Good afternoon. My name is Tiffany and I'll be your conference operator today. I would like to welcome everyone to the Aptose Biosciences Conference Call for the First Quarter Ended March 31, 2019. [Operator Instructions] Thank you. As a reminder, this conference call maybe recorded. I would now like to introduce Ms. Susan Pietropaolo. Please go ahead..

Thank you, Tiffany. Good morning and welcome to the Aptose Biosciences conference call to discuss financial and operational results for the first quarter ended March 31, 2019. I am Susan Pietropaolo, Communications Representative for Aptose Biosciences. Joining me on the call today are Dr. William G. Rice, Chairman, President and CEO; and Mr.

Gregory Chow, Executive 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 U.S. and Canadian Securities Laws.

Forward-looking statements reflect Aptose's current expectations regarding future events, but 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 at 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. I will now turn the call over to Dr. Rice, Chairman, President and CEO of Aptose. Dr.

Rice?.

Thank you, Susan. I'd like to welcome everyone to our call for the first quarter ended March 31, 2019. While we held our fourth quarter and year-end 2018 conference call nearly a few weeks ago in mid-March, Aptose has made noteworthy progress during those weeks.

Clearly, the most significant event in the quarter was the FDA allowance for us to initiate the first human clinical trial of CG-806 or just 806 as I will call it, an oral first-in-class non- covalent pan-FLT3 and pan-BTK inhibitors being developed in this first trial [indiscernible] who have failed or are intolerant to standard therapies.

In addition, we have a planned second trial with 806 for patients with AML and MDS, and I'll explain that in further detail in few minutes.

In addition to the news with 806, during the first quarter this year, we presented clinical data illustrating that our APTO-253 MYC inhibitor could reduce MYC expression in an AML patient at our lowest dose administered.

With progress made in both the 806 and 253 programs, Aptose now has two well-differentiated small molecules in clinical development. On today's call, we'll discuss the clinical plan for 806, review the status of 253, brief you on our quarterly financials and then open the call to your questions.

But first, let's discuss our progress and anticipated timelines with 806. As we announced in our Q1 2019 results press release earlier today, we are thrilled that the first clinical trial with 806 has been initiated and screening for the first patient is underway. We have high expectations for this drug and this is a very exciting time for us.

Our allowed Phase Ia/Ib trial is a multi-center open-label dose-escalation trial to evaluate the safety pharmacokinetics, tolerability and effectiveness of 806 for the treatment of patients with chronic lymphocytic leukemia or CLL, small lymphocytic lymphoma or SLL, and non-Hodgkin's lymphoma or NHL, for which either the standard treatment has failed, is no longer effective or can no longer be administered safely or tolerated.

806 will be administered as oral capsules to the first patient at a starting dose of 150 milligrams every 12 hours for 28 days, followed by six planned ascending cohorts, including 300 milligrams, 450 milligrams, 600 milligrams, 750 milligrams and 900 milligrams bid with intent to determine the recommended Phase II dose for patients with relapsed or refractory CLL, SLL or NHL.

The clinical protocol calls for an accelerated titration in which we are required to administer a 806 only to one patient at each of the two lowest dose levels; 150 milligrams and 300 milligram, and then three by three thereafter in a dose escalation scheme.

Once MTD or safe and biologically active dose has been identified as our recommended Phase II dose up to 100 patients are planned for treatment in the expansion phase at that dose.

In this trial with B-cell malignancy patients, we will determine the PK, safety and tolerance properties of 806, but also we'll watch for clinical benefit and measure a series of markers of disease status.

These markers are planned to include; 1) CLL and -- excuse me, CCL3 and CCL4 serum markers that indicate the level of B-cell receptor activation; 2) circulating tumor DNA on albeit [ph] samples; 3) FDG PET scans to look for tumor volume changes and for tumor cooling; 4) measurement of phospho BTK and potentially the levels of other phospho proteins depending on the availability of sufficient patient samples; and 5) a plasma inhibitory activity or PIA assay, to determine if the plasma at different time points after dosing 806 has levels that can kill cancer cells in vitro, inhibit the target kinases and suppress key oncogenic pathways.

Because 806 uniquely and potently inhibits both the wild-type and C41S mutant forms of BTK, as well as other oncogenic pathways viewed by B-cell cancers to survive, we hope to see signals of clinical response with 806 in this patient population during the Phase I trial.

