Q3 2020 Deciphera Pharmaceuticals Inc Earnings Call

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Operator: Good afternoon, everyone, and welcome to the Decipher Pharmaceuticals 3rd Quarter 2020 Financial Results Conference Call. At this time, all lines are in a listen-only mode.

Good afternoon, everyone and welcome to the Deciphered Pharmaceuticals third quarter 2020 financial results conference call at.

At this time all lines are in listen only mode. After.

Operator: After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, please press star 1 on your touchtone keypad. Please be advised that today's call is being recorded. If you require any further assistance during the conference, please press star zero, and an operator will be happy to assist you. At this time, I would now like to turn the call over to Jen Robinson, Vice President of Investment Relations. Jen?

After the speaker's presentation, there will be a question and answer session.

So question during the session. Please press star one of your Touchtone keypad.

Please be advised that todays call is being recorded.

If your parents any further assistance during the conference. Please press Star Zero I place I'll be happy to assist you.

At this time I would now like to turn the call over to General Anderson, Vice President Investor Relations Ken.

Jennifer Larson: Thank you, Operator. Welcome, and thank you for joining us today to discuss Deciphera's third quarter 2020 financial results. I'm Jen Robinson, Vice President, Investor Relations at Deciphera. With me this afternoon to discuss the financial results and provide a general corporate update are Steve Hoerter, President and Chief Executive Officer, Dan Martin, Chief Commercial Officer, Matt Sherman, Chief Medical Officer, and Tucker Kelly, Chief Financial Officer. Before we begin, I would like to remind you that any statements we make on this call that are not historical facts are forward-looking statements reflecting the current beliefs and expectations of management made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Thank you operator, welcome and thank you for joining us today to discuss the Cyprus third quarter 2020 financial result.

I'm generally Vincent Vice President Investor Relations at the Cyprus.

With me this afternoon to discuss the financial results and provide a general corporate update RC Herder, President and Chief Executive Officer.

And Martin Chief Commercial Officer, Nat Sherman, Chief Medical Officer, and Soccer, Kelly Chief Financial Officer.

Before we begin I would like to remind you that any statements. We make on this call that are not historical facts are forward looking statements, reflecting the current beliefs and expectations of management made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.

Jennifer Larson: Examples of forward-looking statements made during this conference call include our expectations for our preclinical and clinical programs, as well as our commercialization of Chemlock and 2020 guidance. Forward-looking statements made on this call involve substantial risks and uncertainties that could cause actual results to differ materially from those expressed or implied by the forward-looking statements, and we cannot assure you that our expectations will be achieved. Such risks and uncertainties include those set forth in our most recent quarterly report on Form 10-Q, as well as in our other FEC filings. We assume no obligation to update or revise any forward-looking statements.

Forward looking statements made during this conference call include our expectations for our preclinical and clinical programs.

Our commercialization up can lock and 2020 guidance for.

Forward looking statements made on this call involved.

Actual risks and uncertainties that could cause actual results to differ materially from those expressed or implied by the forward looking statements and we cannot assure you that our expectations will be achieved such risks and uncertainties include those set forth in our most recent quarterly report on form 10-Q as well as.

Our other SBC filings, we assume no obligation to update or revise any forward looking statements.

Jennifer Larson: Following this call, a replay will be available on the company's website, www.deciphera.com. With that, I will now turn the call over to Steve Hoerter, President and Chief Executive Officer of Deciphera.

Following this call a replay will be available on the company's website W.W. dot decipher <unk> dot com with that I will now turn the call over to you heard our president and Chief Executive Officer of Decipher Steve.

Steven L. Hoerter: Thank you, Jen. Good afternoon, everyone. And thank you for joining us on today's call. This year has been an incredibly exciting one for Deciphera, a year in which we received regulatory approval for and launched our first medicine, Kenlock, and also made significant progress advancing our pipeline of new product candidates. That we were able to accomplish so much this year, in spite of the challenges of the pandemic, is a testament to the dedication and hard work of the team here at Deciphera and the investigators we work with around the world. We are well positioned for a strong finish to 2020 and eager to continue our mission in 2021. The third quarter marks the first full quarter of results from our ongoing launch of Kenlock in the United States.

Thank you John Good afternoon, everyone and thank you for joining us on todays call. This year has been an incredibly exciting one so to say for a.

A year in which we received regulatory approval for and launched our first medicine can walk and also made significant progress advancing our pipeline of new product candidates.

That we were able to accomplish so much this year in spite of the challenges of the pandemic is a testament to the dedication and hard work of the team here at the site.

And the investigators we work with around the world.

Daniel C. Martin: Kenlock, which was approved by the FDA in May of this year, was designed to address the broad spectrum of mutations that are one of the hallmarks of gastrointestinal stromal tumors, or GISTs. In a moment, Dan Martin, our Chief Commercial Officer, will share with you highlights from the launch and outline how we have been successful in establishing Kenlock as the standard of care in our approved indication. We are focused on exploring the full potential of Kenloch to benefit people with GIST. And on today's call, Matt Sherman, our Chief Medical Officer, will review recent data updates from the Kenloch Development Program, which reinforce the potential best-in-class profile of Kenloch in this disease. Our near-term focus for further clinical development remains in the second-line setting, and we are on track to complete target enrollment by the end of this year in the Phase 3 Intrigue Study, in which we are comparing Kenlock to Sunitinib in the second line.

Daniel C. Martin: We believe Kenlock has the potential to play an even broader role in the treatment of GIST, and we look forward to sharing with you our vision for further clinical development in the coming months. Additionally, one of our goals this year was to expand access to Kinloch for people with GIST outside the United States. To that end, we announce today that we recently submitted a Marketing Authorization Application, or MAA, to the European Medicines Agency.

Okay process.

We look forward to working with the EMEA to bring this potential new treatment option to patients and the European Union opinion.

Steven L. Hoerter: The submission was validated by the EMA last month, which signals the beginning of the formal review process. We look forward to working with the EMA to bring this potential new treatment option to patients in the European Union. We also announced today that we intend to establish a direct commercial presence in key markets in Europe to commercialize Kenlock if approved. This nimble organization will be positioned for future expansion as we develop and seek approval for additional decipherer medicines in the coming years. In Europe, we believe the commercial opportunity for GIST is concentrated in the five largest markets, France, Germany, Italy, Spain, and the U.K.

We also announced today that we intend to establish a direct commercial presence in key markets in Europe to commercialize care market approved.

This nimble organization will be physician for future expansion as we develop and seek approval for additional decipherer medicines in the coming years.

In Europe, we believe the commercial opportunity and just as concentrated in the five largest markets, France, Germany, Italy, Spain, and the UK within these countries the treatment of patients with just as often centralized that tertiary treatment centers, which we believe allows us to build an efficient and targeted commercial infrastructure.

As we lay the building blocks in Europe, we continue to make strides toward the commercialization of Ken lock in other areas of the world as well over.

Over the summer we received approvals for Ken Mark in both Canada and Australia.

I'm pleased to announce that we've recently entered into exclusive distribution agreements and both of these territories and in China or partner XI lab filed with the new drug applications, where can lock in July targeting a potential approval next year.

Steven L. Hoerter: Within these countries, the treatment of patients with GIST is often centralized at tertiary treatment centers, which we believe allows us to build an efficient and targeted commercial infrastructure. As we lay the building blocks in Europe, we continue to make strides for the commercialization of Kenloch in other areas of the world as well. Over the summer, we received approvals for Kenloth in both Canada and Australia. I am pleased to announce that we have recently entered into exclusive distribution agreements in both of these territories.

We look forward to working with our partners around the world to bring Ken lots of patients with advanced chess find.

