BioCryst Pharmaceuticals Inc (BCRX) 2013 Q2 法說會逐字稿

Good day, ladies and gentlemen and welcome to the BioCryst Second Quarter 2013 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. As a reminder, this conference is being recorded.

I'd now like to introduce our host for today's conference, Mr. Robert Bennett, Executive Director of Investor Relations and Communications. Sir, please go ahead.

Yes, good morning and welcome everybody to BioCryst's second quarter 2013 corporate update and financial results conference call. The operator indicated [that] right now all participants are in a listen-only mode. Later, we will open up the call for your questions and instructions for queuing up will be provided at that time.

Joining me on the call today are Jon Stonehouse, Chief Executive Officer of BioCryst; Dr. Bill Sheridan, our Chief Medical Officer; and Tom Staab, our CFO. Today's press release and accompanying slides for this call are available on our website at biocryst.com.

Before I begin, I will read a formal statement as shown on slide two regarding risk factors associated with today's call. Today's conference call will contain forward-looking statements, including statements regarding future results, unaudited and forward-looking financial information and Company performance or achievements. These statements are subject to known and unknown risks and uncertainties which may cause our actual results, performance, or achievements to be materially different from any future results or performance expressed or implied in this presentation. You should not place undue reliance on the forward-looking statements. For additional information, including important risk factors, please refer to BioCryst documents filed with the SEC which can be found on our Company website.

With that, I will turn the call over to Jon.

Thank you, Rob. Good morning, and thanks to everyone for joining us today. At the end of the last year, we set a strategy around our core set of assets and the cash to advance them which would allow us to reach potential value-creating events in the following 18 months. Our execution of this plan has gotten us to the point where we are now driving to a proof-of-concept trial with an oral kallikrein inhibitor for HAE and an NDA for peramivir approval in the U.S. I am very pleased today to highlight the progress we have made in advancing our programs and at the same time carefully managing our finances and cash runway. I'll start with our HAE program.

In late July, we announced that the Phase 1 trial of our oral kallikrein inhibitor BCX4161 met all of its objectives. As slide four shows the bottom line is the safety, tolerability, drug exposure and on-target effect we see on plasma kallikrein strongly support advancing 4161 into a proof-of-concept Phase 2a trial. In the Phase 1 trial, we studied single and multiple ascending doses in 87 healthy volunteers.

The doses tested were generally safe and well tolerated when administered up to seven days. There were no adverse events that lead to discontinuation of study drug, no serious adverse events, no dose limiting adverse events, no effects on coagulation assays and no grade III or IV clinical ECG or laboratory adverse events. Our intensive efforts to improve drug exposure and consistency of exposure through formulation work paid off. In this Phase 1 we achieved dose proportional drug exposure up to 400 milligrams, an acceptable variability. The drug exposure at the 400 milligrams dose exceeds the target we believe is necessary to prevent attacks in HAE patients. This belief is strengthened by a drug effect against the target plasma kallikrein using our kallikrein inhibition assay. This was particularly impressive given that the trial enrolled healthy volunteers with normal levels of C1 inhibitor. When the subject data was normalized to baseline, we saw a statistically meaningful effect on the target. Details on our Phase 1 trial including the slides and the webcast replay remain available on our website.

Now that we understand the PK and PD of 4161 in healthy volunteers, we've begun preparing to initiate the Phase 2a proof-of-concept trial, which is targeted to begin in the fourth quarter with the goal of demonstrating a treatment effect in approximately 25 high-attack rate HAE patients. The randomized, placebo-controlled, two-period cross-over trial will be conducted in Germany, which has an extremely well-organized medical system for treatment and management of HAE patients.

Essentially every patient is managed out of one of five centers, several of which will enroll patients in the trial. The trial design is shown on slide five. We will study 4161 in HAE patients who have experienced a documented historical attack frequency of at least one attack per week. End points will include attack frequency, safety and tolerability, attack severity and quality of life and the results should provide a wealth of new information on the potential of 4161 in HAE treatment. Another positive development last week is the FDA lifted its clinical hold on 4161. This allows us to include U.S. clinical sites in the Phase 2b trial we plan to initiate next year.