However, we also want to remind you that this is the first time 806 will enter humans and certain risks still exist.

For instance, the pharmacokinetics in humans may be very different from those in animal models and although and likely, it is possible an unexpected toxicity could emerge in humans that was not observed in the preclinical animal studies.

The only way to answer these PK, safety and efficacy questions is to perform the first-in-human clinical trial and that is finally at hand with 806. We already have 11 clinical sites committed to the clinical study in the near-term and screening for potential patients has begun.

More information on the trial and study locations is available on clinicaltrials.gov and we will continue to update.

Plus, once we identify dose of 806 in B-cell cancer patients that achieves a plasma concentration that will be therapeutically active for AML patients, we plan to present the findings to the FDA and seek allowance to initiate dosing in patients with AML and MDS.

This strategy avoids treating acutely all AML patients with potentially non-efficacious doses and increases the likelihood that response to 806 may be achieved rapidly in the AML-MDS patient population. And now a few final points regarding 806.

The ability of 806 to potently inhibit all mutant forms of FLT3 and BTK, as well as other kinases with a precision that circumvents, meaning toxicities truly differentiates this molecule from other approved hematology drugs or molecules in development.

Indeed, 806 was shown in preclinical studies to be on average 1,000 times more potent at directly killing B-cell cancer cells than was ibrutinib, the current standard of care for certain B-cell malignancies.

Likewise, 806 is approximately 100 times more potent in killing AML cells with specific FLT3 mutations than as quizartinib, FLT3 inhibitor expected to be approved this year or gilteritinib that was approved in 2018.

These findings position 806 to have the capacity to treat AML patients resistant to other FLT3 inhibitors and we hope to demonstrate that capacity in upcoming clinical trials. As demonstrated with preclinical work on many other tyrosine kinase inhibitors in the market, preclinical data with kinase inhibitors generally translate well to the clinic.

For a drug like 806 that is showing compelling and durable tumor elimination yes-cures [ph] in animal models of cancer, we certainly hope that is the case.

Indeed, 806's superior potency profile gives us our scientific advisers and our clinical investigators great enthusiasm for 806 as potential therapeutic option for patients with the most difficult-to-treat hematologic malignancies.

We hope to have data to report later in the year potentially at the American Society Hematology or ASH Meeting in December. Now, let me update you on the status of APTO-253 or just 253, as I will call it. Our MYC inhibitor currently on a Phase I trial for patients with AML and MDS.

253 is the only known clinical stage molecules that can directly inhibit expression of the MYC oncogene as a potential treatment for AML.

Inhibition of the MYC oncology, a major driver in cancer cell proliferation, suggests that the compound may have a broader anticancer application among a host of hematologic malignancies and certain solid tumor indications.

As we mentioned in our last call, 253 is being administered once weekly over 28-day cycle and the study is expected to enroll up to 20 patients with relapsed or refractory AML and high-risk MDS patients. The study is designed to then transition single-agent expansion cohorts in AML and MDS followed by combination studies.

As reported previously, we successfully dosed the first patient in this study. Our first patient received the lowest dose of 20 mgs per meter square once weekly over 28 days and the drug was tolerated favorably. In addition, we perform MYC and p21 biomarker expression analyses from that patient and we observed evidence of target engagement.

During the 28-day cycle, the total amount of MYK and gene expression in the PBMCs was reduced greater than 70% with a clear downward trend each week and a reduction in MYC gene expression when measured 24 hours after each dose, all of which is consistent with target engagement.

We currently have a number of clinical sites actively screening for patients. As we have mentioned in the past, this is a very sick population and we've been disciplined in the process to find a high-performance patient for that second dose level also.

As a reminder, we are required to evaluate only one patient at each of the first two dose levels provided there are no SAEs before proceeding to further dose escalation. It's important to choose a high-performance patient to complete the entire 28-day cycle, so that we will not need to expand at that dose level to additional patients.

Towards that goal, we now can report that an MDS patient has initiated dosing with 253 at the second dose level of 40 mgs per meter squared, twice the dose density of the first dose level and we hope this patient tolerates the treatment and receives benefit from 253.

As you know, we're candid and transparent in our communications regarding the development of both 253 and 806, we'll continue to keep you updated if there are any new developments. Now, I'd like to quickly review preclinical research that was presented at the American Association for Cancer Research or AACR meeting just last month in Atlanta.

