BioCryst Pharmaceuticals Inc (BCRX) 2015 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to BioCryst fourth-quarter 2015 conference call.

(Operator Instructions)

As a reminder, today's conference is being recorded. I would now like introduce your host for today's conference, Mr. Rob Bennett, Vice President Investor Relations. Sir, please go ahead.

Thank you, Liz. Good morning and welcome to BioCryst fourth-quarter 2015 corporate update and financial results conference call. Today's press release and accompanying slides for the call are available on our website, www.biocryst.com.

At this time, all participants are in a listen-only mode. Later we will open up the call for your questions and instructions will for queuing will be provided at that time. Joining me on the call today are Jon Stonehouse, Chief Executive Officer; Tom Staab, Chief Financial Officer; and Bill Sheridan, Chief Medical Officer.

Before we begin, I'll read 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, un-audited and forward-looking financial information, 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 of the 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 for joining us today.

In 2016 we gained more clarity and our HAE programs and were able to bring additional capital through a license agreement for RAPIVAB. Two weeks ago when we reported results from the OPuS-2 clinical trial, we were outlined our revised HAE strategy to pursue two programs to achieve one goal; bring forward a conveniently-dosed, highly-effective oral drug for HAE patients.

Those two programs are the solid dosage form of avoralstat and our second generation kallikrein inhibitor, BCX7353. Since then we have adjusted our program plan based on the revised strategy and adjusted our capital allocation to implement the plan. The result is we have sufficient cash to get to the next milestones for both programs without needing to raise more capital in advance of these results.

That's it for my introduction, I will now turn it over to our CFO, Tom Staab, who will review our financial results.

Thank you, Jon, and good morning, everyone. Today I'm pleased to report the details of our fourth-quarter and full-year 2015 results. We closed 2015 with approximately $101 million in cash and investments and the primary focus of obtaining data from two near-term decision points in our HAE programs.

We have a history of deploying our cash in a disciplined and stage-gate manner and are conserving our resources to achieve these near-term value creating milestones. In regards to our 2015 results, we utilized $13 million of cash in our operations as we successfully offset most of our operating burn with non-diluted capital through our RAPIVAB out-licensing transaction. In addition, we incurred actual 2015 operating expenses in the lower end of our forecasted range.

On slide 4, our revenue for the fourth quarter of 2015 decreased to $4.6 million from $5.4 million recorded in the fourth quarter of 2014. The decrease resulted primarily from of lower 2015 royalty revenue as well as lower collaborative revenue associated with BCX4430 development under our BARDA and NAIAD contract. Fourth-quarter 2015 R&D expenses of $19 million were in line with the $18.5 million incurred in the fourth quarter of 2015.

2015 R&D expenses were focused on the development of our HAE portfolio of product candidates, including of avoralstat, BCX7353, other second-generation kallikrein inhibitors and to a lesser extent BCX4430. Selling, general and administrative expenses for the fourth quarter of 2015 increased to $2.7 million, compared to $2 million for the fourth quarter of 2014. The increase was largely due to the initiation of activities in preparation for the commercialization of the Company's HAE product candidates.

Moving below the operating line, we incurred $1.3 million of interest expense in the fourth quarters of both 2015 and 2014. We also recorded a mark-to-market foreign currency gain of $229,000 in the fourth quarter of 2015 as compared to a foreign currency gain of $4.8 million in the fourth of quarter 2015. These gains result from periodic changes in the US dollar/Japanese yen exchange rate and the related mark-to-market valuation of our hedge arrangements.

Both interest expense and the foreign currency gain relate to our nonrecourse notes and hedge arrangement and acted in conjunction with the RAPIACTA royalty monetisation. Our net loss in the fourth quarter of 2015 was $18.1 million or $0.25 per share, as compared to $11.7 million of net loss or $0.16 per share in the fourth quarter of 2014.