Finally, we continue to advance multiple clinical stage programs that have the potential to these future approved medicines earlier. This year, we presented initial compelling data with robust and it in combination with Paclitaxel and patience with heavily pre treated endometrial Andrew ovarian cancers.

And later this month, we're excited to present additional clinical data with GCC, 30, 14, and tennis and ovule giant tumor.

Steven L. Hoerter: And in China, our partner Xi Lab filed a new drug application for Kenlock in July, targeting a potential approval next year. We look forward to working with our partners around the world to bring Kinloch to patients with advanced chips. Finally, we continue to advance multiple clinical stage programs that have the potential to be future approved medicines. Earlier this year, we presented initial compelling data with ribastinib in combination with paclitaxel in patients with heavily pretreated endometrial and ovarian cancer.

As are clinical stage pipeline comes into focus our novel switch control kinase inhibitor discovery platform continues to provide opportunities for future growth.

I will now turn the call over to Dan Martin Archie commercial officer to discuss the exciting results for the first full quarter of Ken lock commercial sales Dan.

Thank you Steve Good afternoon today I'm pleased to share results from our first full quarter of can lock sales in.

In Q3, we achieved use net product revenue 14 $70 million, bringing total use net product revenue for the first four and a half months of launch to $19.5 million.

While it is important to remember that it is still early in our launch we continue to be very pleased with the way the launch has progressed.

Several important factors contributed to our queue Street results.

Steven L. Hoerter: And later this month, we are excited to present additional clinical data with TCC3014 in Tenosynovial Giant Cell Tumor. As our clinical stage pipeline comes into focus, our novel switch control kinase inhibitor discovery platform continues to provide opportunities for future growth. I'll now turn the call over to Dan Martin, our Chief Commercial Officer, to discuss the exciting results for the first full quarter of Kenloch commercial sales.

We have continued to see strong prescriber demand for Qinghua.

In addition to robust month over month sales growth insights from our recent launch tracking surveys show strong product awareness message recall product perceptions and intense prescribed among physicians who have for fine just patients.

Further a large majority of these physicians indicate they now you can lock as the standard of care treatment for these patients importantly, these metrics tend to be strongest among physicians, who report being detailed by our sales team underscoring the importance of physician reach and access and this promotional insensitive disease area.

Second we saw continued new prescriber growth across both academic and community settings. Thanks to the tireless work of our commercial team to navigate the unprecedented and ongoing challenges of COVID-19 the.

Daniel C. Martin: Thank you, Steve. Good afternoon. Today I'm pleased to share results from our first full quarter of Kinloch sales. In Q3, we achieved U.S. net product revenue of $14.7 million, bringing total U.S. net product revenue for the first four and a half months of launch to $19.5 million. While it is important to remember that it is still early in our launch, we continue to be very pleased with the way the launch has progressed. First, we have continued to see strong prescriber demand for Kinloch. In addition to robust month-over-month sales growth, insights from our recent launch tracking surveys show strong product awareness, message recall, product perceptions, and intent to prescribe among physicians who have fourth-line only patients. Further, a large majority of these physicians indicate they now view Kinloch as the standard of care treatment for these patients.

The number of new can lawn prescribers more than doubled during Q3.

Since launch more than 250, just treaters, representing more than 200 unique institutions have prescribed Kim.

As expected, while just treaters within academic institutions comprise the majority of our early adopters are data suggest new prescriber growth is shifting toward the community setting.

While new academic prescribers grew by more than 80% in Q3, new community prescribers grew by nearly 150%.

During the quarter more than 50% of boat cannot prescribers and cannot treated patients came from community accounts.

Third or market access team continued to deliver broad patient access to Kim marketing Q3, we've been very pleased with our progress in securing payer coverage for Kim occupations with fourth line just.

We've also been very pleased with the performance of our channel partners and our patient support center.

Finally, the percentage of patients in Q3 that received free drug under our patient assistance program or path was at the low end of our estimate of approximately 20% to 30%. However, we anticipate that the percentage maybe somewhat hiring queue for as it's not uncommon for patients to experience increased affordability challenges.

And the year.

Daniel C. Martin: Importantly, these metrics tend to be strongest among physicians who report being detailed by our sales team, underscoring the importance of physician reach and access in this promotionally sensitive disease area. Second, we saw continued new prescriber growth across both academic and community settings. Thanks to the tireless work of our commercial team to navigate the unprecedented and ongoing challenges of COVID-19, the number of new Kinloch prescribers more than doubled during Q3.

Additionally, the percentage maybe hiring Q1 of next year given that the Medicare part D benefit reset on January 1st requiring patients to pay for their deductible and their portion of the coverage gap before reaching the catastrophic coverage cheer.

Before turning the call over to Matt I would like to highlight factors that may impact our results over the next several quarters as I mentioned previously we expect the majority of our future new prescriber growth to come from the community setting where fourth line just patients are much more widely dispersed and physician awareness and knowledge of just as much slower.

When compared to the academic setting.

Daniel C. Martin: Since launch, more than 250 JustTreaters, representing more than 200 unique institutions, have prescribed Kinmont. As expected, while GIST prescribers within academic institutions comprise the majority of our early adopters, our data suggests new prescriber growth is shifting toward the community setting. While new academic prescribers grew by more than 80% in Q3, new community prescribers grew by nearly 150%. During the quarter, more than 50% of both Kinloch prescribers and Kinloch-treated patients came from community accounts.

Analysis of claims data indicates that Cutie oncologists, who treat fourth line and just patients may see only one such patient every 12 to 18 months.

Thus, while we're very pleased with the results we have seen in both academic and comedians patients to date, we recognize that future growth and product awareness and new patient star.

Maybe more challenging and come more slowly as we work to further penetrate the community setting.

And this dynamic may be particularly challenging given the hurdles to physician access created by COVID-19, which we expect to continue as the pandemic persists and potentially intensifies over the next several quarters I will now turn the call over to map to discuss the progress of our clinical programs Matt.

Daniel C. Martin: Third, our market access team continued to deliver broad patient access to Kinloch in Q3. We have been very pleased with our progress in securing payer coverage for Kinloch in patients with fourth-line GIST. We've also been very pleased with the performance of our channel partners and our patient support center. Finally, the percentage of patients in Q3 that received free drugs under our Patient Assistance Program, or PAP, was at the low end of our estimate of approximately 20-30%. However, we anticipate that the PAP percentage may be somewhat higher in Q4, as it's not uncommon for patients to experience increased affordability challenges late in the year. Additionally, the PAT percentage may be higher in Q1 of next year, given that the Medicare Part D benefit resets on January 1st, requiring patients to pay for their deductible and their portion of the coverage gap before reaching the catastrophic coverage tier.

Thank you Dan.

Cannot service is a great example of how we are effectively and efficiently discover developed and now commercialized a product generated from a research platform.

While dance team has been focused on helping Portland, just patient access to mark in the U S. R. A clinical <unk> of continuing to generate and publish additional data Kim Locke.

Or a pipeline programs.

The Steve mentioned earlier post strategic priority is to maximize the potential of Kinloch and Jeff.

To generate additional clinical data for this program and for our other development for the candidates to reach key value inflection points on the weights potential Registrational study and regulatory approval.

For too long, we're keenly focused on the completion of the ongoing phase III troops study and second lunches.

Studies on track to reach for enrollment by year, and and we expect to be able to provide additional guidance.

Daniel C. Martin: Before turning the call over to Matt, I would like to highlight factors that may impact our results over the next several quarters. As I mentioned previously, we expect the majority of our future new prescriber growth to come from the community setting, where fourth-line GIST patients are much more widely dispersed, and physician awareness and knowledge of GIST are much lower when compared to the academic setting. Analysis of claims data indicates that community oncologists who treat fourth-line GIST patients may see only one such patient every 12 to 18 months.

