Aptose Biosciences Inc. (NASDAQ:APTO) Q4 2022 Earnings Call Transcript

Aptose Biosciences Inc. (NASDAQ:APTO) Q4 2022 Earnings Call Transcript March 23, 2023

Operator: Hello and thank you for standing by and welcome to Aptose Biosciences reports for the Fourth Quarter and Yearend 2022 Conference Call. At this time, all participants on a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. I will now like to hand the conference over to Susan Pietropaolo. You may begin.

Susan Pietropaolo: Thank you, Towanda. Good afternoon and welcome to the Aptose Biosciences conference call to discuss financial and operational results for the yearend and fourth quarter ending December 31, 2022. 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 website. Joining me on today’s call are Dr. William G. 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’d 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 achievements 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’re made. Aptose undertakes no obligation to revise or update these statements to reflect events or circumstances after the date of this call, except as required by law.

I’ll now turn the call over to Dr. Rice, Chairman, President and CEO of Aptose Biosciences, Dr. Rice?

William Rice: Thank you, Susan. I want to welcome everyone to our call for the yearend and fourth quarter ended December 31, 2022. First, I’ll provide a very quick overview of 2022. While the biotech market has been extraordinarily challenging, Aptose continued a steady march forward. We extended our cash runway to the end of Q1 2024. We continued building a talented and experienced team. We created and began testing a new formulation for Luxceptinib and most importantly, we made significant strides in the development of Tuspetinib for the treatment of acute myeloid leukemia or AML. When it comes to Tuspetinib or TUS as we call it, I want to emphasize its highly differentiated profile, having demonstrated the potency to achieve complete remissions in very ill relapse to refractory AML patients, while also being safe and well tolerated.

It’s extraordinary for an anti-leukemic agent to deliver formal responses in such an aggressive cancer without causing the typical toxicities of other agents and today we will unpack both the potency and safety attributes of TUS. It’s also important to highlight the AML population that has been treated with Tuspetinib to date in our Phase 1/2 dose escalation and dose exploration trial. These are typically third line, fourth line or beyond having failed the best available approved therapies and in many cases having failed various investigational drugs or prior hematopoietic stem cell transplants. These are incredibly difficult patients to treat and to reverse the disease progression. What makes these patients even more difficult to treat is extreme diversity of highly adverse genetic and epigenetic alterations, expressed by their disease.

If we recall the Admiral Trial from just five years ago, during which the commercial dose of gilteritinib, a FLT3 inhibitors was tested for responses in AML. The patients were second line, essentially had not seen other FLT3 inhibitors and had not seen venetoclax. In contrast, patients entering our trial are far more treatment experienced with half failing prior venetoclax, 60% failing prior treatment with hypomethylating agents or HMAs more than a quarter having failed transplants and half of the FLT3 mutant patients having failed prior therapy with the FLT3 inhibitor. Nevertheless, TUS has delivered responses with convenience once-daily oral dosing of tablets across four dose levels, 160 milligram, 120 milligram, 80 milligram and 40 milligram and no DLTs were observed with any of those active dose levels.

From a mutation-sensitivity perspective, TUS has shown an unprecedented breadth of activity. TUS delivers responses and FLT3 wild-type patients as well as it does FLT3 mutated patients. We also have seen responses in AML patients having the very difficult to treat TP53 mutations as well as patients with NPM1 and FLT3 co-mutations and patients having alterations in the DNMT3A, RUNX1, IDH1, splicing factors ASXL1 and MLL gene. But one of the most interesting observations is the activity in relapse refractory AML patients with RAS mutations. Mutations in the RAS pathway serve an an escape mechanism to generate resistance to many other drugs. However, we’ve measured a 42% overall response rate in patients with RAS mutations including a 29% CR/CRh response rate.

