Acasti Pharma Inc (ACST) 2022 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Acasti Pharma Second Quarter 2022 Earnings Call. (Operator Instructions) It is now my pleasure to turn the floor over to your host, David Waldman of Investor Relations. Sir, the floor is yours.

Thank you, and good afternoon, everyone. I'd like to welcome you to Acasti Pharma's Fiscal 2022 Second Quarter Conference Call. On the call with us this afternoon are Jan D'Alvise, President and CEO; Dr. Pierre Lemieux, Chief Operating Officer, Canada; Chief Scientific Officer and Co-Founder; Dr. George Kottayil, Chief Operating Officer, U.S.; Brian Ford, Chief Financial Officer; and Prashant Kohli VP of Commercial Operations.

We are planning for a Q&A session at the end of our prepared remarks. But if you have any remaining questions after the call or would like any additional information about the company, please contact Crescendo Communications at (212) 671-1020. I'd also like to remind everyone that statements on this conference call that are not statements of historical or current fact constitute forward-looking information within the meaning of the Canadian securities laws and forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, the Securities Act of 1933 and the Securities Exchange Act of 1934.

Such forward-looking statements involve known and unknown risks and uncertainties and other unknown factors that could cause the actual results of Acasti to be materially different from historical results or from any future results expressed or implied by such forward-looking statements.

In addition, statements which explicitly describe such risks and uncertainties, readers are urged to consider statements labeled with terms believes, belief, expects, intends, anticipates, potential, should, may, will, plans, continue targeted or other similar expressions to be uncertain and forward-looking. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this conference call.

Forward-looking statements during this conference call may include, but are not limited to, the success and timing of regulatory submissions of the PK bridging study for GTX-104 and Acasti’s other preclinical and clinical trials; regulatory requirements or developments; changes to clinical trial designs and regulatory pathways; legislative, regulatory, political and economic developments; Acasti's projected cash position and operating runway; and the effects of COVID-19 on clinical programs and business operations.

The forward-looking statements contained in this conference call are expressly qualified in their entirety by this cautionary statement, the cautionary note regarding forward-looking information section contained in Acasti's last quarterly report on Form 10-Q and most recent management's discussion and analysis, which are available on SEDAR at www.sedar.com, on EDGAR at www.sec.gov and on the Investors section of Acasti's website at www.acastipharma.com.

All forward-looking statements in this conference call are made as of the date of this conference call. Acasti do not undertake to update any such forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. The forward-looking statements contained herein are also subject generally to assumptions and risks and uncertainties that are described from time to time in Acasti's public securities filings with the Securities and Exchange Commission and the Canadian Securities Commission, including today's quarterly form on Form 10-Q and most recent MD&A.

In addition, any forward-looking statements represent Acasti's views as of today and should not be relied upon as representing our views of any subsequent date. While Acasti might update forward-looking statements at some point in the future, unless legally required under applicable securities law, Acasti specifically disclaims any obligation to do so.

I'd now like to turn the call over to Jan D'Alvise. Please go ahead, Jan.

Thank you, David. And I'd like to welcome everyone on the call today. The second quarter was truly transformational for Acasti. As you know, we successfully completed the merger with Grace Therapeutics in August, creating a premier clinical-stage specialty pharma company focused on rare and orphan diseases. We now have a diverse technology and product portfolio comprised of unique drug delivery capabilities and several clinical and preclinical stage drug assets.

Our lead clinical drug candidates have been specifically designed and formulated to enhance efficacy and safety by providing faster onset of action and reduced side effects, all while being more conveniently delivered, which can ultimately increase patient compliance and potentially lead to improved clinical outcomes. This acquisition brings us new and exciting opportunities in sizable orphan disease markets with substantial unmet medical needs.