Slide 5 summarizes our full-year 2015 financial results. Total revenue for 2015 was $48.3 million, compared to $13.6 million in 2014. The increase in 2015 was primarily due to the recognition of $21.8 million of revenue associated with the up-front payment in our RAPIVAB out-licensing transaction, $6.3 million of RAPIVAB product revenue, and increased government collaboration revenue associated with BCX4430 development.

2015 R&D expense increased to $72.8 million from $51.8 million in 2014. The increase was primarily due to more R&D spending associated with our HAE programs and, to a lesser extent, slightly higher RAPIVAB and BCX4430 development expenses as compared to 2014.

Selling, general and administrative expenses for 2015 increased to $13 million, compared to $7.5 million in 2014. The increase was primarily associated with the initiation of a commercial organization in preparation for commercializing our HAE product candidates as well as unrestricted grants awarded to the US and international HAE patient advocacy groups.

Moving below the operating line, we incurred $5.2 million of non-cash interest expense in 2015 and $5 million of non-cash interest expense in 2014. We also recorded a foreign currency gain of $1.1 million in 2015 as compared to a gain of $5.5 million in 2014.

Moving on to slide 6, I'd like to discuss our cash balance and cash usage. We ended the fourth quarter with cash and investments of $101 million, down a net $13 million from the $114 million at the end of 2014, as discussed earlier, or $42.2 million utilization on a gross cash outflow basis. We're pleased to have a strong balance sheet as it affords us sufficient cash runway to fund our operations while past our two HAE data events in 2016 without the need to seek additional capital.

In regards to financial guidance for 2016, we our forecasting operating cash usage to be in the $55 million to $75 million range and thereby expect our existing cash and investments to provide us liquidity through at least mid-2017.

In addition, we expect our 2016 operating expenses to be in the $78 million to $98 million range. As a reminder, equity-based compensation expense is excluded from our operating expense guidance. Now I would like turn the call back over to Jon for some closing remarks.

Thank you, Tom. In 2016, BioCryst is focused on advancing our HAE programs to get closer to our goal of bringing forward a conveniently-dosed, highly-effective, oral drug for HAE patients. In closing, you can see on slide 7 that we expect to report results from the solid dosage PK study of avoralstat by mid-year and APeX-1 results by the end of year. That concludes our prepared remarks. We will now open it up for your questions.

(Operator Instructions)

Our first question comes from the line of Jessica Fye with JPMorgan. Your line is now open.

Hey, guys, good morning. Thanks for taking my questions. I've got two if that's all right.

Sure.

This first one is, have you been able to correlate, in OPuS-2, the patients who you saw did have better drug exposure with any efficacy trend, i.e. do we know at this point if the patients who did get more exposure had better results?

And then the second question is on the solid-dose form. Can you elaborate on if this is a single formulation or whether there are multiple solid-dose forms that you are looking at. And I believe you've given range of monkey exposure that you said was two- to four-fold that for avoralstat, should we expect that data to be presented or somehow provided to the street prior to the human PK results this summer? Thanks.

Hi, Jessica this is Bill. I'll address the first question. I think you know in OPuS-2, as a reminder, we did not see a benefit in the primary endpoint under those circumstances. That's very best fairly difficult to pull out associations and exposure with benefit.

But we certainly looked at it. I think the message from the study is that the exposure was insufficient. And that's what we're focused on trying to fix with regard to the experiments that you ask about with regard to the solid dosage form.

And then on the, is there more than one solid dosage form. There were several different mixes of the solid dosage form. We ended up bringing two into the human PK study. We're continuing to do research, you know, to look at ways to make it better and you know, like we said, we will have the data from the human study by the middle of this year.

The monkey data, I think that's the question that you asked, would we be showing that before the human data. I think it's -- one reason we haven't shown the monkey data to this point is that we've been working to bolster our IP estate with this data and so we want to make sure that we take care of that first. And you know, given that were getting relatively close to the middle of the year, you know what matters here is the human data really. So, it's likely that will wait until we have the human data available.

Got it. Thank you.

You're welcome.

Our next question comes from the line of Liisa Bayko with JMP Securities. Your line is now open.

