Aptose Biosciences Inc. (NASDAQ:APTO) Q3 2023 Earnings Call Transcript

Aptose Biosciences Inc. (NASDAQ:APTO) Q3 2023 Earnings Call Transcript November 9, 2023

Aptose Biosciences Inc. beats earnings expectations. Reported EPS is $-1.76, expectations were $-2.16.

Operator: Good afternoon. My name is Hope, and I will be your conference operator today. I would like to welcome everyone to the Aptose Biosciences Conference Call for the Third Quarter Ended September 30, 2023. At this time, all participants are in a listen-only mode. After the speaker’s remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. As a reminder, this conference call may be recorded. I would now like to introduce Ms. Susan Pietropaolo. Please go ahead.

Susan Pietropaolo: Thank you, Hope. Good afternoon, and welcome to the Aptose Biosciences conference call to discuss financial and operational results for the third quarter ended September 30, 2023. Earlier today, Aptose issued a press release relating to these financial results. The news release as well as related SEC filings are accessible on Aptose’s website. Joining me on today’s call are Dr. William Rice, Chairman, President and CEO; Dr. Rafael Bejar, Senior Vice President and Chief Medical Officer; and Mr. Fletcher Payne, Senior Vice President and Chief Financial Officer. Before we proceed, I would like to remind everyone that certain statements made during this call will include forward-looking statements within the meaning of US and Canadian securities laws.

Forward-looking statements reflect Aptose’s current expectations regarding future events. They are not guarantees of performance, and it is possible that actual results and performance could differ materially from these stated expectations. They involve known and unknown risks, uncertainties and assumptions that may cause actual results, performance and achievement to differ materially from those expressed. To learn more about these risks and uncertainties, please read the risk factors set forth in Aptose’s most recent annual report on Form 10-K and SEC and SEDAR filings. All forward-looking statements made during this call speak only as of the date they are made. Aptose undertakes no obligation to revise or update the statements to reflect events or circumstances after the date of this call, except as required by law.

We encourage you to refer to today’s press release and the 10-Q for additional information and disclosures regarding today’s announcement. I will now turn the call over to Dr. Rice.

William Rice: Thank you, Susan. I want to welcome everyone to our call for the third quarter ended September 30, 2023. Today, I first want to remind everyone that earlier this year, we knew we had an impressive lead agent in Tuspetinib for the treatment of patients with AML. But we also had a limited cash runway to develop it. Strategically, we avoided any punitive financings and any potential warrant overhang. Rather, we extended the cash runway with an at the market or ATM facility with a committed equity facility and through an investment by our partner, Hanmi Pharmaceuticals. This was designed to give us breathing room and time to collect critical data with Tuspetinib that may drive improved financing terms and potential collaborations.

We then undertook the APTIVATE expansion trial to understand Tuspetinib single-agent activity and to identify relapsed or refractory AML populations with unmet needs and who are particularly sensitive to our Tuspetinib plus Venetoclax or TUS/VEN Doublet therapy. We learned that Tuspetinib as a single agent at our 80-milligram recommended Phase 2 dose is highly active in patients naive to Venetoclax with CR/CRi rates of 42% across all valuable patients, 60% in FLT3 mutated patients and nearly 30% in FLT3 wild-type patients, demonstrating potent single-agent activity across a breadth of patients. But we also observed that as we dose escalated above 80 milligrams to higher dose levels of Tuspetinib as a single agent, the response rates unexpectedly dropped.

Initially, we were unsure of what was driving this difference, but after careful analysis, we learned that the patients entering the higher dose levels of 120 milligrams and above represented an entirely different patient population. At the point in time when we transitioned above the 80-milligram dose, suddenly, more than 80% of the patients coming on to our trial had failed prior therapy with Venetoclax. And these VEN failure AML patients are known to be far less responsive to salvage therapy. The VEN failure patients continue to respond to Tuspetinib as a single agent, but at a lower response rate, so that mystery was solved. But more importantly, this rapidly emerging VEN failure population, revealed a unique opportunity for Tuspetinib.

That’s because Tuspetinib targets the resistance mechanisms employed by AML to become resistant to Venetoclax, which includes mutations in FLT3, KIT, JAK and RAS pathways and increases in MCL-1 expression. These VEN resistance mechanisms play directly into the targeting capabilities of Tuspetinib and suggested Tuspetinib may resensitize in VEN failure patients to Venetoclax and that the Tuspetinib Venetoclax or TUS/VEN doublet may effectively treat this patient population in critical need of new therapies. And indeed, now we have learned that the TUS/VEN doublet is clearly active in the relapsed or refractory VEN failure AML patients. In August of this year, we released our first data from 10 evaluable patients that have received the TUS/VEN doublet, nine of them were then failures.

