Edited Transcript of CYTK earnings conference call or presentation 31-Oct-19 8:30pm GMT – Yahoo Finance

South San Francisco Nov 6, 2019 (Thomson StreetEvents) -- Edited Transcript of Cytokinetics Inc earnings conference call or presentation Thursday, October 31, 2019 at 8:30:00pm GMT

* Ching W. Jaw

* Robert I. Blum

H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst

Good afternoon, and welcome, ladies and gentlemen, to the Cytokinetics Third Quarter 2019 Conference Call. At this time, I would like to inform you that this call is being recorded. (Operator Instructions)

I will now turn the call over to Diane Weiser, Cytokinetics' Vice President of Corporate Communications and Investor Relations. Please go ahead.

Diane Weiser, Cytokinetics, Incorporated - VP of IR & Corporate Communications [2]

Happy Halloween, everyone, and thanks for joining us on the call today. Robert Blum, our President and Chief Executive Officer, will kick off the call with a review of our key priorities. Then Fady Malik, our EVP of Research and Development, will provide updates on key developments for omecamtiv mecarbil, our cardiac myosin activator under our collaboration with Amgen as well as our CK-274, our wholly-owned cardiac myosin inhibitor now proceeding from Phase I to Phase II development. Then Robert Wong, our VP and Chief Accounting Officer, will provide a financial overview for the quarter; and Ching Jaw, our SVP and Chief Financial Officer, will discuss corporate development strategies. Andy Wolff, our SVP and Chief Medical Officer, can't be on the call today, so Robert will then cover off on updates relating to reldesemtiv, our fast skeletal muscle troponin activator under a collaboration with Astellas before concluding with thoughts on the company's outlook and expected milestones for the remainder of the year.

Please note that portions of the following discussion, including our responses to questions contain statements that relate to future events and performance rather than historical facts and constitute forward-looking statements. Our actual results may differ materially from those projected in these forward-looking statements. Additional information concerning factors that could cause our actual results to differ materially from those in these forward-looking statements is contained in our SEC filings. We undertake no obligation to update any forward-looking statements after the call.

And now I'll turn the call over to Robert.

Robert I. Blum, Cytokinetics, Incorporated - CEO, President & Director [3]

Thank you, Diane, and thanks again to everyone for joining us on the call today. We continue to make good progress against our priorities during the third quarter. And to begin today's call, I'd like to remind everyone what those priorities are in order to provide some context for the updates you'll be hearing about from the team. Priority number one remains the advancement of omecamtiv mecarbil, our cardiac myosin activator, currently the subject of 2 ongoing Phase III clinical trials under our collaboration with Amgen. As you may know, enrollment in GALACTIC-HF completed in July. That, in and of itself, is a big achievement considering the number of patients, sites and countries that participated in this important clinical trial.

Looking forward, based on the accrual of clinical of -- endpoint events in the trial, we expect the second planned interim analysis to occur in the first quarter of 2020. While we certainly don't expect the trial to conclude as a result of that analysis, we do recognize that, that is a possibility, and we need to be ready. With that said, both GALACTIC-HF and METEORIC-HF continue to be on track to read out results in 2021. Given the proximity to the results of these key trials, Amgen and Cytokinetics have stepped up commercial readiness activities, including work streams focused on matters such as market access, health economics and medical affairs, and we'll elaborate on that in a moment.

Priority number two is the advancement of CK-274, our wholly-owned cardiac myosin inhibitor for the potential treatment of hypertrophic cardiomyopathy, or HCM, and we expect to begin Phase II by year-end. As we said, we believe CK-274 represents a potential next-gen class drug candidate that has now demonstrated a distinct clinical profile in healthy subjects consisting with that which we have observed in preclinical work, and we hope to translate with therapy with optimized dosing, ease of titration and symptom relief for HCM patients. In a moment, Fady will discuss the significance of the Phase I data in healthy volunteers and how the properties we have confirmed will shape our approach to Phase II and beyond.

