Aptose Biosciences Inc. (APS) Earnings Call Transcript & Summary

Good morning, all. I would like to call to order this Annual Meeting of Shareholders of Aptose Biosciences Inc. I'm Dr. William Rice, Chairman of the Board of Directors, President and Chief Executive Officer of Aptose. I'll be serving as the Chair for today's meeting. Joining me today are other directors, including Dr. Denis Burger, our Lead Independent Director; Dr. Erich Platzer; Mr. Warren Whitehead; Ms. Carol Ashe; Ms. Caroline Loewy; and Dr. Mark Vincent, who have joined us on the line. Other members of management also joining us today are Mr. Greg Chow, Executive Vice President and Chief Financial Officer; Dr. Joti Marango, Senior Vice President and Chief Business Officer; Dr. Rafael Bejar, Senior Vice President and Chief Medical Officer; and Mr. Victor Montalvo-Lugo, Vice President of Clinical Operations. It's my pleasure to welcome the shareholders and employees of Aptose, members of the news media and other invited guests to our first shareholders' meeting to be held exclusively online. This year, considering concerns regarding the COVID-19 outbreak, Aptose has opted for a virtual-only annual shareholders meeting in order to reduce the risk of infection to all of you. This virtual-only format also permits us to comply with public health authorities' directives regarding large gatherings. Although we're disappointed that we can't see each of you today, our thoughts are with you, your families and the communities you serve. We want to thank you for your patience as we navigate through this unprecedented situation, and we hope that you agree that we did the right thing by moving to an electronic meeting in light of the circumstances. In making the decision to move to a virtual meeting, it was a paramount to ensure that shareholder rights were protected. We have ensured that this meeting offers registered shareholders and duly appointed and registered proxyholders the same opportunities to participate as in past in-person meetings. Because this is a new technology, instructions on how to ask questions and on the voting procedure will appear on your screens. As with any new technology, unexpected glitches may occur, but our service providers for this platform, Lumi, are very experienced at running this type of meeting and will help us out. Today, we will conduct the votes on the matters before us by a poll. On a poll, every registered shareholder or duly appointed and registered proxyholder entitled to vote as one vote in respect of each share entitled to be voted on a matter and held or represented by that registered shareholder or duly appointed and registered proxyholder. You already may have voted your shares, but if you need to vote during this meeting, it only can be done through our virtual voting platform on the webcast. Once the polls are opened, registered shareholders and proxyholders who have obtained a control number will be able to cast their votes. The log in information and log in process are outlined in our proxy statement, which has been uploaded to our website. When logging into the meeting, if you have a control number, enter it when prompted. If you do not have a control number, please log in to the meeting as a guest. The password for everyone is aptose2020, all in lower case. That's A-P-T-O-S-E-2-0-2-0, all lower case. The polls are now open. Voting can be completed at any time from now until the end of the formal business of the meeting, at which time the polls will close. Thank you to those of you who already have voted. If you already have voted in advance of the meeting and do not wish to change your vote, then you do not need to do anything. For those of you who have not yet voted, we encourage you to vote now. Also registered shareholders and duly appointed registered proxyholders can submit questions at any time during the meeting through the virtual platform of our webcast. We will address questions at the general Q&A session at the end of the formal part of the meeting, provided that only questions regarding procedural matters or questions directly related to the motions before the meeting may be addressed during the meeting. To repeat, we only will answer questions, which are related to the formal business matter presented at today's meeting. The secretary will receive the questions and at the appropriate time, will read them aloud so that everyone may be aware of the question being considered. If we have a number of questions that are similar in topic, we may paraphrase, group the questions and mention that we have received similar questions. However, please note that due to time constraints, we may be unable to address all questions. I also wish to welcome all guests who are not registered shareholders for holding proxies of registered shareholders. As a reminder, as with any in-person meeting, only registered shareholders and duly appointed proxyholders are permitted to vote or ask questions. I now would like to outline the format of today's meeting. First, I will deal with the formal business of the meeting as outlined in the proxy statement that all of you received, including voting on resolutions. After we conclude the formal portion of the meeting, we'll be pleased to answer questions you may have or respond to your comments regarding the business matters addressed during the formal part of the meeting. Second, after the Q&A period is conducted, I'll provide a brief corporate update. I now will ask Mr. Charles-Antoine Soulière of McCarthy Tétrault, Aptose's corporate counsel, to act as secretary of the meeting; and Mr. Paul Allen of Computershare, to act as scrutineer. The secretary has confirmed that the notice calling the meeting, including the proxy statement, financial statements and other documents were mailed on May 7, 2020, to shareholders of record as of April 24, 2020. The secretary has placed with me before this meeting, copies of such notice, the proxy statement and the forms of proxy, together with the confirmations of mailing of these documents. I direct that the confirmations, proof of mailing of the notice be kept by the secretary with the records of this meeting. Our corporate bylaws provided at the meeting may be held by electronic means. Our corporate bylaws also require a quorum comprised of 2 persons present at the opening of the meeting who are entitled to vote either as shareholders or as proxyholders and holding or representing 25% of the votes. I would ask the secretary of the meeting to summarize the scrutineer's report on attendance.