The composite complete remission or CR rate was 44% among the VEN failure patients, whether they were FLT3 mutated or FLT3 wild type. That was impressive, and we continue to enroll these VEN failure patients on to the test and doublet. We then released a second data cut in September, showing roughly the same composite CR rates among 15 evaluable patients. These data then generated tremendous investigator enthusiasm to place additional patients on the TUS/VEN doublet. By the time we reached our planned presentation at the European School of Hematology Conference last week, we had expected a total of up to 30 patients who have been dosed with the TUS/VEN doublet, but we actually had dosed 49 patients with a doublet, as of our data cut on October 23.

To be clear, many of these patients were very early in their course of treatment, just two to six weeks into the treatment in many cases. The composite CR rate at this point in time with these early patients was about 29%, plus additional partial responses, or PRs that emerged early for an overall response rate of 48%. While those early PRs are not yet CRs and are not counted in the composite CR rate, they are noteworthy. For example, one patient entered the trial with a bone marrow blast count of 82% and dropped quickly to 7% after receiving the TUS/VEN doublet. That’s a dramatic reduction in disease burden, but not quite below 5% in the bone marrow blast. So it’s core as a PR. We’ll continue to treat and watch such patients with the hope that many of these responses will mature to CRs over time.

In fact, for all ongoing patients on the trial, we will continue to collect response maturation data and duration of response data and to highlight our ability to execute this trial were approximately two quarters ahead of our expected enrollment rate in the ACTIVATE trial and that will allow us to watch for maturation of responses and extended duration of response data earlier than we had expected. And to wrap up this trial up to two quarters earlier than we had expected. So what will we do with our findings. First, this sets us on the registrational path with the TUS/VEN doublet and relapsed refractory then failure AML patients, inclusive of both FLT3 mutated and FLT3 wild-type patients. And that registrational study could begin in the second half of 2024 and particularly provide an accelerated approval pathway.

Second, data with the TUS/VEN doublet are segueing us into the Tuspetinib, Venetoclax azacitidine triplet pilot study in frontline newly diagnosed AML patients. That study is planned to begin the first half of 2024, and the findings could then support a TUS/VEN hypomethylating agent registrational trial in frontline AML. TUS/VEN has demonstrated potent activity across diverse AML groups with adverse mutations, has a favorable safety and tolerability profile is convenient as a once-daily oral tablet and mechanistically targets the Venetoclax resistance mechanism. This makes Tuspetinib an ideal drug for frontline combination therapy and for combination therapy in the relapsed or refractory AML population, particularly for the emerging wave of patients who fell Venetoclax.

In addition, these same properties of Tuspetinib and its action on AML patients are leading us to include the treatment of patients with higher-risk MDS and CMML in our trials going forward. We now are leveraging our clinical findings and plans to support financing and collaboration discussions. While we have no announcements to make and can make no commitments in these regards, we clearly are pursuing these paths. I now want to turn the call over to Dr. Bejar, our Chief Medical Officer and Resident KOL, for his insights and comments on our latest data. Raf?

Rafael Bejar : Thank you, Bill. I first want to highlight our latest news. We announced last week that clinical data for Tuspetinib or TUS has been selected for an oral presentation at the ASH meeting in December, which will be given by our lead investigator, Dr. Naval Daver of the MD Anderson Cancer Center. Dr. Daver will present data from Aptose ongoing Phase I/II APTIVATE trial to Tuspetinib in relapsed/refractory patients with acute pilo leukemia. We’re really pleased by this recognition from our esteemed colleagues and look forward to sharing the APTIVATE data in this forum. As Bill mentioned, just over a week ago, during the European School hematology meeting on AML or ESH, we reviewed all the data to date from an October 23 data cut from the TUS APTIVATE trial.

We’re not going to go through a full data rehash here. We’ll make this call of vision. But I just want to clarify some key points, address the misperceptions and answer some of the questions that we’ve been getting over the last week or so. If you did not listen to our ASH call, I encourage you to do so, and you can access it on our website under the Events Tab. Dr. Daver joined us on the ESH call last week as an internationally recognized expert in the development of clinical therapeutics for AML, including combination therapies, it was extremely helpful to get his impressions of the ongoing needs in AML and how Tuspetinib could help address them. One of the things we discussed is the changing AML patient population and emerging needs in the AML treatment landscape.

