Acasti Pharma Inc (ACST) 2020 Q3 法說會逐字稿

Ladies and gentlemen, hello, and thank you all for your patience and for joining today's Acasti Pharma Third Quarter 2020 Business Update Conference call. (Operator Instructions) Today's session is being recorded.

And with that, I am pleased to turn the floor over to Mr. David Waldman with Investor Relations. Welcome, David.

Thank you. Good afternoon, everyone, and welcome to Acasti Pharma's Third Quarter Fiscal 2020 Conference Call. On the call with us this afternoon are: Jan D' Alvise, President and CEO; Pierre Lemieux, Chief Operating Officer, Chief Scientific Officer and Co-Founder; Brian Groch, Chief Commercial Officer; and Jean-François Boily, Vice President, Finance. If you have 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 Canadian securities laws and forward-looking statements within the meaning of U.S. federal security laws. 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 to statements, which explicitly describes such risks and uncertainties, readers are urged to consider statements labeled with the terms believes, belief, expects, intends, anticipates, potential, should, may, will, plans, continue 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 in this conference call include, but are not limited to, information statements about Acasti's strategy, future operations, prospects and the plans of management, Acasti's ability to conduct all required clinical and nonclinical trials for CaPre, including the timing and results of those trials, the timing in the outcome of licensing negotiations, CaPre's potential to become the best-in-class cardiovascular drug for treating severe hypertriglyceridemia, Acasti's ability to commercially launch CaPre and to fund its continued operations, CaPre's potential to meet or exceed the target primary endpoint of reducing triglycerides by 20% compared to placebo, Acasti's ability to report top line results for TRILOGY 2 within the contemplated timing as well as Acasti's ability to report key secondary and exploratory endpoints from both TRILOGY studies within the contemplated timing, and Acasti's ability to file an NDA based on the TRILOGY studies.

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 latest annual report on Form 20-F and most recent management 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 does 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 Acasti's latest annual report on Form 20-F and most recent MD&A.

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

Thanks, David. And I want to welcome everyone participating on the call today.

I'd like to start by expressing my gratitude to all of our shareholders for your patience and support. We realize this has been a real volatile period for our stock, and we have been very limited in what we've been able to disclose to date. To the extent possible, I'd like to use this conference call today as an opportunity to provide you with some additional insights on the unexpected TRILOGY 1 results that we reported in January, the status of our ongoing investigations, the potential implications of those investigations and possible next steps. That said, I'd also like to say that I'm cautiously optimistic that the information we gained from this investigation may provide us a viable path forward with the FDA.

Now as we had reported last month, we achieved a 30.5% and a 36.7% reduction in triglyceride levels compared with baseline among patients receiving CaPre at 12 and 26 weeks, respectively, as well as a 42.2% reduction in triglyceride levels among patients receiving CaPre at 12 weeks while on a background of statin therapy. These results were in line with our expectations based on previous studies that we conducted with CaPre and based on the fact that the TRILOGY trials were being conducted in a much sicker, severe hypertriglyceridemia population.

However, as all of you are well aware, despite the meaningful triglyceride lowering in the CaPre arm, the study did not reach statistical significance. The observed reductions in the triglyceride levels in the placebo group were far greater than anything seen in previous triglyceride-lowering trials with a prescription omega-3. In these previous trials, the placebo responses ranged from a positive 16% to a negative 17% across 18 separate intervention arms with the placebo response in more than 75% of those arms ranging between a plus or minus 10%. So our observed placebo response was 2 to 3x what would have been otherwise expected.

We believe that it's highly unlikely that the placebo used in TRILOGY, which is simple cornstarch, could achieve a 27.5% median reduction in triglyceride levels at 12 weeks. Cornstarch is a complex carbohydrate with a low glycemic index. Note that a low-fat diet derives about 55% of energy from carbohydrates, which would represent about 180 to 220 grams of carbohydrates per day. Consequently, taking an additional 4 grams per day of cornstarch, which represents only about 2% of the daily intake of carbohydrates, doesn't significantly add to this expected daily intake.

In addition, cornstarch is generally regarded as safe and is a commonly used placebo in the pharmaceutical industry. It's also known as the so-called sugar pill, and it's well known to be an inert and inactive excipient with low nutritional value. So for these reasons, cornstarch would be expected to have a neutral effect on key biomarkers of patients in the placebo group. And therefore, it's highly unlikely to be a contributing factor to the unusually large placebo effect that we saw in TRILOGY 1.