Priority number three is the advancement of reldesemtiv, our fast skeletal muscle troponin activator, and we expect to potentially begin a pivotal Phase III clinical trial in patients with ALS no sooner but still in the latter part of 2020. In the last quarter, we presented additional results from FORTITUDE-ALS, which provide further support for advancement of this drug candidate as a potential new therapy for patients suffering with ALS, especially in light of the FDA guidance, which recently published. I just returned from productive meetings with our partners at Astellas, and I'll share an update regarding this program in our collaboration later in today's call.

So the company is well positioned with the advancement of our 3 lead drug candidates in later stages of clinical development. In addition, we're also encouraged by recent developments relating to our cardiac troponin activator partnered with Amgen in Phase I, and now 2 more potential drug candidates advancing in IND-enabling studies. Given the opportunities to impact a wide array of cardiovascular and neuromuscular diseases associated with impaired muscle function and muscle weakness, with our industry-leading pipeline of muscle activators and inhibitors, it's especially rewarding to note that the company does not pivot on any one single program that is in an excellent position to deliver on the promise of our biology and its related pharmacology for patients.

With that, I'll turn the call over to Fady to elaborate on key developments in our cardiovascular programs.

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Fady Ibraham Malik, Cytokinetics, Incorporated - EVP of Research & Development [4]

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Thanks, Robert. The most important developments in our cardiovascular program this quarter is centered around completing enrollment in GALACTIC-HF and beginning to advance CK-274 into Phase II clinical development as a result of supportive and encouraging data coming out of the Phase I study in healthy volunteers. I'll address both of these developments starting with omecamtiv and GALACTIC-HF.

On our last call, we discussed the breadth of enrollment of more than 8,200 heart failure patients in GALACTIC-HF, and this -- that this now represents one of the largest outcome trials ever conducted in heart failure. So why is this important, and how is the treatment landscape in heart failure changing as omecamtiv mecarbil gets closer to the finish line in this trial?

Well, it's an exciting time in the treatment of heart failure with newer medicines like Entresto being added to standard of care and existing medicines like the SGLT2 inhibitors, recently demonstrating reduced risk for worsening heart failure and cardiovascular death when added to the standard of care. These developments underscore the continuing burden of heart failure and the opportunity to improve patient outcomes with new approaches to treatment. With this backdrop and given our having enrolled over 8,200 patients in GALACTIC-HF, we are hearing increased enthusiasm for the clinical community and its thought leaders for the important potential omecamtiv mecarbil may represent to heart failure therapy. As therapeutic rationale and development make it the first and only heart failure medicine specifically developed to treat the fundamental problems for these patients, that is the inability of their hearts to pump effectively. As such, omecamtiv mecarbil has the opportunity to become foundational in treating heart failure with reduced ejection fraction.

In GALACTIC-HF, we've now enrolled -- we now have over 10,000 patient years cumulative exposure with a number of patients having been on therapy for over 2 years. The DMC recently held one of their regular meetings and again recommended continuing the trial without changes. We now look forward to the second interim analysis, which we expect to occur in the first quarter of 2020. As a reminder, this analysis will include an assessment for potential superiority as well as for futility.

The futility boundary enables stopping the trial if there's no chance for -- of success for it to continue while the criteria for superiority are conservative unless we think there's a small chance of the trial to stop for efficacy at this interim analysis, even if the benefit of omecamtiv mecarbil is consistent with the planning assumption. Additionally, it's important to note that the stopping boundaries provide guidance for the DMC, and they did not represent binding rules. The DMC considers all available evidence for these recommendations regarding trial conduct, and other considerations may support the consideration of GALACTIC-HF even if numerical superiority boundaries are met in the primary -- on the planned analysis.

Should the trial stop early, we certainly want to be prepared for next step, and so as Robert mentioned, together with Amgen, we are engaging in a diverse range of precommercial, medical and regulatory readiness activities to minimize time for the submission of marketing applications.