Thank you, Bill. The scrutineer's preliminary report has now been received, and it shows that there are 92 shareholders and proxyholders representing 55,836,355 shares or 73.21% of the issued and outstanding shares present at the meeting.

Thank you, Charles. I have before me and I adopt the scrutineer's preliminary report on attendance, whether in person or by proxy through the online webcast platform, which confirms that a quorum is present. I direct that a copy of the final report on attendance be filed with the records of the meeting. As notice of the meeting has been properly given and a quorum is present, accordingly, I now declare today's meeting to be properly constituted for the transaction of the business for which it has been called. The formal business of this meeting consists of: one, presenting the financial statements for our fiscal year 2019; two, electing directors; and three, appointing the auditors of the corporation. To expedite the formal part of the meeting, Mr. Chow will move, and I will second all motions. While this procedure will facilitate the handling of the formal matters, registered shareholders or duty appointed and registered proxyholders may address the meeting when there is a call to discuss the motion before the meeting. [Operator Instructions] If there is any discussion or question, the secretary will read the question aloud. All motions will be moved and seconded once the formal matters of the meeting have been presented. As I said, the annual meeting was called to consider 3 matters. The first item of business is to provide you with Aptose's audited financial statements for the year ended December 31, 2019. A table copy of the audited consolidated financial statements and the auditor's report thereon are available for inspection at the hyperlink provided on the meeting platform. I'd like the secretary to make a copy available for review by any shareholder who so requests. With the consent of the meeting, the reading of such statements and reports will be dispensed with. I do wish to recognize and advise that the auditors of the corporation, KPMG LLP, are in attendance online. I do not propose to ask shareholders to approve the financial statements table. However, I will be pleased to receive any questions concerning the financial statements after the termination of this meeting.

Bill, I confirm that there's no question or discussion at this time.

Thank you. As there are no questions at this time on the audited financial statements for the year ended December 31, 2019, I now will proceed to the second item of business. The second item of business is the election of directors for the current year. The proxy statement contains the names of management's proposed nominees to the Board of Directors, which are Ms. Carol G. Ashe, Dr. Denis R. Burger, Ms. Caroline M. Loewy, Dr. Erich M. Platzer, Dr. William G. Rice, Dr. Mark D. Vincent, and Mr. Warren Whitehead. I understand that these nominees have consented to act as directors. Now we will wait 30 seconds for additional nominations.

Bill, I confirm that there are no additional nominations.

Thank you. There being no further nominations, I declare the nominations closed. The third item of business is the appointment of KPMG LLP, Chartered Accountants, as the auditor of Aptose for the current year. Now that all formal matters of the business have been presented, would Mr. Chow please make the motions for the formal matters of the meeting.

Mr. Chair, first, I move that persons that have been nominated be individually elected as a director of Aptose for the ensuing year or until their successors are elected or appointed. Second, I move that KPMG LLP, Chartered Accountants, be appointed as the auditor of Aptose to hold office until the close of the next annual meeting of shareholders or until their successor is appointed.

