Aclaris Therapeutics Inc (ACRS) 2015 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Aclaris fourth-quarter and fiscal-year 2015 financial results conference call.

At this time, all participants are in a listen-only mode.

Later, we will conduct a question-and-answer session, and instructions will be given at that time.

(Operator Instructions).

As a reminder, this conference may be recorded.

I would now like to introduce your host for today's conference, Miss Kamil Ali-Jackson, Chief Legal Officer.

Miss Ali-Jackson, you may begin.

Thank you, and good afternoon.

I am Kamil Ali-Jackson, Chief Legal Officer for Aclaris.

Please note after the market closed earlier today, Aclaris issued its press release announcing fourth-quarter and full-year 2015 financial results.

For those of you who have not seen it, you will find the release posted in the investors section of our website at www.Aclaristx.com.

Joining me for the call today are Dr. Neal Walker, President and Chief Executive Officer, and Frank Ruffo, Chief Financial Officer.

Before we begin our prepared remarks, I would like to remind you that various statements we make during this call about the Company's future results of operations and financial position, business strategy, and plans and objectives for Aclaris' future operations are considered forward-looking statements within the meaning of the federal securities laws.

Our forward-looking statements are based upon current expectations that involve risks, changes in circumstances, assumptions and uncertainties that could cause actual results to differ materially from those reflected in such statements.

These risks are described in the risk factors in management's discussion and analysis of financial condition and results of operations sections of Aclaris' quarterly report on Form 10-Q for the quarter ended September 30, 2015, filed with the SEC on November 18, 2015 and other filings Aclaris makes with the SEC from time to time.

These documents are available in the financial information section of the investors page of Aclaris' website at www.AclarisTX.com.

Additional factors may also be set forth in those sections of our annual report on Form 10-K for the year ended December 31, 2015 to be filed with the SEC today.

We encourage all investors to read these reports and our other SEC filings.

All the information we provide on this conference call is provided as of today, and we undertake no obligation to update any forward-looking statements we may make on this call on account of new information, future events or otherwise.

Please be advised that today's call is being recorded and webcast.

A link to the webcast is posted in the investors section of our website.

I will now turn the call over to Dr. Neal Walker, President and CEO of Aclaris.

Neal?

Thank you, Kamil.

Good afternoon.

I want to welcome everyone on the call this afternoon.

Thank you for joining us on our first conference call as a publicly traded Company.

I met many of you on our recent IPO road show.

But for those of you who are new to the Aclaris story, I want to take some time this afternoon to provide you with a brief overview of our Company as well as highlight our progress since the end of the third quarter of 2015.

I will conclude my opening remarks by touching upon Aclaris' upcoming potential near-term milestones.

Aclaris is a clinical-stage specialty pharmaceutical Company focused on identifying, developing and commercializing innovative and differentiated therapies to address significant unmet needs in both aesthetic and medical dermatology.

We are primarily interested in novel self-pay aesthetic indications as well as white-space indications in medical dermatology that lack approved products, which is particularly important in a challenging reimbursement environment.

As most of you know, Aclaris completed its initial public offering in mid-October.

Including the full exercise of the underwriters option to purchase additional shares, we were able to raise approximately $56.6 million in net cash proceeds.

The capital raised will allow Aclaris to advance our proprietary pipeline and continue to build a fully integrated dermatology Company.

To accomplish our objectives, we have assembled a management team at Aclaris with both large and small company experience and, importantly, over 120 years of combined directly relevant experience in dermatology.

Across all the senior executives in our organization, we have significant experience with companies that have developed and commercialized multiple products.

In addition, our Chief Scientific Officer, Stuart Shanler, and I are both board-certified dermatologists, providing us with a unique perspective on asset opportunities within dermatology.

In December, Brett Fair was appointed as our Senior Vice President of Commercial Operations.

Brett brings more than 18 years of pharmaceutical commercialization and global business development experience in the dermatology space to the Company.