In fact, one patient had a RAS mutation and a mutation and PTPN11, representing a dual mutation in the RAS pathway. We’ll continue to monitor the response rate in RAS mutated AML patients this year and determine if RAS mutated relapse refractory AML patients may represent a population of high unmet need for future accelerated approval trials. As Dr. Bejar will describe in further detail in a few minutes, we wrapped up our highly successful Phase 1/2 dose escalation and dose exploration trial. We’ve treated over 60 patients to date in that trial. We’ve assembled a strong safety data package. We selected safe and effective doses for our single agent and drug combination trials. We demonstrated the ability of TUS to dramatically reduce bone marrow blast in a high fraction of patients and to achieve formal responses.

And we initiated our ACTIVATE dose expansion study of TUS in a single agent and in combination with Venetoclax. In the ACTIVATE trial this year, we will enrich certain patient populations to receive monotherapy so that we can collect data to guide our conversations with the FDA to request an accelerated approval path for TUS in patients of high unmet need. In parallel with the ACTIVATE monotherapy dosing, we’ll treat a broad array of AML patients with a combination of TUS plus Venetoclax referred to as the TUS/VEN doublet. This TUS/VEN doublet is being conducted to support doublet combination registrational trials in second line AML patients and to serve as a bridge to a pilot study of TUS plus VEN plus a hypomethylating agent or the TUS/VEN HMA triplet in frontline AML patients.

While TUS clearly can deliver responses as a single agent, the ultimate goal in commercial success of success of TUS or any drug for AML will be in combination with other drugs. As of this week, we have begun enrolment of AML patients on the TUS/VEN doublet and we will place additional patients on this doublet throughout 2023. Once we gain experience with the doublet, we plan to initiate the TUS/VEN HMA triplet in frontline patients. The future of AML therapy will also revolve around cocktails of drugs in earlier lines of therapy to take patients into deep remissions. Such AML cocktails will require the blending of drugs that best conserve broad populations of patients, can deliver deep remissions and can be tolerated without cardiotoxicities, unnecessarily prolonged myelosuppression and other complicating side effects and this precisely describes TUS.

TUS is positioned to become the ideal partner for addition to the VEN HMA doublet because of its convenience as a once daily oral agent, its broad activity and its safety profile. Together data to date point TUS toward application as a monotherapy for accelerated approval in relapse to refractory AML as doublet therapy for accelerated approval in second line AML for use in triplet combination and frontline patients as well as the use in maintenance therapy and Dr. Bejar will provide you with additional color of these activities momentarily. Now let me turn briefly to Luxceptinib, many of you know it as CG-806. Lux as we typically refer to it, is our secondary pipeline program. Lux is a clinical stage small molecule oral FLT3 and BTK kinase inhibitor.

Lux’s ability to target kinases, operative and certain leukemias and lymphomas led us to develop it in patients with B-cell leukemias and lymphomas and in patients with AML. We already have reported Lux administered as our initial first generation or G1 formulation, delivered a CR in an AML patient and a CR in a DLBCL lymphoma patient, demonstrating Lux as a clinically active agent. You also are aware that we developed a new formulation of Lux and we call it the G3 formulation because it represents the third generation formulation. In single dose administrations during 2022 in AML and B-cell malignancy patients, we determine the G3 formulation achieved up to 18 fold greater absorption than the original G1 formulation. Because the highest dose of the original formulation was set at 900 milligrams, we initiated continuous dosing of G3 at an 18 fold lower dose level of 50 milligrams.

We continued to collect PK and safety data with G3 and AML patients and the preliminary results suggest continuous dosing of 50 milligrams G3 does indeed deliver roughly equivalent plasma exposures at 900 milligrams of the original G1 formulation. That was the target we hope to achieve with the 50 milligrams of G3 and next we plan to administer a higher dose of G3 to determine if it can achieve even greater plasma exposure levels. We’ll keep you posted on our findings and likely we’ll report preliminary data around ER. I also want to mention that Aptose and collaborators at UCSD, Dr. Manchu and Dr. Stephen Howell just published an article entitled Luxeptinib Interferes with LYN-mediated activation of SYK and modulates BCR signaling in lymphoma in the online journal PLOS One, in which we describe the ability of Lux to act on the B-cell receptor pathway at the level of the LCK and LYN or LYN kinases and to influence downstream BTK activity.

