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Edited Transcript of MACK earnings conference call or presentation 7-Aug-18 12:30pm GMT

Q2 2018 Merrimack Pharmaceuticals Inc Earnings Call

Cambridge Sep 5, 2018 (Thomson StreetEvents) -- Edited Transcript of Merrimack Pharmaceuticals Inc earnings conference call or presentation Tuesday, August 7, 2018 at 12:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Geoffrey Grande

Merrimack Pharmaceuticals, Inc. - Senior Director of Communications

* Jean M. Franchi

Merrimack Pharmaceuticals, Inc. - CFO & Treasurer

* Richard Peters

Merrimack Pharmaceuticals, Inc. - President, CEO & Director

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Conference Call Participants

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* Marc Alan Frahm

Cowen and Company, LLC, Research Division - VP

* Tessa Thomas Romero

JP Morgan Chase & Co, Research Division - Analyst

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Presentation

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Operator [1]

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Good morning, and welcome to the Merrimack Pharmaceuticals Second Quarter 2018 Financial Results Conference Call. (Operator Instructions)

I would now like to introduce your host for today's call, Geoff Grande, Senior Director of Communications at Merrimack.

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Geoffrey Grande, Merrimack Pharmaceuticals, Inc. - Senior Director of Communications [2]

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Thanks, operator. Good morning, everyone, and thank you for joining us on today's call to discuss our second quarter 2018 financial results and recent progress.

A press release detailing our results became available at 7:00 a.m. Eastern Time today and can be found in the Investors section of our website, merrimack.com. This call is being broadcast live and will be archived on our website for 6 weeks.

Joining me on the call today are Dr. Richard Peters, our President and Chief Executive Officer; and Jean Franchi, our Chief Financial Officer.

Before we begin, I need to remind you that during this call, we will be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These may include statements about our future expectations and plans, clinical development timelines and financial projections. These statements involve risks and uncertainties, which are described in the Risk Factors section of our most recent Form 10-Q and the other reports we filed with the SEC, which are available online at sec.gov.

While these forward-looking statements represent our views as of today, they should not be relied upon as representing our views in the future. We may update these statements in the future, but we are not taking on an obligation to do so.

I'll now turn the call over to Richard.

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Richard Peters, Merrimack Pharmaceuticals, Inc. - President, CEO & Director [3]

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Thanks, Geoff, and thank you all for joining us today. I'm happy to update you on our recent progress, including the triggering of an $18 million milestone payment from Shire.

But first, let me remind you of our corporate strategy. At Merrimack, we are committed to developing a focused pipeline of targeted novel therapeutics for the treatment of cancer. Each of our candidates is specifically designed to match our understanding of cancer pathways and drug metabolism and is tested in biomarker-defined populations.

This biomarker-driven strategy employs smaller, shorter, more personalized trials, which lower the cost of development and accelerate the timeline to clinically meaningful data. We conduct trials like this at least in part because they allow us to quickly identify which programs may work and allocate resources accordingly.

I would like to emphasize that it was this strategy of implementing efficient trial designs, which enabled a decision to cease development of MM-141, following the CARRIE study's Phase II results in late June and allowing us to focus our resources on our other programs. The study which evaluated MM-141 in frontline metastatic pancreatic cancer patients did not meet its primary or secondary efficacy endpoints and the data were, therefore, able to provide a clear signal that MM-141 did not offer a clinical benefit to patients.

Despite our confidence in this decision, we are deeply disappointed to discontinue a potential treatment for patients facing this difficult-to-treat disease.

To that end, we remain strongly committed to the development of our broader pipeline as we await clinical readouts from MM-121 and MM-310 expected later this year. And we have strengthened our cash position with 2 non-dilutive events: The triggering of the $18 million milestone payment from Shire that we've announced today as well as the financing we secured from Hercules Capital in July. We believe that these 2 events will extend our runway into at least the first quarter of 2020. Thus in an improved financial position with key readouts upcoming and our robust discovery engine advancing towards the clinic, we remained focused on delivering targeted therapies to patients with biomarker-defined cancers and are well situated to execute on our corporate goals.

Turning now to our pipeline, let me begin with an overview of our lead clinical program MM-121. So MM-121, otherwise known as seribantumab, is our fully human monoclonal antibody targeting the HER3 receptor and it is in development for heregulin-positive cancers, which represent around 50% of solid tumors. In indications in which high expression of heregulin is prevalent, heregulin-positive patients tend to progress more rapidly, and when heregulin binds to HER3 receptors, it has been shown to drive tumor cell resistance to a broad spectrum of antitumor therapies. MM-121 is designed to block the HER3 pathway in order to reduce this effect and is currently being evaluated in 2 ongoing randomized Phase II trials.

