Brickell Biotech Inc (BBI) 2017 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Vical Incorporated financial results conference call. At this time, I would like to inform you that this conference is being recorded. (Operator Instructions)

I will now turn the conference over to Mr. Tony Ramos, Vical's Vice President and Chief Financial Officer. Please go ahead, sir

Hello, everyone. Welcome to our third quarter 2017 financial results conference call. Joining me on the call today is Vical's President and Chief Executive Officer, Mr. Vijay Samant; Vical's Senior Vice President, Research, Dr. Larry Smith; Vical's Senior Vice President, Clinical Development, Dr. Anza Mammen; and Vical's Senior Director of Corporate Development, Andrew Hopkins.

I will begin with a brief notice concerning projections and forecasts. This call includes forward-looking statements, including financial expectations and projections of progress in our independent and collaborative research and clinical development programs. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected, including the risks set forth in Vical's annual report on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission as well as the specific risks and uncertainties noted in Vical's news release on its third quarter 2017 financial results. These forward-looking statements represent the company's judgments and expectations as of today. The company disclaims any intent or obligation to update these forward-looking statements.

Now I'd like to introduce Vical's President and Chief Executive Officer, Mr. Vijay Samant.

Thank you, Tony, and thank you to our participants for joining the call. I'm pleased to report that all our clinical programs are proceeding according to plan. We'll be reporting the results from 2 clinical trials in the first half of 2018. We're also working intensely to begin our VL-2397 Phase II trial by the end of this year. As Tony will report later on, financially, we are well positioned to continue the advancement of our key development programs in 2018.

On the call today, Dr. Larry Smith will discuss our ASP0113 collaboration with Astellas, speaking specifically to the trial endpoints of the timing of the Phase III trial top line results. Dr. Anza Mammen will discuss our ongoing HSV-2 Phase II study, which completed patient treatment in July of 2017, and we expect to report the top line data in Q2 2018 after completion of the surveillance phase. And finally, Andrew Hopkins will provide more detail on our new antifungal program, VL-2397, that is eligible for a limited use indication for the treatment of invasive aspergillosis assuming a successful outcome of a single Phase II study.

We'll begin the call today with a review of financial results. Tony?

Thank you, Vijay. We reported financial and operational results this morning for the third quarter of 2017, which reflects continued progress on our ongoing development activities. Revenues were $3.2 million for the third quarter 2017 compared to revenue of $2.6 million for the third quarter of 2016. Majority of the revenue for both periods were primarily comprised of development services performed under our agreement with Astellas related to the ASP0113 therapeutic vaccine program. We had a net loss of $3.1 million for the third quarter of 2017 compared with $2.5 million for the third quarter of 2016.

Our cash burn for the first 9 months of 2017 was $6.9 million, which is consistent with our full year cash burn guidance of between $8 million and $11 million for 2017.

We ended the third quarter with $35.2 million in cash and investments. We believe that our current cash balance will be sufficient to fund our operations at least through 2018.

I will now turn the call over to Dr. Larry Smith.

Thank you, Tony. As you know, ASP0113 is our first-in-class therapeutic CMV vaccine candidate partnered with Astellas that is designed to prevent CMV disease and associated complications in hematopoietic stem cell transplant recipients. You may recall from Vical's Phase II HCT trial data, which was published in Lancet Infectious Diseases, that ASP0113 significantly decreased CMV reactivation compared to placebo. Increased intereferon gamma T-cell responses were also observed in the vaccine group, and the vaccine was well tolerated among HCT recipients. So we believe ASP0113 is a potential first-in-class treatment for CMV and HCT recipients because it offers the ability to harness the immune system to control CMV reactivation, and in turn, decrease the subsequent risks of end-organ disease and death. To our knowledge, ASP0113 is the first CMV vaccine to undergo testing in a pivotal Phase III trial, and enrollment completed in September of 2016. As we recently announced, the last patient completed their final assessment and a 1-year follow-up in September of 2017. You may recall that the global Phase III trial recruited 515 patients at over 70 clinical sites in 11 countries in North America, Europe and Asia. The specific countries include the United States, Canada, Belgium, France, Germany, Spain, Sweden, Japan, South Korea, Taiwan and Australia. The primary endpoint of this trial is a composite of overall mortality and CMV end-organ disease at 1 year after transplantation. An independent committee has been appointed to adjudicate all cases of CMV end-organ disease, and data collection is in full progress. Astellas anticipates releasing top line results from this well-executed trial in 1Q 2018.

Finally, we continue to work extensively with our colleagues at Astellas on CMC activities. I'm pleased to announce that we completed the process validation activities for the ASP0113 drug substance, and we now expect to begin the validation of the drug product process at a contract manufacturing organization.