Hi there. Can you please just triangulate, and just to remind everyone, where you were with exposure, where you hope to go and why you're confident about that based on the data you've seen so far? And then, when you present the data, will you be presenting it side-by-side with the old formulation in terms of exposure, how are we to calibrate? Thanks.

Hi, Sue. It's Bill. The comparator is the old formulation, for sure. The data will be presented in such a way that you can make a reference to the old formulation. And as Jon said, what matters is can we improve on that in humans.

The other part of your question, Lisa, was -- how will we know if we're in the right range? I think the point there, Lisa, is, based on our assay we believe that in order to restore the normal phenotype you need 4- to 5-times the EC50 so if we're in or about that range, through the dosing interval, including variability, inter-patient variability, then our chances of being able to have a really impressive efficacy outcome is higher. And so that hasn't changed.

I think what we saw in OPus-1 was that we had very big variability based on variability in absorption and then, secondly, based on the timing of taking three doses. And what happened is that people fell below the target range and therefore didn't have the kallikrein inhibition-coverage that they needed during the course of a day.

And so our goal, whether it's the solid dosage form or 7353, which we know, we have human PK data, we know that with a number of doses we can get above that target range for a full 24 hours after a single dose. That should be your reference point, is that blue-bar target-range of 4- to 8-times EC50.

And when -- what are the next steps from there and just give us a sense of timing. When would we have some sense of how, you know, how much, how many events you can suppress or what have? What is the next step?

Well, obviously, we'll take them one at a time. So with the solid dosage form, it would be get data in patients. And so running some sort of HAE trial. We're still in the process of thinking through what that would be, but obviously we need to human PK data first to know if we've got into the target range are not.

The second, with 7353, if we have got success with APeX-1, I think we move as quickly as possible to a much longer study that we would hope to be a pivotal study. And so, that's basically the path. So these two programs, you know as I said in the last call, are competing against each other, right?

It's unlikely we're going to bring both to market. You know the fastest and the one that has the best profile wins. And you know, that's -- and they're both on roughly the same timeline, which I said in the last call was an NDA filing in the 2019-ish time frame.

And so how much does this -- these kind of hypersensitivity rashes that you've seen, how much does that weigh into your decision-making process and can you maybe give us an update if you seen any additional cases thus far in the neighboring studies? Thanks.

There's no update to give. The data we talked about before stands. With APeX-1, when we that starts, we'll put out a note. As we mentioned in last call, we're going over all the data of OPuS-2 to see if there's any changes that would be useful to incorporate into the APeX-1 design. So that process is going to wrap up and then we'll make whatever changes we need to make.

Once the other study has started, we can discuss the details of that. And I look forward to doing that.

With regard to how do we think about it? Basically, we had two subjects with red, itchy rashes which resolved. And in neither case was this a serious problem and we need to pay attention to understanding what is the frequency of that event, first thing. And the second thing is, is that event, the clinical nature of that event, is that going to be what we see if we see other cases?

If the latter is the case, and the frequency is low, this is a drug that has the potential for exceedingly high efficacy based on what we know about it right now. And the efficacy safety balance in mind, it would be very favorable. If we didn't believe that, then we wouldn't be pursuing APeX-1. So there's a very solid basis for pursuing the drug with regard to efficacy, the remainder of the adverse event profile was completely bland, in reality. There's really nothing much else to worry about here.

And the drug can be given as a once-a-day, simple tablet formulation. So there a lot of characteristics of this drug that are very favorable. Once we've finished APeX-1, we'll have a bigger numerator and denominator, or at least a bigger denominator, maybe the numerator will be the same. We'll understand more precisely what the incidence of rash is.

I think Bill said it repeatedly, that it's an efficacy, safety balance, right? Or tolerability balance. And so it's hard to say what's the exact rate that's acceptable until we know what the efficacy is. We have pretty high expectations around the efficacy. Let's get APeX-1 done and then we'll have a better idea of what it really is.

Thank you.

You're welcome.

Our next question comes from the lines of Serge Belanger with Needham & Company. Your line is now open.

