Brickell Biotech Inc (BBI) 2020 Q4 法說會逐字稿

Greetings, and welcome to Brickell Biotech, Inc. Fourth Quarter and Full Year 2020 Financial Results Call. (Operator Instructions)

As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Dan Ferry, with LifeSci Advisors. Thank you. You may begin.

Thank you, and good afternoon, everyone. Joining me on today's call are Brickell's Chief Executive Officer, Rob Brown; Chief Financial Officer, Bert Marchio; Chief R&D Officer, Deepak Chadha; and Chief -- excuse me, Co-Founder and Chief Operating Officer, Andrew Sklawer.

Before we begin, I would like to remind everyone that this conference call and webcast will contain forward-looking statements about the company. These statements are subject to risks and uncertainties that could cause actual results to differ. Please note that these forward-looking statements reflect our opinions only as of the date of this call. We will not undertake obligation to revise or publicly release the results of any revisions to these forward-looking statements in light of new information or future events. Factors that could cause actual results or outcomes to differ materially from those expressed in or implied by such forward-looking statements are discussed in greater detail in our most recent filings on Form 10-K and our other periodic reports on Forms 10-Q and 8-K filed with the SEC.

I would now like to turn the call over to the company's Chief Executive Officer, Rob Brown.

Thank you, Dan, and thanks to everyone for joining us on this call this afternoon. First, I will provide a business update and then ask Deepak to provide an update on our ongoing Phase III clinical program. Bert will then review the financial results we reported earlier today before we open up the call for questions. With that as an outline for the call, let's get started.

We entered 2021 with a positive momentum surrounding our lead program, sofpironium bromide, which we are developing for -- as a potential best-in-class treatment option for the -- for Primary Axillary Hyperhidrosis or more commonly known as excessive underarm sweating. Several recent achievements have put this program on a clear path, and we anticipate that various near-term milestones within the year will position the company for potential long-term success.

We initiated both the pivotal Phase III clinical trials, Cardigan 1 and 2, in which we are evaluating the efficacy and safety of topically applied sofpironium bromide gel 15% in approximately 350 patients per study. I am pleased to announce today that Cardigan -- the Cardigan 1 study has already exceeded 50% enrollment. And we remain on track to announce top line results for both pivotal studies in the fourth quarter of 2021.

Secondly, the fourth quarter of last year, we raised approximately $13.7 million. In addition, already this year, we received approximately $10.5 million in aggregate net proceeds through the warrant exercises and the sale of shares under our existing ATM equity offering program. This capital further strengthens our balance sheet and provides us with cash runway for at least the next 12 months and allows the company to continue executing on key activities that will enable us to submit a new drug application, pending the successful outcome of the pivotal Phase III program.

Now turning to our Japanese development partner, Kaken Pharmaceutical. Kaken has proven to be a valuable partner. As we've previously announced, Kaken recently launched commercial sales of sofpironium bromide gel 5% in Japan under the brand named ECCLOCK for the once-daily treatment of Primary Axillary Hyperhidrosis. This is a significant milestone for both companies as Japan is the first country to approve sofpironium bromide for any indication. And sofpironium bromide is the first topical prescription product for the treatment of Primary Axillary Hyperhidrosis in the country.

As a reminder, Brickell is entitled to receive sales-based milestone payments as well as tiered royalties based on a percentage of net sales of ECCLOCK in Japan. Along those lines, we are pleased to announce that we have already started to recognize the first of these royalties since the launch of ECCLOCK in the fourth quarter of last year. And we continue to believe that these future royalties and potential milestones have the opportunity to provide significant value to Brickell over the years to come.

Lastly, I'd like to briefly touch on our collaboration agreement with AnGes, which provides us with certain rights to develop their proprietary investigational adjuvant plasmid DNA vaccine intended to prevent COVID-19. AnGes completed a Phase I/II study with its investigational COVID-19 vaccine candidate and recently initiated a Phase II/III study in Japan. As AnGes studies progresses and the market evolves, we will continue to evaluate this opportunity. It is worth noting that if the development process continues for this vaccine candidate, a larger Phase III registration study will be required for any approval.