SHERLOC is our ongoing Phase II trial evaluating MM-121 in patients with heregulin-positive adenocarcinoma of the lung, who have progressed after a platinum-based chemotherapy regimen and may also have received a prior immuno-oncology therapy. SHERLOC is an open-label randomized study assessing progression-free survival in patients who have received MM-121 in combination with docetaxel compared to docetaxel alone. We anticipate reporting top line data, including the event-based progression-free survival efficacy endpoint later this year.

As a reminder, MM-121 was also granted orphan drug designation by the FDA in November 2017 for the treatment of heregulin-positive non-small cell lung cancer. This orphan drug designation provides a well-defined path towards registration.

MM-121 is also being evaluated in the second trial, the SHERBOC study, our ongoing Phase II trial in patients with heregulin-positive, hormone receptor positive and HER2 negative postmenopausal metastatic breast cancer, who have progressed after receiving a cyclin-dependent kinase inhibitor-based therapy. SHERBOC is assessing progression-free survivals in patients who have received MM-121 in combination with fulvestrant compared to fulvestrant alone. Enrollment in this trial is ongoing and we plan to offer guidance on the anticipated timing of data as enrollment progresses further.

At the American Society of Clinical Oncology, also referred to as ASCO, at the annual meeting in June we presented an analysis of pharmacokinetic and safety data comparing different dosing regimens from previous Phase I and Phase II studies of MM-121. The data support the dosing regimen currently being evaluated in both the SHERLOC and the SHERBOC trials.

In conjunction we are (technical difficulty) companion diagnostic to accurately and efficiently

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is an antibody-directed nanotherapeutic that [targets] the ephrin A2 receptor and contains a novel chemotherapeutic agent. The ephrin A2 receptor is overexpressed in 50% to 100% of many solid tumor types, including ovarian, bladder, gastric, pancreatic and lung cancers.

MM-310 is currently being studied in an open-label dose-escalating Phase I trial evaluating safety, pharmacology and preliminary activity in solid tumors. We expect to report safety data and the maximum tolerated dose from this study later this year, after which we intend to test the drug in tumor types associated with overexpressed ephrin A2 receptors.

I will also remind you of our discovery engine. Across the board, we are encouraged by the progress we have seen from these programs, which target 3 distinct areas of focus: Growth factor pathways, cellular proliferation and repair, and immuno-oncology. Ultimately, these programs reflect Merrimack's broader commitment to research and development and our ability to repopulate our clinical pipeline, as our current assets mature.

I'll now turn the call over to Jean Franchi, our Chief Financial Officer, for a review of our financial results.

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Jean M. Franchi, Merrimack Pharmaceuticals, Inc. - CFO & Treasurer [4]

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Thank you, Richard.

Before reviewing our June 30 financials, I want to briefly touch on a few recent highlights.

As Richard mentioned, Shire has achieved a commercial milestone: the sale of ONIVYDE in 2 additional major European countries, which triggers an $18 million payment to Merrimack. In addition, we announced in July that Merrimack secured a debt facility with Hercules Capital. The total loan commitment is up to $25 million with $15 million received at July's closing and an aggregate of $10 million available to Merrimack in 2 equal tranches, subject to certain conditions.

Both events occurred in July, following the closing of our quarter 2 financial results and therefore are reported as subsequent events.

When combined with the $60 million of cash, cash equivalents and marketable securities at June 30, the $15 million upfront from Hercules and the $18 million milestone triggered from Shire, results in approximately $93 million in available cash before considering cash burn for the third quarter.

We would like to remind you of the milestone payments Merrimack still remains eligible to receive from Shire, which are not considered in our cash runway until achieved. First, $5 million related to the sale of ONIVYDE in the first major non-European, non-Asian country and $10 million for the first-patient dosed in a pivotal clinical trial in an indication other than pancreatic cancer. Also, pursuant to Merrimack's asset sale in 2017, Merrimack is eligible to receive up to an aggregate of $450 million in milestone payments from Ipsen, which we plan to pass to the shareholders, net of any taxes owed and subject to there being a sufficient surplus at the time.

I'll now provide a summary of our financial highlights for the second quarter, which are outlined in greater depth in today's press release and our related 10-Q filing.

Our total operating expenses for the second quarter ended June 30, 2018, were $17.2 million compared to $34.5 million for the same period last year. This represents a material expense reduction of $17.3 million. This decline in expense is primarily due to Merrimack's refocused clinical and preclinical pipeline announced last year. As a result, we believe that our cash, cash equivalents and marketable securities of $60 million as of June 30, 2018, combined with the subsequent capital events, including the $15 million from the company's non-dilutive debt financing with Hercules Capital and the $18 million milestone triggered from Shire, will be sufficient to fund our planned operations into at least the first quarter of 2020.