I'm really pleased to report that in the short time since completing the merger, we've achieved meaningful progress, both in terms of clinical development and business operations. We've swiftly and smoothly integrated the Grace employees with Acasti, and we're now laser-focused on advancing our clinical pipeline. Towards this end, immediately following the closing of the acquisition, we commenced enrollment for our pivotal pharmacokinetic bridging study for GTX-104, our novel aqueous formulation of nimodipine that's being developed as an IV infusion for patients experiencing subarachnoid hemorrhage, or SAH, that is triggered by an aneurysm. This important study is the next required step in the proposed 505(b)(2) regulatory pathway and it is being conducted in 50 healthy subjects as a single center, randomized, 2-period crossover study.

The primary objective of this study is to evaluate and compare the relative bioavailability of GTX-104 with the currently marketed oral nimodipine capsules which are the standard of care. The second objective is to assess the safety and tolerability of GTX-104 as compared to oral nimodipine capsules. Per the study protocol, subjects will be randomized, assigned in a 1:1 ratio to 1 of 2 treatment sequences with a crossover design. So Group A will switch to Group B where GTX-104 is administered first, or Group B will switch to Group A where oral nimodipine capsules are administered first.

In both groups, GTX-104 nimodipine will be administered intravenously over a 72-hour period, and nimodipine will be administered orally via 2 30-milligram capsules with water every 4 hours for 72 hours. Throughout the study, we will be conducting safety evaluations, which will include capturing any treatment-emergent adverse events, serious adverse events, electrocardiogram data, clinical laboratory evaluations, physical examinations and resting vital signs, which will include, very importantly, blood pressure. Subjects will be admitted to the clinical research unit or the CRU on the day prior to dosing, and they will remain domiciled in the CRU for the duration of each study period.

Again, the goal of this pivotal study is to achieve blood levels with our GTX-104 IV nimodipine formulation that are comparable to the oral form of the drug that is in routine use today. As previously announced, we expect to report results during the first half of calendar 2022. Based on the previous encouraging results from a PK study conducted by Grace, we remain optimistic that this pivotal PK study will achieve its primary and secondary end points.

Following the data readout and its subsequent review with the FDA, we intend to determine the final design of our planned Phase III safety study for GTX-104. Assuming the PK study and the FDA meetings proceed as planned, we intend to commence the Phase III study in the second half of next year, calendar 2022. Both the PK study and the initiation of the Phase III safety study are very important near term and very meaningful catalysts for the company.

As a reminder, SAH is a rare and life-threatening medical emergency where bleeding occurs over the surface of the brain in the subarachnoid space between the brain and the skull. It's estimated to affect about 50,000 patients per year, representing an estimated addressable market of more than $300 million in the United States alone.

SAH typically occurs quickly, and the key to patient survival is prompt medical intervention. Normally, it requires immediate surgery and on average, about 2 weeks in a neurointensive care unit to try to prevent death and reduce the risk of long-term disability. Patients typically remain on nimodipine throughout their stay in the neuro-ICU. Nimodipine is currently only available in an oral dosage form in the United States, and many of these patients come in to the hospital unconscious or have a hard time swallowing during their hospital stay. Therefore, we believe GTX-104 delivered intravenously could be a much more convenient and efficient way to deliver nimodipine.

And importantly, because of its better absorption profile and more consistent blood levels, GTX-104 could potentially provide physicians with a more effective tool for hypotension management. This advantage is really important as GTX-104 could help to reduce the incidence of vasospasm, which requires immediate, aggressive and costly intervention and can lead to worse outcomes for the patient.

Also, please note that GTX-104 has been granted orphan drug designation status by the FDA. This provides us with the potential for 7 years of market exclusivity in the United States. Provided that we see a similar safety profile to oral nimodipine upon completion of the Phase III study, we could then expect to proceed with the filing of an NDA using the orphan drug designation and the 505(b)(2) pathway. We're very excited about GTX-104's potential, and we look forward to updating you as we progress towards achievement of these important near-term catalysts.