Matthew L. Sherman: Thus, while we are very pleased with the results we have seen in both academic and community institutions to date, we recognize that future growth in product awareness and new patient start may be more challenging and come more slowly as we work to further penetrate the community setting. And this dynamic may be particularly challenging given the hurdles to physician access created by COVID-19, which we expect to continue as the pandemic persists and potentially intensifies over the next several quarters. I will now turn the call over to Matt to discuss the progress of our clinical programs. Matt.

EPS benefit.

Comparison of GE is reported in these two dosing periods demonstrated that Kim was similarly, well tolerated.

Matthew L. Sherman: Thank you, Dan. ChemLabs Service is a great example of how we have effectively and efficiently discovered, developed, and now commercialized a product generated from our research platform. While Dan's team has been focused on helping fourth-line GIST patients access Kinloch in the U.S., our clinical and medical affairs teams have continued to generate and publish additional data on Kinloch in our pipeline program. As Steve mentioned earlier, our strategic priority is to maximize the potential of Kinloch and GIST and to generate additional clinical data for this program and for our other development product candidates to reach key value inflection points on the way to potential registrational studies and For Kinloch, we are keenly focused on the completion of the ongoing Phase III intrigue study in Second Line Jail.

Feedback from key opinion leaders on these data has been very positive and we believe these data have the potential to impact clinical practice.

At the upcoming connective tissue oncology society or cost virtual meeting, we will be presenting new Kim of data from this trial. These.

These data include an oral presentation discussing the extensive heterogeneity of care and PDGF, our alpha mutations as well as the poster discussing cemex demonstrated activity across all kit and PDGF, our alpha visitations in patients and in fact the study.

Ken Lockwood, specifically designed as a drug that can broadly inhibit kit and PDGF, our alpha detailed acquaintances, making it particularly suited to address just a disease that is characterized by a broad spectrum of mutations in these kind of users.

We have also explored came up.

Pillar T in the treatment of additional non just indications in the ongoing phase one study, including systemic mastocytosis or et cetera.

We have decided with input from our these investigators not to invest in further studies in SM at this time.

While we have seen clinical activity NSM and a safety and Tolerability were consistent with what we have reported in just given the overall landscape and the strength of the opportunities we have with Kinloch ingest and with our other product candidates. We believe it is best to focus our resources in areas in which we're able to have the greatest impact.

Matthew L. Sherman: The study is on track to reach full enrollment by year end, and we expect to be able to provide additional guidance on the timing of the primary endpoint at that time. We remain confident in the likelihood of successful entry based on the strong data we have seen in the phase one and phase three studies that demonstrate broad clinical activity in patients with, At the recent ESMO Virtual Congress, we presented new data and two mini-oral presentations related to Kinloch that continue to demonstrate the strong clinical benefit for second-line through fourth-line plus gestation. The first mini-oral presentation provided longer-term follow-up results from the INVICTUS study and fourth-line GIST that reinforced the exceptional progression-free survival and overall survival benefit observed at the time of the initial database lock.

As we continue to advance our development activities across the portfolio. We're very excited about the potential for both DCC 30, 14, a potent and selective inhibitor of CSF, one are ever baricitinib, our potent and selective tied to inhibitor.

We are developing PCC 30, 40 for the treatment of tennis, Inovio giant cell tumor or TGC team, which has significant morbidity for these patients and is driven by genetic translocation certain sales within the tumor, causing an overproduction of sales of one the like and for the sales of one receptor.

The only approved systemic therapy for patients with TGC hit this taxi Darden is a small molecule inhibitor CSF, one our which is subject to a rems program do this had a toxicity and adverse event that it's got to be an off target effect.

We believe that TCC 30, 40 has the potential to be a best in class CSF, one receptor inhibitor and to fill the unmet medical need for an effective and well tolerated treatment for patients with TGC.

Matthew L. Sherman: The updated data provided an additional nine months of follow-up and demonstrated that treatment with Kinloch continued to provide clinically meaningful benefit with a PFS maintained at 6.3 months. And importantly, the median OS benefit improved from an initial 15.1 months to an overall survival that has now not been reached. In addition, the updated safety findings were consistent with the previous primary analysis results, demonstrating that Kinloch was generally well-tolerated.

In an oral presentation at sea talk later this month, we are excited to present results for more than 20, TGC patients across multiple dose levels in dose cohorts from the dose escalation portion of the phase. One study. In addition, we are on track to select a recommended phase two dose and to initiate the expansion cohort the phase one two study.

And TGC t. patients.

Turning to our vast net are potent and selective type two inhibitor, which is currently being studied in combination with chemotherapy.

It was a target primarily express the endothelial sales and tied to expressing macrophages are tests and plays an important role in the Andrew Genesis as part of the NGL poets and tied to signaling axis.

Matthew L. Sherman: The second mini-oral presentation of ESMO provided exciting data from the ongoing Phase 1 study of chemoth in patients with 2nd line through 4th line plus GIFs who had just escalated to 150 mg twice daily. In the Phase I study, patients were permitted to dose escalate to Kinloch 150 mg twice daily after disease progression at 150 mg once daily. These data show that across all three patient groups, treatment with 150 milligrams twice daily provided an additional clinically meaningful PFF benefit. Comparison of TEAEs reported in these two dozen periods demonstrated that ChemOx was similarly well-tolerated.

We were very pleased with the recent data presented at ASCO in ESMO from the two phase one the two studies in combination with Paclitaxel and recover platinum.

In particular, we presented data showing strong preliminary activity in patients with endometrial and platinum resistant ovarian cancer in part two of the Paclitaxel combination study.

Data presented at the ESMO virtual Congress 2020 in platinum resistant ovarian cancer demonstrated encouraging efficacy with an objective response rate of 38% confirmed the unconfirmed and the clinical benefit rate of 88% at eight weeks in heavily pretreated patients.

Ill patients received prior platinum and Taxane based therapy, 90% of patients received deficits AMAP, 62% received a PARP inhibitor and 31% received immunotherapy.

Matthew L. Sherman: Feedback from key opinion leaders on these data has been very positive, and we believe these data have the potential to impact clinical practice. At the upcoming Connective Tissue Oncology Society, or CTOS, virtual meeting, we will be presenting new clinical data from the INVICTUS trial. These data include an oral presentation discussing the extensive heterogeneity of KIT and PDGFR-alpha mutations, as well as a poster discussing Kinloch's demonstrated activity across all KIT and PDGFR-alpha mutations in patients in the INVICTUS study. Kinloch was specifically designed as a drug that can broadly inhibit KIT and PDGFR-alpha-mutated kinase.

Matthew L. Sherman: Making it particularly suited to address GIST, a disease that is characterized by a broad spectrum of mutations in these kinases. We have also explored Kenloch's utility in the treatment of additional non-GIST indications in the ongoing Phase I study, including systemic mastocytosis (SM). However, we have decided, with input from our lead investigators, not to invest in further studies in SM at this time.

Matthew L. Sherman: While we have seen clinical activity in SM, and the safety and tolerability were consistent with what we've reported in JIST, given the overall landscape and the strength of the opportunities we have with Kinloch and JIST and with our other product candidates, we believe it is best to focus our resources on areas in which we're able to have the greatest impact. As we continue to advance our development activities across the portfolio, we are very excited about the potential for both DCC3014, our potent and selective inhibitor of CSF1R, and ribacinib, our potent and selective type 2 inhibitor. We're developing DCC3014 for the treatment of penicillinobulogenital tumor or TGCT, which has significant morbidity for these patients and is driven by a genetic translocation in certain cells within the tumor, causing an overproduction of CSF-1, the ligand for the CSF-1 receptor.