Though our focus now is on the clinic, we continue to perform non-clinical studies to better understand the mechanisms of action of 806 and 253 and to compare our drugs to competitive agents.

As we've described in the past through The Beat AML, a beat AML initiative, the groundbreaking collaborative research initiative spearheaded by the OHSU Knight Cancer Institute with Dr. Brian Druker and his team and the Leukemia & Lymphoma Society.

We able to provide a 806 -- profile 806 extensively against primary cells from hundreds of AML patient's samples and samples from patients with other hematologic malignancies, providing keen insights to the compound's activity against actual human cells alone and in combination with other agents.

We also can assess it's effectiveness relative to specific genetic profiles of patients. I will highlight some of the key findings here; you can take a look at the poster on our website, www.aptoes.com in the Events and Presentations section.

The poster, which is entitled CG-806, a pan-FLT3/pan-BTK inhibitor demonstrates superior potency against cells from IDH1 mutant and other non-favorable risk groups of AML, end title.

Described 806 as significant potency across subgroups of AML cells including relapsed refractory AML and those with genetic abnormalities related to poor prognosis in AML patients.

806 demonstrated superior potency when compared to other FLT3 inhibitors that includes midostaurin, sorafenib, sunitinib, dovitinib, quizartinib, crenolanib and gilteritinib, approved drugs and drugs in development that address large hematology markets.

Our patient set with FLT3-ITD mutations were expected to have greater sensitivity to 806, the sensitivity of patient cells with IDH1 R132 mutations was an unexpected finding that presents us with opportunities potential for accelerated approval.

The poster also highlights results of combination studies with 806 and venetoclax, which demonstrated enhanced killing of primary cancer cells from patients with AML and B-cell malignancies. Venetoclax was granted accelerated approval last year for the treatment of AML in combination and for certain populations. In Dr.

Druker's studies with patient samples, 806 acted synergistically with venetoclax. The drug combination data presented in the poster suggest it is possible that a combination of venetoclax with 806 could become a combination of choice in the future for certain populations.

Also described in the poster were the results of 28-day GLP safety and toxicokinectic studies. Importantly, 806 continue to demonstrate a favorable safety profile, a finding that enabled us to initiate testing in patients. The wealth of 806 data continues to grow and strongly supports the drug's clinical development.

We're often asked about the competitive landscape and Aptose's place among companies that have later-stage compounds and much larger market caps. Data like these, which generated tremendous interest at AACR clearly differentiate 806.

CG-806 is early in development, but we believe we have potential best-in-class non-covalent FLT3 BTK multi-kinase -- multi-cluster kinase inhibitor with a robust safety profile. Again, we're excited to finally be in the clinic with this compound and we hope to have 806 clinical data to report to you near year-end.

At AACR, we also presented a poster on 253, also available on our website. The poster described in vitro studies that further define the mechanism of action of 253 and how the small molecule inhibits expression of the MYC oncogene leading to apoptosis, in human-derived solid tumor and hematologic cancer cells.

In this study, our team performed long-term in vitro studies to determine if and how cells might develop resistance to 253. In other words, we were trying to induce resistance. A MYC-driven Raji cells required three years in increasing concentrations of 253 in order to develop high level resistance to 253.

The data demonstrated that the cells required multiple modifications in the MYC gene to generate drug resistance, again pointing to the evolvement of MYC as the primary target for 253. I also want to quickly make remarks regarding additional conferences.

Our research collaborators are prolific in presenting and publishing their data, and we were just notified that an abstract that have been submitted to EHA, the European Hematology Association, has been accepted for presentation at the conference in June.

So we once again have a presence at this important form and we will provide additional detail at a later time. On the Investor Conference front, we presented last week at the Bloom Burton conference. We will be presenting at the Oppenheimer Oncology Insight Summit and RBC Healthcare Conference later this month.

Webcasts and presentations will be on our website. I now will turn the call over to our Executive Vice President and Chief Financial Officer, Mr. Greg Chow, who will review the results for the quarter..

Thank you, Bill, and good afternoon, everyone. We ended the quarter with $17 million in cash and cash equivalents and investments, compared to $15.7 million at December 31, 2018.

