BioCryst Pharmaceuticals Inc (BCRX) 2018 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the BioCryst Third Quarter 2018 Earnings Conference Call.

(Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, Mr. John Bluth.

Sir, you may begin.

Thank you, Ashley.

Good morning, and welcome to BioCryst's Third Quarter 2018 Corporate Update and Financial Results Conference Call.

Today's press release and accompanying slides are available on our website.

Participating on the call with me today are CEO, Jon Stonehouse; CFO, Tom Staab; Chief Medical Officer, Dr. Bill Sheridan; and Chief Commercial Officer, Lynne Powell.

Following their remarks, we will answer your questions.

Before we begin, I want to direct your attention to Slide 2, which discusses our use of forward-looking statements and potential risk factors regarding an investment in BioCryst.

As detailed on the slide, today's conference call will contain forward-looking statements, including those statements regarding future results, unaudited and forward-looking financial information as well as the company's future performance and/or other 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 these forward-looking statements.

For additional information, including a detailed discussion of our risk factors, please refer to the company's documents filed with the SEC, which can be accessed on our website.

Now I'd like to turn the call over to Jon Stonehouse.

Thanks, John.

And thanks to all of you for joining us this morning.

We are making great progress towards our goal of delivering the first targeted oral therapy to patients with hereditary angioedema or HAE.

The clinical data we have from our APeX-1 and ZENITH-1 trials support a unique treatment profile for an oral drug that works to prevent and treat HAE attacks.

For HAE patients, our once daily oral therapy BCX7353 represents hope as their lives today are still terribly restricted as they attempt to manage this disease with home injections or infusions.

Unlike many other diseases, HAE patients have a significant say in deciding which therapy is right for them.

We know from our deep and long-standing involvement with the physician and patient communities that patients desperately want an oral therapy.

Having met many patients and heard their individual stories, bringing an oral therapy to HAE patients has become very personal for us.

We know this is way more than a small incremental improvement in convenience.

It can make a huge difference for them, a normal life, and we're working with a real sense of urgency because we also know they're waiting.

For investors, we've arrived at an exciting moment with multiple data and program milestones lined up over the next six months.

We will touch on these today, as we provide you with an update on the progress we're making toward bringing 7353 to market for preventing HAE attacks, next steps with the acute program following our success with ZENITH-1.

Market research insight we've collected on patients' desire for an oral therapy, our plans to move early programs into the clinic and lastly, our financial results and strong cash position.

So let's start with APeX-2.

We're excited to report the trial has completed enrollment, and we remain firmly on track to report results in the second quarter of next year.

As we've noted throughout the APeX-2 trial, the pace of enrollment was outstanding in part because of the great work of our clinical team, but also because patients want an oral therapy even at a time when new injectable options are available.

With a total of 121 patients randomized, we believe we have a trial that is extremely well powered.

We have seen similar patient enthusiasm to participate in our long-term safety trial, APeX-S, and Bill will have some additional details on both trials in a moment.

In September, we announced positive results from our ZENITH-1 trial evaluating 7353 for the acute treatment of HAE attacks.

7353 demonstrated rapid onset of effect within the first hour of treatment and exceptional duration of activity showing sustained benefit at 24 hours.

This is particularly important as the current treatment paradigm is to treat early and stop the attacks in its -- stop the attack in its tracks before symptoms are more severe, so to show a benefit early and sustain it is a must for new acute treatment options.

We couldn't be happier with the results of ZENITH-1 as we now have a second proof-of-concept trial showing the drug works in HAE.

As we look ahead to 2019, we see a transformative year for BioCryst.

We plan to complete the ZENITH-1 trial in the first quarter and then start the Phase III over the summer, report data for APeX-2 in the second quarter and file the NDA in the fourth quarter and lastly, refill our pipeline by advancing at least 1 of our new programs into the clinic in the first half of next year.

These important milestones coupled with a strong cash position to get there and the capability to successfully launch our first oral drug for a rare disease provide a unique opportunity.

With these milestones coming in the near term, our employees are more engaged than ever to deliver value for patients, physicians and shareholders.

Now, I'd like to turn the call over to Bill.

Thank you, John.

With APeX-2 enrollment now completed, I'd like to review the details of this study and discuss the exciting implications of the clinical profile we see emerging for 7353.

The design of the APeX-2 trial, as shown on Slide 12, was informed by the outcomes of our APeX-1 Phase II trial, which were recently published in the New England Journal of Medicine, and our end of Phase II discussions with FDA and EMA.