The vast majority of U.S. AML — U.S.-based AML patients entering clinical trials now have tried and were failed by Venetoclax at some point in the course of their disease. In our APTIVATE trial, the percentage of U.S.-based patients who have failed Venetoclax has grown to about 90%. This leaves a patient population with highly resistant mutation patterns and dismal response rates to salvage therapy with CR rates often in the single digits, whether treated with monotherapies or drug combinations. This extremely challenging patient population with a rapidly emerging medical need is what all of us who are trying to develop AML treatment in relapsed/refractory populations are up against. We’re seeing an entirely different group of patients and drugs that were developed just a few years ago.

A medical lab technician placing a live tissue sample in an advanced biotechnology machine.

Indeed, what we’re seeing in the APTIVATE expansion trial, the majority of patients have failed prior therapies for Venetoclax and have unmutated FLT3 AML. A patient population that accounts for an estimated 70% of AML cases and with few or no effective treatment options, being able to potentially target a larger FLT3 mutated patient population and to do so safely, is a key differentiator for Entospletinib. Now for people who shake their heads because there’s so much going on in AML. And it’s difficult to determine potential winners in the space, it’s important to Entospletinib. Entospletinib is differentiated by its clinical activity in this SLIT3-unmutated population. So the positive data we’ve generated from Entospletinib which includes responses in that FLT3-mutated or wild-type AML makes it that much more exciting.

And there is room for many other AML drugs in development too. AMLs in extremely heterogeneous disease with broadly resistant mutation patterns, and it will take combination therapies of drugs targeting different kinases other pathways to manage the disease across different populations. As we get into a review of our data highlights, I want to give a quick explanation of what we mean by Evaluable Patient, as it’s defined in our protocol. Briefly, we consider Evaluable any patient that has reached their second response assessment at the end of Cycle 1, or has had an objective response at their first response assessment. Participants that discontinued treatment for disease progression after that first assessment are, in fact, considered Evaluable, only patients who don’t undergo a response assessment or have stable disease with less than 1 Cycle of treatment are considered non-Evaluable or technically, Invaluable.

Currently, about 85% of our study participants are considered Evaluable by the end of Cycle 1, but we also have several ongoing patients that have not yet reached this milestone and will do so in the coming weeks. For example, in our latest data with 31 Evaluable patients out of the 49 patients dosed with the TUS/VEN doublet, many have very recently entered the trial and have only just finished one Cycle of treatment with tuspetinib, having been dosed in September and October, with many patients pending Evaluable assessment in the next two to three weeks. Data reported at ESH are therefore early, and we expect more of the response is noted to continue to mature. We will have more Evaluable patients overtime, including next month at ASH when we’ll provide another update.

Quick notes on patient enrollment, as of today, more than 150 patients have been treated with tuspetinib. 91 patients have received tuspetinib as a single agent. And as Bill said, we have anticipated dosing up to 30 patients with tested by the ESH 2023 conference. However, due to investigator enthusiasm, we ended up with more than 49 patients as of October 23, and patients continue being enrolled. Now let’s talk about the safety profile. In the most recent data cut, from October 23, the favorable safety profile remained consistent for TUS and TUS/VEN treated relapsed or refractory AML patients with no new or unexpected safety signals noted. We’ve reviewed the safety profile despite it often, so I’ll keep it brief here. In short, tuspetinib continues to avoid many of the typical toxicities observed with other agents, including FLT3, IDH1 and 2 and Menin Inhibitors, such as QTc prolongation, differentiation syndrome and elevations of muscle enzymes like CPK that are related to treatment.

We have not observed these as a clinical concern in our treatment. Some quick highlights of the data we presented at The ASH Annual Meeting regarding tuspednib as a single agent. Taspetinib as a single agent was well tolerated and highly active along relapsed/refractory AML patients with the diversity of genotypes. Test single agent delivered a 42% and 60% in our interest rates across all patients and across FLT3 mutated patients, respectively. And among — in the Evaluable the naive patient population treated at 80 milligrams, the recommended Phase 2 dose for Tuspetinib. Tuspetinib demonstrated a 29% CRC rate in naive FLT3 unmutated RAP-type patients at this 80-milligram RP2D dose. This unlocks the potential for dyspeptic to treat an additional 70% to 75% of the AML population without the FLT3 mutation that is not currently addressed by any approved Tyrosine Kinase Inhibitors.

