Earnings Transcript for MACK - Q1 Fiscal Year 2018

Executives: Geoff Grande - Senior Director, Communications Richard Peters - President and CEO Sergio Santillana - CMO Jean Franchi - CFO

Analysts: Laura Christianson - Cowen

Operator: Good morning and welcome to the Merrimack Pharmaceuticals First Quarter 2018 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following the formal remarks, we will open up the call for your questions. I would now like to introduce your host for today's conference, Geoff Grande, Senior Director of Communications at Merrimack. Please begin.

Geoff Grande: Thanks, operator. Good morning, everyone and thank you for joining us on our call to discuss our first quarter 2018 financial results and recent progress. A press release detailing our results became available at 7

Richard Peters: Thanks, Geoff and thank you all for joining us today. At Merrimack, we believe that the smart design and development of novel therapeutics targeting biomarker-defined cancers will deliver optimal patient outcomes. As such, we set out to build a diversified pipeline of antibodies and antibody directed nanotherapeutics, utilizing a three pronged approach to development. First, we begin with a clear understanding of cancer pathways and drug metabolism. Then, informed by this understanding, we design targeted solutions with pharmacological properties to match disease need. And finally, we test these candidates in biomarker defined homogenous patient populations, resulting in smaller, shorter, more personalized studies, lowering development costs and accelerating the timeframe to clinically meaningful data. To that end, Merrimack currently has ten programs across our clinical and preclinical pipeline with four ongoing clinical trials, all targeting biomarker defined cancers. Since reprioritizing our pipeline in conjunction with the Ipsen transaction, we have pointed towards a data rich 2018. Looking ahead to the rest of the year, we expect to report data from each of our three clinical candidates, including randomized phase 2 data from MM-141 or istiratumab and MM-121 or seribantumab and phase 1 data from MM-310. Since we still await each of these data events, we will keep today's call brief. Before turning the call over to Sergio who will provide a brief update on our pipeline, let me provide a quick update on the corporate side. We are delighted to announce the appointment of Dr. Lee Newcomer to our scientific advisory board in the first quarter. Dr. Newcomer is former Senior Vice President for Oncology and Genetics and Chief Medical Officer at UnitedHealthcare and a board certified medical oncologist. As our candidates advance in the clinic, it is essential that we consider how we can demonstrate maximum value to various stakeholders, the patients, the physician and the payer. Dr. Newcomer's expertise in medical oncology and patient access will lend an important voice to our scientific advisory board, which consists of distinguished experts in precision oncology, bioengineering, drug discovery and clinical development. We welcome Dr. Newcomer and look forward to his valuable insights. Now, I will turn the call over to Sergio who will give an overview of our clinical candidates, each of which is expected to report clinical data in 2018.