Now regarding our other 2 clinical candidates, GTX-101 and GTX-102, we've recently been awarded 4 composition of matter patents between the 2 drugs. The European patent office, the Chinese patent office and the Mexican patent office all have issued composition of matter patents for GTX-101, which is our novel bio-adhesive film forming topical spray formulation of bupivacaine for the treatment of postherpetic neuralgia or PHN.

And as a reminder, PHN is a persistent and often debilitating neuropathic pain, which is caused by nerve damage from the shingles virus. In fact, it's so often cited as the leading cause of suicide in chronic pain patients over the age of 70. It's also been reported that PHN affects approximately 150,000 patients per year in the United States alone, which represents an estimated addressable market of about $400 million.

So based on encouraging results from a Phase I PK study conducted previously by Grace, we believe that GTX-101's biphasic delivery mechanism has the potential for rapid onset as well as continuous pain relief for up to 8 hours. This could be a significant improvement over the standard of care, and it could potentially provide physicians and patients with an opioid sparing alternative as bupivacaine is well understood, it's safe and it's a non-habit-forming nonnarcotic analgesic. Now we plan to conduct single and multiple ascending dose or SAD/MAD studies with GTX-101 next year. And we expect to report those results by the end of calendar 2022. Furthermore, we intend to initiate a Phase II study shortly after reporting the SAD/MAD data.

Now turning to GTX-102, the Japanese patent office recently granted Acasti a composition of matter patent for this novel, concentrated, easy-to-use oral mucosal spray formulation of betamethasone. We're developing this to improve the neurological symptoms of ataxia-telangiectasia or A-T. Now A-T is a progressive neurodegenerative genetic disease that's typically diagnosed in children at a very young age. It causes severe disability as it affects many parts of the body, including areas of the brain, which impact their motor function and their speech. A-T is also associated with the weakening of the immune system, predisposing these patients to infection and cancers. Sadly, A-T patients typically die in their mid-20s. This disease unfortunately affects about 4,300 patients per year in the United States, creating an estimated addressable market of about $150 million.

Now based on an independent study conducted in Italy with an oral liquid form of betamethasone, we believe GTX-102's novel concentrated oral mucosal spray formulation has the potential to simplify drug administration and improve the symptoms of A-T, including posture and gait disturbance as well as kinetic and speech functions. Therefore, we believe that GTX-104 could address a very important unmet medical need as no FDA approved pharmacotherapies currently exist.

In the near term, we plan to conduct a pharmacokinetic bridging study comparing blood levels of GTX-102 to a reference product containing betamethasone. We anticipate reporting those results by the end of next year. Assuming this trial is successful, we would then move forward quickly to conduct a confirmatory Phase III safety and efficacy trial in patients with A-T. These newly granted composition of matter patents are very important additions to our already strong and established intellectual property portfolio as they provide protection beyond 2036 and create potential opportunities for partnering in these major international markets.

I hope you're as pleased as we are by the meaningful progress that has already been made in the 2 short months since we completed the merger. We look forward to reporting on progress next quarter as we continue to advance our lead drug candidates through clinical development and ultimately to commercialization.

So with those operating updates, I'll now turn the call over to Brian Ford, our CFO, to discuss our financial results for fiscal Q2. Brian?

Thank you, Jan, and good afternoon, everyone. Turning to our results for the quarter. R&D expenses before depreciation, amortization and stock-based compensation expenses for the 3 months ended September 30, 2021, totaled $0.55 million compared to $0.81 million for the same 3 months ended September 30, 2020. The net decrease was mainly attributable to the reduction in professional fees within the research and development departments associated with the completed TRILOGY trials as well as the reversal of prior period provision after assessments and correspondents from tax authorities. There were no significant R&D costs in Q2 related to the acquired assets from Grace as these programs only began to ramp up as of September of 2021.