This relates to the role of Lux to act on B-cell cancers as well as inflammatory and autoimmunity processes. So please take a look at the article if you get a chance. Finally, we often get asked about potential partnerships for Tuspetinib. In January, during JPMorgan Week, we engaged in productive discussions with several big pharma and biotech companies that further helped to define our priorities and to solidify our clinical plans with Tuspetinib. It’s clear what we need to accomplish with the drug that has such an extensive commercial opportunity. We were pleased to see that we’re on the radar of these companies and interest in our program is growing. The treatment paradigm for AML is shifting toward doublet and triplet therapy and despite some successes, the current combination therapies are somewhat limited by toxicities as I mentioned previously.

The proven breadth of activity and superior safety profile of Tuspetinib, lends itself to combination therapy, potentially as the drug of choice addressing the most sizable markets in AML and clearly making Tus, excuse me, a perspective big pharma drug. The data we’ve generated to date have helped us to elevate clinical and commercial plans for Tuspetinib in multiple lines of therapy, including its use in doublet and triplet combinations and as maintenance therapy. Our Chief Medical Officer, Dr. Rafael Bejar, will speak about our recently initiated ACTIVATE clinical trial of Tuspetinib in AML as a single agent and in combination with Venetoclax as well as our extended clinical plans, which include triplet combination therapy. He also will be available for questions afterwards.

I now will turn it over to our resident KOL, our Chief Medical Officer, Dr. Rafael Bejar, to talk more about our Tuspetinib clinical plans. Raf?

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Rafael Bejar: Thanks Bill. In January, we were thrilled to kick off the 120 milligram dosing of Tuspetinib in the monotherapy arm of the ACTIVATE Phase 1/2 trial. As most of you know, we have successfully completed dose escalation and dose exploration stages of our TUS Phase 1/2 trial, treating approximately 60 relapse refractory AML patients who were heavily exposed to multiple agents. In fact, as Dr. Rice mentioned, while we were wrapping up the dose exploration part of the study, we took the prudent step of putting additional patients on the lowest 40 milligram treatment group because of the FDA’s project optimist that emphasizes dose exploration during early development of oncology products. This experience gave us the additional data needed to support our monotherapy dose selection and was not worn out of the safety concern, rather as higher doses of Tuspetinib have shown an impressive safety profile.

Since we lost the 40 milligram dose level late last year, we have achieved two clinical responses in that low dose group, both AML patients with unmutated FLT3, including the most recent harboring a challenging TP53 mutation, one of the most highly adverse somatically mutated genes. Importantly, this is the second TP53 patient that has achieved a clinical response. The first was at the 80 milligram dose who achieved an unqualified CR as their best response. So we look to enrol more of these patients who with such a poor prognosis have a great unmet need in the ACTIVATE trial. The ACTIVATE expansion trial is designed to confirm monotherapy activity to patient enrichment of specific mutation defined AML population, including the TP53-mutant patients, as well as FLT3-mutant patients who have been failed by a prior FLT3 inhibitor, as supported by FDA fast-track designation and a clinically significant response rate to date.

These patients continue to have great unmet medical need and we believe that the ability to rescue these patients and perhaps allow them to receive the stem cell transplant we have now done with several patients in our study would allow us a quicker path to registration. In addition to being potential accelerated approval pathway to Tuspetinib, treating these subgroups will provide critical data to inform our continued development path. I am pleased to say that we have begun treating patients in the monotherapy arm of the ACTIVATE trial and that our growing network of clinical sites and investigators are engaged in enrolment and that this has been at risk. In the ACTIVATE expansion trial, Tuspetinib also will be tested in combination with Venetoclax.

Several sites now have regulatory clearance and both drugs in hand allowing us to initiate patient enrolment on the tested end combination earlier this week. Having the TUS/VEN combination arm open is an important advance as this represents an attractive treatment option for patients and their physicians leading them to enrol earlier in the course of treatment, increasing the likelihood of achieving a meaningful clinical benefit. So what is our timeline for our clinical trials? Because ACTIVATE is an open label trial, we will report data when available at appropriate forums. We will have an update around EHA in June, for example, as we usually do, but because data collection and verification does take time and ACTIVATE has only been open for a short while, this will be an incremental update.