Let's see also the three months ended September 30th 2020 wasn't material as the majority of the manufacturing costs related to Kinloch sales will encourage prior to empty approval and thus were recorded as R&D expense.

Cost of sales will not be significant until the initial prelaunch inventories depleted and additionally inventories manufacturers insult.

And the third quarter of 2020 or total operating expenses, excluding cost of sales were $79 million compared to total operating expenses of 76 nine in the second quarter.

Research and development expenses, where approximately 49 million and selling general and administrative expenses, where approximately 39th for the third quarter of 2020.

We expect our operating expenses increased modestly in the coming quarters as we continue to invest in the development of our clinical pipeline. The commercial launch of Kinloch in the U S and prepare for potential commercial launch Europe.

Matthew L. Sherman: The only approved systemic therapy for patients with TGCT is pexidartanib, a small molecule inhibitor of CSF1R, which is subject to a REMS program due to hepatiotoxicity, an adverse event that is thought to be an off-target effect. We believe that DCC3014 has the potential to be a best-in-class CSF1 receptor inhibitor and to fulfill the unmet medical need for an effective and well-tolerated treatment for patients with TGCT. And an oral presentation at CTAS later this year, we are excited to present results from more than 20 TGCT patients across multiple dose levels and dose cohorts from the dose escalation portion of the Phase 1 study. In addition, we are on track to select a recommended Phase 2 dose and initiate the expansion cohort of the Phase 1-2 study in TGCT patients. Turning to her death,

Matthew L. Sherman: Our potent and selective type 2 inhibitor, which is currently being studied in combination with chemotherapy. TITU is a target primarily expressed in endothelial cells and TITU-expressing macrophages or caps and plays an important role in angiogenesis as part of the angiopoietin signaling activity. We were very pleased with the recent data presented at ASCO and ESMO from the two Phase 1b2 studies in combination with paclitaxel and with carboplatin. In particular, we presented data showing strong preliminary activity in patients with endometrial and platelet-resistant ovarian cancer in Part 2 of the Paclitaxel Combination Study. Data presented at the ESMO Virtual Congress 2020 in platelet-resistant ovarian cancer demonstrated encouraging efficacy with an objective response rate of 38%, confirmed and unconfirmed, and a clinical benefit rate of 88% at 8 weeks in heavily pretreated patients. All patients received cryoplatinum and taxane-based therapy.

On what we think are the key themes. This quarter, we've been really pleased to see the continued strong demand not.

Not only in terms of the numbers themselves the revenue numbers themselves, but also.

Any number of measures from our.

Various launch tracking service.

The new prescriber growth that we saw as well as broad access we were really pleased with how payer policies have come into place for for can lock in the fourth line.

And in terms of specific metrics. Our our goal is on these calls to provide color that is relevant to.

Today, our launch progress and expectations moving forward.

Matthew L. Sherman: 90% of the patients received deficizumab, 62% received the PARK inhibitor, and 31% received the immunotherapy. In addition to these data, we presented compelling data from the individual cohort at the ASCO 2020 virtual program showing promising preliminary anti-tumor activity and favorable tolerability with an objective response rate of 39%, confirmed and unconfirmed, and a clinical benefit rate of 72% at eight weeks, also in heavily pretreated patients. We look forward to providing updated results from these ongoing Phase 1B2 studies, as well as additional guidance on our clinical and regulatory plans for our vast, Finally, we continue to be excited about the prospects for DCC3116, our potential first-in-class oligokinase inhibitor designed to treat mutant RAS cancer. We are aiming to submit the IMD in the fourth quarter of this year, but this event may shift to the first quarter of 2021.

I'm more of a community treaters hold onto those late stage patients as opposed to I.

Maintaining the same referral pattern they had historically.

Matthew L. Sherman: We're making great progress across each of our programs in our pipeline, and we believe that this is just the beginning of making a meaningful difference in the treatment of patients with cancer and rare diseases. I will now turn the call over to Tucker Kelly, our Chief Financial Officer, to review the financial results.

And so while it's still early days and we don't have answers to all of these questions. What we what we are seeing is.

Slightly more than that 40% that we expected to occur in the in the community setting for late line, just we're seeing slightly more than 50% thus far.

Which were encouraged to see.

But like I said in my prepared remarks, I think it's really important one thing we want to highlight is and we said this from prior calls although the.

Thomas Patrick Kelly: Thanks, Matt. I'd like to review the highlights from our third quarter 2020 financial results, which includes our first complete quarter of Kinloch product sales. Total revenue for the quarter was $15.5 million, which included $15.2 million of net product sales of Kinloch and $300,000 of collaboration revenue. Net product revenue included $14.7 million in U.S. product sales, as well as approximately $500,000 in product sales of Kinloch outside the U.S. under the Early Access Program. The growth to net adjustment in Q3 was slightly lower than our prior guidance of approximately 15%.

Majority of our early adopters, we're in the academic setting and we've seen some nice growth in early days in the community setting we expect moving forward just because of the nature of the structure of the market that future growth will need to increasingly come from the community setting and.

That's a setting where patients are much more.

Widely dispersed as I mentioned in my prepared remarks, you know a lot of.

Patients excuse me a lot of prescribers in the community setting may treat only one patient every 12 to 18 months with late line, just and so given that in the lower awareness and lower knowledge.

We're cognizant of the fact that continued growth, which will depend on our ability to continue to penetrate not setting the community setting maybe more challenging it comes from what more slowly.

Particularly in light of the ongoing challenges of the pandemic, which I think we all know is likely to persist and perhaps even intensify in the coming quarters. So that's how we're thinking about sort of source of business.

Thomas Patrick Kelly: I would note that this adjustment is likely to increase in Q4 and in Q1 as we accrue for anticipated Medicare Part D rebates required for existing Kinloch patients who will re-enter the coverage gap in January. Cost of sales for the three months ended September 30, 2020 was immaterial, as a majority of the manufacturing costs related to Kinloch sales were incurred prior to FDA approval and thus were recorded as R&D expense. Cost of sales will not be significant until the initial pre-launch inventory is depleted and additional inventory is manufactured and sold. In the third quarter of 2020, our total operating expenses, excluding cost of sales, were $79 million, compared to total operating expenses of $76 million in the second quarter.

Just overall and freaking lock as we look at.

Got it thank you and if they can speak and one more for Steve and prepared remarks, I think I alluded to a broader potential for can lock and get any kind of sounded like you weren't slowly talking about second line. So can you elaborate on what you meant there.

Yeah. Thanks, Jess it's a good question, we're very committed with can lots of to fully exploring the potential of the drug interest even beyond where we are now currently standard of care on the fourth line is Dan was describing and also beyond the entries study and the second one seven you know we have a very active dragon this disease.

And we think there may well be other places, where we could explore the drugs utility we're not ready to share details about that vision and that strategy will do that over the course of the coming months, but we are fully committed to conducting further clinical study of this drug and just.

Got it thank you.

Our next question comes from the line of Chris Raymond with Piper Sandra Your line is open.

Thomas Patrick Kelly: Research and development expenses were approximately $49 million, and selling, general, and administrative expenses were approximately $30 million for the third quarter of 2020. We expect our operating expenses to increase modestly in the coming quarters as we continue investing in the development of our clinical pipeline, the commercial launch of Kinloch in the U.S., and prepare for a potential commercial launch in Europe. We ended the third quarter in a strong financial position and remain well capitalized, ending the quarter with cash, cash equivalents, and marketable securities of approximately 584 million, which we expect will be sufficient to fund our operations into the second half of 2022. With that, I'll now turn the call back over to you. Thank you, Tucker. I'm extremely proud of what our team has accomplished so far this year.