General and admin expenses before stock-based compensation expenses for the 3 months ended September 30, 2021, were $2.9 million compared to $1.1 million for the 3 months ended September 30, 2020. This increase was a result of increased legal, tax and accounting and other professional fees related to the Grace Therapeutics transaction. Loss from operating activities for the 3 months ended September 30, 2021, was $3.6 million compared to a loss of $8 million for the 3 months ended September 30, 2020. The reduction was mainly due to a reduction in R&D and sales and marketing expenses, offset by an increase in general and admin expenses as a result of increased legal, tax, accounting and other professional fees related to the Grace transaction for the 3 months ended September 30, 2021.

The company also recognized $5.3 million of impairment charges, including $3.7 million related to the intangible assets and $1.6 million related to production and lab equipment for the CaPre program, and that was back in 2020. Net income for the 3 months ended September 30, 2021, was $1 million or roughly $0.03 a share compared to a net loss of $6.1 million or $0.52 per share for the 3 months ended September 30, 2020. The increase resulted primarily from a gain of $4.5 million due mostly to a decrease in the fair value of the derivative warrant liability as well as a decrease in R&D expenses in the TRILOGY Phase III clinical program for CaPre was completed.

Cash, cash equivalents and short-term investments totaled $50.8 million as of September 30, 2021, compared to $11.6 million in cash and cash equivalents at September 30, 2020. Based on management's current projections, Acasti believes that our existing cash provides at least 2 years of operating runway. Also during the quarter, as Jan mentioned earlier, we completed the acquisition and a merger with Grace Therapeutics through the issuance of 18.2 million shares that had a value of $60.8 million. Upon completion of the transaction, the company recognized acquired intangible assets of $65.2 million primarily related to the development assets at Grace.

Finally, in addition to our quarterly filing, I can report that we also filed a prospectus supplement related to our existing at-the-market or ATM facility to update our disclosures and restore available capacity to $75 million. Under the terms of the related sales agreements and prospectus supplement, Acasti may from time to time issue and sell common shares at an aggregate offering value of up to $75 million. I would remind our shareholders that we currently have an estimated 2 years of operating capital that will fund several major catalysts, including the completion of our GTX-104 program. This filing of the ATM prospectus supplement was simply a good housekeeping activity to regain the active status of the facility following the merger. We have no obligation or plans to use the ATM in the future. And we would only use it prudently and opportunistically with a goal to minimize shareholder dilution.

With that, I'll now turn the call back over to Jan. Jan?

Yes. Super. Thanks, Brian. That concludes our prepared remarks. Now I'd like to open the call to any questions. Operator, do we have any in the queue?

(Operator Instructions) Your first question for today is coming from [Nicole Kaufman].

I'm with Blackridge Capital. I want to congratulate you guys on the progress so far. I do have a few questions. First, Jan, do you mind elaborating on the importance of the PK study and then the expected timing of the Phase III of GTX-104.

Sure. Thanks, Nicole. Appreciate the question, and thanks for attending today. So I assume you're referring to GTX-104, our IV formulation of nimodipine. Is that correct?

Correct.

Yes. So that study is well underway. We refer to it as a pivotal trial. The key here is, again, being able to compare our blood levels of our IV infusion to the orally administered nimodipine. And if we can show comparison between the 2, then we'll be able to proceed directly to our Phase III safety study. And again, the PK study is underway. We expect results in the first half of next year, and we would expect then to be able to start the Phase III safety study in the second half of next year. So certainly before year-end.

Great. And then a follow-on to that. What would be your commercial strategy following approval?

Yes. So great question. So with GTX-104, it's -- we're targeting a fairly concentrated market. We'll be focused on the major neuro-ICU centers around the country. So we believe that we can reach those centers ourselves with a small, very targeted commercial team. We feel that we can do that very cost effectively, and it gives us control of the product. So that would be our plan with GTX-104. I think it would be our plan as well with GTX-102. That's even a smaller, more concentrated market. There's probably about a dozen centers in the United States that treat these kids with A-T. The most important center is Johns Hopkins. They probably treat about 50% of the patients in the United States. And we're very pleased that they're working with us and will be part of our clinical trial program.