In our second generation kallikrein inhibitor program, we have met our primary goal of improving oral bioavailability while retaining high potency and high selectivity. We now have a series of bioavailable potent and specific compounds as summarized on slide six. The bioavailability we see in animals is in the range of 20% to 60%, compared to single-digit percent for 4161. We expect to pick one or more to advance into preclinical development before the end of the year.

Let me wrap up our program update with peramivir and our broad spectrum anti-viral BCX4430. As a reminder, these assets are funded predominantly by the government and provide near-term and long-term sources of revenue to fund HAE clinical trials and commercial activities. This puts us in a unique position to have non-dilutive financing for activities that are typically expensive and burdensome for biotech companies.

Through a series of interactions with the FDA, we've reached agreement on the content of a new drug application for peramivir. In addition, we were able to obtain financial support from BARDA for these activities associated with NDA completion. BARDA released $12.8 million in funding under the current contract to enable completion of the NDA filing. BioCryst expects to submit the peramivir NDA by the end of 2013. Our goal is to gain approval of peramivir in the U.S. in time for the 2014, 2015 influenza season.

We continue to make progress in our efforts to secure additional government funding for our broad spectrum anti-viral BCX4430. We have also submitted additional results for a scientific publication that describes 4430's activity against hemorrhagic fever viruses.

Before I turn the call over to Tom to review our financial results, I'll make a few comments about our recently closed $20 million public offering.

BioCryst ended the second quarter of 2013 with enough cash to carry the Company into the middle of 2014, enough cash runway to complete both the 4461 2a trial and peramivir NDA filing. While we didn't have an immediate cash need, we determined that a small raise would provide enough cash to carry us into 2015.

In addition, we felt that it was important to present the 4161 Phase 1 data to institutional investors with a goal of getting more of them interested in the Company. The demand for this small offering was impressive. It was more than five times oversubscribed and with this kind of demand, we were able to price the deal at the market. We were also successful in placing the shares with quality institutional investors, including a mix of current investors and new ones. So overall, we were very pleased with this financing.

While BioCryst is in a stronger financial position following this offering, going forward, we remain committed to prudent management of our resources.

With that, I will turn it over to Tom.

Thank you, Jon, and good morning, everyone. Today, I will summarize the key elements of our second quarter 2013 financial results and update you on our revised financial guidance.

Our guiding principle throughout 2013 has been to focus our cash resources on advancing our key development programs to important value-creating milestones while minimizing non-critical and non-project spending. You have heard this principle before and now you are beginning to see the results of our focused approach.

Since our last quarterly call in May, we have delivered the following positive financial results; one, 2013 operating expenses decreased 45% and 43% from the second quarter and first half 2012 levels; two, 2013 operating cash utilization levels decreased 49% and 35% from second quarter and first half 2012 levels; and three, we completed a very successful and significantly oversubscribed public equity offering which added over $20 million in gross proceeds and extended our cash runway into 2015.

In order to appropriately present the true success we have had in managing expenses, please note we have excluded the write-off of deferred collaboration costs and deferred expenses associated with our PNP agreements.

On slide seven, you will note that revenue for the second quarter of 2013 decreased to $821,000 as compared to $4.2 million in 2012. This decrease is due to a decline in reimbursable peramivir expenses resulting from reduced development activity.

Second quarter 2013 R&D expenses were $11.7 million, down 8% from $12.8 million in the second quarter of 2012. This decrease was primarily associated with reduced development activity in the peramivir and BCX5191 programs which was largely offset by a $5 million non-cash write-off of a deferred collaboration cost asset associated with our PNP licensing agreement with Albert Einstein School of Medicine.

Second quarter 2013 G&A costs were $1.2 million, decreasing 23% from the $1.6 million incurred in the second quarter of 2012. This decrease is due primarily to the continued realization of cost containment measures and the impact of the Company's corporate restructuring in December 2012.

Moving below the operating line, we incurred $1.2 million of interest expense in both the second quarter of 2013 and 2012. We also reported a mark-to-market hedge related gain of approximately $1.1 million in the second quarter of 2013 as compared to a loss of $1 million in the second quarter of 2012. Both amounts related to the fluctuation in the Japanese yen valuation relative to the U.S. dollar. Both interest expense and the hedge mark-to-market adjustments related to our non-recourse notes and related hedge enacted in conjunction with the RAPIACTA royalty monetization.

