BioCryst Pharmaceuticals Inc (BCRX) 2013 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the BioCryst Third 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. If anyone should require operator assistance, please star then zero on your touchtone telephone. As a reminder, this call may be recorded. I'd now like to introduce your host for today's conference, Robert Bennett, Vice President Investor Relations. You may begin.

Good morning and thanks, everybody, for joining us for BioCryst's third quarter 2013 conference call. Today's press release and accompanying slides for the call are available on our website at BioCryst.com at this point, as Ashley said, everyone is in listen-only mode and we'll open up the lines later for your questions and provide further instructions about queuing up at that time.

With me today is our CEO Jon Stonehouse; Bill Sheridan, our Chief Medical Officer; and Tom Staab, our Chief Financial Officer. Before we begin, we have a formal statement as shown on slide 2 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, 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. Throughout 2013 our team has focused on executing a strategy to advance our core assets while managing our operations with financial discipline.

Our strategic goal is to build a company that becomes a market leader in the treatment of HAE. This can be accomplished by bringing to market the first oral kallikrein inhibitor, BCX4161, and then following that up with an improved version from our second-generation HAE program where we are seeking to develop a one pill once a day treatment to prevent attacks.

In addition, we have assets that are funded by the government that could provide meaningful, non-dilutive capital to fund HAE and other future programs. Stockpiling orders from either Peramivir or BCX4430 have the potential to provide large capital inflows that could be used for HAE trials or building our commercial infrastructure.

With this combination of assets, we have the potential to commercialize HAE assets by ourselves, which likely translates into a more valuable company.

Now let me describe the progress we have made recently on each of these programs, starting with HAE. 4161 continues to advance since our July announcement that the Phase 1 trial met all of its goals. The safety tolerability drug exposure and on-target effect we saw on plasma kallikrein strongly supported advancing 4161 into a proof-of-concept Phase 2a trial we now call the Oral Prophylaxis 1, or OPUS1 trial.

We are in the rampup stage of this trial, and we have recently initiated screening of HAE patients. We expect to dose the first subject soon and to complete the clinical trial during the first half of 2014.

Our second-generation oral kallikrein inhibitor program is advancing nicely as well. Our discovery team has finished its work to identifying compounds that have met all of our goals, improving oral bioavailability while retaining high potency and high selectivity.

Our scientists were so successful that we have more molecules meeting our selection criteria than we expected, so they are conducting additional screening activities to narrow the list to one to three candidates to begin preclinical development by the end of 2013.

Turning to our antivirals, our broad spectrum antiviral program took an important step forward in September when the National Institute of Allergy and Infectious Diseases, or NIAID, contracted with BioCryst for the development of BCX4430 as a treatment for Marburg virus disease. NIAID granted an initial award of $5 million to BioCryst under a contract worth up to $22 million.

The goals of this contract are to file IND applications for both intravenous and intramuscular formulations of 4430 and to conduct an initial Phase 1 human clinical trial. We are proceeding with in vivo and in vitro experiments as well as CMC activities.

Lastly, we have also submitted a scientific manuscript we hope to get published detailing the in vitro and in vivo antiviral activity of 4430.

Finally, we remain on track to file a new drug application for Peramivir before the end of the year. This could be our first approved drug in the US, and any revenue generated from this will help fund our HAE program.

With that, I will now turn it over to Bill Sheridan, who will provide additional information on our HAE program.

Thanks, Jon. In July we presented kallikrein inhibition results for the 400 milligram, 800 milligram, and placebo every eight-hour cohorts in the multiple ascending dose portion of the Phase 1 study.

Since then, we have had some questions pertaining to the details of the kallikrein inhibition assay. In brief, the assays run on plasma samples prepared by centrifugation of anti-coagulated whole blood samples. Aliquots of plasma are frozen, and the analyses are performed in batches after completion of all sampling.

Fluid samples are prepared into triplicate microwells with 25 microliters of plasma in each well. As we explained in the last call, the assay involved activation of the contact system with ellagic acid and measurement of kallikrein enzyme activity using a specific artificial substrate.

