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spk04: Good afternoon and welcome to the Avio Oncology Second Quarter 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone who wishes or requires any assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I will now turn the call over to Mr. Hans Wisdom of LifeSky Advisors. Please go ahead, sir.
spk03: Thank you, operator. Good afternoon, and thank you all for joining us on today's conference call to discuss Aveo's second quarter 2022 financial results. I'm joined today by Michael Bailey, Chief Executive Officer, Mike Ferraresso, Chief Commercial Officer, Eric Lucera, Chief Financial Officer, and Jeb LaBelle, Chief Operating Officer. Before we begin today's call, let me remind you that during this discussion, we will be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to important risks and uncertainties, including those that are detailed in today's press release and in the Risk Factor Summary and Risk Factors section of our most recent quarterly report on Form 10-Q, which is on file with the SEC. that may cause actual results to differ materially from those results expressed in such statements. Furthermore, we caution you that these forward-looking statements represent our views only as of today, and we do not assume any obligation to update these statements, whether as a result of new information, future events, or otherwise, except as required by law. With that, I will now turn the call over to Aveo's President and Chief Executive Officer, Michael Bailey. Michael?
spk07: Thank you, Hans, and thank you to everyone for joining us on today's call. I am pleased to report that this quarter our commercial team continued to build on the success of the Fativda launch and steadily increased market adoption as we kicked off the second year of commercial sales for Fativda. This positive momentum is reflected in both the number of prescriptions filled, which increased to 18% in the second quarter compared with the first quarter of 2022, and the U.S. Fativda net product revenue, which was $25 million for the second quarter, a 24% increase compared to the first quarter of 2022. While several factors help drive our success, we believe the most important one is that Fativda is fulfilling a significant unmet need by providing an evidence-based, effective, and well-tolerated treatment option for RCC patients who have relapsed or become refractory to two or more prior therapies. This fact was further recognized on June 17th of 2022 when the National Comprehensive Cancer Network, or NCCN, elevated FATIVTA to category one status. FATIVTA is now the only treatment with category one in that setting of RCC patients who have received two or more prior therapies. As background, the NCCN clinical practice guidelines are recognized standard for clinical policy in cancer care and are developed through a review of evidence and recommendations from physicians and oncology researchers. The current NCCN RCC guidelines make treatment recommendations for first line or subsequent therapy options for RCC patients and are referenced in the development of all other clinical pathways and formularies. Importantly, Category 1 is the highest category recommendation offered by the NCCN and reflects positive clinical evidence and perception of the product among the expert NCCN panel members. In addition, the Fativita launch was recently recognized by ZS Associates as an over-performing launch in its analysis of U.S. emerging pharma and biotech companies with first-time launches. And finally, Aveo and our PR agency were recognized during the 28th Annual Communicator Awards for excellence in our multimedia and PR campaigns. Mike Ferraresa will discuss this external recognition in more depth in a moment. With the strong sales trend demonstrated in the first two quarters of 2022 and the recent NCCN status elevation, we continue to be confident in our $100 to $110 million guidance for Fortivita U.S. net product revenue for fiscal year 2022. Furthermore, with growing recognition of our commercial acumen supported by the strong trajectory of Fortivita launch, we believe that there is an opportunity to leverage our commercial capabilities by identifying additional assets to potentially add to our commercial stage portfolio. We recently enhanced this effort and look forward to providing future updates on our progress. Turning to our clinical trial activity, we continue to align our R&D investments with our overall corporate strategy of focusing on the U.S. market opportunity for our portfolio while leveraging partnerships outside of North America to provide R&D funding for our development assets. Consistent with this strategy, we are working to expand the commercial opportunity of Tivozanib for the treatment of RCC, and our focus, our pipeline, R&D spend exclusively on development initiatives that get our antibody assets to key partnership inflection points. We believe this strategy will create partnering opportunities that can advance these assets with minimal investment from Aveo. During the second quarter, we sought to further refine this focus strategy by streamlining our planned R&D spend for the second half of the year, which resulted in a $10 to $20 million reduction in our full year 2022 R&D guidance. Eric will provide updated OPEX detail and guidance for the full year 2022 in a moment. With that as an update on our broader strategy, let me offer a quick overview for each program in our pipeline. During the second quarter, at the ASCO Annual Meeting in June of 2022, we presented two posters with new clinical data for Tivozinib. One poster featured updated data from