I will now turn the call over to Dr. Anza Mammen.

Thank you, Larry. Vical is developing a HSV-2 therapeutic vaccine to treat patients with symptomatic recurrent genital herpes infection. Genital herpes is a chronic, incurable, contagious, sexually transmitted viral infection caused primarily by HSV-2. Once infected, many people deal with the lifetime infection with periodic painful outbreaks of genital lesions. It can result in significant emotional trauma, giving the need to disclose your infection to your partner along with the risk of transmitting the virus. Furthermore, when you're infected with HSV, you have a threefold increase risk of HIV acquisition. Consequently, HSV-2 infection can be rather devastating from a number of vantage points.

Dr. Katharine Looker at University of Bristol has estimated that over 400 million people, 15 to 49 years of age worldwide, are infected with HSV-2, approximately 70 million in the Americas, 80 million in Asia and Australia, and 135 million in Sub-Saharan Africa. In the U.S. alone, 1 in 6 people, 14 to 29 years of age, are infected with HSV-2. The prevalence is almost double in women than in men. The prevalence increases with age, with approximately 30% of U.S. women in their 40s being infected. In non-Hispanic black women, the prevalence rates approach 50%.

There are currently 3 approved antiviral drugs: acyclovir approved in 1985; Famciclovir approved in 1994; and valacyclovir approved in 1995. These antivirals are inadequate and underutilized as they may reduce the frequency of outbreaks but they will not eliminate them. Furthermore, they require daily dosing that may, in time, lead to poor patient compliance and serve as a daily reminder of their sexually transmitted disease.

Despite this unmet medical need, no new therapies have been approved in over 20 years. Our VCL-HB01 vaccine includes 2 full-length HSV-2 antigens: gD and UL46 and is formulated with Vical's proprietary adjuvant, Vaxfectin. Following an initial Phase I/II study that was presented at the 2016 ASM Microbe meeting in Boston and is available on our website, we embarked on a Phase II study in September 2016 in healthy adult subjects. In this study, subjects who are 18 to 50 years of age are randomized 2:1 to receive either vaccine or placebo. This study has proceeded as planned with a successful randomization of 261 subjects at 15 U.S. clinical sites by the end of April 2017. Subjects completed the vaccination series as of July 2017. An independent safety monitoring board has completed all 3 planned meetings and has recommended continuation of the study as planned.

All active subjects are currently participating in a 12-month surveillance period, during which they record daily in their electronic diary whether they have lesions or not. If they experience a new lesion recurrence, the subjects are expected to visit the clinic within 48 hours of the onset of the recurrence. This allows the investigator to independently verify the recurrence. Once all subjects have completed a minimum of 9 months of surveillance, the primary endpoint of annualized recurrence rate will be calculated based on those recurrences that are both clinically and biologically confirmed. Once the investigator clinically confirms the recurrence, the subject receives, as per the clinical protocol, 3 days of episodic valacyclovir therapy intended to reduce the severity and duration of that recurrence. We feel that by our providing episodic antiviral therapy for each recurrence, we establish a favorable rapport with our subject.

We are excited at the possibility of a HSV-2 therapeutic vaccine that, if approved, would offer a paradigm shift in the management of recurring genital herpes. We feel that a HSV-2 therapeutic vaccine offers the potential to boost one's immunity to HSV-2, thereby reducing lesion recurrences and associated symptoms. Such a vaccine would alleviate the need for daily pill taking that serves as a constant reminder that one has herpes. Given that no new antivirals have been approved for over 2 decades, patients and treating physicians are expecting therapeutic vaccine to reshape the treatment landscape.

Now that the 4-dose vaccination series has been completed as of July this year, once the last subject dose completes 9 months of follow-up, we plan to conduct a primarily analysis. We are pleased with the trial progress and continue to work diligently to deliver top line results during the second quarter of 2018.

I will now turn the call over to Andrew Hopkins.

Thank you, Anza. As we announced earlier this month, our novel antifungal drug candidate, VL-2397, is eligible for a limited use indication for the treatment of invasive aspergillosis. This is a life-threatening infection caused by Aspergillus species, which are ubiquitous soil-dwelling fungi. The infection occurs primarily in severely immunocompromised patients, and the annual incidence is estimated to be in excess of 200,000 cases worldwide.

Despite the availability of approved antifungal therapies, there are significant unmet medical needs in the treatment of invasive aspergillosis. These unmet needs include 6-week mortality of approximately 20%; a variety of adverse events affecting the liver, kidneys, nervous system and vision; and interactions with other drugs. In addition, and as noted by the CDC, there is an increasing prevalence of infections caused by drug-resistant invasive fungal pathogens.