So I think it will be very easy for us to reach those markets directly ourselves. On the other hand, GTX-101 is a very large market and the physicians that are primarily prescribing are PCPs, primary care physicians. And so for GTX-101, we'll likely seek a commercial partnership in the United States and as we will, outside of the U.S. really for all of our drug assets.

I appreciate the detailed response, Jan. I look forward to hearing more developments from you guys.

(Operator Instructions) We do have a follow-up question coming from Nicole.

I do have another question. I see you do have sufficient cash. Can you explain how you're going to be deploying that and your plans for it?

Yes, sure. Happy to do that. Yes, it's difficult to precisely estimate the total cost of each of these programs at this point. We don't have final designs, for example, for the Phase III programs for each of these products. But we will be getting that a tremendous amount of input from the FDA over the next year as we complete our Phase I PK programs and getting input into the Phase IIIs in the case of GTX-104 and 102.

With GTX-101, we do expect we'll proceed to a Phase II next year. But the current cash that we have, we believe, is adequate to take us through complete development through Phase III of GTX-104, and it should significantly advance both GTX-102 and 101. So I don't know if that answered your question, Nicole. Can I expand on that?

No, I think that's great. That officially answers my question.

I would now like to turn the floor back over to [Jim Caldwell].

Just wondering if you could outline what's happening with CaPre. And the second question is, do we had some investment firms that were following Acasti beforehand with CaPre? And just wondering if they are still on the scene.

Yes. Thanks, Jim. Great to hear your voice. Thanks for the question. With CaPre, what I can tell you is, as we've stated previously, we are continuing to evaluate several strategic options for CaPre, and those are progressing. We'll continue to keep you apprised as this process progresses. So we'll keep you posted on that.

And your second question, yes, we're very, very hopeful that we'll be able to pick up coverage -- analyst coverage with some additional firms in the near future. But I really don't have -- I can't really comment on the timing because I don't have any insight into the timing at this point.

Your next question is coming from [Sean Canavan].

Coming from a shareholder, question I have for you is we were going back and forth with the Investor Relations team. I mean even yourself on several calls. There's a lot of shareholders impacted with that reverse stock split. What is the plan moving forward to kind of recoup some of that, right? And being that you guys said that it was the absolute last sort, what did you guys do prior to that before it became a last resort?

You're speaking the reverse split. Yes, we worked with NASDAQ to try to delay the implementation, hoping that the market would react to the news of our merger with Grace. That did not happen, and we simply ran out of time. The -- in order to maintain our listing, NASDAQ required that we get our share price back up above $1. So we really had to implement that at the time that we did. And now, honestly, all we can do, I think, is really focus on execution.

And I hope you can see that we've made significant progress in the last 2 months just since the merger. We have a number of studies either underway or about to start. These are very important catalysts for the company, and I think will have the potential to create a lot of value as we go forward. And it's also up to us to get the word out. I mean what I'm realizing is that so many of our investors really don't understand the new business of Acasti. They're not familiar with the assets. I think we've got to get out and we've got to educate, we've got to communicate. And we are doing that now. We're going to a number of conferences. We've been to several just since the acquisition was completed. We have participated in a number of interviews. We've had a couple of publications. So we just need to do more of that, Sean.

And I think if we can show in a very short period of time -- for example, I mentioned that we'll have our PK results in the first half next year. If we can start showing results with additional studies following that one, then I think the company will -- should be able to significantly improve our value.

I know it's frustrating. We're all frustrated over it, but we really did the best we could to postpone doing the reverse split to the very last moment.

I feel like I heard the same thing prior to the reverse split. But again, I'm all on with you guys, got my fingers crossed.