APeX-2 is a randomized double-blind, placebo-controlled 3-arm trial, testing 2 dose levels of once daily oral 7353, 110 milligrams and 150 milligrams for the prevention of angioedema attacks in patients with type 1 and type 2 hereditary angioedema.

The primary efficacy endpoint of APeX-2 is the rate of angioedema attacks over 24 weeks of blinded study drug administration.

The pace of enrollment in APeX-2 was much faster than either we or our investigators had anticipated.

In fact, we overenrolled the study with 121 patients randomized in the United States, Canada and Europe, about 2/3 of those from North America.

As a result, the final sample size results in overall power of 99%.

We had originally planned to enroll 96 patients, which would've provided 90% power.

The robust enrollment in APeX-2 is yet another strong indicator to us that patients want an oral option to control their disease.

Our long-term safety study, APeX-S, is also seeing very strong enrollment.

If we add up both APeX-2 and APeX-S we have already met the goal of at least 100 subjects enrolled at each dose level of 7353 in order to support safety analysis for the NDA.

We look forward to completing follow-up through 48 weeks, and we remain on target to submit the U.S. NDA in the fourth quarter of '19, followed by a European marketing application in early 2020.

As John noted, we are already hard at work on the core sections of the NDA.

We look forward to completing the clinical trial program for HAE prophylaxis and to advancing the first targeted oral therapy to launch.

Turning to our acute treatment program, we're very pleased that the ZENITH-1 trial is now fully enrolled.

With the success of the 750 milligrams single dose cohort, we are moving quickly to complete data collection for the additional dose arms of ZENITH-1 and commence the Phase III study.

We plan to meet with regulators in the summer of 2019 to discuss the Phase III trial design and to begin that trial after midyear.

What's been especially exciting about the clinical outcomes in ZENITH-1 is that the results validate our PK PD profile, showing both a rapid onset of clinical activity from the first assessment time post dose 1 hour and sustained benefits over 24 hours.

From both the clinical and patient perspective, these are both critical attributes because the treatment paradigm for acute attacks has changed completely since the prior licensing trials for acute treatments were conducted.

From intervening many hours after an attack in a hospital setting or a clinic to immediate self-administered treatment in order to limit the progression of the attack.

You can see this dramatic shift illustrated on Slide 17, which compares the study parameters of ZENITH-1 to the study parameters in other acute trials.

Instead of injectable treatment in a clinic, subjects in ZENITH-1 self-administered oral 7353 at home, instead of 4 to 12 hours of symptoms before study drug treatment, in ZENITH-1 almost all subjects treated within 1 hour of onset of symptoms, in fact the median was 35 minutes.

As shown in slides 18 through 21, our results in ZENITH-1 show clear-cut clinical benefits in a dose that is generally safe and well tolerated.

7353 was discovered and developed at BioCryst using the disciplines of structural biology and structure-based drug design in order to meet an urgent medical need for a targeted oral treatment for a rare disease.

Oral treatments for rare diseases are very hard to come by.

Fortunately, our research team in Birmingham continues to invent and progress new oral product candidates in other rare disease settings, and we are very excited to be progressing 2 nonclinical programs in separate disease areas.

One of these diseases is fibrodysplasia ossificans progressiva, or FOP, a very rare condition that results in irregular formation of bone in muscles, tendons, and other soft tissues resulting in devastating loss of function, deformity and early mortality.

There are currently no approved treatments for this disease.

We have advanced 2 compounds into late preclinical development, which work to inhibit the mutated ALK2 kinase that is responsible for this disease.

For competitive reasons, we have not yet disclosed the molecular target or indication we plan for our second nonclinical program.

Unlike FOP, this undisclosed condition is more prevalent, and it can be treated by repeated IV infusions.

The treatment could be fundamentally transformed with an oral drug.

We are very excited by what we are seeing emerge preclinically.

It is a very active time for us at BioCryst as our pipeline progresses.

The clinical data with 7353 continues to reinforce its attractive profile as an oral kallikrein inhibitor that can be safely and effectively used to prevent and treat HAE attacks, meeting an urgent patient demand for a targeted oral therapy.

Now I'd like to turn the call over to Lynne to further describe this patient demand from a commercial perspective.

Thank you, Bill.

I'm delighted that we have closed our recruitment of APeX-2 and are one step closer to bringing the first targeted oral therapy to HAE patients.