I'll now hand the call back to Richard for concluding remarks.

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Richard Peters, Merrimack Pharmaceuticals, Inc. - President, CEO & Director [5]

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Thank you, Jean.

We are pleased to report on Merrimack's recent progress, as we remain focused on our prioritized pipeline and are capitalized to deliver on our anticipated clinical readouts.

To recap across the 9 wholly owned programs in our pipeline, we have 3 ongoing clinical trials, 2 of which are expected to readout later this year. We expect top line data from the randomized Phase II SHERLOC study of MM-121 in non-small cell lung cancer, and we expect to have safety data in a maximum tolerated dose from our Phase I study of MM-310 in solid tumors.

With that, I'd like to thank you all for joining today's call. And we will now open the line to any questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Marc Frahm with Cowen and Company.

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Marc Alan Frahm, Cowen and Company, LLC, Research Division - VP [2]

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I was wondering if you could just give a kind of enrollment update on SHERLOC, where you are in completing enrollment, and then what type of percent I/O experience you're kind of expecting at this point in that trial. And then finally on that point, where are your latest thoughts are on what the PFS might be within that subset, since that's an evolving area of science?

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Richard Peters, Merrimack Pharmaceuticals, Inc. - President, CEO & Director [3]

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Thanks, Marc. This is Richard Peters. So in the SHERLOC trial, the trial continues to progress very nicely. As you recall, we a while back announced the sizing up of the study because the trial was occurring so fast. We were able to increase the number of patients to be enrolled in the study so that we can strengthen the statistics and do that without changing our timeline for top line results as well as without changing our budgets, so we thought it was really a win-win.

We are -- it's an event-based trial. So it's -- the primary endpoint is progression-free survival, looking at the percent of patients who are alive and without their cancer progressing. And so we have to wait for a certain number of events, and an event is defined in this study as a patient who is progressing or a patient who passes away from whatever cause. And then they -- that counts as an event. So we need to collect enough event before we're able to really analyze the data and report on it.

Based on the progress of the study, we are, again, reconfirmed today what we expect the top-level results later this year. And that's as much as we can share right now in terms of SHERLOC.

In terms of the proportion of immuno-oncology or prior immuno-oncology, patients have been exposed to prior immuno-oncology drug, I think, we were -- we had the foresight when we designed the study to realize that the landscape was going to change in lung cancer. So of course, all patients have to be exposed to a platinum-containing chemotherapy regimen; that's a required prerequisite. But we realized that the field of immuno-oncology was going to evolve in lung cancer. So we also allowed for patients who had received a prior immune checkpoint inhibitor to be eligible for the study. That has been incredibly well received by our investigators and because there is a high unmet need for patients who progress after an immuno-oncology checkpoint inhibitor. And the fact that we have the companion diagnostic measuring heregulin, fits also very nicely within the treatment pathway for oncologists. They're really measuring PD-L1 expressions so they can measure as well heregulin expression.

And so we are able to capture in this trial a sizable number of prior immuno-oncology exposure. And so it would be very interesting to look at the results both for the total population, right, as well as in the subset that would have received not only platinum-containing agent, but also immune checkpoint inhibitor.

With regard to the PFS in that subset, I think, that's we'll have to wait, right? Because this is something that is not exactly known. This is a field that's evolving. We do have the overall -- for the overall population our estimation of the progression-free survival in second and third line patients who get docetaxel, which is the control treatment -- is a median progression-free survival of 3 months. We are shooting for a doubling of the progression-free survival for the overall population.

As far as the -- in the subset of the immune checkpoint inhibitors, I think, that's something we'll have to really figure out when we get the results. So the trial would be interesting, because it will certainly provide a very clear answer on the benefit of MM-121 in heregulin-positive second line adenocarcinoma -- second and third line adenocarcinoma of the lung, but also inform the field about how the patients performs post-progression after an immune checkpoint inhibitor.

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Marc Alan Frahm, Cowen and Company, LLC, Research Division - VP [4]

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Great. And then maybe can you also give an update on kind of where you are in enrollment with SHERBOC? And do you think that data will likely be 2019? Or could it be into 2020?

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Richard Peters, Merrimack Pharmaceuticals, Inc. - President, CEO & Director [5]

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Yes. So thank you, Mark, for that question. So SHERBOC, that's the breast cancer study. That trial -- we started enrollment this year. We dosed our first patient in February. So clearly, that trial is later than the SHERLOC study. SHERLOC study was already well ongoing when we started SHERBOC, the breast cancer study.