As you evaluate the second quarter at a macro level, please note we successfully decreased our net loss per share to $0.23 as compared to a $0.25 loss per share incurred in the second quarter of 2012.

Our six-month financial results are summarized on slide eight. Revenue for the six months ending June 30, 2013 decreased to $4.4 million as compared to $16.4 million in the first half of 2012. The decrease was due primarily to a decline in reimbursable peramivir expenses as a result of reduced program activity in 2013 as well as a $7.8 million of previously deferred forodesine-related revenue recognized in the first half of 2012. As a reminder, this forodesine-related revenue resulted from the restructuring of our license agreement with Mundipharma in the first quarter of 2012.

Six-month 2013 R&D expenses were $19.1 million, down 32% from $28.3 million in first six months of 2012. This decrease was primarily associated with reduced development activity in the peramivir and BCX5191 programs in 2013 compared to the first half of 2012, which also included the recognition of $1.9 million of previously deferred expenses associated with the restructuring of the Mundipharma agreement.

General and administrative cost through June 30, 2013 decreased to $2.6 million from $3.3 million in the first half of 2012. This decrease resulted from cost containment measures and the corporate restructuring mentioned previously.

Dropping below the operating line, we incurred $2.3 million of interest expense in both the first half of 2013 and 2012 and recorded a mark-to-market hedge gain of approximately $3.1 million in the first six months of 2013 as compared to a $1 million loss in 2012 due to valuation fluctuations of the Japanese yen relative to the U.S. dollar.

Now moving to slide nine, I'd like to discuss our cash usage and our 2013 financial outlook. At June 30, 2013 we had cash and investments of $31.3 million. Our operating cash usage for the second quarter and six months ending June 30, 2013 was $4.1 million and $13 million respectively.

As you evaluate our cash use, please be aware that we successfully decreased our cash utilization in the second quarter of 2013, 49% from the second quarter of 2012 and 54% as you compare it to the first quarter of 2013. Furthermore, we expect to remain within our cash utilization guidance originally given in February. Accordingly, we are maintaining our operating cash utilization guidance range of $22 million to $26 million.

As a reminder, operating cash use excludes any impact of our royalty monetization, hedge collateral posted or returned, sale of stock in the marketplace, and any other non-routine cash outflows or inflows like restructuring and transaction costs.

In regards to our operating expense guidance, we are increasing this range by $20 million thereby amending the range to $45 million to $55 million. This change reflects anticipated incremental and reimbursed operating expenses associated with the imminent peramivir NDA filing as well as the non-cash write-off of deferred collaboration cost with our PNP licensing agreement. Both of these events were not anticipated in February 2013 when we originally gave 2013 financial guidance.

Lastly, based on BARDA's decision to fund up to $12.8 million of NDA filing costs, we anticipate predominantly all future peramivir expenses to be reimbursed, but we may incur some modest costs in 2013 outside of the BARDA contract.

So in summary, we are very pleased with our financial discipline, operational performance, and the overall execution of our corporate strategy.

Now I'd like to turn the call back over to Jon for some closing remarks.

Thanks, Tom. Before we open it up for your questions I'd like to thank the dedicated employees of BioCryst for their laser-focused commitment to high-quality work product and tireless effort and we don't plan to let up. As our milestone slide 10 shows, our focus for the remainder of this year is to move 4161 into a Phase 2a trial to select a lead and start the preclinical program for our second generation kallikrein inhibitor, file our Company's ever U.S. NDA for peramivir, and lastly, to share additional proof-of-principle efficacy results for 4430 and update you regarding government funding for this program.

This concludes our prepared remarks. We'll now open it up for your questions.

(Operator Instructions) Liisa Bayko, JMP Securities.

Hi, guys. Thanks for taking the question and congratulations on all your progress.

Thank you.

I just wanted to ask about the upcoming Phase 2a. Can you maybe talk about the duration of the study and sort of what level of sensitivity will you have to detect a difference in attacks? And what are you looking for in terms of what's meaningful? How much of a reduction? Should we expect something comparable to Cinryze, or, like frame up how we can think of what kind of reduction target you're looking for? Thanks.