During the quarter, we raised $6 million through the common share purchase agreement with Aspire Capital and a normal amount from the aftermarket facility with Cantor Fitzgerald. Subsequent to the quarter, we raised an additional $4 million through the Aspire agreement, which exhausted the number of shares that we could issue under that agreement.

As a result, we terminated that agreement, and today, as we mentioned in the press release, entered into a new $20 million agreement under the same terms with Aspire. Additional information can be found in the Form K that will be filed.

As of today, we have approximately $19 million in cash and cash equivalents, which along with the availability from the ATM and this new Aspire facility, if approved, provides cash runway well into the second half of 2020.

During the quarter, we utilized approximately $4.9 million of cash in operating activities compared with $4.1 million for the same quarter last year. The increase is attributable to increased activity surrounding 253 and 806 and general and administrative purposes.

Research and development expenses were $3.3 million for the quarter and attributable to 806 development severities, which include completing the IND submission to the FDA, continuing development on improving GMP formulations for 806 and 253 and increased salaries related to increased headcount and clinical operations there for the CG-806 clinical trial.

G&A expenses for the quarter were $2.3 million compared to $3.7 million for the same quarter last year. This variance was primarily due to a decrease in stock-based compensation. Finally, our net loss for the quarter was $5.5 million or $0.14 per share. Before I turn the call back to Dr. Rice, I want to touch on a couple of additional items.

As we mentioned on the last call, effective January 1, 2019, this year, Aptose became a domestic issuer. Meaning our filings will be consistent with those of a U.S. company. Going forward, we will file our annual reports on Form 10-K and our quarterly statements on Form 10-Q, etcetera.

As a result of this transition to a domestic issuer, the $100 million shelf registration statement that we filed last year on Form F-10 became obsolete as that was a Canadian shelf. And we then filed a new $100 million mixed-use shelf on Form S-3 to replace that. The S-3 was declared effective on April 26, 2019.

More detailed information can be found in our filings on EDGAR and SEDAR. I will now turn the call back over to Dr. Rice.

Bill?.

Thank you, Greg. And I would like to open the call for questions. Operator, if you could please introduce the first question..

[Operator Instructions] Your first question comes from the line of Gregory Renza with RBC Capital Markets..

Congratulations on all the progress. I just want to start with a question on 806.

As you've laid out the dosing plan and looking for that first patient to be dosed anytime now, I'm just curious how you could perhaps provide some color on the potential expected cadence of patients to come online to the trial and maybe much towards -- your pointing towards the year-end potentially ASH update for data, essentially, how many patients and what would you like to see at that time..

Thanks for coming on, Greg. In terms of the cadence, it all comes down to the number of clinical trials that you have active, those that are screening, the number of patients you need on each dose level and the rate at which you can accrue the patients. So currently, we have 11 clinical sites already committed to us.

As of today, one of those clinical sites has been initiated and has been screening for patients, in particular, we're trying to look for the CLL patients that we spoke about earlier. So we're clearly screening and trying to select the best possible patients in. On this first dose level, we only have to have one patient.

Again, we want to make sure we get through the 28-day cycle with that one patients so that we don't have the need to expand out further. Then, we -- at the second dose level, we also have to have only one patient, and then after that will be the three by 3.

So over the next week to two weeks, if we can get this first patient on, then it's 28-day cycle after that, then you have to assume it's a week to 10 days to collect all of the data for the cohort Safety Review Board, that's the PK data, the safety data, all the data available at that time, so that they can indicate let's move up to the next level.

During that process, we will also already have been screening for the next patient, so we hope that they would come on immediately. So I would assume there will be five to six weeks between the dose levels, that if the recruitment goes well. And then the third dose level after that with three patients.

So if you look out over time we hope to have, let's say, eight or more patients, a valuable data that we can discuss at the time we get to ASH that is assuming that we can advance forward on the B-cell malignancy trial and then also if the plasma exposure levels, the plasma concentrations levels that we see in these B-cell malignancy patients, if we believe it hit the threshold, that will be active in AML patients and we hope to be able to start that AML trial possibly in the third quarter or maybe you can have a few patients on there.

So that is our intent, but you know that early on in the year, you also have to submit your abstract to ASH quite early. We likely will put in placeholder with some information and then update that -- the poster or presentation at ASH with the available data at that time.

Does that answer your question?.