Thank you, Mr. Chow. I'll second Mr. Chow's first and second motions. Are there any questions or discussions on these motions?

There is no discussion at this time.

Thank you, Charles. As there is no discussion, I now call for a vote on the motions before the meeting. As previously mentioned, voting today will be conducted by electronic ballot. The polls have been opened since the beginning of the meeting and at this point, all registered holders and duly appointed and registered proxyholders who have been properly logged in with their control numbers and user name and wish to vote should make their way to the vote tab on the webcast platform. There, they will be able to see on the screen, the election of directors and the appointment of auditor motions brought forward at this meeting. The voting will remain open for an additional 1 minute. Once the electronic balloting closes, the voting page will disappear, and your votes will automatically be submitted. We will now pause for 1 minute. [Voting]

And we're back. Now before announcing the voting results, is there any other business that any shareholder or proxyholder present wishes to bring to the attention of the meeting?

There is no proposal for other business.

Thank you, Charles. As there is no further business, I now declare the polls closed, and we will proceed to present the voting results. I now ask the scrutineer to provide the preliminary results of the scrutineer's tabulation of today's votes.

Thank you, Mr. Chair. The scrutineer confirms the following preliminary voting result. Each of the 7 director nominees received the required percentage of votes for, and the percentage of votes required in favor of the appointment of KPMG as auditors has been received as well.

Thank you. I declare each of the resolutions considered at today's meeting in respect to those matters as carried. The exact number of votes cast in respect to each matter will be filed on SEDAR and made available on our website. We now will take a few moments to answer any questions received during today's meeting.

No questions have been received, Bill.