Towards the end, our medical affairs activities are ramping up. Implementation of our field-based medical strategies has begun with the successful deployment of our first Medical Science Liaisons, or MSLs. As you may know, MSLs are seen as the medical face of the company, and they will also be the first representatives of Cytokinetics with whom a health care provider has contact, particularly, key opinion leaders, investigators and academics. The MSLs will be focused on scientific exchange, medical and disease data education and support of our ongoing clinical trial.

In addition, Cytokinetics, as mentioned, have ramped up commercial readiness activities in critical areas, including brand development and marketing research to prepare for a successful global launch of omecamtiv mecarbil. Importantly, the companies are also implementing multiple strategies to generate real-world evidence and targeted health care systems to complement expected clinical trial data and to support plan discussion with payers regarding the economic value treatment with omecamtiv mecarbil.

Now moving to our cardiac myosin inhibitor program. We are pleased to recently present data from a completed Phase I study looking at escalating single and multiple ascending doses of CK-274 in healthy subjects at the Heart Failure Society of Americas 23rd Annual Scientific Meeting in Philadelphia. The data were encouraging and consistent with what we see preclinically. The study met its primary and secondary objectives to assess the safety and tolerability of single and multiple oral doses of CK-274, describe the pharmacokinetics of CK-274 and its pharmacodynamics as measured by echocardiography. We also characterized the pharmacokinetic and pharmacodynamic relationship, or PK/PD relationship between -- with CK-274 with regards to cardiac function in healthy participants.

To quickly recap, the study demonstrated that CK-274 was safe and well tolerated in healthy participants. No serious adverse events and no clinically meaningful changes in vital signs, ECGs or laboratory tests were observed. The pharmacokinetic of CK-274 were generally dose-linear and steady state appeared evident within 14 days of dosing. Left ventricular ejection fractions decreased in exposure-dependent manner in the PK/PD relationship for CK-274 observed in humans was similar to that observed preclinically when adjusted for differences in protein binding.

Specifically, the shallow exposure response relationship observed preclinically appears to translate to healthy participants and when combined with the drugs PK may enable flexible dose optimization in humans.

Importantly, steady-state was achieved within 2 weeks of daily dosing, and reversibility of effects was observed within 24 to 48 hours following 14 days of dosing. We are really pleased to see that these properties enable us to include a 2-week dose titration schedule in the upcoming Phase II clinical trial, and may ultimately translate to rapid onset, ease of titration and rapid symptom relief for patients with obstructive HCM in the clinical practice setting.

So with that, I'll now share more details about the planned Phase II trial, which we expect to begin by year-end. The trial is called REDWOOD-HCM, which stands for randomized evaluation of dosing with CK-274 in obstructive outflow disease in HCM. We're excited to have selected for the name of the trial this magnificent and enduring tree, a symbol of Northern California as it not only reflects Cytokinetics' root in the region, but importantly reflects the strength and dependence and enduring qualities we aspire to deliver to patients who are living with obstructive HCM as may eventually benefit from our novel investigational therapy.

REDWOOD-HCM will be a multicenter, randomized, placebo-controlled, double-blind, dose-binding studies in patients with symptomatic obstructive HCM. The primary objective of the trial is to determine the safety and tolerability of CK-274. Secondary objectives are to describe the concentration response relationship of CK-274 under resting and post-Valsalva left ventricular outflow gradient, as measured by echocardiography during 10 weeks of treatment. We'll get into more details regarding specific endpoints of REDWOOD-HCM when we announce the start of the trial expected later this quarter.

Two sequential cohorts with an option for a third cohort will be enrolled. Within each cohort, 18 patients will be randomized 2:1 to active or placebo treatment and receive up to 3 escalating doses of CK-274 or placebo based on echocardiographic guidance. Importantly, given the half-life of CK-274, patients will receive an echocardiogram after 2 weeks of treatment at each dose to determine whether they will be up titrated. The schedule should contribute to optimizing dosing and potential efficacy quickly, both in the trial and ideally, in the clinical study. Overall, the treatment duration will be 10 weeks with an echocardiogram to confirm reversibility of effect 2 weeks after the last dose.