a long-term and conditional overall survival analysis of Tivo3, both of which show improvements in overall survival relative to serafinib a non-selective VEGF TKI. The second poster at ASCO included data from a subgroup analysis of patients with non-clear cell renal cell carcinoma who had no prior VEGF-targeted treatment. This comes from a previously published Phase II randomized discontinuation trial. The analysis concluded that tavozinib demonstrated activity and a favorable safety profile in patients with non-clear cell RCC. On the clinical front, the Phase III Tenevo II trial, which is evaluating the combination of tavozinib and Optivo versus tavozinib monotherapy for the treatment of RCC patients progressing on a prior IO therapy, continues to enroll patients. We expect to be fully enrolled in the second quarter of 2023. If successful, the data from this trial has the potential to support an FDA approval of Tivozinib in combination with Nivolumab or Opdivo in relapsed refractory RCC, and this would expand the market opportunity for Fatibda into the larger second-line relapsed refractory RCC setting. In the deductive trial evaluating Tivozinib and Dervolumab in HCC, earlier this year, we announced encouraging data from the first-line cohort. Given the strength of this data and consistent with our focus R&D spend initiatives, we in AstraZeneca have decided to focus our evaluation on the first-line population and close down further enrollment for the second-line cohort of the study, which to date has enrolled five of 20 planned patients. Aveo is committed to providing tavozinib drug supply should AstraZeneca pursue a registrational study in the first line, but Aveo does not intend to fund further development for tavozinib in HCC or liver cancer. Turning to ficletuzumab, we believe this asset is well positioned to potentially address a significant unmet need that exists for patients with HPV-negative recurrent or metastatic head and neck cancer. A patient population whose prognosis is very challenging. After being granted fast-track designation by the FDA in the fourth quarter of 2021, we have announced two clinical trial collaboration and supply agreements, one with Merck KGAA, Darmstadt, Germany, in January, and one with Eli Lilly that we announced this quarter. These collaborations not only offset clinical trial costs by providing cetuximab, marketed as Erbitux, for the potential Phase III study, but we believe they also serve as validation of the strength of the data supporting the combination of ficletuzumab and cetuximab. Also of note, we recently completed full-scale drug substance manufacturing for ficletuzumab, which we believe strongly positions ficletuzumab as a potential phase three ready partnering opportunity. We plan on continuing to discuss trial designs with the FDA and to continue to seek a strategic partner to help initiate and fund a potential registration trial in the first half of 2023. For AB380, we remain on track to initiate a phase 1B clinical trial in GDF15 expressing cancer patients during the second half of this year. where we hope to generate additional data supporting the dosing, safety, and anti-GDF-15 activity of AV380 in cancer patients. We believe this Phase 1b data in hand, we will be in a strong position to find a partner for this potential blockbuster asset. All in all, we are pleased with our continued progress. In particular, we are pleased with the success to date with the Fatibda launch and the external recognition we have received which highlights the strength of our commercial capabilities and we believe creates the potential to leverage our commercial organization as a strategic asset in the future to attract additional potential commercial opportunities. I would like to turn the call over to Mike Ferraresso to walk us through more detailed commercial update, including second quarter 2022 metrics. Mike?
spk08: Thank you, Michael. As Michael mentioned, we are pleased with the continued success of Fotivda in the second quarter of 2022. Our commercial team continues to raise awareness of Fotivda as the first and only treatment option with Phase III data for third-line kidney cancer patients. As some of you may have already seen, the success of our commercial launch of Fotivda was included in a market analysis conducted by global management consulting and technology firm ZS Associates, which was published in June. In this report, ZS Associates analyzed first launches by emerging pharmaceutical and biotech companies over the last three years, ranking the launches as underperformed, met expectations, or overperformed. ZS reported that Fotibda's launch was one of just three launches in 2021 that overperformed compared to prelaunch expectations, while a majority of the 14 products launched in 2021 and included in the analysis underperformed. We believe that this recognition not only validates the success we've had to date, but also speaks to the quality of our commercial team and their ability to execute, even in the challenging COVID access environment. Our commercial capabilities were also commended by the Distinguished Excellence Award we received at the 28th Annual Communicator Awards Competition, sponsored by Academy of Interactive and Visual Arts. Aveo and our agency, JFK Communications, received this award for our multimedia PR campaign around the FDA approval and commercial launch of Fotivda. The Communicator Awards is a leading international creative awards program honoring creative excellence in advertising, corporate communications, and public relations, which is an acknowledgement of the multi-channel marketing approach we've taken