The total volume of reagents added to the microwells is 75 microliters per well. Thus the final concentration of drug derived from the oral dose of BCX4161 is 25% of the actual PK value at the time of blood sampling.

I am pleased to report that we have now completed analyses of kallikrein inhibition assays in plasma samples across all dose cohorts in the study. These analyses have shown that there is a clear and statistically significant dose effect on the degree of kallikrein inhibition. These effects are shown on slide 5 with the left panel showing the results at steady state after dosing every eight hours.

In a repeated measures analysis-of-variance test, the p-value associated with the dose effect is less than 0.01. The full results confirm that the dose regimen of 400 milligrams every eight hours results in plateau effects in this assay of on-target pharmacokinetic effect of 4161 on plasma kallikrein.

The right panel displays the relationship between the achieved drug concentrations after oral dosing and the degree of inhibition of kallikrein in the assay.

The relationship conforms to a typical [Emex] PKPD model as expected for a classic competitive enzyme inhibitor and the associated correlation coefficient of 0.93 indicates that drug exposure will likely be a very reliable predictor of the desired pharmacodynamic effect.

As Jon mentioned, screening has been open for patients in the Phase 2a trial of 4161 in hereditary angioedema. We've had some questions about how to assist the potential results of the study. The study goals include estimating the efficacy of [fix size] on reduction of HAE attacks and building on our current knowledge of the safety, tolerability, PK and PD of 4161. In each study period in this crossover study, we will estimate the main attack right and its variance and also look at how many subjects have no attacks.

As this is our first 4161 trial in HAE patients, we have not set an efficacy target. However, given that 4161 is an oral drug, observing even a modest reduction in attack frequency or a proportion of subjects attack-free would represent important clinical benefits.

We will be able to evaluate population PK and PD from the Phase 2a trial and compared the findings to those from the normal subjects in the Phase 1 study.

Finally, assessment of adverse events and laboratory safety monitoring will extend our safety database in humans to a duration of four weeks' exposure. [Four] of these measures will provide a sound benchmark for designing the next studies of 4161 in HAE patients.

Our CFO, Tom Staab, will now update you regarding our financial results.

Thank you, Bill, and good morning, everyone. Today I will summarize the key elements of our third quarter 2013 financial results and performance against our financial guidance.

Our guiding principle throughout 2013 has been to focus our cash resources directly to the advancement of our key development programs to value-creating milestones and to minimize non-critical spending.

Consistent with previous quarters, the third quarter represents another period whereby we continue to strictly adhere to this focused approach and a quarter whereby you see the benefits of this strategy.

Year-to-date and for the third quarter, we have delivered the following positive financial results. 2013 operating cash utilization decreased 45% and 38% from the third quarter and nine-month 2012 levels.

2013 operating expenses decreased 32% and 31% from the third quarter and nine-month 2012 levels, and we closed the third quarter with $43.4 million in cash and investments following a successful and well-received public equity offering, which added $18.5 million of net proceeds to our cash runway.

On slide 6, you will note that revenue for the third quarter of 2013 decreased to $2.4 million as compared to $5.8 million in 2012. This decrease is due primarily to the recognition of $2.8 million of previously deferred RAPIACTA royalty revenue in the third quarter of 2012 as well as a decline in third quarter 2013 reimbursable Peramivir expenses resulting from reduced development activity compared to the third quarter of 2012.

Third quarter 2013 R&D expenses were $8 million, down 34% from $12.1 million in the third quarter of 2012. This decrease was primarily associated with the reduction in ulodesine and BCX5191 development expenses and overall decrease in R&D infrastructure costs and the conclusion of Peramivir development activity.

All of these identified reductions were partially offset by higher BCX4161 development costs in 2013.

Third quarter 2013 G&A costs were $1.3 million, decreasing 16% from the $1.6 million incurred in the third quarter of 2012. This decrease is primarily due 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 the third quarter of both 2013 and 2012. We recorded a mark-to-market hedge-related gain of approximately $97,000 in the third quarter of 2013 as compared to a loss of $572,000 in the third quarter of 2012. Both amounts related to the fluctuation of the Japanese yen relative to the US dollar.