A quick follow-up with respect, if I may, to just your thoughts as these sites are lining up, just your comments on the competitive nature of trials in these indications and how that squares with the -- certainly the enthusiasm that has been generated from the physician community for and the patient community for [indiscernible]?.

I'll bet you still the question at several other people on to. So it is very competitive. So we looked at all the clinical sites that are being utilized by the various other companies that are in, especially in the non-covalent BTK space.

So some of those sites we will go to and then also some of the other sites we'll focus on will be the major institutional sites. I don't want to name them at this point. Well, there actually on the -- some of those are on the clinicaltrials.gov. Again, you take a look at MD Anderson Cancer Center.

So we know that they can accrue patients quite readily and we're not necessarily competitive with all the other molecules there. In addition to that, we're going into some of the more of the community sites also because many of these community sites have patients that are referred from different areas.

For instance, you look in Oregon, there is a community site up there that -- for which many of the patients that don't go to OHSU Oregon, they go to this particular site.

So we're being very strategic in going to some of the major sites because we need those and we'll need them for publication, and especially when we get into the higher dose levels, we will need more patients rapidly, but we feel as though these community sites where we have the IRB allowance that covers many of these simultaneously that will be able to use these sites and be able to recruit quickly.

We're also looking at other CROs that specialize in Phase I site and they have been eager to get to join the trial.

We -- based on everything that we've heard from the various investigators, we believe that, well, they're actually competing to BPIs at their clinical sites because they believe in the molecule, they want to put patients on and so we hope we're going to be able to recruit quickly..

Your next question comes from the line of Matt Biegler with Oppenheimer..

Maybe I'll just start with just a quick clarification on the 806 Phase I design. In the past, you've mentioned having the option to dose healthy volunteers to expedite that transition to AML.

Is this option on the table?.

So that does exist. When we first talked about that and when we spoke to the FDA that was at our pre-IND meeting some time ago, and at that time we did not have talks data. We did not have the starting dose for 806, and so we put that on the table in case we needed it. We have kept it on the table, if we do need it.

But now that we see that our starting dose is 150 milligram twice a day, it is quite possible, if humans have pharmacokinetics even similar to that of the animal model, it's quite possible that we'll be able to see exposure levels of plasma concentrations that are going to be therapeutic for AML patients and we could present that and go directly into the AML patient population.

So we wrote our IND to give us the flexibility to go directly from the B-cell cancer patients, if it's the first couple of doses, to go into then AML and MDS patients.

But if we think that the pharmacokinetics are going to be, let's say, lesser exposure at those dose levels, we can always use the healthy volunteers to move forward as quickly as possible.

We've even considered doing those -- some of those studies so that we can perform certain biomarker assays, you can use them for other types of studies also, drug-drug interactions, food -- the food effects. So we're going to keep that option on the table, but we may not need to use it..

And then maybe I'll follow up with a more theoretical question, if I may. So I'm interested to know if you guys are expecting differences in response kinetics, specifically between the B-cell malignancies and AML.

For example, we know responses to BTK inhibitors typically develop and deepen over several months whereas FLT3 inhibitors seem to work very quickly. So maybe any insights that you might have from your preclinical work would be helpful there..

It's actually a good question.

So clearly with the AML, if the animal studies translate into humans, which typically they do, you see a very rapid response in the animal studies, and you can see, we'll be presenting some of the data at EHA in which we go out to 120 days in our animal models and we even had one animal that we let go up to 1000 cubic millimeters the tumors and then hit them with the drug and it still dropped down to zero with no toxicity and no indication of drug resistance.

So we believe these data should translate very quickly into AML patients, and you will see -- we expect to see a rapid response in AML patients during the first month.

The other thing is when talk about the B-cell malignancies and the fact that it tends to emerge over time the responses and then starts out more slowly and then deepen, we may see that that.

But on the other hand, you have to remember the mechanism by which the BTK inhibitors work, and the ibrutinib, for example, the acalabrutinib and ibrutinib, they work much -- in many ways indirectly through the bone marrow and the lymphoid tissues such that those tissues then direct the CLL cells to leave the protected environments go on to peripheral blood and die.

And so that's part of why you see it beginning slowly and then ramping up over time.

One thing that we've seen with our drug is that this drug directly kills the sales much more effectively than the other BTK inhibitors we've looked at, like I said, 1,000 times more potent at directly killing the cells because we inhibit BTK, FLT3, we inhibit AKT pathways, we inhibit a number of pathways that allow us to directly kill the cells.