Hi, Good afternoon. This is Alison back on for Chris Thanks for taking my question.

So first one on on the cannot dynamics I think class corner, you'd you'd call back Ah Ah Ah slight revenue benefit from Kinloch inventory belt soap it just hoping you could provide any color on.

Whether there was any inventory and packed this corner or even just directionally help us understand Harper magnitude.

Our our direction up any inventory impact in Q3 compares to keep too and and maybe a similar question on.

A new patient our new commercial patient at from the the expanded access program and and how that played into the queue three revenue number.

Yeah. Thanks for the questions Allison a list and Martin to take both of those.

Yes, thanks, Alison good questions. So the first one related to inventory build inventory build was not a significant contributor to our future revenue performance.

And then on the EAP front as we've shared previously.

There were a number of patients who converted from our EAP program too commercial.

Product at the time of approval and our Kyushu revenues did include continue to include a modest contribution from those patients, but we haven't provided specific numbers, but yes Q3 did include a modest contribution from those patients who were sown therapy.

Steven L. Hoerter: We have delivered on our promise to bring an important new medicine to patients with cancer with the approval and successful initial launch of Kenlock in the United States and are now working to bring this novel product to patients with advanced gist around the world. Meanwhile, we continue to advance the rest of our pipeline based on our novel switch control kinase inhibitor platform, and we look forward to presenting updated data on DCC 3014 at the CTOS meeting later this month. Operator, I'd now like to open the call for Q&A. As a reminder, ladies and gentlemen, to ask a question at this time, please press the star and the number one when you touch the telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key.

Okay, Thanks, and maybe just one more.

Some of the day that you had asthma all specifically that.

Data on <unk> from the first one the intra patient dose escalation.

That that was really supportive of of treating patients past progression.

And up dosing them to the to the VIP dose.

Really the later lying patient seen a nice benefit on PFS too.

So so I was hoping you could maybe talk to how that compares with with that early launch experience and and your messaging for Kinloch.

And basically how willing are are physicians to treat past progression and those later like just patients.

Operator: Our first question comes from the line of Jessica Fye with J.P. Morgan. Your line is open. Hey guys, good afternoon, congrats on the quarter. I'm curious if you can give a little more color about the Kinloch dynamics. For example, is it possible to find the average number of patients on Kinloch in the quarter and how many were on therapy as of quarter end? Yeah, hi Jess, it's Steve.

Okay and would you like to take that.

Sure absolutely so.

Good question, yes.

We mentioned that data.

Number of times I think that's really interesting data.

<unk> also said previously though that.

Steven L. Hoerter: Thanks for your voice call. And thanks for the question. I'll ask Dan Martin, who's on the call, to address your question. Hey, Jess.

Daniel C. Martin: Thanks for the question. It's a good one. So really, I think we're just going to remain focused on what we think were the key themes this quarter. We've been really pleased to see the continued strong demand, not only in terms of the numbers themselves, the revenue numbers themselves, but also a number of measures from our various launch tracking surveys. The new prescriber growth that we saw, as well as broad access, we've been really pleased with how payer policies have come into place for Kinloch on the fourth line. And in terms of specific metrics, our goal on these calls is to provide color that's relevant to convey our launch progress and expectations moving forward. Okay, maybe if you can't, you cannot answer that.

Okay.

Hi, guys. This is while he'd on for Peter Congrats some great quarter and thank you for taking the questions. Just had a couple of questions. Here I was wondering if you could provide any sort of details on the kinloch usage. This quarter are you seeing any potential off label use an earlier lines of just.

Daniel C. Martin: I'm curious, with the, you know, rapid uptake you're seeing in the community, what percent of Kenlock use you estimate is in the fourth line versus potentially earlier lines of therapy? Yeah, thank you. Another good question.

Then and then a question on the upcoming data for for Cheesy T. G. C. T. F. C task I'm wondering if you could set expectations as to what you would be considering to be positive results from that study.

Daniel C. Martin: You know, before launch, we did quite a bit of claims analytics to help us estimate just that. And before launch, before we had experience selling our first product in that market, we thought that overall, about 30% of GIST treatment across all lines of therapy occurs in the academic setting, with about 70% broadly distributed throughout the much larger, just in terms of the number of physicians and institutions, community setting. At the time, we also thought that that tended to flip a bit, with maybe 60% of late line, fourth line, or later patients being treated in the academic setting. But interestingly, even then, our analytics would suggest that, you know, 40% or so of very late line patients received care in the community.

Daniel C. Martin: And what we're seeing – well, before I comment on what we're seeing, I think one other important thought was – or one other important question was, would more community treaters hold on to those late stage patients with a new product that is highly efficacious and has, you know, a favorable tolerability profile, as opposed to maintaining the same referral pattern they had, you know, historically? And so, while we don't, it's still early days, and we don't have answers to all those questions, what we, yeah, what we are seeing is slightly more than that 40% that we expected to occur in the community setting for late-line GIST.

So.

We of course are not out promoting anything other than are labeled indication.

And the pair policies that we're seeing come online.

Have very consistently been aligned with are labeled indication.

It is difficult we've shared before it's difficult to estimate the proportion of patients who may be receiving can lock in earlier lines of therapy frankly, because of the data sources are imperfect.

Daniel C. Martin: We're seeing slightly more than 50% thus far, which we've been encouraged to see. But like I said in my prepared remarks, I think it's really important, one thing we want to highlight is, and we've said this in prior calls, although the majority of our early adopters were in the academic setting, and we've seen some nice growth in the early days in the community setting, we expect moving forward, just because of the nature of the structure of the market, that future growth will need to increasingly come from the community setting. And that's a setting where patients are much more widely dispersed, as I mentioned in my prepared remarks. A lot of patients, excuse me, a lot of prescribers in the community setting may treat only one patient every 12 to 18 months with late-line GIST.

Daniel C. Martin: And so, given that and the lower awareness and lower knowledge, we're cognizant of the fact that continued growth, which will depend on our ability to continue to penetrate in that setting, the community setting, may be more challenging and come somewhat more slowly, particularly in light of the ongoing challenges of the pandemic, which I think we all know is likely to persist and perhaps even intensify in the coming quarters.

Steven L. Hoerter: So that's how we're thinking about sort of a source of business, you know, just overall and for Kinloch as we look ahead. Thank you. And if I can sneak in one more for Steve.

Yes, and when you look at the <unk> label, one would expect to Pff's in the range of five and a half months six months uhm. So it's premature for us at this stage to to talk about when we take the study will read it out but certainly as we get the full enrollment uhm here before the end of the year, which is our target will then be in a position to share more.

Steven L. Hoerter: In your prepared remarks, I think you alluded to a broader potential for Kinloch and GIST, and it kind of sounded like you weren't solely talking about second line. So can you elaborate on what you meant there? Yeah, thanks, Jess. It's a good question.

Steven L. Hoerter: And we're very committed with Kenloch to fully exploring the potential of the drug in GIST, even beyond where we're now currently standard of care on the fourth line, as Dan was describing, and also beyond the intrigue study in the second line setting. We know we have a very active drug in this disease. And we think there may well be other places where we could explore the drug's utility. But we're not ready to share details about that vision and that strategy.

Steven L. Hoerter: We'll do that over the course of the coming months, but we are fully committed to conducting further clinical studies of this drug in GIST.