We believe dermatology is an attractive market relative to other therapy areas for several reasons.

First, it is both -- the development is both time and capital efficient.

Second, the prescriber base is highly concentrated.

Third, there are still many large unmet market segments with no FDA-approved drugs.

And fourth, there is a growing market for both cash-pay aesthetic and medical dermatology products.

Our lead drug candidate, A-101, is being developed as an in-office cash-pay treatment for seborrheic keratosis, or SK, a common non-cancer skin tumor, as well as for other cutaneous indications such as common warts.

SK is one of the most common diagnoses made by dermatologists.

The current treatment options are predominantly surgical and have an unfavorable safety profile in terms of the potential to cause hyperpigmentation, hypopigmentation, scarring and/or pain.

It is a highly prevalent condition, with over 83 million people with SK in the US.

18.5 million patients currently visit the dermatologist for the disease, and 8.3 million procedures take place annually, even in light of the sub-optimal surgical treatments currently available.

Our product candidate, A-101, is noninvasive and is topically applied by the physician or the medical staff with minimal discomfort and no need for anesthesia.

A-101 potentially offers a reduced risk of pigmentary changes and scarring as well as the ability to treat larger numbers of lesions.

In addition to the lead indication, we are also conducting a Phase 2b study in common warts.

For common warts, approximately 1.9 million people are diagnosed annually by physicians in the United States.

And despite the fact that there are presently no FDA-approved prescription drugs available, an estimated $470 million is currently being spent annually on the treatment for the condition.

In addition to A-101, we have several other products in the drug development pipeline.

In August of last year, Aclaris acquired a portfolio of oral and topical Janus Kinase, or JAK, inhibitor compounds for the treatment of alopecia areata and other dermatological conditions from Rigel Pharmaceuticals.

Alopecia areata is an autoimmune dermatologic condition typically characterized by patchy, non-scarring hair loss on the scalp and body.

The National Alopecia Areata Foundation reports that over 6.6 million Americans have had or will develop alopecia areata at some point in their lives.

Treatment options for this disease include topical and injectable corticosteroids and topical contact sensitizing agents.

For the more severe forms of alopecia areata, utilization of these same treatment options is limited due to limited efficacy, certain side effects and the impracticality of using these treatment options on extensive surface areas.

It has been reported recently that systemically administered JAK inhibitors may be potentially efficacious in the treatment of alopecia areata.

We plan to develop A-201 for oral administration in patients with the more severe forms of alopecia areata such as alopecia totalis, which is total scalp hair loss, and alopecia universalis, which is total hair loss on the scalp and body.

We are also developing A-301 for topical administration in patients with patchy alopecia areata.

I would now like to highlight a few other recent key developments and provide an update on our clinical programs.

In January of this year, we initiated two Phase 3 trials to evaluate A-101 topical solution for the treatment of SK.

The two Phase 3 trials are designed to evaluate the safety and efficacy of A-101 compared with a placebo solution.

Approximately 800 subjects will be randomized in these multi-center, double-blinded, vehicle-controlled clinical trials which are being conducted at 34 investigational centers within the United States.

We anticipate results in the third quarter of this year.

And if the data is positive, our plan is to submit an NDA to the FDA in the fourth quarter of 2016.

In December of last year, we initiated a Phase 2 clinical trial of A-101 topical solution for the treatment of common warts, also known as verruca vulgaris.

The double-blinded, randomized Phase 2 trial is being conducted at six sites in the US and is designed to evaluate the safety, tolerability and dose response of two concentrations of A-101, a 40% and a higher 45% concentration, compared with a vehicle control.

Aclaris intends to enroll approximately 108 subjects in this clinical trial, and we expect results in the third quarter of this year.

In addition, we are continuing to progress our JAK inhibitor program for the treatment of alopecia areata.

Our plan is to submit an IND in the second half of 2016 for A-201 and commence a proof-of-concept trial in the first half of 2017.