to successfully launch Fotivda in the COVID environment. Let me now turn to the sales results for the second quarter. To start, this was the fifth consecutive quarter of growth for Fotivda, with U.S. net product revenue of $25 million, which reflects a 24% increase in revenues from the first quarter and a 271% increase over the second quarter of last year. Further, during the second quarter, we recorded a total of 1,157 commercial prescriptions, reflecting an 18% increase in prescriptions compared to the first quarter in a 309% increase over Q2 last year. As we look ahead, there are several opportunities that we believe will help drive continued growth. For example, in June we announced that the National Comprehensive Cancer Network, or NCCN, had elevated FOTIVDA in the latest kidney cancer treatment guidelines to Category 1 status as a subsequent therapy for kidney cancer patients who've received two or more prior therapies. This is the highest category recommendation offered by the NCCN, which is based on strong clinical evidence and perception of the product among the NCCN panel members. We believe that this elevated rating can benefit our team's efforts in getting physicians to adopt FOTIVDA, as these guidelines are recognized and followed by both academic and community oncologists when selecting appropriate therapeutic options for their kidney cancer patients. For example, our most recent market research conducted with Cardinal Health showed that 80% of the respondents said the Category 1 for TIVTA upgrade would positively impact their prescribing decisions. In addition, we've seen a significant increase in our field team's ability to secure in-person meetings as COVID restrictions are lifting. We believe this increased customer access will help us continue to broaden our base of prescribers particularly in the community setting where the majority of kidney cancer treatment occurs. We're also seeing FOTIVDA improve the average treatment duration in the third and fourth line kidney cancer setting versus the reported benchmarks for other therapy options. The FOTIVDA real-world data from the patients initiating treatment in 2021, which provides a minimum of six months of follow-up, is currently 4.7 months and is expected to increase as 21% of patients are still ongoing with active treatment. The benchmark for treatment duration in this setting is 3.8 months, so we're already seeing an improvement in this early snapshot. We are very pleased to see an impact on duration and expect the averages to further improve with time. In closing, we continue to be pleased with the momentum that our commercial team has generated since launch and the encouraging reception of Fortivita that we've heard from oncologists, patients in the broader medical community. We believe there continues to be tremendous potential for Fortivita under the current label and that our commercial capabilities and infrastructure are well positioned to support a potential second line Fortivita label expansion, if approved, and possible future launches from our pipeline. I look forward to updating you on our continued progress over the coming quarters. I will now turn the call over to Eric Lucera to discuss second quarter 2022 financial results. Eric?
spk09: Thank you, Mike. Total net revenue for the second quarter of 2022 was $25.3 million, driven by U.S. net product revenue of $25 million. Selling, general, and administrative expenses for the second quarter of 2022 was $17.1 million, a level consistent with the prior four quarters and is compared with $14.9 million in the second quarter of 2021. Research and development expense for the second quarter of 2022 was $12.3 million, compared with $6.9 million in the second quarter of 2021. While we're not yet in the position of paying income taxes, many have asked about the status of our NOLs. During the second quarter, our company, in conjunction with our outside advisors, performed a Section 382 analysis of our NOLs. Based on that analysis, we believe that most of the $613 million of NOLs could potentially be used to offset taxable income in the coming years. Looking to our full year guidance for 2022, we continue to expect our commercial spending levels to remain relatively constant during the year. Specifically, we continue to expect commercial spend for 2022 to increase slightly over last year to approximately $50 million reflecting the full year expenses of the commercial launch as compared to only three quarters in 2021. Gross margins are expected to remain in the mid to high 80th percentile in 2022. In addition, we expect general and administrative expense to remain flat at approximately $20 million for the year. In terms of our research and development expense, we now expect it to be $50 million for 2022 versus the prior range of $60 million to $70 million in 2022. As Michael Bailey mentioned earlier, we have reconfirmed our revenue guidance for Fativda U.S. net revenue of $100 to $110 million. We ended the second quarter of 2022 with cash, cash equivalents, and marketable equity securities of $77.2 million compared with $79 million at March 31, 2022, and $87.3 million at December 31, 2021. We believe our existing cash, cash equivalents, and marketable securities as of June 30, 2022, along with expected U.S. net product revenues from sales of Fativda, will enable us to maintain our current operations for a period of at least 12 months following the filing of Form 10-Q for the quarter ended June 30, 2022. A full overview of the results for the second quarter 2022 is available on our quarterly report on Form 10-Q. I will now turn the call back over to Michael Bailey.