Operator: Thank you. Our next question comes from the line of Chris Raymond with Piper Sandler. Your line is open. Hi, good afternoon. This is Allison Braselon for Chris.

Operator: Thanks for taking the question. So first, one on Kinloch dynamics. I think last quarter you called out a slight revenue benefit from Kinloch inventory build. So just hoping you could provide any color on whether there was any inventory impact this quarter or even just directionally help us understand the magnitude or direction of any inventory impact. New Commercial Patient Ads from the Expanded Access Program and how that played into the Q3 revenue number. Yeah, thanks for the questions, Allison. I'll ask Dan Martin to take both of those.

And seeing kinlaw get to that second lines setting they'll tell us that that's where they see.

The principal use for can lock and they're really excited to see the results of intrigue as a result, as you would expect.

When we look through the claims data when we talk to our Kols, we don't see a dramatic amount of re treatment in this space as you know, there's some data for Matt Nib with re treatment.

But we just we haven't seen a ton of that.

Daniel C. Martin: Yes, thanks, Allison. Good questions. So the first one related to inventory build. Inventory build was not a significant contributor to our Q3 revenue performance.

Daniel C. Martin: And then on the EAP front, as we've shared previously, there were a number of patients who converted from our EAP program to commercial product at the time of approval. And our Q3 revenues did include, continue to include a modest contribution from those patients, but we haven't provided specific numbers. But yes, Q3 did include a modest contribution from those patients who were still on. Okay, thanks.

Daniel C. Martin: And maybe just one more on some of the data you had at ESMO, specifically the data on Repretnib from Phase 1, the interpatient dose escalation that was really supportive of treating patients past progression and updosing them to the BID dose, and really the later line patients seeing a nice benefit on PFS2. So just hoping you could maybe talk about how that compares with the early launch experience and your messaging for Kinloch and basically how willing are our physicians to treat past progression in those later line gist patients. Dan, would you like to take this?

Daniel C. Martin: Sure, absolutely. So, a good question. Yes. We mentioned that data a number of times. I think that's really interesting data. We've also said previously, though, that how a drug gets used in the commercial setting is impacted by any number of factors. And as it relates to the BID dosing, you know, first, I'd want to underscore that we are entirely focused on launching Kinloch in the fourth line, you know, consistent with our label. And that goes for indication; it goes for our recommended dose in our label. But we've seen a small number of prescriptions for BID, but the vast majority have been for 150 QD. And, you know, when I say a lot of things contribute to how a drug gets used in the commercial setting, one of them that's really important is payer policies.

Daniel C. Martin: And, you know, we've been really pleased to see payer coverage come along really nicely for Kinloch. Those policies have very much been consistent with the label, including the dose from the dose perspective. So while certainly interesting data and certainly our K-Wealth tell us there's interest in it, from a commercial point of view, it's been a pretty modest contribution to revenues to date.

30, and 50% of those are those patients have recurrence, but at some point those those patients as we understand it run out of surgical options to manage their disease, and then would become candidates for systemic therapy. So that is the population. We're targeting we also know that their patients with the localized form of the disease that are also not amenable.

Daniel C. Martin: Thank you. And our next question comes from the line of Peter Lawson with Barclays. Your line is open. Hi guys, this is Waleed on behalf of Peter.

Sales to surgery for whatever reason and then also with the candidates for drug therapy for systemic therapy.

Operator: Congratulations on a great quarter and thank you for taking the questions. I just had a couple questions here. I was wondering if you could provide any sort of details on Kinloch usage this quarter. Are you seeing any potential off-label use in earlier lines of GIST?

Steven L. Hoerter: And then a question on the upcoming data for TGCT at CTOS. Wondering if you could set expectations as to what you would be considering to be positive results from that study. Sure, Willie.

Steven L. Hoerter: Steve, thanks very much for the question. So maybe what I'll do is take the TGCT question first and then ask Dan to take the first question that you had. So with respect to 3014, as Matt mentioned in his prepared remarks, we're looking forward to having additional data from the Phase I study in just over 20 patients be presented in an oral presentation at the Connective Tissue Oncology Society Conference here in a couple of weeks. As you know, this Phase I study is a dose escalation study. So what you can expect to see is data from a variety of different dose cohorts, doses, and schedules of 3014 in patients with TGCT. What we do know is that our dose of 3014 is very potent and very selective against the target.

Steven L. Hoerter: This is a disease, as you know, that's driven by a genetic translocation that results in overproduction of the ligand for the receptor. So based on the biology and based on our knowledge of the mechanism, we would expect to see 3014 have activity in this patient population, as we previously reported at CTOS last year. So we're looking forward to presenting the data here in a couple of weeks. And as Matt mentioned, we'll remain on track to get to a recommended Phase II dose and also to open the expansion cohort. Dan, would you like to take one of these questions related to off-level use? Sure, absolutely. So, as I, similar to as I mentioned a moment ago, you know, we, of course, are not out promoting anything other than our labeled indication. And the payer policies that we're seeing come online have very consistently been aligned with our labeled indication.

Next question comes from the line of Ren Benjamin with JMP Securities. Your line is open.

Steven L. Hoerter: It is difficult, as we've shared before, it's difficult to estimate the proportion of patients who may be receiving Kinloch and earlier lines of therapy, frankly, because the data sources are imperfect. But what we are seeing in the data that we have is that a significant majority of Kinloch patients have been fourth line or fourth line plus. That's not surprising to us again because, again, the point about payer policies being consistent with the label, and then again, we're not out promoting that data. So, you know, the large majority is consistent with the fourth line indication. I got it.

Steven L. Hoerter: Thank you for taking the questions. Our next question comes from the line of Eun Yang with Jefferies. Your line is open.

Steven L. Hoerter: Thank you. So the first question is on the Phase III intrigue data timeline. So based on what you saw in the Phase I and II lines for the PRAC-NIP, PFS, and certain historical PFS, when do you think you would expect to see the data once you finish the enrollment by the end of this year? Hi Eun, it's Steve.

Steven L. Hoerter: Thanks very much for the question. It's a great question. As Matt mentioned in his prepared remarks, we're looking forward to getting to completion of enrollment in Intrigue here by the end of the year. And when we get to completion of enrollment in the study, our intention at that time is to be able to share more detail about the timeline for the study to read out. As you know from our phase one experience in the second line cohort, we've seen a very robust PFS in that patient population that we've studied of close to 11 months. And when you look at the suit tent label, one would expect a PFS in the range of five and a half months to six months.

That you know that.

The FM.

Opportunity is is you guys are no longer investing in that can you talk a little bit I.

Steven L. Hoerter: So it's premature for us at this stage to talk about when we think the study will read out, but certainly, as we get to full enrollment here before the end of the year, which is our target, we'll then be in a position to share more. Great, and then as you move into second line with the integrated study, so once it's approved in second line, do you expect the use of repratinib in fourth line will be dramatically reduced, or do you think that there is a potential that in some patients, repratinib could be recycled in fourth line? Yeah, you know, Steve, I'll ask Dan to address that here in a second, you know, because the team and Dan have done a ton of market research and speak to clinicians all the time about their view of RepretMib and Kenlock and the treatment of this disease as the treatment paradigm evolves.

At this time right.

Got it and then just one final one regarding B I N D for 3116, I think I heard it right, but it was shifted to the first quarter anything.

Steven L. Hoerter: And I think what's also relevant here, in a way, are the data that we presented at ESMO, where we dose escalated patients to 150 BID and saw additional meaningful benefits by treating patients beyond after progression with a higher dose of the drug. So it seems clear that RepretMib has the potential, at least, to be a real backbone of treatment for patients and for patients to receive prolonged benefit from the drug in that context. But Dan, maybe you want to comment further about how you see the market evolving in a world of positive intrigue readouts and how physicians may evolve the treatment approach and paradigm. Sure, absolutely. So, you know, what we hear from our KOLs is certainly a real interest in seeing Kinloch get to that second line setting.