Both interest expense and the hedge mark-to-market adjustments relate to our non-recourse notes and related hedge arrangement and acted in conjunction with our RAPIACTA royalty monetization.

Turning now to the bottom line, please note we successfully decreased our net loss to $8 million, or $0.14 per share in the third quarter of 2013 as compared to a $9.7 million loss, or $0.19 per share incurred in the third quarter of 2012.

Our nine-month financial results are summarized on slide 7.

Revenue for the nine months ending September 30, 2013, decreased to $6.8 million as compared to $22.2 million in the same period of 2012. The decrease was due primarily due to $7.8 million of previously deferred forodesine-related revenue recognized in the first quarter of 2012 as well as a decline in reimbursable Peramavir expenses as a result of concluding the clinical development program and transitioning to NDA preparations in 2013.

The forodesine-related revenue resulted from the restructuring of our license agreement with Mundipharma in 2012.

Nine-month 2013 R&D expenses were $27.1 million, down 33% from $40.4 million in the nine months of 2012. This decrease was primarily associated with reduced development activity in the Peramivir and BCX5191 programs in 2013 compared to the same period of 2012.

The 2012 period also included the recognition of $1.9 million of previously deferred expenses associated with the restructuring of the Mundipharma agreement.

General and administrative costs through September 30, 2013, decreased 19% to $4 million from $4.9 million in the first nine months of 2012. The decrease resulted from cost containment measures and the corporate restructuring mentioned previously.

Dropping below the operating line, we incurred $3.5 million of interest expense in the first nine months of both 2013 and 2012 and recorded a mark-to-market hedge of approximately $3.2 million in the first nine months of 2013 as compared to a loss of $1.5 million in the 2012 period due to valuation fluctuations of the Japanese yen relative to the US dollar.

Now moving to slide 8, I'd like to discuss our cash usage and our 2013 financial outlook. At September 30, 2013, we had cash and investments of $43.4 million bolstered by our successful public offering in August. Our operating cash usage for the third quarter and nine months ending September 30, 2013, was $5.3 million and $18.4 million, respectively.

Through the first nine months of 2013, we have successfully reduced our cash utilization by 38% compared to the same period in 2012, even though we recorded $6.9 million less BARDA HHS revenue in the 2013 period.

Furthermore, we expect to remain within previously forecast guidance and thus are maintaining our operating cash utilization range of $22 million to $26 million, and our operating expense range of $45 million to $55 million.

In closing, we are very pleased with the financial discipline and the operational accomplishments achieved in the third quarter.

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

Thanks, Tom. As we head into the last two months of the year, our primary focus will be on enrollment in the 4161 Phase 2a trial and selection of at least one second-generation kallikrein inhibitor to take into preclinical development. We also expect to file our company's first-ever US NDA for Peramivir before year-end.

These are exciting times at BioCryst and our employees are firmly committed to delivering on these milestones in order to continue to move closer to our strategic goal of building a successful company.

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

Thank you. (Operator Instructions) Brian Abrahams, Wells Fargo.

This is Shin calling in for Brian. I have a couple of questions on your second-generation kallikrein inhibitor strategy. Could you remind us whether the second-gen molecules belong to a different genus compared to 4161, and any additional details about the structural characteristics of the molecule would be helpful. And maybe your thoughts on the potential overlap on efficacy and safety profiles between the two molecules, and I have a quick follow-up.

Hi, this is Bill. Thanks for the question. So to answer the first part, it's a completely different basic structure. So rather than try to tinker with the structure of 4161, we started fresh with a new round of structure-based drug design. So they're totally new scaffolds and have nothing to do with the structure of 4161.

We have not and don't intend to disclose any other details about the structure of the compounds at this stage, so I can't go into the second part of your question.