Tuspetinib single-agent response rates compare favorably to gilteritinib matched patient populations. Details on this interesting comparison are presented in our slide deck in the meeting, which is available on our website. Let’s turn to the doublet data. In addition to the safety and efficacy of the Tuspetinib reported at ESH, we also presented a poster that points mentioned here. Tuspetinib directly targets pathways involved in VEN resistance. By shutting down these pathways Tuspetinib appears to clinically resensitize prior Ven failure patients to venetoclax. Our overall response rates with the TUS/VEN doublet includes several recent preliminary responses. And as of last week, we had dosed 49 patients, 31 of whom were evaluable to date. Keen investigator interest has led to this increased rate of enrollment, and we expect to report on additional patients at ASH in December.

Our evaluable patients showed an overall response rate of 48%. That’s 15 out of the 31 evaluable patients. [Technical Difficulty] 44% overall response rate was observed in this Ven failure population. There was a 60% overall response rate in the FLT3 needing population and a 43% overall response rate in the FLT3 unmutated population. As I mentioned, most patients are early in the course of treatment, having initiated dosing in the past two to six weeks, and we do expect these responses to mature over time. Our experience with the Tespen Double will inform how best to carry out the triple combination with a touch HMA venetoclax in the frontline setting. In the near term, we continue to collect data to demonstrate that the doublet is active in patients who are prior to enact exposure, both with and without the FLT3 mutation.

And to meet and share with potential partners how we might be able to position taspetinib for frontline triplet therapy and maintenance therapy and move tastetinib anaptos onto a clear path for success Indeed, tuspetnib with its proven breadth of activity and safety profile may address the most sizable markets in AML, and we are developing it as such. The interest in tuspetnib from potential partners continues to grow and we are engaged in multiple productive discussions because tuspetnib looks like a large biotech or big pharma drug. Therefore, we endeavor to design our patient accruals to meet the needs of Aptose, meet the needs of regulatory agencies and to meet the desires of potential partners. We look forward to sharing more at the upcoming ASH conference, and we are very pleased that the test clinical data was recognized and selected for an oral presentation by Dr. Daver.

We will also plan on releasing our next set of updated date at a time. As Dr. Daver described in the question-and-answer session after our clinical update call at ESH, the safety and efficacy data that we’re seeing with the tuspetnib venetoclax combination is very encouraging suggests that cost may effectively treat the growing number of end failures that we’re seeing in relapsed/refractory AML. We’re now looking forward to moving test forward into tespetinib, venetoclax azacitidine triplet for the treatment of frontline newly diagnosed patients. The spend up safety profile is key here, and we believe that it has the potential to be the ideal drug for combination therapy in AML, both in the frontline and in the relaxed refractory settings. [Technical Difficulty] Well, everyone, for some reason, we’re unable to hear Fletcher.

So I’m going to jump in at this point, and I apologize. I’d like to start by noting that in it our comments on this call — additional information may be found in today’s press release and the 10-Q filed with the SEC. As discussed in our financial statements, the company plans to raise additional funds to fund business operations. During the 2023, we used the 2022 ATM facility, a 2023 committed equity facility and the Hanmi subscription agreement to raise capital. We continue to use these methods to raise capital and we are also actively evaluating other options to raise capital, including debt, equity issuance and corporate collaboration. Lastly, we continue to evaluate ways to reduce operational expenses. Based on current operations, the company expects that cash on hand plus available capital from Hanmi subscription agreement, committed equity facility and the ATM facility provides the company with sufficient resources to fund planned company operations, including research and development through March of 2024.

I would direct you to also review the company’s risk factors and the discussion in the going concern footnote in our 10-Q. Now let’s review the third quarter of 2023 financials. We continue our disciplined financial management of our operations and prioritization of our investments in the suspended clinical program. We ended the third quarter of 2023 was approximately $17.7 million in cash, cash equivalents and investments, a decrease of approximately $5.6 million as compared to June 30, 2020. The $5.6 million decrease in cash and investments as a result of the use of funds for the APTIVATE study, and operating expenses, which was offset by an increase in cash from financing activities. On a cumulative basis, through September 30, 2023, the company has raised a total of $6.1 million, $3 million from the Hanmi subscription agreement, $1.9 million gross proceeds from the 2022 ATM facility and $1.2 million gross proceeds from the 2023 committed equity building.

During the quarter, the net loss was approximately $11.4 million translating into approximately $1.76 per share — loss per share compared to $9.8 million loss or $0.59 — $1.59 loss per share from the same period in 2020. As of November 9, 2023, Aptose had e 7,816,923 common shares outstanding. All references to loss per share and shares outstanding have been presented to reflect the 1 for 15 reverse stock split completed on June 6, 2023. As seen in the income statement, we had no revenue during the first nine months of 2023. Research and development expenses were approximately $8.3 million for the quarter, compared to $6.6 million during the same quarter of 2022. Program costs for Tuspetinib were $5.8 million for the three months ended September 30, 2023, compared to $3 million for the three months ended September 30th, 2022.