Sergio Santillana: Thank you, Richard. Let me begin with MM-141, our candidate with the nearest term expected data readout. MM-141 also known as istiratumab is a bispecific antibody targeting IGF-1 and HER2 receptors, two pathways which cooperate to drive cancer cell growth. We anticipate that blocking both pathways with a single drug will be more effective than doing so with two drugs acting separately. MM-141 is currently being evaluated in the CARRIE study, our ongoing double blind placebo controlled randomized phase 2 trial in patients with front line metastatic pancreatic cancer. Patients receive MM-141 in combination with a standard of care chemotherapy, gem and Abraxane compared to placebo plus gem and Abraxane. Patient selection in this trial is based on high serum levels of free IGF-1, a biomarker associated with more aggressive forms of pancreatic cancer. The primary endpoint is progression free survival in the overall patient population as well as in patients with both high serum levels of free IGF-1 and high levels of heregulin. While objective response rate, disease control rate, duration of response, overall survival and safety are all secondary measures. With this type of trial design, where we evaluate several event driven endpoints, we have to wait for patients to progress on therapy in order to capture sufficient information for data measurements. We continue to expect that we will be able to report top line data in a press release later this quarter and of course, follow up with a presentation and at appropriate medical congress at a later date. Turning to MM-121 or seribantumab, our fully human monoclonal antibody, targeting the HER2 receptor. The HER3 pathway is a drug resistance pathway, activated with heregulin balance to the HER3 receptor. MM-121 was designed to block the HER2 pathway in order to reduce cancer cell resistance through the effects of the antitumor therapies. MM-121 is currently being evaluated in two randomized phase 2 trials in a biomarker defined population in non-small cell lung cancer and in postmenopausal metastatic breast cancer. SHERLOC is our ongoing phase 2 trial of MM-121 in patients with heregulin positive non-small cell lung cancer who has progress after a platinum based chemotherapy regimen and may also have received a prior immunooncology therapy. SHERLOC is designed as an open label randomized study, assisting progression free survival in patients who have received MM-121 in combination with docetaxel compared to patients treated with docetaxel alone. This trial is enrolling 100 patients and we are looking for a very meaningful clinical benefit of doubling the progression free survival compared to chemotherapy alone with a robust statistical design targeting a hazard ratio of less than or equal to 0.5. We continue to state to report top line data for this study in the second half of 2018. Also as a reminder, MM-121 was granted orphan drug designation by the FDA back in November 2017 for the treatment of heregulin positive non-small cell lung cancer, which offers eligibility for up to 7 years of marker exclusivity in this indication if approved as well as other development assistance and financial incentives. Turning now to the SHERBOC study, our ongoing double-blind placebo controlled randomized phase 2 trial of MM-121 in patients with heregulin positive hormone receptor positive and HER2 negative postmenopausal metastatic breast cancer who have progressed after receiving cyclin-dependent kinase inhibitor based therapy. SHERBOC is assisting progression free survival in patients who have received MM-121 in combination with fulvestrant compared with those treated with placebo plus fulvestrant. The first patient was dosed in this trial in mid-February and the enrolment is ongoing. We plan to offer guidance on the anticipated timing of data when we have a better sense of how patient enrolment is progressing. Next, our third clinical candidate MM-310 is an antibody-directed nanotherapeutic that targets the ephrin A2 receptor and delivers a novel prodrug of docetaxel encapsulated in a nanoliposome. The ephrin A2 receptor is under [indiscernible] in 50% to 100% of many solid tumor types, including prostate, ovarian, bladder, gastric, pancreatic and lung cancers. In multiple critical models, MM-310 demonstrated superior activity and tolerability compared with a free drug comparator. MM-310 is currently being studied in the dose escalation Phase 1 trial, evaluating safety, pharmacology and preliminary activity in solid tumors. Enrolment is ongoing and we expect to report safety data and the maximum tolerated dose from this study in the second half of this year. Finally, we presented four processes at the 2018 American Association of Cancer Research Annual Meeting in April, AACR. Highlight preclinical data from MM-310 and other programs currently in preclinical development. Merrimack currently has 6 programs at varying stages of preclinical development which target three distinct areas of focus, growth factor pathways, cellular proliferation and repair and immunooncology. These programs reflect Merrimack’s broader commitment to research and development and our ability to repopulate our clinical pipeline as our current assets mature. With that, I will now turn the call over to Jean Franchi, our Chief Financial Officer.

Jean Franchi: Thank you, Sergio. I’ll now summarize our financial highlights, outlined in greater depth in today's press release and related 10-Q filing. Our total operating expenses for the three months ended March 31, 2018 were 17.4 million compared to 27.2 million for the three months ended March 31, 2017. This represents an expense reduction of 9.8 million compared to our first quarter of 2017. The reduced expenses largely reflect our completed transition to a research and clinical development stage company. With the majority of our costs focused on our prioritized clinical programs, we also had materially decreased expenses compared to the same quarter last year, due to reduced headcount and related corporate costs. We ended the quarter with 76.3 million of cash, cash equivalents and marketable securities compared to 93.4 million as of December 31, 2017. As a result, we continue to believe that our cash, cash equivalents and marketable securities as of March 31, 2018 and certain potential net milestone payments will be sufficient to fund our planned operations to our upcoming data readouts and into the second half of 2019. I’ll now hand the call back to Richard for concluding remarks.