We would expect to have more complete data, particularly for the monotherapy arm at the European School Hematology Meeting ESH at the end of October in Esther, Portugal. Expect more data including from the TUS/VEN combination cohort to then be updated at ASH in San Diego in December. So 2023 will be a busy year for us. Having tested Tuspetinib in specific genetically-defined populations, we would expect to have sufficient patient data this year and then segue into Phase 2 registrational studies to support accelerated approval. As Dr. Rice mentioned, we are including relapse or refractory AML patients with unmated FLT3, what we often call wild-type patients that have other adverse mutations, exploring safety and activity in these patients with Tuspetinib treatment, both as a single agent and in combination with Venetoclax, identifying meaningful activity and other adverse subgroups could lead to other options for accelerated approval.

The paradigm for the treatment of AML is increasingly moving towards combination therapy and we hope to position Tuspetinib as a preferred agent for combination and use in earlier lines of treatment. It is our hope and based on our data thus far, it is our expectation that we will move forward to Tuspetinib in a triplet combination and in maintenance settings. Dr. Naval Daver from MD Anderson, who’s been one of the investigators pioneering AM accommodation therapies with Venetoclax is our lead investigator on up to date and as eager as we are to see what Tuspetinib can do in this setting. We’ll also highlight a few comments from Dr. Harry Erba of the Duke Cancer Institute during a recent KOL event. He noted that this drug may be better suited for the combinations that we hope to develop than anything we have right now, and he was excited about the apparent lack of mild suppression noted in our clinical study to date and he emphasized that a drug-like TUS will have a position mostly because of his better toxicity profiles than the drugs we’re using now in terms of mild suppression.

Clearly we agree wholeheartedly with Dr. Erba and we believe that potency, breadth and anti-emetic activity, along with the safety profile make to spend of the ideal drug for combination therapy and scalable commercialization. On our website, you can see our projected timeline for our ongoing and planned clinical trials. I want to thank our clinical team for their hard work and execution and getting both arms of ACTIVATE expansion study up and running. We certainly look forward to sharing the data with you. Now I’d like to turn the call over to our CFO, Fletcher Payne for an update on our financial status, Fletcher?

Fletcher Payne: Thanks Raf and good afternoon, all. Before we start speaking about the financials, I’d like to introduce to you the newest member of our finance team, Brooks Ensign, who is VP and Controller of Aptose. Mr. Ensign has more than 20 years of pharmaceutical industry experience in accounting, finance, corporate development and he is served as this position for multiple public and private companies. Mr. Ensign has a Master’s and holds an MBA from Harvard Business School and a Masters in Accountancy. We’re pleased to be able to recruit quality people like him and we’re very happy to have him here at Aptose. Let’s review the fourth quarter and yearend financials. As most of you know from following Aptose, we take a discipline approach to cash management and always look the prioritize our clinical activities without sacrificing quality of our programs.

These efforts have extended our cash runway into 2024, and our cash management policies and actions taken have helped us avoid the financial impact of Silicon Valley banks fallout. Now, let’s review our cash position. We ended 2022 with approximately $47 million in cash, cash equivalents and investments, a decrease of $4.8 million as compared to the previous quarter. During the quarter, the net loss was approximately $10 million, translating into approximately negative $0.11 per share loss, down from $24.3 million, loss from the comparable period in 2021. As identified in the income statement, we had no revenues during the fourth quarter of 2022. Research and development expenses were $6.8 million for the quarter down, $20.2 million from the same quarter in 2021.