With regard to what we can expect, you know, the goals here are to improve our bioavailability, eliminate the off-target effect on tissue factors (inaudible) and maintain potency. And the set of compounds that we currently have, have met all of those goals.

So the second question relates to your comment. If your goal is to have similar potency as 4161 but improve on bioavailability for dosing convenience and to reduce pill burden, do you think that's sufficiently high enough bar to fend off generic versions of 4161 when it goes generic? And what do you think would be a sufficiently high bar for the second-generation molecule to set the bar high enough to overcome such competition?

Listen, we're still in early days here and having two molecules gives us a better shot at having one that gets to market. But we are setting a high bar for the second-generation molecule. We've now told the team that we want one pill once a day. And, as you know, if we can get kallikrein inhibitory activity similar to normal C1 levels, there's a potential to wipe out attacks. That's the ultimate goal. Will we get there? We don't know, but that's what we're shooting for.

So I don't want to get into the strategies of how we're going to fend off competition and the like in this call, but we'll be very thoughtful about how we move these molecules forward.

Okay, great. One quick last one -- maybe your expectations for the orphan status for 4161?

Clearly, hereditary angioedema, in terms of its prevalence, qualifies as an orphan disease, and we will be applying for orphan drug status in due course.

Heather Behanna, JMP Securities.

Hey, guys, congrats on the progress. Thanks for taking the question. Just a quick question about the current -- the ongoing Phase 2 study. If you could give us any color at all, just, sort of, of what the background rates you've been seeing during screening or how the population that you're bringing in fits with the expectations of before starting the trial.

So I think at this stage, what we can say is that the centers are actively screening and, as Jon said, we expect that the first patient on the study will be dosed soon. I think that, as you recall, we've set, again, a pretty strict inclusion criteria around the attack frequency that qualifies the patient for entering into the study. So that's going to be the minority of patients with hereditary angioedema that are going to have an attack frequency of at least one per week.

Also, as we've said before, I think that until we are further into the study, it's premature to give guidance on how long it will take to complete the enrollment and how fast or slow that will go that we are cognizant of the length of time it took our predecessors in this field to do their study. So I think let's watch this space at the moment.

Yes, and I think there's constant and thorough interactions between our team, the CRO and the investigators. And a critical element to this study is getting the right patients in, and so we're not going to rush to get it enrolled. We're going to ensure that we get the right patients in.

Rahul Jasuja, Noble Capital Market.

Hi, good morning, guys. Just a few questions on 4161 and then Peramivir. So, Jon and team, I think I've kind of discussed this with you guys in the past, but let's sort of go back and think about the potential of the future market with an oral.

Obviously, the Cinryze market is the direct grab for 4161, but looking at the current oral, which is the androgen group, could you add some more color and discuss -- really, if there's an opportunity for something that's pennies of the androgen group or the attendant androgen group. It's moving on to a 4161 therapy. Is that a clear opportunity or is that debatable?

Let me first say that Cinryze market is a moving target. They're doing very nicely in growing their share, and so that appears, anyway, to be a growing market with each quarter that passes.

And I think, with regard to androgens, the side effect profile of these drugs, while they might be inexpensive, it is really difficult for patients to deal with. And so I'm confident that if we end up with an effective, safe, and well-tolerated oral, the opportunity to get some of those patients is high.

So I don't think the profile is such that people want to put up with the risks of the side effects.

Right, and then related to that, assuming success with the subcu versions of the Cinryzes and the others that may be approaching clinical trials, you have not an IV with maybe a subcu versus your oral. So that really doesn't really affect the market in your mind too much because, clearly, the oral is dramatically better than a subcu versus, obviously, an IV.

Yes, improvements on existing therapies is always a good thing for patients, but at least my experience has been, and I think if you look at other therapeutic areas in the industry, oral beats needles every time. So we're confident that we can be the market leader, assuming that we've got an efficacious, safe, and well-tolerated drug.