If approved, VL-2397 has the potential to address these unmet needs. This novel antifungal has a new mechanism of action compared to currently available therapies. In preclinical studies, VL-2397 demonstrated rapid antifungals -- demonstrated rapid fungicidal activity in vitro and high survival rates and reduced lung fungal burns in vivo. These animals -- in these animal models, the survival is also high in experiments where an azole-resistant isolate was used. VL-2397 is a cyclic hexa-peptide that resembles siderophore ferrichrome, and it enters the fungal cell through a transporter called [SIC 1]. This transporter is not present in humans, so we expect this to translate into a favorable therapeutic window and low risk for toxicity. This is consistent with the safety findings reviewed by a safety review committee from our first-in-human Phase I trial of VL-2397 normal healthy volunteers. In addition, VL-2397 is not metabolized by cytochrome P450 enzymes and studies demonstrated that it has a low propensity for drug-drug interactions.

Turning now to the planned development for VL-2397. Vical has interacted intensively with FDA to design a single Phase II efficacy study that can support limited use indication approval. For VL-2397, this would mean for the treatment of invasive aspergillosis in patients for whom alternative therapies are not available. The eligibility for a limited use indication approval is contingent upon the successful outcome of a single Phase II trial carried out in accordance with the protocol and statistical analysis plan consistent with the FDA's advice. The final determination whether the drug is approvable will be made by the FDA after a review of all relevant data and if all standards have been met for a new drug application.

The limited use indication is a provision of the limited population pathway established under the 21st Century Cures Act of 2016. This pathway is designed to streamline development programs for antimicrobial drugs like VL-2397 that are intended to treat serious or life-threatening infections like invasive aspergillosis.

For VL-2397, a Phase III trial will be required to support full approval in a broader population of invasive aspergillosis patients. Vical intends to initiate a Phase II trial in the fourth quarter of 2017. The trial was designed to -- the trial design was developed after discussions with the FDA in addition to clinical investigators with experience treating invasive aspergillosis, including members of the Mycoses Study Group. The global Phase III trial will be a randomized open-label study conducted in approximately 200 patients with acute leukemia and recipients of allogeneic hematopoietic cell transplants who are suspected of having invasive aspergillosis. Participants will be randomized 2:1 to receive VL-2397 or standard treatment of voriconazole, posaconazole or liposomal amphotericin B. This trial is designed as a noninferiority study with a primary endpoint of all-cause mortality at 4 weeks and a key secondary endpoint of all-cause mortality at 6 weeks. Achieving a limited use indication approval is contingent upon successfully meeting both endpoints. We anticipate enrolling at 30 to 40 major cancer and transplantation centers in North America, Europe and possibly other regions, with a targeted first site activated in fourth quarter 2017. We estimate the trial could take up to 24 months to fully enroll.

With that, I'll now turn the call back to Vijay.

Thank you, Andrew. I would remind investors that this is a very exciting time for Vical. We have 2 important clinical readouts in the first half of 2018. And we'll also be embarking on the VL-2397 proof-of-concept study, which would be eligible for a limited use indication approval for the treatment of invasive aspergillosis, assuming a successful outcome of the Phase II trial carried out in accordance with the protocol and statistical analysis plan consistent with the agency's advice. The final determination of whether the drug is approved will be made by the FDA after a review of all relevant data. Our partner, Astellas, is planning for success and has begun preparations for BLA filing and commercial launch. The team at Vical is geared towards getting our manufacturing facility ready for a potential commercial launch. In summary, a busy and exciting time for Vical employees and hopefully, a satisfying 2018 for our shareholders.

That concludes our prepared comments for today. Operator, we are now ready to open the call to questions from our invited participants.

(Operator Instructions) Our first question comes from Ram Selvaraju from H.C. Wainwright.

I just wanted to ask about what the relative reception was to VL-2397 at the recent IDWeek conference, in particular with regard to, a, the possibility of using it as a weapon against these new fungal superbugs like Candida auris as well as potentially in complement to existing antifungal agents, potentially of the conazole class. And also, if you could make some comments regarding what the potential commercial infrastructure might be for commercialization of 2397, and if you would regard that as an opportunity that you can pursue entirely independently or potentially in collaboration with more established company?

Okay. Let me start off. I think the reception at IDSA for this program was very enthusiastic because, as you know, nothing has been approved for treatment of invasive aspergillosis for almost 20 years now. So this is based on the preclinical data. To remind you, this is a drug which has a unique mechanism of action. It's a fast-acting drug. This is all in preclinical models. And also, in our Phase I study, it was well tolerated. So I think people are looking for a new modality to treat these patients. So we had a little cocktail hour. We had a whole bunch of invasive aspergillosis physicians who actually came in to find out more about this drug, and there seems to be a level of excitement. Larry, you want to add something to that?