Let's now turn the call over to Deepak for a discussion of our Phase III Cardigan 1 and Cardigan 2 studies. Deepak?

Thanks, Rob. This is truly a transformational phase in the company's history. The progress we have made over the past year, particularly in the light of the pandemic, speaks not only to the strength and resilience of our team, but also the opportunity in front of us as we develop sofpironium bromide as a potential best-in-class treatment option to improve the lives of millions of patients suffering from Primary Axillary Hyperhidrosis in the United States. As Rob just mentioned, enrollment is on schedule for the 2 U.S. pivotal Phase III studies evaluating sofpironium bromide gel 15% for the treatment of Primary Axillary Hyperhidrosis. We initiated the first study, Cardigan 1, last October. And we are pleased to report that we have already enrolled more than half of the approximately 350 total subjects we expect to enroll in the study.

The second study, Cardigan 2, started dosing patients last December and all participating investigational sites are now on both. We continue to be pleased with the recruitment and study enrollment progress, which is in line with our expectations. Looking at Cardigan 1 and Cardigan 2, we believe these studies are on track to complete enrollment by the end of third quarter of 2021, which would allow us to report top line data from both of the pivotal studies in the fourth quarter of this year.

As just a quick refresher on the steady design of these U.S. pivotal Phase III studies, both Cardigan 1 and Cardigan 2 are randomized, double-blinded, vehicle-controlled studies that are expected to enroll approximately 350 subjects aged 9 years and older per study in the U.S. The studies are designed to evaluate the safety and efficacy of topically applied sofpironium bromide gel 15% for patients suffering from Primary Axillary Hyperhidrosis. Subjects participating in the studies will be treated with either sofpironium bromide gel 15% or placebo for 6 weeks with a 2-week follow-up period.

The co-primary efficacy endpoints as agreed with FDA are the proportion of subjects achieving at least 2-point improvement on the patient-reported outcome assessment that is the hyperhidrosis disease severity measure axillary, or HDSMAX scale, and the change in gravimetric sweat production, each from baseline to the end of treatment. It is important to note that if these 2 pivotal studies are successful, they will form the basis of a prospective new drug application with the U.S. FDA for sofpironium bromide gel 15% for the treatment of Primary Axillary Hyperhidrosis.

With that, I will now turn the call over to Bert for a financial overview. Bert?

Thanks, Deepak. And good afternoon to everyone on the call. Before I review financial results, as the newest member of the Brickell executive team, I'd like to share my enthusiasm in joining Brickell as its Chief Financial Officer. As Rob and Deepak have discussed on this call, great things are happening here at Brickell as our lead program progresses through Phase III clinical trials. And I'm really excited to be part of the team and bring my years of experience as we look to scale the company up over the coming years.

And now on to a summary of the fourth quarter and year-end financial results. After which, I also encourage you to read our full consolidated financial statements and MD&A contained in our annual report and on Form 10-K, which can be assessed through the Investors section of our website once filed with the SEC.

Starting with cash. As of December 31, 2020, we reported $30.1 million in cash and cash equivalents, having used $4.8 million in cash during the fourth quarter of 2020. In addition to our year-end cash balance, as previously mentioned, our balance sheet has been further strengthened this quarter by aggregate net proceeds of approximately $8.9 million we received from warrant exercises and approximately $1.6 million from the sale of shares under our ATM offering program.

We believe our current cash position will support our operations beyond the top line results of the U.S. pivotal Phase III program and into 2022. In addition, as a general housekeeping measure, we filed a new S3 today. Net loss was $7.4 million for the fourth quarter of 2020 compared to $10.9 million for the fourth quarter of 2019. The net loss was reduced despite a decline in revenue and is largely due to lower R&D expense incurred between finishing the long-term safety study and the start of the Phase III pivotal trials.

Revenue for the fourth quarter of 2020 was approximately $27,000, which is attributable to the royalty revenue we recognized from the sales of ECCLOCK in Japan. This was compared to $0.7 million in total revenue reported for the same period in 2019, which was largely attributable to the recognition of a research and development payment received pursuant to the license agreement with our Japanese partner, Kaken. Research and development expenses were $4.6 million for the fourth quarter of 2020 compared to $6.6 million for the fourth quarter of 2019.