If that is true then we may actually see earlier responses in the patients. That's just again theoretical, but there's no guarantee. But if I had to bank it based on mechanistic properties, I would say that, but in vivo the disease may be very different and they just be fine to emerge. So it's a good question but it is theoretical at this point..

And our next question comes from the line of Joe Pantginis with HC Wainwright..

Bill, I have a question on the 253 study. Nice to see that you've enrolled the second patient.

My question is, since the criteria are so stringent with regard to getting a high performance AML patient, do you think the potential exists that you might see more predominant MDS patients enrolled in the study?.

In fact this patients that we just enrolled is an MDS patient..

No, besides that one..

So yes, going forward, we believe we can because, first of all, AML is a great market to go after but so MDS, and in particular on these early patients in which we only have one patient on each of the two lower dose levels, we wanted really high performance patients and that's very difficult to find in AML.

So we did turn to the clinical sites and we said, hey, let's go for an MDS patient and we found one that looks like he has a great performance status.

So we've completed the first dosing there, everything went well, and we'll continue on, but as we go further and further into this, we do want to collect both AML and MDS patients into this trial because we hope that this drug, now that we know what's actually is a MYC inhibitor, it may have much more activity than we originally thought, and we'll be measuring MYC inhibition P21 in the patient and looking for a variety of parameters.

These MDS patients also looking for transfusion independence in a variety of different markers. So we're very happy to get an MDS based on there and as you suggest, we should continue doing that going forward. And thanks for coming on. Here today, Joe, and asking a question. We appreciate it..

Your next question comes from the line of John Newman with Canaccord Genuity..

Just had two quick questions. The first one is, what would your expectation be for the patient mix on the CG-806 study here; you're obviously allowing patients with a very different B-cell malignancies whether it be CLL, SLL or NHL. Just curious if you would expect to get more of one of those than the other.

And then, for 253, given that you do have an MDS patient now, do you think that that provides an opportunity for potentially longer dosing, assuming that the patient may or may not progress as quickly as AML? And then just wonder if you could remind us the dosing protocol for 253, if you're simply dosing to progression.

I know in AML, as you previously stated, sometimes patients will be dosed for a while, but then doctors will sort of moving to something else if they don't see a response quickly..

Yes, two good questions. So let's turn with 253 first.

Good example is, our very first dose level with 253, we made it through there, no adverse events, but the physician took the patient off after 28 days because they were not necessarily seeing benefit and in those patients, if you're not seeing benefit then it's high risk to leave a patient on there.

But once we collected the MYC and P21 data, we present -- that was two weeks later, the physician kind of slapped his forehead and said, ah, I wish I had left him on because by 28 days that had dropped down to 70% and there was a clear trend of dropping.

It's possible that in that second month, MYCs might have dropped even further and he might have had responses. That is pure conjecture. The flip side of that is, the patient may have had an SAE or death because these patients are so sick and that could have been negative for us. So the physician did the right thing there.

In the second patient here, again it's an MDS patient, and as long as the patients are doing well and they're receiving benefit and they're not decompensating by any means, we're happy to leave them on this -- the study that will be at the physicians prerogative, they'll make the judgment, but we'll be happy to leave them on there, collect the data and now that we're getting into the higher dose, we hope to see some benefit, especially in a patient that these patients are not dying day 1, the MDS patients.

So we'll have to see what we get. We hope that the patient stays on the longer, we collect data and we'll keep you updated as to what we see there. Again, we try to be very transparent about this. It's open label. All right, 806 -- expectations for 806, one type of patient or the other.

If you look at all the different types of AML -- excuse me, the B-cell malignancy patients out there, people tend to focus on the CLL because they know that area better, so we are going to look at CLL patients, and ironically, we are getting a lot of those kind of presenting to the clinical sites now much more than I expected initially, and what we're hearing is, these patients are failing the traditional drugs, both the cytotoxic drugs, the R-CHOP, all those types of therapies, as well as the ibrutinib and some of the others, they're coming in and they're looking for something different.

They're going to have to decide if they want to go on venetoclax, our drug or have they already filled venetoclax. So that's something that we're dealing with and we'll keep an eye on that, but I think we're going to be able to get plenty of CLL patients on this trial. The most common one out there is deal DLBCL.