Hi, Liisa, it's Bill. Thanks for the question. So right now, we're limited to 28-day duration of study drug administration of 4161 because that's what we have from our tox program. We have commenced the longer-duration study, but they won't be available until next year.

So the study is designed as a crossover, so each patient enrolled will get 28 days of placebo and 28 days of 4161 and the order is randomized. Because this is our first experiment in hereditary angioedema, we've designed this as a treatment effect estimation experiment rather than as a pivotal study with power and the typical apprentice statistical approach. So our calculation still indicate that with 25 -- or up to 25 or so patients in a study of this nature, we should be able to see a treatment effect of the drug.

And I think given that this is the first oral kallikrein inhibitor for hereditary angioedema, we'll be very happy to see a treatment effect. Obviously, the more, the better, but we don't -- we haven't established a predefined cutoff percentage reduction in attack frequency, for example, as necessarily a criterion for moving the program into Phase 2. So the goal is a safety tolerability for 28 days, confirmation of the PK in patients and the estimation of effect size. And Jon, maybe you want to make some comments, too?

Yes. So if it were similar to the results of the pivotal Cinryze study, that would be fantastic. If it's better, I mean, that's super fantastic. If it's a modest effect, given that it's oral, I still think we might have a [viable] marketed drug. And we've got a second-generation that we think we can even make improvements on 4161.

So I think we're keeping it wide open and we want -- we designed it in a way to give us a relatively quick answer on what we see in HAE patients.

Okay, great. And then just for the second generation, can you maybe give us -- are you going to put in preclinical by the end of 2013? And then sort of can you walk us through what happens after that and just basic timing? And that's my last question. Thank you.

Great. So the main goal of this project is to have much better bioavailability, and with the results that we've seen in the preclinical test basis already, I think we've achieved that goal. So we have a number of compounds that we have to sort through in terms of which would be the most suitable to advance into preclinical development, and we'll definitely do that this year.

So by the end of the year, one or more of those compounds will be in preclinical development. So the big task, once you start that process -- to develop a process for making kilogram quantities of drug and then doing the IND-enabling talks. So you can think of it as being about one-and-a-half to two years behind where 4161 is right now. It will take that length of time to get to the point where we're in Phase 1 with something that isn't quite up to preclinical yet.

Thanks a lot.

Rahul Jasuja, Noble Capital.

So a few questions. I'm trying to get a sense, a better sense of the market that is potentially more amenable to an oral beyond just the Cinryze market. And the question I have here, really is is there any information that you guys have on mortality rates or ER visits in the androgen-taking population or even the undiagnosed HAE patient population because there is an element of that that is not diagnosed that have acute laryngeal attacks and so on. And then compare that with the mortality rate or ER versus those who are actually on the prophylactic.

Hi. This is Bill. Interesting set of questions. I think with regard to the epidemiology part of your questions, there's a big range of attack frequency that's well described. I think women with hereditary angioedema tend to have more frequent and potentially more severe attacks than men because of the role of estrogens in the way the series of plasma proteins get made and the levels of the plasma proteins.

I don't know that there's really solid information out there that directly addresses passing emergency room visits or mortality up between one or other of these different categories. I will say, though, that the way I think about having an oral kallikrein inhibitor and how that might impact on care for these patients is right now, it's a choice of androgens, which is not a very good choice for women or for children and even for men. There are problems with hepatic toxicity, metabolic toxicity, behavioral toxicities. So everybody wants to get away from taking androgens. So it's choice of androgens or for prophylaxis, IV infusions for life and the problems of IV access. So I think having a safe and effective oral agent would make a big difference on both front. So I think regardless of what the ER frequency is or what the mortality rate is, I think it should make a big impact.

The final comment is with regard to undiagnosed, I think that's an interesting question. That's all to do with index of suspicion, and there's no doubt in my mind that having companies who are promoting approved products for a disease improves the awareness of the disease. The Hereditary Angioedema Association is a terrific organization, and they're doing their best to also do that. So I think we look forward to being able to bring out product to market hopefully and also contributing to raising the awareness of disease and getting more patients onto therapy.