That left us with 2 possible explanations. First, either this outcome was simply due to chance, which we view as highly unlikely, or something related to how the patients were screened and qualified for the study or how the trial was conducted must have contributed to this unusually high placebo response. Consequently, this is where our investigations have focused. Immediately after reporting our top line results and with the help of our clinical and statistical advisers, we dug into the data and we noted a very high placebo response at 5 sites out of the total of 54 enrolling sites, which appeared to disproportionately contribute to the overall placebo response and treatment effect. Armed with this information, we immediately launched a full investigation, including an audit of these sites as well as a comprehensive review of all data and records from all patients taking both CaPre and placebo in order to identify a possible root cause of the unprecedented placebo effect.

It's important to note that while these 5 sites accounted for about 36% of the 242 patients enrolled in TRILOGY 1, they accounted for only about 12% of the total 278 patients in TRILOGY 2, with the majority of these patients coming from only 3 of those 5 sites.

Before discussing the key aspects of the audit, I'd like to comment on the TRILOGY protocol and trial design as several investors have speculated that perhaps it was faulty in some way. I'd like to emphasize that our protocol was very consistent with other omega-3 therapeutic trials conducted in a severe hypertriglyceridemia population. The inclusion and exclusion criteria were virtually identical with these previous studies, with the exception that TRILOGY allowed patients on concomitant fibrates, provided, however, that their triglyceride levels were stabilized going into randomization. And in fact, only 17 patients in TRILOGY 1 were actually on fibrates and all appear to have been properly stabilized before starting on CaPre or placebo.

Now another difference in the protocol design is that TRILOGY ran for a total of 6 months or 26 weeks, although our primary endpoint was read out at 12 weeks, which is identical to all of the other omega-3 studies in severe hypertriglyceridemia. However, while the protocols were virtually identical, we did note some differences in the patient demographics, with TRILOGY 1 having a higher proportion of patients with diabetes. We had about 50% of our patients were diabetic versus 27% in Amarin's MARINE trial and 37% in the EVOLVE trial with EPANOVA. Also, about 43% of the patients in TRILOGY 1 reported concomitant use of the statin, which is actually about the same percentage as what was seen in EVOLVE but compared to only about 20% of patients who are on statins in MARINE. Furthermore, the sites were monitored by our CRO and by us throughout the TRILOGY 1 trial to ensure adherence to the protocol. Our CRO is one of the world's largest clinical research organizations, and they manage trials for many of the largest pharmaceutical companies in the world. Furthermore, they have a lot of experience conducting trials in hypertriglyceridemia.

Now having said that, despite both our CRO and the company having conducted routine patient and site monitoring activities throughout the TRILOGY 1 trial to ensure adherence to protocol following the unblinding of TRILOGY 1 and the start of our investigation, we identified some unexpected and inconsistent findings that we believe may have negatively contributed to the overall top line results. These findings are now being very carefully explored via a comprehensive and rigorous review of the data and patient medical records by an independent team of auditors. We're working very closely with our CRO, our principal investigator, Dr. Mozaffarian, who has been extremely helpful, as well as our other clinical and regulatory advisers. We put together a team of experts who are conducting a thorough review of all data and records from patients taking both CaPre and placebo.

We're making steady progress with the audit of the clinical sites and additional post-hoc analyses. We believe that we now have a better understanding of what may have contributed to the unusually large placebo response, and we hope that the results of the site audits and the additional data analyses will provide us with confirmation and validation. Once we have all of the information and data compiled, we plan to request a meeting with the FDA to discuss and get their feedback on a proposal to potentially adjust the statistical analysis plan for TRILOGY 2 based on the findings from TRILOGY 1.