Is it just.

You guys are having.

Have enough to focus on right now or did anything kind of pop up that's making you have to make that shift.

Steven L. Hoerter: They all tell us that that's where they see, you know, the principal use for Kinloch, and they're really excited to see the results of Intrigue as a result, as you would expect. But when we look through the claims data, when we talk to our KOLs, we don't see a dramatic amount of retreatment in this space. As you know, there's some data for Imatinib with retreatment, but, you know, we haven't seen a ton of that, and so it remains to be seen whether or not repretinib Kinloch would be looked at as a valuable option in a retreatment setting.

Alright, what extent can you communicate the potential for earlier lighting treatment. Since you guys are already there can you kill two birds with one stone is at work and.

Steven L. Hoerter: As we said before, there are a lot of things that go into how a drug will be used, obviously data that gets generated, how things appear in guidelines, payer policies, and the like. So it's still a bit early for us to have a good sense for that, but definitely, what our KOLs tell us is that they're looking forward to potentially having Kinloch available in the second line. And the last question is about the market, the commercial strategy, so, you know, Steve, in your prepared remark, you are preparing to launch in at least the major European countries, but emerging markets are really a big opportunity for new therapies. So I want to ask you, outside the U.S. and, you know, major European countries and Xilat territories, what is your plan for commercial strategy for the pregnancy? Thank you. Yeah, thanks, Ian. That's a good question.

And I have a couple of follow ups.

Yeah. Thanks for the question then I'll I'll S N. Martin I'll, just take that first part of your question that will come back for your follow ups.

Yeah. Thank you good question so.

The really the crux of our.

To penetrate the community setting.

Is just being incredibly highly targeted and leveraging our analytics strength to identify where the physicians where most likely to have.

Ah late line for line just patient.

As I mentioned before.

Patients are much more widely dispersed so.

So much more diffuse and the community setting and so making sure that you are spending your.

Sales marketing efforts in the right place is critically important so.

Of course in addition to communicating all the things that we do irrespective.

Irrespective of setting communicating the.

Best in class profile.

Communicating the fact that.

Steven L. Hoerter: So, as you know, you referenced that we have our collaboration with Xi in Greater China, that NDA has been filed, and there's the potential for action on that application next year. And, of course, we also announced today that we're working through a couple of distributors in other territories, so specialized therapeutics in Australia and other Pacific Rim countries. And then we also announced our distribution agreement with Medicine for Canada and Israel. Beyond those territories, however, you know, our approach from a commercial point of view would be to take a similar approach, that is, to work through distributors in key territories.

It's the only approved agent.

For the fourth line et cetera.

Really making sure that we are laser targeted in our efforts is critically important now as it relates to COVID-19. This is an ongoing challenge I think it is for just about every company.

It's an ongoing challenge because of in any number of reasons patient data continues to show that.

Broadly patient numbers remain somewhat depressed and oncology.

And there's a lot going on it is provider institutions.

One of the things that is a challenge is virtual fatigue, I think a lot of people can appreciate the sort of virtual fatigue that that happens in so.

We continue to invest in training and resources for our fueled forced to make sure that.

Steven L. Hoerter: And we'll start to make our way around the world, you know, with Kinloch in terms of making sure that patients have access to it in a commercial setting upon approval. And that is something that we're committed to. So we're looking forward to continuing to identify partners in the right priority territories as we seek to make the drug available further. Thank you. Our next question comes from the line of Michael Schmidt with Guggenheim. Your line is open.

They are having the most robust and engaging.

Operator: Hey guys, this is Charles Zuhan from Michael Schmidt. Thanks for taking the question and congratulations on a strong quarter. A couple on DCC for the PGCT. I fully understand that you and others have highlighted the market opportunity for PGCT as an annual 1,300 patients or so, at least for the diffuse type, with a much larger prevalence given it's more non-lethal. On that front, however, what's your sense of how many patients are truly candidates for pharmaceutical intervention relative to the current role and potential cure rates of surgery, even repeat surgery, and or radiation? Hi Charles. It's Steve.

Steven L. Hoerter: Thanks for the question with respect to 3014. As you know, the target indication for us for 3014 and TGCT is for patients that are not amenable to surgery. And we know that, as you mentioned, there are about 1,300 new patients in the U.S. each year with a diffuse form of the disease. And these are patients with a high recurrence rate who generally, at some point in the course of their disease, the estimates are between 30% and 50% of those patients have recurrence. But at some point, those patients, as we understand it, run out of surgical options to manage their disease and then become candidates for systemic therapy. So that is the population we're targeting. We also know that there are patients with the localized form of the disease that are also not amenable to surgery for whatever reason and that also would be candidates for drug therapy or systemic therapy.

The material changes in payer mix for the quarter I'm, sorry, if I missed the question.

Okay great.

I can take that as Dan no material change that weve seen impairment.

Okay great.

Thanks, very much and congrats on the quarter.

Thank you Ben.

Thank you and I'm not showing any further questions. So I'll now turn the call back over to Steve order for closing remarks.

Steven L. Hoerter: God, it makes sense. And I guess, also based on the research you've done so far around pexidartanib and other off-label drugs such as imatinib for this disease, what's your sense around a potential treatment duration in these patients? And is it possible to convert these patients, I guess, from previously unamenable to surgery into eligible patients for potential curative surgery?

Great. Thank you Bridget I appreciate that and thanks to everybody on the call for joining us on the call today and for your continued support were looking forward to keeping you all updated on our continued progress with can lock as well as with the balance of our development programs have a great evening everyone.

Steven L. Hoerter: Yes, it's a good question with respect to the potential for neoadjuvant treatment in this disease context, and who knows, there may well be a role for CSF1R inhibition in such patients to shrink tumors, to make them potentially resectable, whereas perhaps prior to treatment, they might not have been resectable. So that, I think, remains an open question. You know, this is a disease category where there haven't been systemic treatments until the approval of hexadartinib last year. And what we continue to hear from physicians is that they have concerns about using PEX in their patients. And, in fact, patients have concerns about using PEX as a result of the black box warning for hepatotoxicity and the REMS that is associated with that.

Ladies and gentlemen, this does conclude the program you may now disconnect everyone have a great day.

[music].

Steven L. Hoerter: So we believe there remains a significant other medical need for a drug that is effective and well tolerated in the treatment of this disease. And I think part of our task, assuming continued success, is going to be to ensure that we're able to access patients at the right time in their disease course for a systemic treatment like ours.

Steven L. Hoerter: Thanks for taking the questions and congratulations again on this strong quarter. Thanks, Charles. Our next question comes from the line of Ren Benjamin with J&P Securities. Your line is open. If your phone's on mute, please unmute.

Operator: Oh, sorry about that. Congratulations, guys, on a great quarter. Thanks for taking the questions. Can you please provide us with maybe a little bit more color on the commercial plans in the EU? Maybe I missed it.

Steven L. Hoerter: But how many people are we talking about? Is there going to be a centralized kind of sales force? Just any sort of ideas about how that build out will occur? Or will it occur just based on country by country approval? Any sort of color that, Hi Ren, it's Steve.

Steven L. Hoerter: I'd be happy to take your question about Europe. As I mentioned in my prepared remarks, we think the majority of the opportunity is in the five largest markets, as you would expect. And we don't have any reason to believe that the prevalence of GIST or the incidence of GIST in Europe as a percent of the population is any different than what we see in the US.

[music].