For A-301, we are targeting a submission of an IND and commencement of clinical trials in the first half of 2017.

I will now pass the call over to Frank Ruffo, our Chief Financial Officer, to provide you with a more in-depth review of our financial results.

Frank?

Thanks, Neal.

Good afternoon.

As Neal mentioned, on October 13, 2015, we completed our initial public offering of common stock.

The Company sold 5,750,000 shares at a price of $11 per share.

This included the full exercise of the underwriters option to purchase an additional (technical difficulty) shares and resulted in net proceeds of $56.6 million from our IPO.

Focusing on 2015 cash flows from operations, our operating cash burn was $4.1 million for the fourth quarter and approximately $20.4 million for the full year of 2015.

As of December 31, 2015, we had just over $92 million in cash and investments, which we believe is sufficient to fund our current operating activities through at least the end of the third quarter of 2017.

Turning to the P&L, on a comparative basis, total operating expenses for the fourth quarter 2015 were $4.8 million, compared with $2.6 million for the fourth quarter of 2014.

For the full year of 2015, total operating expenses came in at $20.7 million, compared to $8.5 million for 2014.

Research and development expenses were $2.4 million for the fourth quarter of 2015, compared with $2.1 million for the fourth quarter of 2014.

This increase was largely attributable to higher personnel expenses and stock-based compensation costs and higher depreciation expense resulting from a one-time equipment impairment charge.

For the full year of 2015, R&D costs were $15.3 million, compared to $6.5 million for the full year of 2014.

The year-over-year increase was mainly the result of an $8 million upfront licensing payment to Rigel for the JAK inhibitor technology.

It also included higher personnel-related and stock-based compensation costs.

General and administrative expenses were $2.4 million for the fourth quarter of 2015, compared with $500,000 for the same period in 2014.

For the full year of 2015, G&A expenses were $5.3 million, compared to $2 million for 2014.

Both the year-over-year and quarter-over-quarter increases were related to higher legal and professional fees, increased market research costs, higher personnel and stock-based compensation costs, and the incremental costs associated with being a public company.

Our net loss attributable to common stockholders includes the accretion of cumulative dividends and issuance costs on our convertible preferred stock through the closing of our IPO in October 2015, at which time the preferred stock was converted into common.

Accordingly, the net loss attributable to common stockholders was $4.9 million for the fourth quarter of 2015, compared to $3.3 million for the fourth quarter of 2014.

For the full year 2015, the net loss attributable to common stockholders was $23.1 million, compared to $10.6 million for the full year 2014.

As of December 31, 2015, we had roughly 20.2 million shares of common stock outstanding.

Assuming no material issuances of equity this year, we expect our 2016 amount to be similar on a quarterly and annual basis.

With that, I will turn the call back over to Neal for a few closing remarks.

Thank you, Frank.

2015 was a very exciting year for Aclaris, both in terms of our successful IPO as well as the continuing momentum we are experiencing as we build our business.

With the proceeds of the IPO and the resulting balance sheet, we continue to thoughtfully and strategically evaluate potential business development opportunities consistent with our goal to build a fully integrated dermatology Company.

As you can see, our story remains on track with what we have communicated on the IPO road show.

We are continuing to execute on our plan, and I look forward to updating you on our progress.

Thanks for joining in today's call, and we can now open up the line for Q&A.

As a reminder, I have asked Dr. Stuart Shanler, our CSO, and Brett Fair, our SVP of Commercial Operations, to join us for the Q&A.

Andrea, can you please poll for questions?

Absolutely.

(Operator Instructions).

Liav Abraham, Citi.

Good afternoon.

A couple of questions.

Firstly, just on the timing of your clinical trial readouts in Q3, can you provide any color at all as to what you anticipate will come first: the Phase 2 warts data or the Phase 3 SK data?

That is the first question.

The second question is regarding cash burn.