In the past, I have seen that when Phase III studies recruit quickly, it can be an encouraging indicator of interest in the commercial product, especially in a competitive market like HAE.

I'm not surprised that APeX-2 enrollment exceeded our expectations because even with better injectable therapies available, patients want an oral therapy that will able them to control their disease and live a more normal life.

HAE is different from many other diseases because patients have greater input into choosing their therapy.

As you can see on Slide 24, our market research confirms strong demand for once daily oral HAE therapy compared to injectable options.

Slide 25, indicates that the majority of HAE patients would ask their physician for a drug with the profile of 7353.

And the vast majority of allergists would prescribe it.

Significant majorities of both physicians and patients cite unaided ease of use and/or lack of injection as the top reason for wanting an oral option.

I encourage you to listen to HAE patients to better understand this, and to go online and view some of the videos of HAE patients taking newer injectable therapies.

This really gives you a sense of the burden of refrigeration, significant preparation time and the pain of needle administration.

Over the past 12 months, the $2 billion HAE market has grown at a rate of more than 20%.

And we see prophylaxis emerging as the largest segment.

We now see more than 50% of revenues being derived from products with a labeled indication for prophylaxis.

In practice, the use of prophylactic therapy is even greater as some of the products registered with an acute indication are used in a prophylactic or a semi-prophylactic manner.

It's an exciting time at BioCryst as we advance our launch preparation for a once daily oral therapy and actively build a highly skilled commercial team with proven rare disease launch experience.

Now, I'd like to turn the call over to Tom.

Thank you, Lynne.

I'm pleased to report we are in a strong position as we head into a milestone-filled year for 2019.

With the additional cash we raised in our successful oversubscribed August equity offering and the efficient debt refinancing we completed in July, we ended the third quarter with $151 million in cash and cash equivalents, which is roughly the same amount in which we began the year.

This provides us with a cash runway into 2020 and past our APeX-2 data and expected 7353 NDA filing.

Importantly, it provides us the financial resources to prepare for 7353's launch, and to refill our pipeline by advancing our new orphan disease preclinical compounds.

I do not intend to repeat the financial detail in the press release issued today, but I'd like to add some additional color to certain commentary.

Revenue for the third quarter of 2018 decreased to $1.5 million as compared to $8.8 million recorded in the third quarter of 2017.

The decrease was primarily due to 2 infrequent events in 2017 that did not recur in 2018, namely an inventory sale to one of our collaborative partners, and recognition of a product approval milestone under our Securus agreement; however, when gauging revenue for future quarters, you should expect collaborative revenue to be recognized at lower levels than in prior years, with collaborative revenue more in line with the 3 quarters of 2018 ranging between $400,000 to $900,000 per quarter.

In addition, there are no remaining milestones under the Securus agreement, so there will be no future milestone revenue associated with this collaboration.

Third quarter 2018 R&D expenses increased to $22 million from $17.5 million incurred in the third quarter of 2017.

This increase was primarily due to increased spending on our HAE and preclinical programs.

As we complete the ongoing APeX-2 and APeX-S clinical trials, continue the acute 7353 program and progress our programs into the clinic and pivotal trials, we expect our future R&D expenses will be at least equal to our currently -- our current quarterly run rate and will likely increase as we continue to advance our programs.

General and administrative expenses of $7.9 million increased significantly in the third quarter of 2018 as compared to $3.3 million for the third quarter of 2017.

The increase was largely the result of merger-related costs incurred in association with our terminated merger.

We do not expect to incur any future merger-related costs, however, as we get closer to APeX-2 data and the commercial launch, we anticipate our administrative expenses will increase.

Finally, for our 2018 forecast, we continue to expect our cash utilization to be in the range of $85 million to $105 million and our operating expenses in the range of $90 million to $110 million, as we have previously guided.

Consistent with previous quarters, our operating expense guidance excludes equity-based compensation due to the difficulty in reliably projecting this expense as it is impacted by the volatility and price of our stock as well as by the vesting of the company's outstanding performance-based stock options.

In summary, we are pleased that we have completed 2 very focused and efficient financial transactions in the third quarter that strengthen our balance sheet and provide operating runway well past APeX-2 results.

With our current level of cash and investments, we can now focus our attention on trial completion, regulatory filings and preparing for a successful commercial launch of 7353.

Ashley, we would now like to turn the call over to the Q&A session.

(Operator Instructions) And our first question comes from the line of Maury Raycroft with Jefferies.

Good morning and congrats on the progress.