But many patients -- I mean, many companies are kind of afraid to go after too many DLBCLs because they tend just not respond well. So I think they're going to be more of those patients available.

Perhaps as we get into the higher doses, we may try to populate a little bit more with the DLBCL where we feel as though we can have a stronger effect, but when we profiled all these different types of cancer cells in vitro, we actually have a slide on this in our deck, but you can see is we got an IC50 for our drug versus ibrutinib.

It turns out the DLBCLs had a higher IC50 than all the other types of B-cell malignancies, that surprised us.

But when we did, and that was with cytotoxicity assay, but when we that clonogenic assay, which is the real assay, can they form colonies grown each other, then 806 was still active in the single-digit nanomolar range and still 1,000 times more potent than ibrutinib.

So it may be that we have activity against those and we'll just have to see what comes into the clinic.

But again, that's why we want to go to all these different sites, both the community sites, the major institutional sites, because at the major institutional sites, you tend to get a lot of the diseased patients, the unusual, and we hope to get a kind of a smattering of all different types of patients here.

So hope that I answered your question?.

And your next question comes from the line of Matthew Cross with Jones Trading..

Congrats on the progress in the clinic thus far this year with both lead candidates and thanks for taking my questions. So you mentioned that following dose escalation for CG-806, you'd anticipate moving into four expansion cohorts of B-cell malignancies patients.

So would you envision this as grouping simply based on indication or could these potentially be distinguished based on prior treatment, cytogenetics, such as the C481S mutants, etcetera? And I guess are you planning to stratify along any of those lines and data cuts for the dose escalation phase?.

So let me answer that one and then we'll go to your next one. And the answer to that is, yes and yes. So we recommended to the FDA when we submitted the IND that we do two separate expansions, maybe 1, and we will have to choose those at the time depending on the data.

The FDA came back and said no, what we are going to allow you to do is four separate expansions and instead of 15 patients each, we'll let you go to 25 to 30 patients each and that way you can collect enough data such that if you truly have benefit in these patients depending on the activity, you can expand those into Phase II and registrational type studies, if it's a patient population with on medical need and you're seeing strong benefit in the patients.

So the categories were DLBCL, that's one; the second was CLL, SLL; the third was MCL, and then the fourth, they group all other types of lymphomas as indolent lymphomas and said that we could group all the data together and combine the data for our analysis.

So this was better than we could have ever expected, but in each of these, let's say, CLL, SLL. If we see great activity with C481S, as we may go after that population, but we might also see, let's say, a Waldenstrom's, if we get great activity there, we may pursue that.

So a lot of this will be depend on the data, but the way the FDA allowed us to do this and to do more patients in these four different areas, it gives us great latitude to be able to select the categories of patients and then sub-stratify within those depending on the genetic parameters and based on the data that we've seen both in vitro as well as in the clinical trial.

So it all depends on data, but we have flexibility and the latitude to go after whatever we think will work best for the patients and build value in the drugs fastest, but less speed, more haste.

Okay, second question?.

And thank you so much for, that clarification is very helpful.

And second one was, so given that the preclinical data that you presented at AACR for 806 in combination with venetoclax, I mean we're considering the clinical trajectory for 806, when would you hope to explore in the clinical setting? Is this something that makes sense to initiate this is a separate trial when the expansion cohorts in B-cell malignancy start to enroll, where could this come sooner or later based on your available resources and current thinking?.

I will be careful what I say, but it definitely could come sooner.

This is something that we want to explore as rapidly as possible for two reasons, one is yes, you have to perform the single agent because everyone wants to understand what are the toxicities that are associated with your drug, what are the activities associated with your drug and to prove to the world that your drug is active in these indications.

And it also gives you an understanding of the tox profile by itself. In parallel, if I am saying, yes, we were able to run a drug combination with venetoclax that could provide us with tremendous value, because every drug into the future is going to be used in combination. We think the major drug for combination in these indications is venetoclax.

So we would like to be able to do that. And again, it will give us -- we don't see overlapping toxicities based on what we've seen in animal studies and what we know about venetoclax. So we think this could be a great combination moving forward.

So out of all the drugs out there, we would probably select venetoclax for a dose escalation combination study if we were to do that and if there FDA were to allow it. I think that's enough disclaimers and ifs in there, but you can clearly see where our thoughts are going as our yours.