Good morning. I have a couple of questions but I guess the first one is for Jon. Clearly, the focus remains on the two HAE programs but I wanted to know if you could provide an update on the non-HAE programs? Do you expect anything out of 4430 in -- for this year?

I know in the past you talked about governments stockpiling contracts. I know there's not a whole lot of visibility there, but if you can, I guess, talk about recent developments or any expectations for this year?

Sure. So let me tackle these one at a time. Let's start with kallikrein inhibitors.

I can't remember if it was the last call or the call before that, that I mentioned that we're starting to look at other indications. You know we have a whole suite of backup kallikrein inhibitors. They are at least some initial attractive indications that we are considering.

And so, you know, I think we've -- our last comment on the backups was that we were advancing some toward scale up to get to preclinical tox and that remains to be the case. And so that program continues forward. And you know as we make decisions around other indications, we'll make that known to investors and others.

We have a discovery research program on two other targets that we haven't identified yet. In January, I had mentioned that we're making good progress on optimizing the leads of both of these targets and so that continues to move forward. And our expectation is that, you know, we'll give an update maybe towards the end of this year, beginning of next, that's at least our goal in that program.

4430 continues to move through phase 1 development. You know were also working to move forward the IV formulation so that phase 1 is an IM version, but we're working to move forward an IV version as well.

You know there's a lot of attention right now on Zika virus, I think that answers your question about stockpiling with RAPIVAB because the government's sole attention is on a crisis at hand. And so, you know I wouldn't put any expectations around RAPIVAB stockpiling at this point in time. Obviously, we're continuing to pursue it, but it's an election year. Budgets are tight.

I think from an investor perspective, expectations should be extremely low on that front. But we have a broad-spectrum antiviral. We have extremely impressive data Marburg virus and we think has broad spectrum applicability.

And the government still is interested. The program continues to move. Yes, it's slower that other programs that we moved through phase 1. But, at least from our perspective, the interest in this program remains, I would say, reasonably high.

Thanks for the update. I guess one question for Tom.

Just wanted to get a little more clarity on the assumptions behind the 2016 guidance. It seems to be in the same range as what we saw in 2015, despite the fact you kind of pulling back on R&D, at least for the start of the year? And then just wanted to know the, you know, the assumption behind the $20 million delta between the low and high end of the range.

Yes so, you know obviously with OPuS-2 results, we reevaluated our 2016 budget. And with the elimination of this soft gel formulation, any activities associated directly without that formulation have been discontinued. There's some wrap-up cost, but for all intents and purposes, that's pretty low spin.

And then we reevaluated every single ongoing program we had and figured out what we needed to spend to get to value-creating points. And went through that. So we've done -- we've actually done the 2016 budget process two times now and we're very comfortable, not only with our cash and investments, but that we're able to resource our programs to the next value-creation point and hopefully when we create -- when we achieve those, we will make those known.

But in a, I guess, a holistic view, we are aggressively funding both avoralstat in the solid dose formulation and 7353 through APeX-1 because those two milestones are the most significant to investors and we certainly want to get those data points as soon as possible. And then continue both of those programs, or at least those programs after we have the data going forward, to Jon's point, and an eventual NDA filing.

Okay thank you.

Our next question comes from line up Brian Abrahams with Jefferies. Your line is now open.

Hi guys. This is Greg on for Brian. Thanks for taking my question.

Question that relates to the timing of APeX-1. You indicated that you're pausing and regrouping post results. Can you just confirm if or if not any regulatory feedback is an input into those specific timelines at all?

Yes, I can confirm that. This is BioCryst's decision to look at the OPuS-2 results and make sure that every detail of APeX-1 is what we want it to be.

So, Greg, I'm trying to understand your question. We, as I said to Brian in the last call, we were ready to go. Remember our original guidance was that we were going to start APeX-1 either the tail-end of last year, beginning of next and that we'd have data out by the middle of the year.

We were ready to go but with the OPuS-2 results, we made a decision to evaluate everything. To make sure that APeX-1 had its best shot at success.