The higher program costs for Tuspetinib in the current period represents the enrollment of patients in our APTOVATE clinical trial, clinical materials, the healthy volunteer trial that we’ve completed and other expenses. Program costs for Luxeptinib were $648,000 for the three months ended September 30, 2023, and decreased [ph] by approximately $742,000 compared to $1.4 million for the three months ended September 30, 2022, primarily due to lower clinical trial costs and lower manufacturing costs as a result of the current G3 formulation, which required less API or active pharmaceutical ingredient, than the prior formulation. G&A expenses were $3.4 million for the quarter compared to $3.5 million from the same quarter of 2022. The decrease is primarily due to lower stock-based compensation, partially offset by increased salary expenses and higher professional fees.

We now would like to open the call for questions. And please feel free to post questions to any of us. So operator, if you could please introduce the questions.

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Q&A Session

Operator: Thank you. [Operator Instructions] Our first question comes from John Newman with Canaccord Genuity. Your line is now open.

John Newman: Hi guys. Thanks for taking my question. Apologies, some noise in the background.

William Rice: No problem

John Newman: Just curious here. I know that earlier in the study, there were a lot of patients that we’re doing very well on Tuspetinib, and those patients were able to go to transplant and I’m curious if the mechanism by which that can occur is the same. So, are physicians still able to sort of make whatever call that they believe is in the patient’s best interest and say this patient should go to transplant? Or is there anything different about the study at this point in time, especially for the doublet? Thanks.

William Rice: Okay. So, John, the earlier patients you were talking about were on the single agent Tuspetinib, and now we’re primarily talking about the test in doublet. And I’m going to ask Dr. Bejar to address that, please.

Rafael Bejar: Sure. Yes. So I think I understand the question. So you’re correct that we had several patients go to transplant in the single-agent portion of the study. And the rules haven’t changed. The physicians can continue to do whatever is in the best interest of the patient. We would encourage them to take the patients to transplant if that is an option. We’re hoping that the ability to reduce their blast count and reduce their disease burden might allow more patients to go to transplant than would otherwise. But as we said in the call, it is still early. So as decisions about transplant are likely not made yet in many of these patients that have just started the study in a weeks, a couple two months.

William Rice: Hey John, does that answer your question? Is there anything else?

John Newman: It does. That does answer my question. Thank you.

William Rice: All right. Thank you, John.

Operator: One moment for our next question. Our next question comes from Gregory Renza with RBC Capital Markets. Your line is now open.

Unidentified Analyst: Hi, Bill and team. It’s Anish on for Greg. Congrats on the quarter and thanks for taking my questions. Just firstly, on the expansion into high-risk MDS and CMML for Tuspetinib. What aspects of the data to-date give confidence on this sort of — this expansion opportunity? How should we be thinking about mechanistic overlap? And then just when thinking about this sort of progression in development for Tuspetinib, how should we be thinking about resource allocation and any considerations for collaborative opportunities on these ventures? Congrats on the progress and thanks again.

William Rice: All right. So I’m going to ask Dr. Bejar to address the first part of that that fits right into his expertise in the high-risk MDS and Tuspetinib. Raf?

Rafael Bejar: Yes. Thanks for that question. So the higher-risk MDS patients, particularly those patients that have increased blast in the bone marrow that are just shy of that AML threshold, a very similar pathophysiologic and unfortunately, very similar outcomes to patients with Frank AML. In fact, the ICC, the International Classification Consortium Committee, recently redesignated these patients with more than 10% blast as being MDS/AML because of the shared physiology and outcome. What we observed in our study is that we have several FLT3 unmutated patients that have very MDS like mutation patterns, mutations and things like splicing factors, genes like ASXL1, types of mutations that we associate with AML with myelodysplasia related changes.

So this is a clinical rationale for extending the treatment of Tuspetinib into this very AML like MDS population. CMML also share some of these pathophysiologic features but also had a very proliferative phenotype with regard to the monocytes that give the disease its name. And we think that the particular axis of activity for Tuspetinib might be particularly favorable in that patient population. We don’t want to exclude them from this potential benefit. So we know that there aren’t that many of them out there, and we hope that we get a few on our trials so we can at least explore the activity in this really underserved patient population.