REDWOOD-HCM is expected to enroll patients in around 20 investigated sites in North America and Europe. We're currently finalizing operational plans to initiate the trial and expect it to open to enrollment in this fourth quarter. We're enthusiastic to get the trial up and running and continue to receive positive feedback with similar enthusiasm from our investigated sites.

And now Robert Wong will update you on our financials for the quarter.

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Robert Wong, Cytokinetics, Incorporated - VP & CAO [5]

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Thanks, Fady. I'll first provide an update on cash, revenue and spending, and then Ching will review our corporate development strategy. More details of our actual results for the third quarter 2019 are included in the press release, which we released earlier this afternoon.

We ended the third quarter with $166 million in cash and investments. Our revenue in Q3 2019 came from our strategic alliances with Amgen and Astellas. For Amgen, we recognized revenue associated with the reimbursement of our development expenses related to METEORIC-HF.

For Astellas, we recognized revenue for reimbursement of our research activity as well as for development expenses incurred related to our closing out of FORTITUDE-ALS.

Our third quarter 2019 R&D expenses decreased to $20.2 million from $21.7 million in the third quarter of 2018, primarily due to lower spending related to our neuromuscular development activities, offset by increased activities related to METEORIC-HF and CK-274. More than half of our R&D expenses were attributable to our cardiovascular programs as expected given activity for METEORIC-HF and the cardiac myosin inhibitor programs. And the remainder of our expenses were attributable primarily to our early research activity.

Our third quarter 2019 G&A expenses were $9.8 million, up from $7.2 million in Q3 2018 due primarily to increased outside legal expenses and higher personnel-related costs, including stock-based compensation.

And now Ching will review our corporate development strategies.

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Ching W. Jaw, Cytokinetics, Incorporated - Senior VP & CFO [6]

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Thanks, Robert. As Robert mentioned, we ended the third quarter with $166 million in cash, which represents nearly 24 months of forward cash based on our 2019 guidance of $85 million to $90 million net cash burn. As we have previously stated, our strategy remains to manage our cash prudently through the expected readout of results from GALACTIC-HF in 2021. Towards that objective, in September, we presented our strategic plan to our Board, which focused on prioritizing near-term spending to position the company for long-term growth.

Prior to the Board meeting, we engaged the company's middle management and senior leadership team in a program prioritization exercise, and then we did the same with our 4 members. We consider scientific and clinical validation, probabilities of technical success, regulatory path to approval and market access and commercial potential. We also assess unmet patient need and potential for impacts.

The results from all 3 groups were remarkably similar and echo what Robert outlined at the start of the call. We consider omecamtiv mecarbil to be our top priority, CK-274 in [oHCM] to be our second priority and reldesemtiv in ALS to be our third priority. As such, near-term spending will be allocated based on the strength of order.

What that also means is that others of our programs in development and research will not receive comparable funding until such time as we have access to more capital. For long-term growth, we also discussed with the Board our approach to broaden our research platform and to strengthen our commercial capabilities in anticipation of potentially multiple commercial product launches in the next few years.

As we look towards year-end, our balance sheet remains strong, but we also are continuing to seek additional capital to extend our cash runway to our recent expansion of activity, inclusive of potential business development collaborations and/or project financing. In the third quarter, we made progress towards our potentially executing on multiple transactions, some of which we can foresee occurring in this current fourth quarter.

We remain confident in our ability to vigilantly deploy capital against our prioritized programs to deliver optimal patient care and return on investment for our shareholders.

And with that, I'll turn the call back over to Robert.