If we make meaningful changes in the protocol, then you know, obviously, we will need to go back to regulators to get their approval on that and that's why we built in timing so that the results would come by the end of the year. Is that what you're asking?

Absolutely. It makes sense. Thank you.

And just one quick follow up with respect to spend this year. What can we expect around the pace of the spend? Would that -- any lumpiness there or do we expect it to be smooth over 2016?

Yes, so I think that, you know, the most significant spend, as I've mentioned to Serge's question is associated with our two lead HAE programs, which would be avoralstat in the solid dosage formulation and 7353. So if you bifurcate that into activity, obviously the 107 trial is closer to the present and we're spending a decent chunk of money on that.

And then the APeX-1, you know as we digest the results, we'd make the protocol changes, submit that to regulatory authorities and go through that process, that may lag a little bit. So I think that, roughly, you're going to have more of your spend towards the last six months of the year. However, there will be a decent chunk of avoralstat-spend in the first six months.

Great. Thanks guys.

You're welcome.

(Operator Instructions)

Our next question comes from the line of Rahul Jasuja with Noble Life Science. Your line is now open.

Hi, guys. Thanks for taking my question. I had got a couple of questions that help me I guess clarify the dosing formulation here.

So the reason the soft gel was attractive initially was that because commercially, one kind of dosing, which is the soft gel, being more attractive on the commercial basis? Is that thinking correct?

All right so let's kind of rewind history because I think that's important. The reason liquid gel was interesting because it was the only formulation that, you know, gave us a shot at getting drug exposure in humans. I remember this was a formulation that had less than 5% bioavailability.

And before we started doing the formulation work with the liquid gel, had massive variability in animal. To the point where it never would have flown and what we were able to do, and as you saw in Phase I, was get more consistent exposures and add exposure up the doses of 400 milligrams in the phase 1. It was never ideal. Right?

It was given three times a day. But it was the best we had and so we continued to work on formulation research all along the way and we worked on new molecules, right? And so that caused us to come up with our second generation program which BCX7353 is a part of.

The goal there was to come up with a once-a-day drug with really high drug levels and our team was successful. Much better bioavailability, north of 50%. And then we continue to work on different formulation research to see if we could improve on avoralstat. The whole reason were doing all of this is because we believe that a conveniently-dosed, highly-effective, oral drug can be the market leader.

And so we wanted to have as many shots at that as we could because we know stuff happens in drug development. Today we're in a situation where we're working towards a PK study to see if we can get the exposures that we need with the solid dosage form of avoralstat and we're moving forward with BCX7353 in its first patient study.

Like I said before, our expectation on efficacy is very high. And we are hopeful that -- we need one of these to come out as a winner to be successful in the market. That's critical.

Lynne's not on the call but I'll step into her shoes for a second. Any powerful oral formulation would be fine commercially. There's nothing to choose between a soft gel or tablet or whatever. As long as it's effective, safe, well-tolerated, and a palatable, conveniently dosed, it's fine.

That's helpful. Thanks.

That's why when we first presented twice-a-day versus once-a-day to physicians, it was overwhelming that, you know, the difference between three-times-a-day and twice-a-day is huge. The difference between twice-a-day and once-a-day is not that big.

Okay, that's helpful. So then sort of that sticking to the same topic. I have them in my notes here that we talked about the solid dose, the duration of absorption being longer for the solid dose versus the liquid dose. And that could be one reason why we saw the OPuS-2 results turning out to be different.

But do we expect any difference in GI tract tolerability that either the solid dose versus -- with the solid dose versus the liquid dose?

The answer to the last question is yes, because the excipients were part of the liquid formulation in the soft gel. We showed in toxicology studies and in the clinic in the vehicle-treated animals and the placebo-treated healthy subjects and the placebo-treated patients with hereditary angioedema with that formulation, their rate of lower GI symptoms, loose stools and flatulence and the like, were similar.

It's related to its components in the vehicle. The solid dosage forms are different. And we would expect not to have that issue with the solid dosage form.