Richard Peters: Thank you, Jean. Once again, we look forward to our upcoming milestones. Across the ten wholly owned programs in our pipeline, we have four ongoing clinical trials, three of which we expect to read out this year. Later this quarter, we expect to report top line data from the randomized phase 2 CARRIE evaluating MM-141 in frontline metastatic pancreatic cancer. In the second half of the year, we expect to report top line data from the randomized phase 2 SHERLOC study of MM-121 in non-small cell lung cancer. Also in the second half of 2018, we expect to have safety data and a maximum tolerated dose from our Phase 1 study of MM-310 in solid tumors. And with that, I’d like to thank you all for being here and we will now open the line to any questions. Operator?

Operator: [Operator Instructions] The first question is from Anupam Rama of JPMorgan.

Unidentified Analyst: This is [indiscernible] on for Anupam this morning. Thank you for the updates here on the quarter and for taking our questions. So a couple from us on the CARRIE study in frontline metastatic pancreatic cancer. Can you remind us here what the trial is powered to show between 141 and Abraxane plus Gemcitabine versus Abraxane plus Gemcitabine alone on PFS? And then maybe related to OS as a secondary endpoint of the trial, what would be viewed as clinically meaningful or a win scenario in the eyes of physicians and what OS duration is assumed for the Abraxane plus Gemcitabine arm? And then maybe finally, whatever color can you provide on what will be included within the top line reup coming up here and what will we have to wait for in our future update?

Sergio Santillana: Thank you so much for the question. So in terms of the statistical design of this study, the assumption of efficacy for the CARRIE study in the overall IGF-1 high serum levels of IGF-1 is 8 months versus 5 months, which represents a hazard ratio of 0.63 or lower with an alpha of 0.15 and a power of 80%. You were also asking the question about the overall survival. We are capturing the overall survival and as a comparison, the overall survival of what you will expect for Abraxane, Gem for this patient population in unselected patient population is 8 months. So, but we would expect a PFS target in this study as a clinically meaningful improvement in the outcome of these patients. In terms of the top line results, we have plan to include the primary endpoint as well as key secondary endpoints including overall survival and safety.

Richard Peters: This is Richard. And what Sergio mentioned with regard to the secondary endpoint, of course, the study is not powered. It's a proof of concept trial, right, but we understand your question of wanting to understand better what the overall survival benefit might be. What Sergio quoted for the Gem, Abraxane in unselected patients and that’s based on the pivotal trials of the approval of Abraxane, that's a median overall survival of eight months. Remember that in our trial, we are enrolling patients, all patients have high circulating free IGF-1, which is the growth signal for pancreatic cancer and tends to be associated with a more aggressive form of pancreatic cancer. And therefore, it would be very important for us to have this phase 2 randomized trial when you are concurrently, at the same time, comparing the treatment arm with 141 and of course the chemotherapy alone. So we've got chemotherapy plus our drug versus chemotherapy alone with placebo and so that's the whole strategy that we've implemented last year when we re-sharpened the focus of Merrimack of really running these proof-of-concept studies where we can have ideally the highest quality of data to compare head to head our treatment vis-à-vis standard of care.

Operator: The next question is from Laura Christianson of Cowen.

Laura Christianson: Just a quick one on your pipeline candidates. I'm curious your plans for moving them forward and whether you have any partnerships in the works and if you've been talking with any potential interested parties on that front?

Richard Peters: This is Richard. Thank you for the question. So yes, regarding our pipeline, we have four programs in the clinic and Sergio highlighted the update on the number of those and we also have six programs in at the preclinical stage. So that’s a total of 10 programs. We are, as I often say, in the very fortunate situation of having all of those programs being 100% wholly owned by the company, so they're not unencumbered. And it's part of our corporate strategy to really leverage our assets into value and we can do this through partnerships, through licensing agreements and we are having ongoing discussions with a number of potential partners, both for the clinical assets as well as the preclinical stage assets. Of course, we will be continuing to prioritize our business development efforts and we'll of course over time assess all the options to optimally manage our business.

Operator: Thank you. There are no further questions. I’ll turn the call back over to Geoff Grande for closing remarks.

Geoff Grande: Great. Well, thank you all for joining us and for your continued interest in Merrimack. We look forward to updating you on our progress in the months ahead.

Operator: Ladies and gentlemen, this concludes today’s conference. You may now disconnect. Everyone, have a great day.