I think that really covers it, Vijay. I think there is quite a bit of excitement in the community, and we had a great opportunity to speak to a number of investigators for our Phase II. And we had a really great turnout at our poster presentation in which we presented the data supporting PK -- PD data supporting the dose selection for Phase II. So overall, I think it was a terrific venue and we spoke to quite a few people. We got some really good interactions and feedback.

And one of the reasons for that, Ram, is that we're working very closely with the Mycosis Study Group. And these are really the -- this is a group that has the alignment all of invasive physicians pertaining invasive aspergillosis and they've been giving us guidance on design of the clinical study and they'll be also helping us in selection of some of the clinical sites in the United States. So all that adds up okay to make sure that we take the right steps going forward with this particular program. Your second question was commercial infrastructure. This would -- for limited use indication, this is not a huge sales effort. This could be done by a rent-a-salesforce. But you need to understand the synergy we -- remember, the ASP0113, we have copromotion rights in the United States, okay? So these are the, basically, the same patient population. So if ASP0113 is positive, there could be synergy with the same salesforce calling on the hospitals and the physicians that this group will be attacking. So I think it will be a synergy. So we haven't given it much thought at this stage. Our focus right now is to get the study going. And we patiently await the outcome of our ASP0113 data, which is going to occur in the first quarter of 2018. But that's an exciting thing to think about going in the future.

Our next question comes from David Bouchey with IFS Securities.

I have -- I think my first question is a quick housekeeping question for Tony. Can you give us some guidance going forward on what the license and royalty revenue streams are going to be? Seems like for the past 2 quarters, it's been in 52 range. Do you expect that to continue?

Yes. I would think that would continue, yes.

Okay. And the next sort of financial question is you guys have recently filed an S-1. The last time I have Vical raising money was in January of 2012. Is that correct?

Yes, that was the last underwritten offering.

The last underwritten offering. Yes, excuse me. So that's been quite some time. And do you have a specific objective in mind for this cash?

Well, first of all, we don't talk as to cash raises in public forums. But any time a company raises money, it's specifically related to their development programs and general profit purposes, okay?

So would it be fair to say that if you do raise money, you would probably have enough to pay for the entire Phase II trial for VL-2397?

I think that's a fair answer.

Okay, great. And let's go now real quickly to the ASP0113. I believe you mentioned that you are completing the chemistry manufacturing, a control segment requirements. Can you give me a little bit more detail about how much work you have to do for that?

I think it's a -- probably one of the largest sections of the BLA. And the first element of that really is completion of the process validation for the full drug. And we have completed that last year that it was manufacturing lots for each. There are 2 plasmids here in this vaccine. So you'll make 3 lots in a series and all 3 are to pass and meet the specifications. So we completed 6 lots of that activity last year. Then the entire manufacturing process has to be written in and of the process characterization data to make sure that the processes are validated and controlled. All the guiding documents, the reference assays, which are all validated, the potency assays, the release assays, the validation protocols all have to be included, the description of the manufacturing facility, the description of the process. It's a pretty huge undertaking, okay? Now that's just on the bulk drug. And then beyond that, you also have to do the same thing for the filling process. We actually fill the [wires], which is the (inaudible) product, which involves the defining the process, including storage conditions, stability data, pretty involved David.

It does sound like a lot of work. One last question. I want to make sure that I understand...

David, just to remind you, whether it's Pfizer or Merck filing a BLA versus Vical assisting Astellas filing the BLA, the same [C] sections are reviewed in the same context, okay? There are no free passes because you're a small company.

Okay. One last question here about the antifungal Phase II again. Can you make sure I understand what inclusion/exclusion criteria you're going to be applying to patients that you'll be enrolling in order to satisfy the limited use indication?

Dr. Anza?

Yes. So David, we're going to be focusing on patients who have either ALL or AML. So acute leukemia or those who have received allogeneic HCT transplant. So that's the primary focus. Now we don't want to -- we're including patients who are at least 18 years of age and that they've not received more than 4 days of previous antifungal therapy before they're going in to receive our product.

And the patients we include are both possible diagnosis in invasive aspergillosis, probable and confirmed, those other 3 categories, okay?

Okay.

There are no further questions. I will now turn the call over to Vijay Samant for additional or closing remarks

Well, thank you all for participating. We look forward to continued progress in our development programs and to meeting with some of you at our upcoming conferences. Thank you again.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. You may now disconnect.