Okay great. And then one final question, as I said I'll wrap up my post-mortem of the OPuS-2. We spoke at length about the 30% placebo rate. Could you explain that? I mean, I think it's a bit redundant but for my purposes, could you explain why that was so in that study and how that can be, you know, taken care of going forward?

It's in definite different looking at the OPuS-1 study and the OPuS-2 study. We went back and looked at the qualifying attack rates, if you like, or the historical information that we had either from clinic records in both studies or from 30 out of 110 subjects in OPuS-2, for the running period that those subjects went into because they didn't have any records to order.

And then looked at the difference in attack rates from that data compared to what we saw on our own study. In OPuS-1 there was hardly any difference. In OPuS-2 there was a 30% reduction.

The literature in other fields of medicine where there are repeated acute attacks of an illness, and you know, industry has tried to develop prophylactic medicines, for example, migraine, those suggest that something called expectation-bias is different when a potential trial subject is presented with a crossover design versus a parallel cohort design. In short, with a parallel cohort design, the expectation that people have is one of benefit.

And with a crossover design, the expectation that people have going into the study is of less benefit or no benefit. And so there is, sorry for the technical response, but there some is evidence from the migraine literature that expectation-bias is different in different designs. How to cope with it is a different matter.

And first of all, the placebo response that we saw in OPuS-2 is not a sufficient reason for why we did not hit a primary endpoint. You can -- you should be able to see a treatment effect over and above the placebo response, if it's there. And it comes down to, is the study adequately powered? We did some post hoc pair-analyses of what we would been able to detect.

And we would have been able to detect a 30% reduction in attack rate over and above the 30% reduction in attack rate that we saw impairing the qualification attack rate with the on-study attack rate. So the short answer to the question is that, provided you build that in to your power calculations then you can work with the placebo response and at the same time, many times, in different drug development programs, different indications, for example rheumatoid arthritis.

And, Bill, isn't it safe to say that if you got huge treatment effect, that you'll be able to show a difference. I think that's a really important piece here.

When I say, conveniently-dosed, highly-effective, highly-effective is drug levels above that, you know, at or above that target range to you know eliminate as many attacks as we can. Right? So this isn't a small incremental change in HAE patients' live, this is a dramatic shift. And so if you've got a highly effective drug you should see a difference even if you have big placebo effect.

Right. So, you know that whole conversation about placebo effect is obviously one of the items that we're looking with regard to, should we make any alterations to the intended design of APeX-1. Obviously we need to take it into account.

Great, that's been very helpful. I look forward to the data in the middle of the year. Thanks.

Great

Our next question comes from line of Christopher James with FBR & Company. Your line is now open.

Hi. Good morning, guys. Thanks for taking my questions. Most of my questions have been answered and maybe this one has been answered directly. Since both HAE drugs are competing sort of directly, what are your decision parameters and timelines to make a go, no go decision on avoralstat versus 7353. Thanks.

I think it comes down to, you know, which drug has them best shot at hitting the profile. Right? And so, you know, like I said we have PK data with 7353 that shows that it's well above the range at doses that we think could be well-tolerated. And so, that's what we're studying in APeX-1.

With the solid dosage form, we have monkey data that's encouraging compared to the soft gel. But you know what matters is what we see in humans. And the bar is high. Right?

It's that target range in or above and you know, variability, that if we see big error bars, the error bars still have to be in or above the target range. Right? And so if we're fortunate enough to have both programs that achieve that, then we will continue to advance them further. Both of them. If one falls out, then we'll continue to advance one. The good news is we have got two shots at it.

And, Chris, from a budgeting and from a forecasted guidance perspective, both programs are aggressively funded through 2016 so there's no expectation to decide in 2016 about one versus the other program.

Got it. Thank you, guys.

I'm showing no further questions in queue at this time. I would like to turn the call back to Mr. Jon Stonehouse for closing remarks.

Yes, so nothing further to say. As always we appreciate your interest in BioCryst and have a great day. Thank you.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program and you may now disconnect. Everyone have a great day.