Steven L. Hoerter: So based on that, we think across the five largest markets, there are probably between 4,000 and 6,000 new patients with GIST that are diagnosed each year. So as we think about our build in Europe, it will very much be a staggered build based on market access. So, as you know, each of these markets are generally single payer markets. And so, depending on the country, a manufacturer like us would have to go through pricing and reimbursement negotiations. And sometimes that can take a matter of a few months, and sometimes that can take as long as a year. So there's probably an opportunity here, as we look at it, for us to build more of a hub model across Europe where we'd have the majority of our headcount sitting in a regional center with field-based personnel in key markets.

Steven L. Hoerter: And so I'm sure as we get closer to a potential approval in Europe, which, as you know, the filing has now gone in, it's been validated, so we think that the earliest potential action on the application could be by the end of next year. So as we get closer, I'm sure we'll be sharing some more detail about how we view the build and what we see in terms of numbers. But it's certainly going to be a staggered build, and we'll, of course, continue to be thoughtful about what the size of that organization ends up looking like to access the opportunity.

Steven L. Hoerter: And then, I think it was Matt who might have mentioned that, you know, the SM opportunity is, you guys are no longer investing in that. Can you talk a little bit about, you know, was it because enrollment was kind of tough, or you were not seeing the kind of efficacy that you were hoping for? And ultimately, you know, will we see, based on the patients that you have enrolled, what the data looks like? Or does it really not make any sense?

Steven L. Hoerter: You know, to that first of all. Yeah, thanks for the question, Ren. And as we've been saying for a number of months now, even well over a year, our real focus of development for Kenloch over pregnancy is GIST. And as Matt noted in his prepared remarks, we have seen modest clinical activity in the fewer than 20 patients that we treated in that SM cohort, but we didn't see sufficient activity to warrant further development in this disease.

Steven L. Hoerter: And that's particularly given the context of the evolving treatment landscape in SM and, frankly, the compelling investment opportunities that we see in other parts of the portfolio, not only in Kenloch over pregnancy but also in our other clinical stage assets as those start to really come into focus. And so, as a result, we've decided to focus our investment resources, both people and dollars, in other areas for now. I'm sure, you know, when the time is right, at some stage, we'll publish the data from the SM cohort. But I don't have any specific details I can share with you at this time, Ren. Got it. And then just one final one regarding the IND for 3116. I think I heard it right that it was shifted to the first quarter. Anything, you know, is it just that you guys have enough to focus on right now? Or did anything kind of pop up that's making you have to make that shift?

Steven L. Hoerter: No, we remain really excited about 3116. You know, this is targeting the initiating factor in autophagy, which is thought to play a role in mutant breast cancer. So, really large patient populations and significant tumor types like lung and bladder cancer. So, we remain really excited about the program. The team has been working so hard to advance us to file the IND. This is a goal that we have for the end of the year. That was our initial milestone, and as Matt indicated, this is a goal that we have for the end of the year. That was our initial milestone, and as Matt indicated, there's a possibility that this shifts into quarter one. But this is really just a function of timing, being an end-of-year sort of goal.

Steven L. Hoerter: But we remain really excited about the program and very focused on it. Terrific. Thanks for taking the questions and congratulations.

[music].

Steven L. Hoerter: And our last question comes from the line of Arlinda Lee with Canaccord Genuity. Your line is open. Hey, good afternoon, folks. It's Ben Shim for Arlinda, and congratulations on the great quarter.

Operator: Many of my questions have already been answered. I kind of have a high-level question for you, for the benefit of us outsiders. Can you walk us through how, on a day to day basis, you're getting more penetration in the community setting? And how is it different in the pandemic environment?

Daniel C. Martin: And to what extent can you communicate the potential for earlier lines of treatment since you guys are already there? Can you kill two birds with one stone, as it were? And I have a couple of other follow-ups. Yeah, thanks for the question, Ben. I'll ask Dan Martin to take the first part of your question, and we'll come back for your follow-up. Yeah, hi. Thank you. Good question.

Daniel C. Martin: So, really, the crux of our effort to penetrate the community setting is just being incredibly highly targeted and leveraging our analytics strength to identify where the physicians who are most likely to have a late line, fourth line anticipation are. As I mentioned before, patients are much more widely dispersed; it's much more diffuse in the community setting. And so making sure that you are spending your sales marketing efforts in the right places is critically important.

Daniel C. Martin: And so, of course, in addition to communicating all the things that we do, you know, irrespective of setting, communicating the best in class profile, communicating the fact that, you know, it's the only approved agent for the fourth line, etc., really making sure that we are laser targeted in our efforts is critically important. Now, as it relates to COVID-19, this is an ongoing challenge for just about every company. It's an ongoing challenge because of any number of reasons; patient numbers, you know, the data continues to show that, you know, broadly, patient numbers remain somewhat depressed in oncology.

Daniel C. Martin: And, you know, there's a lot going on at these provider institutions. One of the things that is a challenge is virtual fatigue. I think a lot of people can appreciate the sort of virtual fatigue that happens. And so, you know, we continue to invest in training and resources for our field force to make sure that they are having the most robust and engaging conversations with physicians about Kinloch and about their on-label patients. So, you know, there's no magic bullet, and no magic potion here.

Daniel C. Martin: A lot of it is just, you know, continuing to work every day. And the team has done a fabulous job navigating that. But, you know, as we think about moving further and further into the community setting and with the ongoing pandemic, which may, you know, intensify in the coming quarters, it is something that we are cognizant of and think that, you know, continued growth in those new patient starts may be a bit more challenging and come a bit more slowly.

Daniel C. Martin: So I hope that answers your question. I missed the second part of your question, and I wasn't sure if that was a commercial one or not. You mentioned something about the second line. Yeah, to what extent can you communicate or can you communicate the potential for earlier lines since you guys are already there and don't have to go back? When you say already there, do you mean with the physician? Yeah, at the physician level, yeah.

Daniel C. Martin: Oh, okay. Sure. So the answer is we can't, not promotionally. The data on Second Line, you know, the KOLs are obviously already aware of that data from publications and such.

[music].

Daniel C. Martin: Really excited about it and really looking forward to interesting results and the potential movement of kinlockup in the, you know, order of therapy. But from a promotion perspective, we stick to the labeled indication. Gotcha. Okay, that makes sense. And maybe a question for Tucker. Can you give us some color on when the accrued pre-launched inventory will be worked through at, let's say, the current run rate?

Thomas Patrick Kelly: We talked before, so... Yeah, absolutely. As you notice, we did have a little bit of a when you see the financial results in the earnings release and then the Q, there was a little bit of COGS expense in this quarter, but it'll be a number of quarters before we work off the pre-launch inventory. We've already expensed as our, Okay, that's very helpful. I think you guys mentioned something. Was there any material change in Paramex for the quarter?

Thomas Patrick Kelly: I'm sorry if I missed the question. I'll be escaping. I can take that. Dan, no, no material change that we've seen in. Great, thanks very much and congrats on the quarter.

Operator: Thank you, Ben. Thank you. I'm not showing any further questions. I'll now turn the call back over to Steve Hoerter for closing remarks. Great. Thank you, Bridget. I appreciate that. And thanks to everybody on the call for joining us on the call today and for your continued support. We're looking forward to keeping you all updated on our continued progress with Kenlock as well as with the balance of our development.

Steven L. Hoerter: Have a great evening, everyone. Ladies and gentlemen, this does conclude the program. You may now disconnect. Everyone have a great day.

Unknown Executive: BF-WATCH TV 2021, [inaudible]. This is a production of the Center for Autonomous Vehicle Research and the Center for Autonomous Vehicle Research and Development.

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