Okay, and then moving on to Peramivir -- so the stockpiling opportunity is clear. And clear in the sense that it's a clear opportunity when that happens is debatable, and it's hard to model. But this particular NDA submission is for acute, uncomplicated influenza that's kind of based on the Shionogi Phase 2 and the previous BCRX studies.

So this gives an opportunity for seasonal sales in the retail market. So how should we look at that particular aspect outside of the hospitalized complicated influenza over just potentially off-label use.

With the label that we anticipate that we're going to get in acute uncomplicated and given the statement I just made about oral beating IV every time, we don't expect to go head-to-head in a primary care doc's office and beat Tamiflu. That's not realistic.

What is realistic is in emergency rooms and urgent care centers where you've got high-risk or at-risk patients -- elderly people with concomitant disorders. The opportunity to get a drug in fast, know that they got it all, got the full dose with one infusion is important.

We did some market research over the past few months, and I think there's a real opportunity in that space.

(Operator Instructions) Steve Byrne, Banc of America.

Jon, you mentioned your goal in the second-gen HAE drug collection of molecules was to achieve one pill one per day, and I was just wondering what you're looking at, so far, is the hurdle for bioavailability more achievable than lengthening the half-life and do you think out of this group of molecules you're looking at now, you can get something on both of those fronts?

Hi, Steve, it's Bill. So I think that right now we are completing the relevant PK work. That helps to answer your question, so we don't have a complete answer on that yet. It's pretty easy to imagine how to rank these compounds that we've had to do extra work to select what we need to take forward.

So the ones with the best PK and the best potency are going to win. So I think that's -- the goal looks very achievable from the data that we currently have in front of us.

And, Bill, are you satisfied with your assay as you have it now, or do you think that it would be worth developing an HAE animal model?

The time it takes to develop the animal model doesn't suit our current purposes. Those types of models are certainly very valuable, but right now I think that we can rely on kallikrein inhibition assay and other research level types of bradykinin release assays that we've talked about in the past to help us distinguish between the molecules and those assays that are performing extremely well in our laboratories.

So we certainly do not need an animal model to make the selection of the second-gen lead candidates.

I think what's interesting, too, with the information Bill presented today in the slide is this really nice correlation between PK and PD. And if we see that PD is predictive of clinical benefit meaning reduction in attacks, then the PK could be the measure, and we could potentially not even have to do the PD in future study. So that's a nice finding.

And just one on 4430 -- is the Marburg virus the target here because you could do it through an animal model or an animal study? And can you just comment on, more broadly, the antiviral activity of this molecule?

So what we've talked about in public, so far, is its activity on yellow fever virus and some other viruses that are being screened in vitro. Yellow fever, we had in vivo data, and that was presented about a year ago at the Second Antiviral Congress.

With regard to why select Marburg virus, I think the approach we have taken is to base it on the type of animal model data that we currently have and our collaboration with USAMRIID on filoviruses has generated that data. It's certainly -- the class of compound that we're dealing with and its potential benefit as a broad spectrum medical countermeasure that would cope with many bugs with one drug is quite attractive from a government need perspective rather than having every time you have a new virus, you have to get a new drug.

So I think that the broad spectrum activity of the virus, I think, is something we look forward to evaluating in the future but the first funded program is focused on Marburg virus for those reasons.

And it ends up being a real cost-efficient approach to drug development because to expand to other viruses you just have to do the animal efficacy study, and you've got another indication with another virus. So that's way less expensive than big clinical trials.

Rahul Jasuja, Noble Capital Markets.

Bill, I think this is for you. Looking at slide 5 in your presentation, just a clarification on the kallikrein inhibition -- at the end of the dosing interval (inaudible), that is not dose-related. Can you explain that?

I think you'll notice there is no error bar on the 100 milligram C-Tab point -- that's because the sample size there was too small. So you should basically discount that particular bar. So there is, indeed, a dose response.

Thank you. I am not showing any further questions in the queue. I'd like to turn the call back over to management for any further remarks.

Thanks. As always, we really appreciate your interest in BioCryst. We'll be giving you updates as the year unfolds and we enter 2014 and have a great day. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone have a great day.