Fair enough?.

Fair enough. No, I appreciate it and looking forward to seeing how it pans out where you guys decide. Thanks again for the questions..

[Operator instructions] Our next question comes from George [ph] call with B. Riley FBR..

Thanks for a very detailed and helpful update. A question on 806. I mean, you already alluded to all the multiple drugs that are out there, both approved and under-study for these hematologic malignancies. I'm wondering what your criteria are for prior therapy in actually both of the trials for 253 and 806..

So when I heard very detailed, I think that's a euphemism for a long-winded but we will allow us to [indiscernible] offline. All right, so, in terms of prior therapy, I will just tell you, we're agnostic.

So for AML, we actually want patients who have failed other FLT3 inhibitors because we've demonstrated in vitro and with patient samples and in PDX models that even if the patients have multiple mutations in FLT3, they are resistant to the other FLT3 inhibitors, they still respond to our drug. So, we would welcome those.

If they failed hypomethylating agents, we've seen that our drug still work on this. So for AML literally any type of failures that occurred to date, we would be happy to take in our trial because we have broad activity, but we want to make sure that we get certain populations in so that we have data that can guide us into the expansion phase.

And then the same is true with the B-cell malignancies. So if they failed CHOP, R-CHOP, any of the covalent BTK, non-covalent BTK inhibitors, venetoclax, we are -- again, we're agnostic; we believe we can target all those populations. No one drug is going to cure all of these patients.

But if we can demonstrate activity in those patients, let's say, a patient comes in with a mutation, BCL-2 mutation for venetoclax, well, we would want to treat that patient and it may turn out that ultimately we treat it with hypomethylating -- not hypomethylating, but another type of drug rather than with venetoclax for the B-cell malignancies for combination, but we would want those patients.

And in fact, the more of those that we can get, the kind of unusual, the patients who have failed all the other drugs that helps us in terms of the accelerated approval because we think we'll have activity.

But I will also say all of this is based on where we are today, we have no PK, no exposure data in humans at this point, it's all based on preclinical data. So buckle up, hopefully, we'll get good exposures and will be agnostic to the patient population.

But if we don't get as good exposures, we'll have to try to select those that are the most sensitive.

Is that a fair analysis?.

I mean, that's typically the first-in-human type of trial design, but it also brings the question that if in the best case scenario, if it says as good and a superior to other drugs, you want to move this up the line, as it were, and maybe if you got to be front line because you're targeting to two kinases, as the other drug only do one -- actually more than two, because you have a multi-kinase paradigm there.

Have you thought about that? I mean, maybe it's too early to think about that, but I just wanted to comment on that..

Well, it's never too early. You have to collect the data and move it up the line. So, of course, we're thinking about that, but we have to collect the data and present it to the FDA, to the world to justify that.

Along those lines, as we talked about earlier, if we can do a combination study early on with venetoclax and if that's in AML patients, well, guess what the toxicities and the overall effect would apply both to the AML as well as B-cell malignancies. And so, we'd be able to hopefully move that up more quickly.

The other thing is, once we get to our recommended Phase II dose, we want to work with Dr. Brian Druker and The Beat AML initiative, which now has a Phase I trial, in which they take AML patients that have just been diagnosed.

So these are naive patients, never been treated with other drugs and they will treat with single agent and then with combination with your drug to show activity in that first line set of patients. And so, yes, we have to start out with a relapsed refractory patient. We'd like to move up as quickly as possible.

Data are the only thing that will allow us to do that, but the relationship with Dr. Druker also gains us access into that Beat AML trial that we hope we can take advantage of once we get the Phase II dose, yes. So we agree with you..

Thank you. And I'm currently showing no further questions. I'll now turn the call back over to Dr. Rice for closing remarks..

All right, well, everyone thank you for joining us today. With two compounds now in clinical trials, we're excited about the opportunity to advance treatment options for patients with the malignancies.

We're committed to improving the odds of achieving long-term benefit for these patients and maximizing shareholder value with the diligent development of these lead assets. So as always say, no unforced errors, speed, not haste.

We're very pleased to have reached this critical juncture with the support of our staff, shareholders and a stellar group of researchers and advisors. We thank you and have a wonderful evening. Bye-bye..

Thank you, ladies and gentlemen. That concludes today's conference. You may all disconnect and have a wonderful day..