Thank you. As there are no questions, I would like to take this opportunity to thank our shareholders for their continued support over the past year as well as our employees for their commitment and their diligence. And we look forward to reporting our ongoing progress during the upcoming year. As we wrap up this formal portion of the meeting, once again, I wish to thank all shareholders and proxyholders for your attendance today. Also, I would like to remind everyone that I plan to provide a corporate update following the formal part of the meeting, and it is my pleasure to begin the slide presentation now. During this past year, we've faced the typical challenges developing cancer drugs as a biotech company and face the additional challenges presented by COVID-19. We've taken steps to solve problems, to build our team, to advance our product candidates, to treat patients with respect and gratitude and to generate financial stability. We've acted swiftly and decisively when we perceived the imminent onset of COVID-19. And today, I'm pleased to report that we have managed to maintain our critical time lines and grow the value of the company and our assets during the challenging period. As illustrated on Slide 3, during the past year, we expanded the Aptose leadership team. You're accustomed to seeing and hearing from myself and from Greg Chow. And last year at our AGM, we introduced you to Dr. Jotin Marango, our Senior Vice President and Chief Business Officer. Since then, in November of 2019, we also hired Mr. Victor Montalvo-Lugo as our Vice President of Clinical Operations. And in January of this year, we recruited Dr. Rafael Bejar as our Senior Vice President and Chief Medical Officer. Our dedication to building the best possible team at all levels, demonstrates our commitment to excellence. On Slide 4, we highlight our accomplishments to establish financial stability over this past year so that we can support the development of our clinical assets. As you are aware, we completed 2 major financings during 2019. In May of 2019, we raised approximately $21 million, and later in the year in December, we raised just over $74 million. Importantly, during these financings, we built strong institutional participation by fundamental health care funds that helped provide long-term financial stability. Following the financings, we established a new $200 million shelf registration earlier this year and established a new $75 million at-the-market, or ATM, facility, effective during the second quarter of this year. We maintained and strengthened our existing banking relationships and forged new ones. Likewise, we enhanced the universe of research analyst coverage for the company. Now let's move on to Slide 5. Here, I want to provide an update on APTO-253, our small molecule MYC inhibitor being developed for AML and MDS, myelodysplastic syndromes. This regulation of the MYC oncogene is a key driver of AML, MDS, certain B-cell cancers and certain solid tumors. We've shown previously that 253 potently inhibits expression of the MYC oncogene, and 253 is an element of Phase Ia/b trial for the treatment of patients with AML or MDS. Importantly, 253 is the first agent shown to selectively inhibit MYC expression in humans, while still being well tolerated. On Slide 6, I'll remind you that we have completed dosing for the first 3 dose levels. Now we are in dose level 4, and we need to complete the 28-day dosing of 2 additional patients at dose level 4. Thus far, 253 has been well tolerated with no drug-related serious adverse events. We have demonstrated suppression of MYC expression in the peripheral blood cells for patients receiving each dose level, and this includes both AML and MDS patients. Now we're eager to dose escalate further, and we are making strides in that direction. Yet, as I pointed out on Slide 7, I'll remind you that COVID-19 has created headwinds for the 253 program. 253 is administered by IV infusion over a 90-minute period once weekly. Unfortunately, IV infusion is more difficult to accomplish in clinical sites during the COVID-19 high-risk period. This is because many of the clinical sites are treating COVID-19 patients and are reluctant to bring immunocompromised AML or MDS patients into clinics for hospitalization or for extended periods of time. As a consequence, COVID-19 may result in less data available at the ASH 2020 conference in December. Efforts are underway to minimize the impact of COVID-19 and boost enrollment and we will keep you posted throughout the remainder of this year. Now on to Slide 8. Changing gears, I now want to update you on CG-806, our first-in-class oral kinase inhibitor that potently inhibits all forms of the FLT3 kinase and all forms of the BTK kinase. 806 has a unique kinase inhibitory profile that allows us to develop it across the spectrum of hematologic malignancies, including lymphoid malignancies, such as CLL and non-Hodgkin's lymphomas and across myeloid malignancies, including AML as well as patients with MDS. 806 is currently in a Phase Ia/b trial in patients with CLL and other B-cell malignancies, and this is made possible by its ability to inhibit the BTK kinase and other kinase-driven pathways operative in the B-cell cancers. We also are planning a Phase Ia/b trial in patients with AML and MDS and I'll speak more about that in a moment. Now let's move on to Slide 9 and discuss the potential impact of COVID-19 on 806. It's important to note that the properties by 806, along with details of our trial designs have actually minimized the impact of COVID-19 on the development of 806. First, treatment of cancer patients is considered essential rather than elective. This is especially true in the case of CG-806 because 806 is being developed for patients with lymphoid cancers and myeloid cancers that are generally viewed as critically ill. Second, 806 is an oral agent. An oral administration places less strain on clinics, hospital staff, systems and patients. Oral administration does not require hospital stays and oral capsules can be shipped directly to patients. Third, the safety profile of 806 thus far reduces risk to patients as it minimizes the number of nonessential clinic visits for additional supportive care. Fourth, remote monitoring using electronic diaries, or eDiaries, allows for remote data collection and avoids