This decrease was primarily due to reduced clinical and other related regulatory and compliance costs of the Phase III open-label long-term safety study of sofpironium bromide gel and other ancillary clinical studies that were completed or winding down by the end of the first quarter of 2020. This was offset slightly in the fourth quarter of 2020 as we started incurring greater research and development costs upon the initiation of our Phase III program.

G&A expenses totaled $2.9 million for the fourth quarter of 2020 compared to $4.9 million for the fourth quarter of 2019. This decrease was attributable to lower costs of $1.4 million for professional-related fees associated with the merger with Vical Inc. that occurred in the third quarter of 2019 as well as reduced impairment costs of $0.8 million and other miscellaneous expenses of $0.4 million, partially offset by higher costs of $0.6 million for stock and other compensation expense.

With that, I will now turn the call back over to Rob. Rob?

Thank you, Deepak and Bert, for your recap. This is really an exciting time for the company, and we're all working together to continue to build momentum behind our ongoing pivotal Phase III clinical program.

Before we open the call up for questions, I would like to make everyone aware of an upcoming KOL event on hyperhidrosis that we will be hosting later this month. This event will provide our investors, analysts, and other interested stakeholders the opportunity to get an even deeper understanding of what a Primary Axillary Hyperhidrosis patient is dealing with in their daily lives, their current treatment options and why we believe this is a severely underserved and undertreated market. This virtual event will be led by 2 highly distinguished thought leaders in the field of hyperhidrosis: Dr. Adam Friedman of the George Washington University School of Medicine & Health Sciences; and Dr. Joel Cohen of AboutSkin Dermatology. This KOL event is scheduled to take place at 10:00 a.m. Eastern Time on Friday, March 26.

We have already issued a press release with registration instructions. But if you have any additional questions, please don't hesitate to contact our Investor Relations representatives. We are excited about this event and look forward to having you all listen in.

That concludes the prepared remarks. I'll now ask the operator to open the call for questions. Operator?

(Operator Instructions) Our first question comes from the line of Thomas Flaten with Lake Street Capital markets.

Just a couple on the timing of Cardigan I and II. So with -- if enrollment is completed by the end of the third quarter, as I think you've guided. Given the time that the last patient would be in the study, what -- how should we think about the risk of that flipping over into 2022 from a data reporting perspective?

Yes. Thomas, thanks for jumping on the call and asking the question. Normally, after a study is completed, obviously, there's the whole data cleanse process and making sure you've got everything right, and you want to be very careful on that. That process is usually, let's say, 6 weeks. So it'd have to go pretty long for us to flip over into the next quarter.

But if you -- so do you believe the patients will be out of the study by the end of the third quarter? Or it will be the last patient in at the end of the third quarter. I just want to make sure I understand.

No, no. We meant last patient out by the end of the third quarter.

I see. Okay. Well, that changes everything. Fair enough. And then I was wondering if you guys could provide a little bit of guidance on operating expense spending for the year. Obviously, it ramped up pretty heavily in the fourth quarter. And I know there's some prepayments in there. But I was wondering if you could give us some thoughts on how you expect that to look over the course of the year.

Sure. Bert, would you like to handle that?

Yes. In terms of the expenses, as we said on the call, we expect the cash that we have to last us through top line readout and into 2022. At this point, that's the guidance we're giving.

Okay. Fair enough. And then if you could just clarify on the AnGes. So I had understood it from the original agreement that you guys would take a look at the Phase I data and then determine if you were going to participate in Phase II, but then they turned it into a Phase II/III. Can you just walk us through what happened there? And how and -- if and how you guys are involved in that data review?

Yes. Yes. Thanks, Thomas. Yes. So the way the -- remember, we have an option for -- to make decisions at different points in their development process. What they've done is they finished their Phase I. They moved into this II/III before all of the data was complete. We have had a chance to look at the top line information of the study but not the finalized study report. AnGes obviously controls the release of that information, so we really can't talk about their data. But we have had a chance to look at some of their initial feedback from that study. Obviously, they looked at that information and chose to move forward with their study, which we viewed as encouraging.