We are still activating sites. So we still early in the lifecycle of this trial. As you know, we activate multiple sites and then once the sites are activated, they start enrolling patients. We continue to enroll patients in that study.

As we're activating sites, we can get a better feel for the total accrual curves and what our run rate will be in terms of accrual patients, patients screening and prescreenings. And so once we have a little bit more visibility in terms of that performance, we'll be able to provide more guidance in terms of when we might expect the top-level results. At this stage, we're not able to predict it, but once we have a better feel for the total accrual curves, then we'll certainly provide more clarity around that.

I'd like to point out that the SHERBOC study is an interesting one, because it's in breast cancer in the HER2 negative patients. As I mentioned in my introductory remarks, in patients who have progressed on the cyclin-dependent kinase inhibitor, and they all have to have high heregulin in their tumor cells -- in their tumor biopsies, about 50% of patients in our experience qualify with this high heregulin.

It's a high unmet medical need, what we're hearing from the oncologists -- breast oncologists is that as a patient progresses on the CDK4, CDK6 inhibitor, they're not quite sure what to do with these patients. And so having a trial that is offering an anti-hormonal -- fulvestrant -- or the anti-hormonal plus MM-121 that could really overcome potential resistance since the HER3 pathway is a well-known, described pathway that provides resistance to many therapeutic agents, that's something that oncologists are really welcoming. And of course, the fact that we have a companion diagnostic to help select patients is also something that they're very much welcoming.

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Operator [6]

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(Operator Instructions) Our next question comes from Anupam Rama with JPMorgan.

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Tessa Thomas Romero, JP Morgan Chase & Co, Research Division - Analyst [7]

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This is Tessa on for Anupam this morning. Maybe one from us also on the SHERLOC study here. We know you have recently presented at ASCO some of the Phase I, II data in solid tumors. Any other physician's feedback that you have heard that provides context for what else you're looking for in efficacy and safety beyond PFS here? And in the indication -- I think, you said you'd be presenting event-free survival as well. And then one other color can you provide just generally on what will be included within the top line, and what we will have to wait for future update?

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Richard Peters, Merrimack Pharmaceuticals, Inc. - President, CEO & Director [8]

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Thank you, Tessa. It's Richard Peters, again. So, again, on SHERLOC, the primary endpoint as far as the lung cancer study, the primary endpoint will be progression-free survival. We also have a number of secondary endpoints -- the typical efficacy endpoints that you measure: response rates, duration of treatment, but also overall survival. So we're capturing in that trial as well overall survival. And of course, it's not powered for overall survival, but it's still something that we are going to be looking at as well.

The trial is enrolling adenocarcinoma of the lung, which is the most common histology in non-small cell lung cancer. We wanted to have a very cohesive, well-defined patient population. Again, this is the approach that we take with our proof-of-concept trials. The idea is that you run the trials in well-defined patient populations, well-defined tumor histology, well-defined, in this case, heregulin biomarker, so that we have a more homogeneous patient population that we can get a clear signal, of course, with the active comparator, which is in this case will be docetaxel or Taxotere. So having the concurrent active comparator is also very impactful, because then we can really look at the data and ask or direct to perform on the efficacy front.

On the safety front, we have vast amount of data already, and as you mentioned, Tessa, we presented data from prior Phase I and Phase II studies at the American Society of Clinical Oncology meeting in Chicago. We have a total, I think, over 700 patient experience with MM-121. So it's a drug that has been well tested in humans. So the safety database is very robust.

We also have a lot of information on the dosing and that's what that abstract was about. It's about looking at a fixed dosing. So sometimes you can dose oncology drugs on the weight basis or you can go sometimes on the fixed dosing, which is easier actually to implement in the clinic and that abstract documented that the fixed dosing that we're implementing in our studies is very appropriate.

And so, again, we'll -- we very much eagerly await the results of this study later this year. And on the top-level results, you say what kind of top-level results we'd be sharing? Certainly the primary endpoint but any other efficacy endpoints that we can share would be made available. And of course, we're always committed to presenting the full data set to -- at an following oncology meeting -- congress.

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Operator [9]

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And I'm not showing any further questions at this time. I would now like to turn the call back over to Geoff Grande for any further remarks.

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Geoffrey Grande, Merrimack Pharmaceuticals, Inc. - Senior Director of Communications [10]

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Great. Well, thank you all for your continued interest in Merrimack. We look forward -- and we will be presenting at the Baird Global Healthcare Conference on September 6, and we look forward to updating you on our progress in the months ahead. Have a good morning.

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Operator [11]

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Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program, and you may all disconnect. Everyone, have a wonderful day.