to say, just the timing patients retreated and the pattern of B-cell repletion is similar to what we saw with the initial treatment.

Steve Harr – Morgan Stanley

Which was what?

Scott Stromatt

Well, in initial treatment, you start seeing repletion of B-cells starting around 12 weeks, 12 to 20 weeks, depending on the dose.

Steve Harr – Morgan Stanley

Great, thank you.

Operator

(Operator instructions) And at this time, we have no other question standing by. I’d like to turn the program back to Dr. Thompson for closing remarks.

Peter Thompson

I’d like to thank all of you again for your continued interest in and support of Trubion and we look forward to speaking with you again soon.

Operator

Thank you, everyone, for your participation.

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