Our next question comes from the line of Leland Gershell with Oppenheimer.

Got a couple. First, just in terms of the enrollment, it seems like it went at a bit faster pace than had been anticipated. Just wanted to ask if there were any factors you can identify that drove that faster rate. And also just among the sites, if there were any particular centers that represented kind of the drivers of the faster enrollment. And then just a question in terms of ECCLOCK in Japan. I know it's still early days with that launch, and there are obviously certain limitations on early drug launches in Japan. But I just want any further color that you can share with the trajectory of how that launch is going as we've gotten into 2021.

Sure thing. Thanks, Leland. And yes, why don't -- I'll answer the last question. Then Deepak, why don't I turn it over to you to answer the question on the clinical trial. On ECCLOCK, they got approval. I think it was -- and launched. I think they launched November 26. So obviously, the third -- the fourth quarter of last year was a pretty short quarter. And of course, you're just getting started and stocking is more than anything else. So it's a little early based on those sales to make any projections to what the product might look like.

I mean, based on our conversations with Kaken, we're encouraged by how well it's going, but it is really early. And it is -- the first year in Japan is a little hard to interpret in terms of long-term value for an asset. For those on the call that don't know, in Japan, there is a -- there's a limit on the link of a prescription to 2 weeks. And what that means is that for a patient to get more than 2 weeks of product, they actually physically have to go back and see the doctor and get a new prescription. It's not a refill. And the Japanese government does that because, historically, they had problems with drugs getting approved and seeing unknown side effects. So therefore, they try to limit the utilization of new products in their first year.

So often, what you do is see kind of a muted first year and then month 13 tends to be more substantial. So with that said, Kaken is out doing their stuff. Everything we hear is positive, so we feel very good about the launch overall. But the first -- the whole first year is a little hard to interpret. And certainly the first 6 weeks, which is what we're reporting here, is definitely difficult to make too much -- to determine too much how a product is going to do. Deepak, would you like to answer the questions on the clinical trial?

Sure. Happy to do that. Leland, this is Deepak. Thanks for your question. So your question was around the enrollment for our Phase III studies. And again, I think, as mentioned on our call, I think we are tracking against our projected enrollment time line. But again, I think the -- we are pleasantly surprised a little bit not having any COVID-related delays, although we put the checks and balances and measures to do any COVID-related delays, whether to do any remote assessment.

But that's maybe one of the factors that our enrollment is on target. And also because it's a multinational study across all the geographies in the United States. So clearly, I think looking at the extent of COVID play, some of our investigational centers, for example, like in Florida, Texas, I think, clearly, I think they were more of the high end rollers. So I think that may be one of the reasons we are still on track. And -- which is good news. And we are just hoping we stay on track with our second pivotal in coming months.

Yes. Thanks, Deepak. And just to add a little color to that. The -- we're pleasantly surprised by enrollment. We had obviously some concerns about our ability to recruit during the peak of the pandemic. And we're really happy with the work, the team, the CRO, everybody has really done to bring this together and certainly the sites and the patients. So we're encouraged by where we are and think, certainly, we're still on track to report out top line data in the fourth quarter.

There are no other questions in the queue. I'd like to hand the call back to CEO, Robert Brown for closing remarks.

Great. Thanks, and thanks for taking the time this afternoon to listen to our update. I wanted to close out the call by thanking our team for their hard work and dedication, the investigators and the health care workers at the clinical trial sites for getting these 2 studies up and running smoothly. And of course, the patients who are participating in the studies that are paving the way for others across the country that continue to suffer silently with hyperhidrosis.

While every clinical program undoubtedly has its own set of challenges, the COVID-19 pandemic has presented a unique set of hurdles. That said, I believe our team has done an excellent job in conducting these studies. And we are encouraged with the enrollment rates, which continue to fall within our expectations. We look forward to keeping you all updated on the progress of these studies over the months to come. As always, feel free to reach out to us if you have any additional questions, and we hope you have a great rest of your day.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.