You say you have enough cash to take you through the latter part of 2017.

Does that assumption include a Phase 3 trial for warts?

Or do you -- is that in your plans at all, a Phase 3 trial, or are you planning on perhaps that being used off-label if you have favorable Phase 2 data once the SK indication is approved?

And then thirdly, any comments that you could make on your appetite for additional assets?

I am aware that your JAK inhibitor is in early stages of development.

Is this -- are you still pursuing additional assets to actual preferred at this stage?

Thanks very much.

Yes.

Thank you for those questions.

Regarding the timing of the clinical trial readouts, a little early to say which will come first.

They are going to come within a couple, probably a few weeks of each other.

I would say that I would expect that the Phase 3 SK trial will probably read out first, but that is -- it's, again, a little early to say.

On the cash burn front, as Frank mentioned, we had $92 million as of December 31.

Our current cash, as we have talked about in the past, will fund three main items.

One is the Phase 3 for SK through the NDA submission, the work program into Phase 3 if we choose to go that route in terms of the next step there, and then the JAK inhibitor program into POC studies in 2017; and also increasing our headcount in 2017 as we prepare for launch of the lead asset.

I think, relative to the off-label comment on warts, our plan right now is to go through a Phase 3 study where we are predicting success in that based on the Phase 2 results we had a readout last year.

On the third question on the additional assets, we continue to look at a number of asset opportunities.

We are using two main filters at the moment.

One is to look for novel cash-pay or self-pay aesthetic products that feed into the same buy-and-bill model approach that we will have in place with our SK product.

And then the second is looking for white-space indications in medical dermatology.

So, given all the reimbursement headwinds that are out there, we prefer to look for indications that actually have no approved product in the category, and we think that positions us well relative to other companies.

That's great.

Thanks, Neal.

Thank you.

(Operator Instructions).

Tim Lugo, William Blair.

Thanks for taking my question.

For the warts study, are these patients going to be naive to therapy, or have they already been treated by cryo or salicylic acid?

And also, is there any possibility of going above the 45% concentration if efficacy is trending well but maybe you need a little bit higher dose?

Thank you, Tim.

They are -- the patients are naive, and that is important when you're looking at the wart indication in general.

They can be -- warts can be recalcitrant, and so you want to study a naive patient population when you are treating with a new chemical entity.

And the other question related to the top concentration, 45% of the top we can go to in our current formulation.

That is important because the proprietary formulation includes other excipients.

And with the current formulation we have now, that is as high as we can go.

Okay.

And maybe can you go into some more detail about some of the case reports we are seeing coming out from the JAK inhibitors in alopecia areata, totalis and universalis, and maybe give us some indications on when you expect going into clinic and what a proof-of-concept study could look like?

Yes.

On the first question on the case reports, yes, there has been a number based on the work of -- the early work of Angela Christiano and Raphael Clynes, who made the original discovery at Columbia linking JAK inhibitors to the pathophysiology of alopecia areata.

They have done -- Columbia has done a number of case series, all open-label studies with commercially available JAK inhibitors like tofacitinib and ruxolitinib.

And then on the heels of that, other institutions such as Sanford and Yale have also conducted open-label case series of patients using, again, those commercially available JAK inhibitors.

And that is one of the reasons we were pretty excited about this program, because we know a lot about the biology, we know a lot about the mechanism of action.

And then from our perspective, it is about getting the right JAK inhibitor that has the right selectivity, the right safety profile for dermatology indications.

In terms of the clinicals on our side, as we mentioned, we do plan to file an IND in the back half of this year, and we would expect to be in the clinic in the back half of this year, a Phase 1 study looking at PK/PD on the oral front.

Great.

Thanks for taking my questions.

Thank you.

Thank you.

And that concludes our Q&A session.

Ladies and gentlemen, thank you for participating in today's conference.

This does conclude the program, and you may now disconnect.

Everyone have a great day.