First question is just based on discussion prior around an interim in APeX-2, but I'm guessing that since enrollment is now complete, there's no need for resizing or can you comment on how the interim went?

Enrollment was so fast that we overenrolled and with 121 subjects on study there's now no need to do it.

You are correct.

Got it.

Okay.

And then I'm just wondering for your Phase III and in the real-world commercial setting what therapy do you recommend in case a patient has a breakthrough attack?

I guess do you see any potential synergies with current acute treatments that are out there?

Well I think that the top experts in the field are the ones who are going to create or renew the guidelines for treatment of the disease.

And our expectation is that with the launch of new treatments, they'll take that into account.

I think what we can say is that we've got strong data right now for both prophylaxis and emerging in acute, we are going to wrap up that acute study and report out the final results in the first quarter and move forward into a Phase III program.

It would be great to be able to offer patients the option of an oral treatment for both treatment of acute attack as well as for prophylaxis.

I think it's probably not up to BioCryst or any other company to recommend which order of treatments patients would want.

I think what we hear over and over again is that patients want more options and they want oral treatments.

Yes.

Maury, I'll just add to Bill's comments.

It's a real individualized situation on a patient by patient basis in terms of what they want.

But one of the things that we are hearing a lot since the ZENITH data is an all-oral option, and so clearly we're going to be pushing both programs forward and try to make that available to patients in the future.

Got it, that's helpful.

Then the last question is just on commercial strategy, ex U.S., any thoughts around that?

Will the U.K. PIM designation that you have, will that accelerate time lines with the launch in the U.K.?

So we're looking to supply this product globally and after the U.S., E.U. is very important for us, so yes, we are looking at a potential for early access in the U.K. and other markets.

And our next question comes from the line of Jessica Fye with JPMorgan.

Thanks for taking my questions; I had a few.

Now that enrollment is complete, are you looking at blinded safety data and if so, can you speak to any insights you might be gaining from that?

I'm also curious if you can speak to the overall discontinuation rate you've seen so far.

And then with enrollment complete, can you also speak more specifically to the baseline attack rate of the patients you enrolled?

Hi, Jess, it's Bill.

Our practice is to wait till the studies are mature and we report out all the results together, so we'll be able to speak to all of those questions in the second quarter when we report out on APeX-2.

Historically, if you look at other studies, the discontinuation rate in studies of similar duration is in the range of about 10% to 15%, that all got factored into our planning for the trials.

So if that's what we see at the end of the day, we can cope with that type of a discontinuation rate.

So we look forward to sharing the data in the second quarter.

Okay.

And the patients who maybe have completed the 24 week period at this point, can you speak to what proportion have moved on into the extension?

It's not our practice to give blow-by-blow details of where we are with patient enrollment.

The enrollment went very fast, so you can imagine there are a lot of patients at different stages in the study.

And you can obviously figure out that everybody will have to be through 24 weeks in order to do our analysis and report it out in the second quarter.

Yes, and when we say our expectation is that we will have a dropout rate of 10% to 15%, that's through the full 48 weeks, right, because an important piece of APeX-2 is also getting 48 weeks' worth of data for the safety filing to complement APeX-S.

And our next question comes from the line of Gena Wang with Barclays.

Hi, this is Xiaobin calling in for Gena.

Maybe 1 quick question on the -- your pre-clinical program.

So can you give us a sense about the next step before you enter the clinic, and also what to expect from initial clinical results, is that indications that you expect a rapid clinical benefit to be seen?

And I have a quick question on the accounting, the booking of the CDC ordering like how should we work around it for over the next 5 years.

So thanks for your questions, I will take a shot at the first one, Bill, make sure that I get this accurately.

So right now, what we're doing is, we're going through toxicology and scale up of drug supply to be able to be file an IND and then start the first-in-human studies.

And so we're in that process, it's not complete yet, but we're making good progress in both programs and so that's where we stand on that.

And then the accounting.

So I don't know that I caught the question, if you could repeat it for me, hopefully, I'll be able to answer it.

For CDC ordering of above $35 million, should we book that like $7 million for each year, will that start this year?

Yes, I got your question now.

So -- as you're right, the contract is $35 million and it's over a 5-year period.

The way that I would look at that is, I would look at a -- split it proportionately over the 5 years knowing full well that the government year ends on September 30, so you could have multiple deliveries in a calendar year, but only one delivery in a government year.

And so obviously cash is very important to us, so we're going to try to negotiate with the government to get those shipments as soon as we can.

And his another question was, would the first shipment come this next year?