hospital visits. And finally, our study design supports patient accrual and minimize risks. In particular, we leverage both large institutional centers and specialty regional cancer clinics. During the pandemic, large institutional centers often have infectious disease and emergency units populated with COVID-19 patients and are less likely to bring immunocompromised cancer patients into those centers to place along clinical trials. This is not the case with the regional cancer specialty sites and greater usage from those regional sites has allowed us to continue recruiting patients. So while COVID-19 has caused us to change course with several activities, we have, thus far, been able to maintain our long-term momentum and time line with 806. On Slide 10, I'll outline our near-term clinical development plans for 806. As I noted earlier, 806 is currently being evaluated in a Phase Ia/b trial in patients with relapsed or refractory CL or non-Hodgkin's lymphomas. In this trial, we want to characterize the safety, tolerability, pharmacokinetic and pharmacodynamic properties of 806 in this population and identify the recommended Phase II dose for future studies. And of course, we're watching for evidence of clinical activity in these patients. So why haven't we initiated the trial for the AML patients? Well, this is because relapsed or refractory AML patients are extraordinarily ill, and we did not wish to treat those patients with a potentially subtherapeutic dose that would not provide them with benefit. So how do we select the dose to begin treating AML patients? Well, during this CLL trial, we monitor the safety, tolerability, PK and PD markers in the CLL patients. In doing so, we identify the dose level that is likely to be therapeutically active for AML patients. We now have submitted a new IND to the FDA for a trial with 806 in AML patients. 806 has orphan drug designation for AML. And we hope that AML will view favorably our new IND and our approach and allow us to move into AML patients as quickly as possible. Because of COVID-19, we cannot be certain about the turnaround time, and we still need to finalize R&D approval at clinical sites even after the FDA allows the new IND. But be assured that we're taking all reasonable steps to get 806 into AML patients as soon as possible. Now let's review a few details of the CLL trial on Slide 11. You will recall that in this trial, we're administering oral capsules twice daily on a 28-day cycle, that we completed the one patient required on dose level 1, one patient required on dose level 2, 3 patients required on dose level 3, and now we're dosing patients on dose level 4. In addition, following completion of dose level 3, we dose escalated the patient that was on dose level 1 at 150 milligrams to the 450-milligram dose at the dose level 3. On Slide 12, let's quickly summarize our findings for this trial. As I mentioned, dose escalation to dose level 4 has progressed efficiently. Thus far, 806 has been safe and well tolerated, and we have seen evidence of pharmacologic activity. On numerous occasions, we've highlighted the ability of 806 to target the BTK kinase that drives CLL, the FLT3 kinase that drives AML and a constellation of other kinase-driven oncogenic pathways. We now have shown that we have achieved plasma exposure levels in patients that inhibit all of these key kinases, including BTK and FLT3 as well as SYK, ERK and PDGFR alpha. We also observed lymphocytosis in patients with CLL, a biological response from certain CLL patients indicating that the BTK kinase has been inhibited. And finally, we've seen steady-state levels of 806 in the bloodstream of patients that is at or above the levels required in animal models to cause strong antitumor effects. So our plan is to continue to dose escalate, get patients on higher dose levels and hope that clinical proof-of-concept will emerge in the second half of this year. As noted on Slide 13, 806 represents a new class of drugs. It is the only BTK inhibitor to also inhibit FLT3 and therefore, has the potential for development for CLL and AML. To refresh your memory, AML is an aggressive cancer of the blood and bone marrow. This is on Slide 14. And the most common driver mutation is referred to as the ITD mutation in the FLT3 kinase. Other FLT3 inhibitors are approved or in development, but they are limited by toxicities or the rapid emergence of drug resistance. 806 is different because it has been well tolerated and inhibits all known wild-type and mutant forms of FLT3 as well as other oncogenic pathways used by AML cells to circumvent other drugs and it combines well within other agents. For these reasons, as illustrated on Slide 15, we plan to develop 806 for relapsed or refractory AML patients that have failed other FLT3 inhibitors and other types of agents and have a vast array of mutational backgrounds. We plan to initiate dosing of AML patients during the second half of this year with what we expect is an active dose. And we hope to see that 806 differentiates clinically from other FLT3 inhibitors. As summarized on Slide 16, we plan to develop 806 across a spectrum of hematologic malignancies, and we hope it can serve the unmet needs of these patient populations. On Slide 17, we highlight additional activities throughout this past year. Although I will not list all of them verbally, they're important to the progress of our pipeline and our continued focus on execution. On Slide 18, I'll remind you of a few important catalysts for 2020. For 806, we will present clinical data in CLL patients at the EHA conference in less than 2 weeks. Also, we plan to continue treating CLL and other B-cell cancer patients throughout the year and then present clinical data at the ASH conference in December. Likewise, with 806, we expect to have the IND allowed for AML to initiate dosing in AML patients and then present AML clinical data at the ASH conference in December. For 253, we plan to continue with dose escalation and then to present clinical data also at the ASH conference in December. We have a busy year ahead, so please stay tuned. Finally, on Slide 19, we wish to express our sincere gratitude to the patients, their families and their caregivers, to our dedicated employees and to our supportive shareholders. We wish you a good evening and a wonderful year ahead. Thank you.