spk07: Michael. Thank you, Eric. To close, we are excited by the sustained growth of Fatibda's commercial sales and remain confident in our ability to meet the revenue guidance of $100 to $110 million for the full year 2022. As we look out the longer term, with the category one endorsement of NCCN, and as treating oncologists continue to gain experience with the benefits of Fativda, we see a direct path for Fativda to be established as the standard of care for third line RCC patients. I am very proud of the work our entire team has done to get us to this point, and look forward to reporting future successes. Operator?
spk04: Thank you. Ladies and gentlemen, at this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions.
spk05: Our first question comes from the line of Stephen Wheeling from Stifel.
spk04: Please go ahead.
spk01: Yeah, good afternoon. Thanks for taking the questions. I guess maybe just a couple of commercial ones. You know, you provided the data point with respect to the proportion of prescribers that would, I guess, be more willing to use the product as a function of the NCCN upgrade. But just kind of curious, as you look at your data internally, I guess over the course of the last near two months since that upgrade occurred, is there anything that you're seeing in the trajectory of script trends that would suggest that that survey data is kind of playing out right now in the real world? And then I guess second to that, if you also just have a gross to net for 2Q, that would be helpful.
spk07: Yeah. Hey, thanks, Steve, for the question. I'm going to turn this over to Mike Ferris, our chief commercial officer.
spk08: Hey, Steven, thanks for the question. So we're really excited by the upgrade from the NCCN, and it puts us in a really strong position. And as we mentioned in the call, we did a recent market research, and 80% of the surveyed kidney cancer treating physicians said this upgrade would have a positive impact on their prescribing. Now, that said, we just got this upgrade in the back half of June. and it takes a little while to get that into our promotional materials, so we're not reporting anything for Q3 results at this point, but we think it will have a significant impact for us going forward.
spk07: Yeah, one of the specific details, NCCN does require a review of any materials referencing their organization.
spk01: Okay, and then just gross to net for the quarter, if you have that available?
spk09: Yeah, the gross to net was 17.8 for the quarter, 17.8.
spk01: And then maybe just a bigger picture question. You know, you made the comment of perhaps looking to leverage your commercial organization as a strategic asset in the future. And I guess just kind of curious, not looking for specific timing or guidance, obviously, but When do you think you might be in a position to maybe start to look at other commercial opportunities that you can funnel through the infrastructure that you've already built out? Do you need to get to sustainable profitability? Do you need to have another year under your belt? Is it just a function of opportunism? I think any commentary there would be helpful.
spk07: Yes, Steve, this is Michael. I think the simple answer is all of the above. As we mentioned in the call, we're ramping this up. We've got Jeb Liddell, and he's built a business development function in the organization. So we are actively looking for those kind of assets. So it's hard to put a timeline on that. The other aspect of it is a financial one, and I want to just turn that over to Eric and
spk09: talk about that? Yeah, Steve, great question. Obviously, you know, our most important asset is our commercial organization and the ability to bring in another product after a year, year and a half on the market where we feel very confident in what we have is important. But in terms of financing it, you know, how would we do it? Obviously, there's three ways. One is cash from operations, the other is debt, and the other is equity. The most important thing is to make sure that it's an accretive transaction and And second to that is, you know, we have no interest in selling equity at these levels. So, you know, we are on the hunt and open for business.
spk07: Yeah, and I'll just add one more color commentary on it. My general rule of thumb with regard to launches, you want to give 100% focus to Tavosanib. We are currently 100% focused on launching Tavosanib. You know, when you get to that 18-month point and beyond, then that's when really the capacity opens up and we think we could bring on additional strategic assets. So that would probably be the earliest.
spk01: And then can you just say whether or not you're also looking at opportunities kind of outside of the GU space, or are you still focused in that area?
spk07: So we kind of think about this in a target space. So, you know, GU would be the center of the target. Moving further out, you know, solid tumors would be acceptable potential targets. Moving out outside of that would be heme. And then on the outside of our oncology target zone would probably be supportive care, you know, directly associated with cancer treatment. So, you know, there's a broad opportunity here. And I think one of the other things that makes this, you know, concentric circles work is that As Mike has said, we're basically covering right now consensus for the GU space. Seventy percent of the prescribing is in the community. So we've got a very broad footprint in the community. And as with any other successful oncology organization, we'll have 100 percent coverage over the major institutions. It will be a matter, you know, if you went out to the heme space, knocking on a different door, not going to the different institutions.
spk01: Okay, that's very helpful. Thanks for taking the questions and congrats.
spk04: Thank you. Thank you. Our next question comes from the line of Colleen Cossie from Baird. Please go ahead.
spk02: Great. Good afternoon and thanks for your questions. Congrats on the quarter. Curious if you saw any persisting impact from COVID bleeding into 2Q and if we should keep in mind any additional COVID impact in the second half of this year.