Yes, okay. I mean, that's helpful. And really, the question really was trying to address as to how difficult would it be for a successful oral HAE drug to tap into the androgen market, so to say. And that's what's the question.

Yes, Rahul, this is Jon. I think, at least the conversations that we've had with physicians and patients, if it's generally safe and well-tolerated and effective and it's oral, they're going to use it. That's a sense that they're dying for it. I mean, I'm getting e-mails from patients before we even finish the Phase 1, telling us to go faster. So there's clearly a desire for better treatments here. And Bill said it. You look at the side effects associated with Danazol, they're horrible. And so having, again, a generally safe and well-tolerated and effective oral will make a big difference.

Okay. So the next question that I have is regarding -- I guess this is probably addressed to Bill. So Bill, we've seen really good Phase I data, and the next set of patients is going to be patients who -- the next set of patients is supposed to be healthy volunteers.

If you look at or understand the inhibition of kallikrein, are we safe in assuming that the inhibition of kallikrein is such that the ultimate factor you want to stop or block is bradykinin is sort of a direct correlation, so in these patients that you're going to be looking at, we should have similar efficacy and safety? Because -- is there a feedback loop for bradykinin or something that we should be looking at that could change the efficacy going forward?

So the short answer is no. So I think that the only way that you can make bradykinin in human plasma is by kallikrein digesting high-molecular weight kind of antigen. That's it. There is no other pathway. And bradykinin is the bad actor in this disease, so this is -- what's so fantastic about this project is that the level of scientific validation of the pathophysiology and what really matters in hereditary angioedema is so deep. It's a massive literature, very high quality, backed up by both human and animal model data, and so there's no doubt that the kallikrein -- bradykinin access is absolutely validated.

And so we should be very, very confident that if we can achieve enough kallikrein inhibition, that we'll get efficacy in the disease. So I think another way to think about it is most of us don't have hereditary angioedema. It's an orphan disease. It's pretty rare. So everybody else in the world has normal amounts of naturally produced kallikrein inhibitors in their blood, the main one of which is C1 inhibitor, and we never get an attack of edema of this nature. So I think that's a very, very strong evidence. So I think we very much look forward to seeing the results of that PK efficacy estimates in patients.

Okay, and then one final question. There's a chart from your last time's presentation showing that with BCX4161, you had at 400 milligrams and even in the 800 milligrams about 70%, 75% inhibition, and that's pretty nice. But the question that I have is that, how much kallikrein inhibition do think you need to better the next generation?

I mean, by increasing bioavailability, which you can, with the next-generation, assuming significantly better bioavailability compared to 4161, are you going to have better efficacy, a larger decrease in kallikrein? Are you looking for decreasing the frequency of dosing or the number of tablets and tolerability? How should I look at that?

Yes, great question. So I think that we're very, very happy with the PK and the PD effects we saw in the Phase 1 with 4161. And if the next-generation compounds replicate that degree of kallikrein inhibition, I'll be perfectly satisfied.

What we're mainly looking for in the second-generation compound is much broader dosing flexibility. So what better bioavailability does for you is gives you a much better chance of having a once-a-day single tablet, for example. And we expect that we'll learn as we progress the second-gen program in animals, exactly what the PK characteristics and better bioavailability is always a good thing.

Great. Thanks.

Chris Glennie, Edison Investment.

Hi. Good morning. Just looking at the target patient population for the Phase 2a, could you just characterize the sort of the nature of these patients in terms of whether [some volunteers are] there and what proportion of HAE patients have the sort of one attack per week?

Sure. Thanks for the question. So the minority, I'm not sure that we have a good handle on exactly what proportion, but in our discussions with the investigators who will be conducting the study, they're quite confident that they'll be able to recruit patients with this type of attack frequency in a reasonable time frame. You always have to be cautious about how that's going to go. So for that reason, we haven't put a definitive time frame on when we'll complete the study. We'll start it this year, and then we'll see what the enrollment looks like.