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Robert I. Blum, Cytokinetics, Incorporated - CEO, President & Director [7]

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Thank you, Ching. To pick up on Ching's comments regarding prioritization of R&D programs and spending, the exercise we went through with our management team and Board was especially instructive. And based on conversations we've had with many of you, we believe our internal priorities are well aligned with feedback we've received from external stakeholders as well. As we execute on these priorities, we do so with an eye towards initiating commercialization of what could be our first approved therapy, omecamtiv mecarbil. As you've heard, we're substantially dialing up precommercial activities, specifically in the areas of health economic and outcomes research, market access and commercial planning, and we've added key new hires to our teams alongside those of counterparts at Amgen. The number of concurrent work streams and support of potential launch readiness is impressive and underscores the significant opportunity that omecamtiv mecarbil represents to patients with systolic dysfunction heart failure, with the clinical and economic burden that's only growing given the aging demographics.

I also want to emphasize our enthusiasm and urgency to initiate REDWOOD-HCM, the Phase II clinical trial of CK-274 in patients with obstructive HCM. This is a patient population in great need of novel therapies to treat both the symptoms of HCM, which impact everyday life and the ability to do some of the things that we take for granted, like walking up a flight of stairs or going food shopping as well as the underlying contractile dysfunction and fibrosis. As Fady discussed, the data from our Phase I study argued well to what we may see in the Phase II trial and ultimately what physicians can look forward to in terms of ease-of-use titration and potential safety and efficacy in the clinical setting.

Finally, we're continuing to delve deeply and critically to evaluate the results from our recent Phase II clinical trials of reldesemtiv in ALS and in SMA. In parallel, we're working with regulatory authorities and payers to assess various approaches we may consider to advance reldesemtiv into later stage clinical development.

Most recently, at the NEALS meeting last month, Jeremy Shefner, the principal investigator for FORTITUDE-ALS, presented additional post-hoc analyses from the trial, that showed faster progress in patients who received any dose of reldesemtiv experienced a statistically significant and clinically meaningful lesser decline in ALSFRS as measured from baseline to week 12 than did their counterparts who received placebo in addition, and in both cases, to standard of care.

These results are important because if reldesemtiv can have a positive impact on faster progressing patients over just 12 weeks, it's reasonable to hypothesize that we may see an impact on function and disease progression for slower progressing patients over a longer time horizon. And thus, we have a compelling opportunity to potentially demonstrate that a treatment benefit of a future clinical trial by either evaluating a broader set of patients to be studied over a longer time horizon or otherwise by enriching the trial with faster progressing patients, but in both scenarios, in order to show a potentially clinically meaningful and statistically valid therapeutic effect of reldesemtiv in patients with ALS.

Towards that objective, we recently received from feedback from FDA in response to questions relating to a draft registration trial protocol. And we're pleased to see the responses were constructive and supportive of our plans. Moreover, we're especially pleased that our plans seemed to resonate with recently published FDA guidance pertaining to drug development in ALS. As previously mentioned, we can't anticipate beginning of Phase III trial until soonest the latter half of 2020. And between now and then, we'll finalize the protocol to obtain additional investigator and regulatory feedback and operationalize the study plan before committing to do so.

We also need to restructure and clarify the economics and respective roles and responsibilities under our collaboration with Astellas. Towards that objective, we had previously communicated our want to renegotiate certain terms of our collaboration agreement. I'm pleased to report that we and Astellas have agreed in principle to revise the terms of our collaboration agreement so that Cytokinetics would have the exclusive right to develop and commercialize all fast skeletal troponin activators, including reldesemtiv and CK-601. In that case, Astellas' future contributions would be to provide partial cofunding for certain Phase III clinical trial costs for reldesemtiv in ALS and to provide other in-kind support. And in exchange, Astellas would receive a low to mid-single-digit royalty on reldesemtiv to be payable by Cytokinetics.

We also agreed in principle to extend our joint research program for another year with Astellas sponsoring research Cytokinetics through 2020. Of course, these agreements in principle are nonbinding, and they're contingent upon our finalizing amendments towards collaboration agreement. And absent that agreement, the terms of the existing agreement remain in place.