Research and development expenses for the full year period ended December 31. 2022 were $28.1 million as compared to $46 million for the comparative period, a decrease of $18 million. That decrease was due to several factors, including a $12 million licensing fee paid for the previous year to acquire global development rights for Tuspetinib, which comprise a $5 million cash payment and a $7 million worth of common shares. Additionally, there were lower cost for the Lux program and 253 program, as well as lower personnel costs. These savings were potentially offset by costs for the Tuspetinib program that was adopted in 2022. G&A expenses were $3.6 million for the quarter as compared to $4.1 million for the same quarter of 2021. G&A expenses for the 12-month period ended December 31, 2022 were $14.5 million as compared with $19.5 million for the comparative period, a decrease of approximately $5 million.

The decrease was primary due to a decrease in stock-based compensation expenses offset by higher compensation expenses, travel expenses, and professional fees. As of March 23, 2023, Aptose has 93,005,278 common shares outstanding. More detailed information can be found in our filings on Edgar and Cedar. Now I’ll turn the call back to Dr. Rice.

William Rice: Thank you, Fletcher. As we open the call for questions, please feel free to pose a question to any of us. Operator, if you could please introduce the first question.

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Q&A Session

Operator: Our first question comes from the line of Matthew Biegler with Oppenheimer. Your line is open.

Matthew Biegler: Oh, hey guys. Thanks for the update. Just two from me; I’m wondering is it too soon to guide on patient numbers for that October update yet from the APTIVATE trial? And then just curious about some of the comments Raf made about the doublet versus the singlet Tuspetinib and APTIVATE. I’m just — I’m curious if you’re concerned that it might be challenging to enrol the monotherapy arm given that there is a doublet or kind of how are you approaching that or how are you thinking of kind of weeding out patients from one to the other? Thanks.

William Rice: Yeah, thanks Matt. This is Bill. I’ll start on that. Your second question is really easy, doublet versus monotherapy. We’ve had exceptional uptake, rapid uptake and I think the word that Dr. Bejar, you was brisk uptake as the monotherapy, we got it up and running first this year and it’s been great enrolment pace and we’re just now beginning to enrol the doublet. In terms of the numbers of patients and all, I’m going to turn that back over to Dr. Bejar. We’ll be careful not to really bracket them too much, but we’ll try to give you a sense, Raf?

Rafael Bejar: And just to follow up on Bill, your earlier point about the enrolment to both the doublet, I think is going to be more appealing to investigators in the monotherapy in general, but once both arms are open and both options exist, there’ll be a random assignment. So we are hoping that not only do we get more patients on, because there’s more enthusiasm for the study, but the patients may actually come on earlier in the course of therapy because there is a sub combination option available to them. So we will focus on both through the end of the year and we’ll give you more clarity when we get to that point. In terms of numbers of patients it’s, like I said, it’s hard to put an exact number on it, but I would say enrolment has been very good and there certainly will be some, again not breaking too much, maybe tens of patients on the monotherapy arm and hopeful, somewhere between 10 patients and 20 patients on the doublet arm by the time that we read out near the end of the year.

Operator: Our next question comes from the line of Soumit Roy with Jones Trading. The line is open.

Soumit Roy: Hi everyone. Thank you for the update. Could you give us a little bit more color on the different dose cohort size you’re enrolling currently between 40, 80, 120, and then the 100 patient you mentioned, what split is monotherapy and doublet?

William Rice: Hey, Soumit, this is Bill Rice. So yeah, we have completed the dose escalation and dose exploration trial. And so Dr. — I’ll ask Dr. Bejar to give you a breakdown on the numbers of patients there, and then he can talk about the APTIVATE.

Rafael Bejar: Right. So as of the ASH meeting, when we had not yet opened APTIVATE, we had treated 60 patients between the dose escalation and what we call the dose exploration. We since treated additional patients in the dose exploration arm primarily at the 40 milligram dose level to further characterize that better before APTIVATE was opened where we were then dosing patients ideally exclusively on APTIVATE studies became online, we were able to do that. The dose level that we started APTIVATE at, so the monotherapy was 120 milligrams, that may change as we learn more about the PK and the activity of the drug that we may move to 80 milligrams for the monotherapy dose seeing it at the level of activity, although it’s not something we have implemented. For the combination study, 80 milligrams will be the starting dose that we’ve signaled before in combination with Venetoclax and as always, that is also subject to change based on the data that we received.