But to give you some sense of is this doable at all, I can refer you to the [live] study that was published in the New England Journal, which was the pivotal study for Cinryze. And the main attack frequency in the placebo period in the prophylactic study that they reported was 1.06 per week, which is about the same as what we're targeting here. And that study had, I think, 26 patients who enrolled and 22 who completed, and that was a 12-week crossover. So it's a much more onerous type of study than the one we're looking at. So those patients do exist. They're in the minority, and indeed, partly for that reason, we'll be doing the study in Germany, where care for hereditary angioedema patients is centralized into several big centers, and we'll be in most of those centers in Germany. And that will give us our best chance to attract this minority population.

And Bill, if my memory is correct, these patients had to come in for their infusions, right, because there was IV for that study. And our patients will be able to take the oral medication home with them, so that's a big plus when recruiting patients from a convenience factor.

Okay. Great. Thank you.

And I would just add one more comment, which is I think the usual sort of farmer industry division of patients into mild, moderate and severe really doesn't sort of apply in hereditary angioedema. So you only need one laryngeal attack, right, and you've got a really bad news attack that's life-threatening. So whether you have -- whether you never have another attacker or not or what your background attack frequency is, having something like that or having a severe abdominal attack with abdominal obstruction on ascites, it's more to do with life-threatening and disabling and disfiguring nature of the disease rather than the attack frequency.

So I think the way I look at an oral, safe and effective kallikrein inhibitor, should it come to market, is you got the disease, then you need this therapy because you can prevent these disabling, disfiguring and potentially life-threatening attacks.

Sure. (inaudible) Just one more, just to confirm the expected kind of baseline therapies, if any, or also background therapy that these patients might have already received or if you're thinking about whether they would definitely be C1NH naive?

So we've taken the approach that it would be impossible to prevent or exclude patients from receiving whatever marketed therapies there are prior to enrolling in the study. Obviously, if you're doing a study in measuring attack rates and it's a placebo-controlled study, then for the duration of the study, they have to be off prophylactic medicines. So there's a -- it doesn't take very long for those medicines to clear from the body.

Okay. Thank you.

(Operator Instructions) Ed Arce, MLV & Co.

Hi. Good morning every. Congrats on a great quarter.

Thank you.

Just one question on the longer-term timeline here. If you look out in your own projections, you're targeting that this 2a study by end of this year and likely would commence a 2b study at some point next year. When do you think is a reasonable timeline to expect submitting a pivotal study to the FDA and other agencies and reaching the market?

So I think at this stage, it's a bit hard to predict exactly when that's going to happen for the reasons we discussed earlier. We really need to get our hands dirty running studies in -- in clinical development, it's the same rule. Until you actually do the studies in the patient population you're targeting, you're skating on thin ice making predictions on timelines. So once we've got the 2a under our belt and have started the 2b, I think we'll be in a better position to understand how quickly the program unfolds. I think we're very excited that we've got this opportunity, and I look forward to putting it throughout [its places].

Yes, and we'll work with the agency to understand what the requirements are. Clearly, we'll need to have them in the Phase 2 discussion with the division to understand what's required for the Phase 3. But trust that we're going to move as quickly as is possible. The 2b will likely be constructed in a way that it may meet the requirements of an adequate and well-controlled trial. So we'll look at ways to go as fast as we can, but we also want to make sure that we do this in a high-quality way.

Okay. And then one other follow-up. You had mentioned, Bill, I think, something about your current tox program limiting the current studies at 28 days. What do you need to do to be able to expand that so that you can move forward with, say, the 2b [at some point next year]?

Sure. So as is typical at this stage, we've got the IND-enabling tox that supported the first study. That was a 28-day program in two species. And we've now commenced the next step, which is a 12-week program in two species, and so we look forward to seeing the results of that in next year, early part of next year sometime. And that will enable longer studies to be done in humans up to a duration of 12 weeks.

As the program of unfolds, you keep extending the tox to the regulatory guidance around what do we need for a chronic therapy in man. And so there will be -- there will need to be additional toxicology studies done at a later date informed by the one we're doing now of longer duration.

Okay. Thank you.

You are welcome.

And I'm not showing any further questions at this time. I'd like to turn the conference back over to our host for closing remarks.

Yes. So we thank you for your interest, and we look forward to keeping you updated as things unfold over the remainder of this year. Have a great day.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.