In the meantime, however, we continue to plan for the potential advancement of reldesemtiv into a Phase III trial again later in 2020. We also remain dedicated to advancing research education support and awareness for the patient populations we serve.

During the quarter, we announced the continuation of our partnership with Cure SMA to increase education awareness, public policy and fundraising for spinal muscular atrophy. We're also very pleased to recently announce the call for proposals for the second annual Cytokinetics Communications Fellowship Grant program, which provide grants to select patient advocacy organizations that are serving the ALS, heart failure, HCM or SMA communities. These grants would be intended to support increased capacity in communications awareness building and community engagement. Key activities we've identified [again] for advocacy organizations who are in need of support.

Given that, now let me recap our expected milestones for the remainder of 2019. For omecamtiv mecarbil, we expect to continue to conduct the GALACTIC-HF and METEORIC-HF in patients with heart failure throughout 2019. For CK-274, we expect to begin REDWOOD-HCM, our planned Phase II clinical trial in patients with obstructive HCM in this fourth quarter.

For AMG 594, we expect Amgen will continue the Phase I study of AMG 594 throughout 2019. And for reldesemtiv, we'll continue to advance planning for potential future trials in ALS and SMA.

For preclinical research, we expect to continue research activities under our joint research program with Astellas directed to the discovery of next-generation skeletal muscle activators again throughout 2019. We also expect to continue our other muscle biology-focused research, including the expansion of our research activities beyond the contractility of muscle to the energetics of muscle.

And operator, with that, we can now open up the call please to questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions)

And we will take your first question from Jason Butler with JMP Securities.

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Jason Nicholas Butler, JMP Securities LLC, Research Division - MD and Senior Research Analyst [2]

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Congrats on all the progress across the pipeline in the quarter. I had a couple on 274 and then a follow-up on omecamtiv. For the Phase II REDWOOD trial, Fady, I think you said that you're going to be assessing the LVOT gradient both at rest and post exercise. If that's correct, can you just talk about those 2 measures? And how we should think about those data points? And how informative each is in terms of Phase III planning? And then can you just speak to how you think about opportunities for CK-274 beyond obstructive HCM, for example, and most obviously on unobstructed patients?

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Fady Ibraham Malik, Cytokinetics, Incorporated - EVP of Research & Development [3]

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Yes, sure. I'll take the first question. So just to be clear, what we will be assessing is the effect of 274 on the left ventricular outflow gradient at rest and post-Valsalva, not post exercise. So Valsalva is a breathing maneuver where you bear down against a closed glottis, so that you're generating intrathoracic pressure and increasing the gradient through that means. It's a common maneuver that's done in HCM patients to look at maximum gradient.

And so those 2 maneuvers will look at both that -- the Valsalva gradient and the resting gradient in this trial. There won't be an exercise assessed in this trial. I think our experience in other domains just really to be confident in a placebo-controlled trial of -- effect of any drug on exercise. We need a much larger study than we have planned right now for this Phase II trial. The second question you asked, if you can remind me was...

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Diane Weiser, Cytokinetics, Incorporated - VP of IR & Corporate Communications [4]

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Wanted to know the impact of that to Phase III plan.

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Fady Ibraham Malik, Cytokinetics, Incorporated - EVP of Research & Development [5]

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Right. So the relationship to Phase III planning is that the effect of CK-274 on the gradient is the most sensitive way by which we can establish dose and a dosing regimen. So it's a highly sensitive biomarker of cardiac myosin -- inhibitor's effect, and it'll enable us really to characterize exposure response relationship and set dose properly for Phase III. So that, I think, was - the main objective of our Phase II study is to ensure that we are dosing patients that are similar to those that we would enroll in Phase III and then we dose them with a similar dosing regimen as we would've employed in Phase III.

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Robert I. Blum, Cytokinetics, Incorporated - CEO, President & Director [6]

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Originally posted here:

Edited Transcript of CYTK earnings conference call or presentation 31-Oct-19 8:30pm GMT - Yahoo Finance