Now specifically, some of the key areas of focus for our investigations include, but are not limited to the following: first, we want to determine whether all patients enrolled and randomized in TRILOGY 1 came from a valid study population. This means we need to verify that all patients were properly confirmed by their patient history and fasting triglyceride levels during screening in the study qualification process as having severe hypertriglyceridemia before they were randomized to placebo or active drug; second, we need to confirm that the protocol was strictly followed at each of the 5 sites throughout the entire screening, randomization and trial periods. And related to that, we want to know if all patients, not just at the 5 sites, were actually compliant throughout the study, despite indicating to the clinical staff at each clinical site that they actually took the drug. We can verify whether they actually took CaPre by looking at levels of EPA and DHA in their blood at each time point before and during the trial; and finally, we want to verify whether patients inappropriately resumed use of other lipid-lowering drugs after being washed out during screening and/or whether they were properly stabilized on any concomitant therapy prior to the start of the trial.

So as you can see, there are a number of factors that we will continue to pursue and assess, and it's extremely important that we fully understand and are able to validate what may or may not have contributed to the unusual and unexpected results in TRILOGY 1 and then determine to what extent any of these factors may also have impacted TRILOGY 2. We're moving as quickly as possible now to complete this work and to secure a meeting with the FDA to discuss the TRILOGY 1 data and our rationale and proposal for revising our statistical analysis plan for TRILOGY 2. We clearly want to seek FDA guidance prior to unblinding TRILOGY 2. This is very important to give TRILOGY 2 the best chance of success. Once we submit our meeting request to the FDA, which we expect will occur in the second quarter of 2020, the FDA will then have 75 days to respond and then schedule a meeting for us to present our data, ask our questions and for the FDA to provide feedback and guidance.

We regret that we're currently unable to share any additional information and data from our investigations at this time. But until we can complete our audits and get the FDA's perspective and guidance, our current information will continue to be preliminary and subject to change. Consequently, we made the determination that it was absolutely critical to first complete a thorough investigation of the data, and in turn, review this data with the FDA before reporting our findings from TRILOGY 1 and what we might see as the potential implications for TRILOGY 2.

Please also bear in mind that we would not be planning a meeting with the FDA if we did not feel it was justified based on our current understanding of the data and what we believe impacted the success of TRILOGY 1. Again, we recognize how frustrating this delay is for our shareholders. However, we need to systematically work our way through this investigation and do everything possible to position TRILOGY 2 for success.

As a result, we're currently -- we currently anticipate the unblinding of the top line results for TRILOGY 2 sometime in calendar Q3 of 2020. Acasti will provide further guidance as to the timing of the reporting of TRILOGY 2 data based on the progress of the audits and feedback from the FDA. Given this timing for the top line data, we would expect to report key secondary and exploratory endpoints from both TRILOGY 1 and TRILOGY 2 studies as soon as possible after the unblinding of TRILOGY 2.

Now as we've noticed -- noted previously, there is established precedent for the FDA accepting post-hoc analyses of study results, assuming the analyses are transparent, well justified and well supported. If the interpretation of the analyses produced as an outcome of the audits and post-hoc data review are supported by the FDA and if TRILOGY 2 achieves statistical significance, we believe we may still have a viable path forward to file an NDA for CaPre.

Now switching gears a bit. I've had a lot of questions recently from shareholders regarding our current cash position and how long it will last us. As you saw in this morning's press release, as of December 31, 2019, we had $25.7 million of cash, cash equivalents and marketable securities, which we project will provide us with sufficient funding through at least December of this year, December 2020. I also want to emphasize that we currently have no plans to raise additional capital until we have completed our meeting with the FDA, which, of course, will clarify our regulatory path forward, and until we have unblinded TRILOGY 2 and the data is reported. Given our current cash position, we're not dependent on our share price at the moment. And while the delay has certainly led to share price volatility in the near term, ultimately, we believe our success will be measured by the final data that we report. Therefore, we're taking a long-term view, and we have chosen a path that we believe will maximize our chances with the FDA, and in turn, maximize value for our shareholders.

So to wrap up, we're working as quickly as possible to complete the investigations into TRILOGY 1, prepare a meeting package and secure a meeting with the FDA. Based on our Phase II data -- or Phase II trial results and the preliminary findings of our investigation into TRILOGY 1, I personally remain very confident in the potential of CaPre and look forward to providing further updates as soon as possible.

So with that, I'll now turn it over to Jean-François Boily, our VP of Finance, to present our Q3 financial results. Jean-François?

Thank you, Jan.

Turning to our results for the quarter. R&D expenses before depreciation, amortization and stock-based compensation expenses were $4.2 million for the quarter ended December 31, 2019, compared to $8.8 million for 3 months ended December 31, 2018. The $4.6 million decrease was mainly attributable to a $5.6 million decrease in research contracts. That lower research contract expense is primarily attributed to the Phase III clinical program getting closer to completion.