And the answer is no, it takes us about 7 months to 9 months to manufacture, so the first one will come in 2019.

On your question about what to expect from the Phase I trials, you can expect standard Phase I trials basically.

And we'll share the details of those once the project has reached the clinic.

And our next question comes from the line of Brian Abrahams with RBC Capital Markets.

This is Owen on for Brian.

Just a couple of quick ones for you.

First I am wondering if you have been able to follow the TAKHZYRO launch dynamics at all?

And anything you're learning from that either operationally or in terms of clinician and patient engagement with the different mechanism?

And then related to ZENITH-1, I know you're getting close to the full data.

Do you have any initial thoughts on what you're seeing about the endpoint you might want to focus on in Phase III before you enter into discussions with the FDA?

So on the TAKHZYRO launch, yes, we are watching it very, very closely.

One of the things about when you're coming in lastly into the market is that you get to learn from what those have done before.

So, yes, very early in that launch, but we continue to watch very carefully.

With regards to endpoints for the Phase III trial for acute, that will be negotiated with regulatory agencies.

What I love about the data is that we have got plenty of choice.

The endpoints in clinical trials need to match with the patients and physicians, and fit in with the way the disease is treated.

So, at the moment, there's nothing more to say except watch this space and we will go through finishing the study and meet with the regulators.

And fact that, Bill, that we have a number of different endpoints that we have hit and the fact that the treatment paradigm has dramatically changed from when these other drugs was approved can only help our situation with the regulators, right.

(Operator Instructions) And our next question comes from the line of Serge Belanger with Needham & Company.

First on APeX-S.

Can you tell us whether or not that study is fully enrolled at this point?

And when do you think you'll be able to report results from that one?

So APeX-S is what I said or what Bill said in his prepared remarks is that combining both APeX-2 and APeX-S, we have the 100 subjects necessary for filing.

Will we continue to enroll in APeX-S?

The answer to that is yes.

And then in terms of timing, the important part of APeX-S and the second 24 weeks of APeX-2 is all around the filing and our plan is to file the NDA in the fourth quarter, and we are on track for that.

And as we think about the NDA filing about a year from now, are there still ancillary studies that are outstanding at this point, and where are you in terms of the CMC component?

We are in great shape.

So the nonclinical and CMC programs are extremely well advanced, the rate-limiting steps for the filing is actually completing the APeX-S study.

And as Bill said in his comments, prepared comments, we're already writing some of the sections, parts of CMC and tox and things like that.

And our final question comes from the line of Liisa Bayko with JMP Securities.

This is John on for Liisa.

Congrats on the progress and thanks for the questions.

Just a couple of other follow-ups on APeX-S, I'm wondering are these the same type of inclusion/exclusion criteria for APeX-2?

And I'm wondering what data are you seeing rolling out of APeX-S, are you getting any attack rate data from that study since it's open label?

APeX-S is designed as a 48-week safety study.

So the mature data will come when we have 48 weeks of follow-up on the subjects entering the trial that we then cut that data to file the NDA in the fourth quarter next year.

It's not an efficacy study.

We will collect all of that information and summarize it for the NDA.

But as I mentioned earlier, our practice is to report out data when the trial is complete.

And then the inclusion and exclusion.

Oh, yes, sorry, your question about inclusion/ exclusion.

It's generally a broad inclusion/exclusion criteria trial.

For example, in APeX-2, we have a requirement for a minimum attack rate because it's a placebo-controlled study with attack rate as the primary efficacy endpoint, so you have to have that; in APeX-S that's not a requirement obviously.

So people can come in if they and their physicians believe they might benefit from an oral-targeted therapy, and they have the disease, and then there are other standard criteria.

And ladies and gentlemen, this concludes our Q&A session for today.

I would now like to turn the call back over to management for any closing remarks.

Yes, so I just like to say thanks again for your participation in the call.

Clearly, an exciting time here at BioCryst, on the home stretch towards filing an approval for our prophylactic program with 7353, we've got a second indication opportunity with the acute treatment.

Lynne is really gearing up being a great student of those in front of us and what they're doing in terms of switching patients and launching the product and building her team to ensure a successful launch and then refilling the pipeline with some other interesting oral drugs for rare disease.

So an extremely exciting time at BioCryst.

And we thank you for your interest.

Have a great day.

Ladies and gentlemen, thank you for participating in today's conference.

This does conclude today's program.

And you may all disconnect.

Everyone, have a wonderful day.