Yes. Well, just let's see what we -- we definitely plan to show you we can execute. We've got a great team, and we're well underway with the PK trial. And as I mentioned on the call, this is really a pivotal study. These results are very important. The safety of nimodipine is well accepted. So the fact that all that we have to do after this pivotal PK trial is a safety study. It bodes well for our ability to get approval of GTX-104. So we've just got to keep putting one foot ahead of the other here. And I think we've got the team to do it. We've got some exciting assets. So you're going to see a number of catalysts over the next year that I think hopefully will make a difference. We appreciate your hanging in there.

Your next question is coming from [Sahil Kazmi].

Congratulations on all the progress. Just a couple of brief one from us. Curious about how you're thinking about the commercial potential here across both 104 and 102? And how that might differ across the different geographies, whether it be in the U.S. or the EU? Are there certain prescribers you're targeting? And just in general, how should we think about the ramp as we go into the PK study through the safety study and then into 2023?

Sahil, thank you for joining today. Appreciate it. I'll turn this question over to Prashant. Prashant is our VP of Commercial Operations. Prashant, can you respond on the commercial question?

Sure, happy to. Sahil, so in terms of -- I'll just take them one at a time, 104 and then 102. 104, as Jan alluded to, the market is fairly concentrated through the comprehensive and advanced stroke centers in the country. We believe based on the segmentation and the market analysis that we have conducted, there are about 400 such centers in the country that handle about 70% of the patient volume. So with a relatively small footprint of sales force, highly experienced hospital-based sales force, we believe we can cover a major portion of the market.

GTX-104, which is an IV formulation of nimodipine, we believe has potential outside the U.S. as well. There is an intravenous formulation of nimodipine available in certain geographies in Europe. However, there are significant benefits to our formulation, the biggest one being that it can be peripherally infused as opposed to a central line, which adds a lot of complexity, bedside. So we believe that there is a strong value proposition outside the U.S. And opportunistically, we plan on partnering for those -- for such opportunities.

For GTX-102, as again, Jan mentioned, that's a very -- that's a much smaller market from a clinical perspective. There are about a dozen such centers in the country. So with a relatively small sales force, we can capture a lot of the value and then cover those markets. Similar to 104, our plans are to partner with international biopharma to take our drug to those markets. Does that help answer the question?

Yes. That's great. And then just a brief follow-up on 104. From our perspective, it looks like a relatively derisked path forward here. But if you can talk about pending the PK study, a little bit more color on what that sort of Phase III pivotal safety study might look like from a design perspective? And maybe when you plan to read that out as well?

Yes. So I'll give you a brief answer here and then Pierre or George could jump in. Ultimately, we're going to have to sit down with the FDA, but preliminary discussions would indicate that we would need maybe about 100 patients. So it's not a big study. And again, the important focus of the study is going to be on safety. And again, what we've seen so far with the IV form of nimodipine is that it may, in fact, even be more safe or have a reduced number of adverse events as compared to the oral simply because it's easier to control the administration, and you see less variability in terms of blood levels. So this could be important.

And I think the other thing to mention is while it's not required for the design of this study, we do want to collect some pharmacoeconomic endpoint data because we do believe that this will be a very important aspect or benefit of our IV formulation. For example, we believe that it's going to require less nursing time, less prone to medication errors, certainly want to capture whether there's a reduction in the -- any sort of rescue therapy that's required. And ultimately, does it lead to a shorter stay in the ICU? Do these patients -- are the outcomes better? So these are the sorts of things that we want to collect. It won't be designed as an outcome trial, but we'll be able to collect data, such as I described, and then our thoughts would be to try to publish that data.

Excellent. Once again, congrats on the progress. We look forward to following the story.

There are no more questions in queue.

Okay. Thank you, operator. And again, I want to thank everyone for joining us today. Appreciate your being here with us, and we really look forward to continuing to provide you with further updates in the very near future. So with that, I'll wish you a good day. Thank you.

Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.