spk07: Hey, Colleen, thanks for the question. I'll again turn that over to Mike.
spk08: Sure. Thanks, Colleen. So the COVID situation is always evolving. We're really pleased that probably starting in the middle of the first quarter and then even more significantly in the second quarter, we're seeing a big increase in our ability to access customers in person. And we're very optimistic and hopeful that trend will continue. That's all signs right now. But Again, we're really pleased with the organization, the infrastructure we've built. We've proven we can be effective when we're under the tightest of COVID restrictions and can impact our customers through our multi-channel efforts. So the more it opens up, the better for us. And again, we're really optimistic that trend will continue.
spk07: Yeah, and I'll just add one more thing, Colleen. We're very proud of this external recognition between the ZS Associates as well as the Communicator Award. because it really shows our adaptability and our ability to step up to the challenges and overcome them. So we're always thinking about what the dynamic nature of the market is and what we need to do to satisfy it. So we'll continue to do that.
spk02: Great. Makes sense. Thank you. And in the past, you've spoken about some of the metrics around patients coming back who would have maybe foregone treatment.
spk08: before approval so do you have any sense how what that number is now and how much higher that penetration could go and then any any sort of efforts you're making to continue to increase that number yeah again I'll turn that over to Mike sure so we look at externally reported benchmarks for this that report the what percent of eligible third and fourth line patients go on to active treatment so just as a reminder prior to our approval that number was at 50% It was updated almost a year into our launch to 58%, and so it's already improving. And then to your question about how far could it go, we look at the benchmarks for the second-line setting, which is an 80% to 85% kind of range, and we think with really viable, tolerable treatments with Phase III data and Cat 1 support from the NCCN, our aspiration and goal is to get those treatment rates similar to the second-line setting.
spk02: Great, thank you.
spk04: Thanks, Colin. Thank you. Ladies and gentlemen, if you would like to ask a question, please press star one. Our next question is from the line of Arthur E. from HC Wainwright. Please go ahead.
spk06: Hey, good afternoon, guys. This is Ocarin for Arcane. Thanks for taking my question. I'm just curious regarding your third-party market research survey. For those, 20% of respondents didn't show positive impact in the prescription decision. Did you guys further dig out what's the reason they give a hesitation to prescribe the fatibda?
spk07: Yeah, thanks, Arthur, for the question. I'll turn that over to Mike.
spk08: It's a great question. So what was done is we showed the update to treating physicians, and we asked them to rate the impact. So the 80% said it would be a significant or moderate impact. The other 20% was broken out of low impact, so increase but low increase, and then no impact was about 8%. So the vast majority said it's going to have an impact, and others, maybe they've already adopted it and are already using it, or You never win 100% of the time, but this is really impressive in a market research setting to see this kind of response.
spk06: Thanks for that, Michael. And regarding the pipeline, I just wonder, are you guys planning to release the data from the deductible trifles cohort B pipeline? Is there any plan on presenting that at the conference, or you could release that data by yourself? Thank you.
spk07: Yeah, thanks, Arthur. I'll try to tackle that. Remember, there's only five patients who are enrolled in it, so it's basically an anecdote. And this is purely a strategic decision in order to conserve resources for the organization. The second line, because the first time cohort data was so encouraging, in our discussions with AstraZeneca, they basically said this would be something they'll evaluate. I think what we agreed collectively was given the strength of the first-line data, there's really no need to continue to waste patient resources as well as our own financial resources in continuing that study. Jeb, I don't know if you wanted to add anything else. No, I think that very, very well covers it. Thank you. I suspect we'll probably report it at some upcoming scientific meeting as possibly in concert with some additional analysis, long-term follow-up that we would have for the first-line cohort.
spk06: Great. Thanks for that.
spk07: One last thing, Arthur, just 100% certainty. There was no adverse effects that we saw that were unexpected in that population. This was truly and purely a business decision.
spk06: Got you. Got you. Thanks for the additional comment and congratulations on the strong quarter. Thanks.
spk05: Thanks, Arvind.
spk04: Ladies and gentlemen, we have reached the end of the question and answer session. And now I would like to turn the call back to the management for closing remarks.
spk07: Well, thank you all for joining us today. We appreciate your continued support and look forward to updating you on further progress in the coming quarters. We wish you all a great second half of the summer. Thank you.
spk05: Thank you.
spk04: The Conference of Avial Oncology has now concluded. Thank you for your participation. You may now disconnect your lines.
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