General and administrative expenses before stock-based compensation expenses were $1.6 million for the 3 months ended December 31, 2019, compared to $800,000 for the 3 months ended December 31, 2018. Our loss from operating activity for the third quarter ended December 31, 2019, was $7.9 million compared to a loss from operating activities of $10.7 million for the quarter ended December 31, 2018. The decrease again was due mainly to a reduction in research contract expenses as our Phase III clinical program is getting closer to completion.

Our net loss for the quarter ended was $15.7 million or $0.18 per share compared to a net loss of $4.6 million or $0.07 per share for the quarter ended December 31, 2018. The higher net loss was primarily due to the noncash financial loss of $7.9 million for the 3 months ended December 31, 2019, which was due mostly to the change in the fair value of the warrant derivative liability, partially offset by a decrease in the number of warrants.

Cash, cash equivalents and marketable security totaled $25.7 million as of December 31, 2019, compared to $28.9 million for the quarter ended December 31, 2018. The decrease was mainly generated by the operating losses, partially offset by the net proceeds from the sales of share through the established ATM, at-the-market program, and the recent exercise of warrants. As Jan stated earlier, we believe that existing cash will fully fund the company's operation through at least December of 2020.

Operator, we'll now open the call to any questions.

(Operator Instructions) We'll hear first from Leland Gershell at Oppenheimer.

Just one question for me at this point. In your discussions with your regulatory and perhaps statistical advisers, wondering to what extent the FDA would be sensitive to a p-value that may be more rigorous than 0.05, perhaps 0.01 or other as a requirement for TRILOGY 2 with respect to what's happened with TRILOGY 1 to enable potential approval?

Yes. Thanks, Leland. Pierre, I don't know, can you take that question?

Well, I mean it's obvious that the investigation will need to describe well the phenomenon that we've observed in TRILOGY 1. And despite the fact that we don't -- we might not necessarily, let's say, show a significant p-value, being close to it will be helpful to make the point. And so really, FDA will consider that post-hoc analysis based on what we've heard from our regulatory experts. And I think that observation will be important to translate into TRILOGY 2. So if there's anything we can do in the SAP of TRILOGY 2 to improve the outcome and meet the primary endpoint, even though we might be truncated on a number of patients, it's still a good story, and this is what we're going to need to do with the FDA once we meet with them. And it's going to be a review issue, obviously. But still, there's some precedents where companies can have even nonsignificant p-value, and yet still make the point to the FDA that there was, I would say, a medical benefit or maybe some potential post-commitment, post-approval commitment with the FDA.

So it's a very good question. It's -- it all depends on how the FDA will react to -- and the feedback that we're going to get from FDA and also what we could learn from the FDA. I'm pretty sure that they've seen that sort of situation before. And honestly, I think they want to see the success of good products. So if there's anything scientifically that we can explain, even though we might be short on the p-value of TRILOGY 1, and TRILOGY 2 is -- turned out to be positive, it is still a good story and a possibility to approve the product.

Yes. I guess just to maybe push a little bit further...

Leland, did you have a further question?

(technical difficulty)

Leland, I believe we lost connection with your line. (Operator Instructions)

Leland?

Sorry about that. My earbuds must have died. Want to just push a little bit further on that question. Just with regard to the level of significance in the p-value that you ultimately get from TRILOGY 2, to what extent would it matter? Should you be more stringent, let's say, at a p 0.01 or better level versus between p 0.01 and p 0.05 in TRILOGY 2, irrespective of what ultimately transpires with your post-hoc and site review for TRILOGY 1?

Well, obviously, TRILOGY 2 is -- that's why we're taking some very good time to exchange with FDA. So for us, TRILOGY 2 -- the likelihood of getting an approved product is -- will be really based on the success of TRILOGY 2. So what we're looking for is a p-value of 0.05. And so that's what we're looking for.

So as I said before, you can have one trial that is positive, and the second one might not be, or the one that we've seen with TRILOGY 1 is not as is. But if we start explaining why the combination of the 2, because at the end of the day, what we've been requested to do was to have 3 Phase -- 2 Phase III trials. And it's exactly for that reason, to see reproducibility. But there might be an explanation for not being able to reproduce TRILOGY 2 if that turned out to -- if that trial turned out to be positive.

So I think there's -- as I said, we've -- we do have precedents that gives us some, I would say, confidence or hope that we can still have an approval product despite this hiccup in TRILOGY 1.

Next, we'll hear from the line of Andre Uddin with Mackie Research.

So this is Toby for Andre. I have 2 questions. First, I was wondering, Jan, if you can talk about the placebo effect in the other 49 normal sites in TRILOGY 1. Was the trig reduction rate within the plus/minus 10% of design?

And my second question is in terms of the FDA meeting, you are -- what are you hoping to discuss with the agency?

Okay. Yes. Thanks, Toby. I'll take the first question and then let Pierre comment on the strategy and plans for the FDA meeting. I can simply say that we have not disclosed yet the details of the data in the other 49 sites. Obviously, the focus of our investigation is in the 5 sites. But this is a complex analysis, and we don't want to report any information that's premature. So right now, we really want to finish this investigation and make sure we have the full benefit of the audits and all of the post-hoc data analysis before we release any more specific data on either the 5 sites of the total 54 sites. And Pierre, do you want to comment on the objective for the FDA meeting?

Yes. The FDA meeting is really there to help us see through this -- the findings fully confirming with the audits. I think it's really, again, unusual to see a very strong placebo effect. And for us, we have some, I would say, ideas of what might have explained this. And I think Jan alluded to some of those possibilities in her script. So obviously, this is what we want to share with the FDA, share the findings, and we might learn as well from the FDA.

So I think it's obvious for us that it's a very unusual situation, and it really deserves a meeting with FDA. So now FDA has seen that sort of product before, and they probably know more than we do maybe on some of the raw data that they've seen, and this is what we want to share with the FDA. So we want to have the benefit of picking their brain and having them, I would say, buy in our strategy. And what we've said in the -- today is the possibility of modifying the statistical analysis plan.

So as you know, we've pre-established a way to look at the data and analyze data. And so based on the information we have, we might have the possibility to modify slightly the SAP based on the observation, not necessarily to meet -- to get a positive trial, but I think it would be justified for us to do so. And especially that the SAP for TRILOGY 2 was not, I would say, filed officially. And I think for that reason, actually, we -- it was good -- even though it's the same protocol for each trial for TRILOGY 1 and 2, TRILOGY 2 -- the SAP for TRILOGY 2 was still not available to the FDA. And now that we have this TRILOGY 1 finding unusual placebo effect, I think it's really normal for us to discuss the possibility of changing the SAP.

So it's going to be, I would say, a very interesting discussions with the FDA to see how we can improve and integrate maybe what would have explained the failure of TRILOGY 1. So -- and yet, with TRILOGY 1, if you -- if we -- by doing some post-hoc analyses, we can convince the FDA that we've put our finger on the explanation, then we have, as I said before, we have the path forward to keep going with TRILOGY 2.

So it's really good practice on our part. We could have, I would say, modified the SAP without consulting with the FDA, but I think it's very prudent on our part to do so because it's unusual. I think it's really out of the extraordinary here. So yes, so that was our -- and it was also, as you can imagine, discussed internally intensively with our regulatory experts, and they all agreed, including Dr. Mozaffarian as well, that it really deserves a good meeting with FDA.

Okay. I just have one more quick question. So is it fair to assume you would report the outcome of the FDA meeting ahead of the TRILOGY 2 top line results?

Yes. I don't know that we can comment on that yet at this point, Toby. It's going to depend on the timing of the FDA and what the FDA says about the approach to the statistical analysis plan and then, of course, the timing to unblind TRILOGY 2. So I think, at this point, we can't comment on that, but we'll certainly provide an update as we move forward.

And to our audience joining today, that concludes our Q&A session in the interest of everyone's time today. I will turn the floor back to our management team for any additional or closing remarks.

Thanks, Jim. And I just would like to wrap things up here briefly by saying, as always, of course, we want to thank everyone again for joining us today, and we look forward to providing further updates as soon as possible. So thank you, and I hope everybody has a good Valentine's Day. All the best.

Ladies and gentlemen, this does conclude today's business update, and we thank you all for joining. You may now disconnect your lines, and we hope that you enjoy your weekend.