Galmed Pharmaceuticals Ltd (GLMD) 2014 Q4 法說會逐字稿

Good day and welcome to the Galmed Pharmaceuticals fourth-quarter 2014 earnings call. Today's conference is being recorded. At this time, I would like to turn the conference over to Josh Blacher, CFO. Please go ahead, sir.

Thank you, Lisa. Good morning, everyone, and thank you for joining us on today's conference call. We are pleased to be here with you today to provide you with an update on our clinical development programs, as well as report to you on our financial results for the full year ended December 31, 2014. Together in the room is CEO Allen Baharaff; and Chief Medical Officer, Dr. Maya Halperin. We will be happy to take any additional questions that you may have at the conclusion of our prepared remarks.

Before we begin, please note that we will be making certain forward-looking statements on today's call including without limitation those with respect to financial results, statements and forecasts regarding anticipated timelines, and expectations with respect to our regulatory and clinical development programs as well as other statements that relate to future events. These statements are based on our beliefs and expectations of management as of today and actual results, trends, timelines, and progressions relating to our financial positions and projected development programs and pipelines could differ materially.

I urge all investors to read carefully the risks and uncertainties including without limitation the risks and uncertainties under the heading risk factors described in our registration statement on Form F-1 and 20-F filed with the SEC. Galmed assumes no obligation to update any forward-looking statements or information which speak as of their respective dates only.

With that, I would now like to turn the call over to CEO Allen Baharaff. Allen?

Thanks, Josh, and good morning to you all. Thanks very much for joining us. I would like to update you regarding the progress of our clinical studies.

First and foremost, our Phase IIB ARREST study in NASH, which stands for ARamchol for the REsolution of Steatohepatitis, was initiated last month in eight sites in Israel. Outside of Israel, the ARREST study protocol has already been approved in several sites in Chile and Mexico. We expect that all sites in those countries will start recruiting by the end of June or early July. Other countries in Latin America will follow soon thereafter. In Europe, clinical trial applications were submitted in a number of countries, and we expect the trials in Germany, France, and Italy will start recruiting early July.

As you know, we also announced that we have expanded our ARREST is study to include patients recruitment in the United States. We took this move because we ultimately believe that US-based patient recruitment will shorten the recruitment time as well as improve the study breadth and relevance.

Needless to say, all of our FDA requirements to commence the study have been completed, including is the chronic nine-month toxicology study which had no toxic funding as well as the PK study in the two new higher doses which had no serious adverse events. We have already identified several potential sites and we are in the process of executing the necessary contract and approvals. We believe the sites will start recruiting by the summer, and we aim to recruit at least 60 patients in the US.

Importantly, we are pleased that Professor Vlad Ratziu, an internationally acclaimed key opinion leader is the ARREST study's global principal investigator and professor Rohit Loomba is the study's US-based principal investigator.

Now, let me take this opportunity to refresh your memory regarding the ARREST study design. This is a very important to reiterate, especially in light of some of the recent news regarding study results for some of our competitors. The study population in the ARREST study will only include subjects with insulin resistance and relatively severe NASH, which is defined as a NAS score of 4 or above. In concert with our scientific advisory board, we selected this population because they are the most likely to benefit from the treatment. In addition to relative severity of the NASH at baseline, we will allow for high quality of assessment of the change in the biopsy.

The ARREST study treatment period is 12 months, we include doses of aramchol, 400 milligrams and 600 milligrams, versus the placebo. After one year of treatment, the patient will undergo a second biopsy to evaluate the histological effect of aramchol. The effect will be measured by two histological endpoints -- the resolution of NASH without worsening of fibrosis; and second, a two point decrease in NAFLD activity score, or NAS, without worsening of fibrosis.

It is important to dive into more detail concerning these endpoints. The resolution of NASH is the reversal of NASH to simple steatosis by disappearance of ballooning. Ballooning has been proven in a number of clinical studies to have the strongest correlation with liver injury and the development of fibrosis. Our primary endpoint in the ARREST study is a statistically significant decrease in liver fat content as measured by MRS. Accordingly, the ARREST study will be considered to be successful if aramchol will show a statistically significant effect relative to the placebo in the reduction of liver fat concentration as well as the resolution of NASH in biopsy findings. Combining the imaging and histological findings will reduce the inherent variability of each of these measurements independently, and will provide a more comprehensive assessment of our aramchol on NASH.

Turning now to our proof of concept study in cholesterol gallstones. As we reported, the study was initiated last December. Recruitment has unfortunately occurred more slowly than anticipated. We've recruited only eight patients so far to the study. We have therefore decided to open three additional centers and close the initial underperforming center. As we have seen in the process of revising our recruiting strategy and site profile, we are not quite in a position to provide updated timing on the completion of the study but will do so as soon as possible.

I'm turning now to financial. I will turn the line over to CFO Josh Blacher. Josh?

Thanks, Allen, and thanks once again for joining the call. This morning I will be providing you with our financial results for the year ended December 31, 2014. For more information, please refer to our annual report on Form 20-F filed earlier today with the SEC, which among other things provides a summary of such financial results.

We reported cash and cash equivalents and other liquid current assets totaling $32.2 million at December 31, 2014, which compares to $35.4 million at September 30, 2014. This change is consistent with the previous guidance we have stated regarding our annual burn rate of roughly $12 million.

You will note that during the quarter we began deploying a cash management strategy with a leading international bank. Since the end of 2014, we completed executing this strategy. All marketable securities are investment grade with an average credit rating of Aa3/AA minus and option unadjusted duration of 0.9 years and effective market yield of 0.6%. Roughly 67% of the portfolio is invested in corporate bonds, and 22% in municipal bonds. This cash management strategy is expected to provide interest income of a couple of hundred thousand dollars on an annual basis.

We continue to believe that our existing cash balance will be sufficient to fund our current operations into 2017 including the completion of our ARREST study. Of course, either our burn rate or our plans could change in the future so there is no assurance that these funds would last into 2017 as anticipated.

For the full-year ended December 31, 2014, on a GAAP basis our net loss totaled $9.1 million or $0.88 per share compared to a net loss of $17.5 million or $3.45 per share for the year ended December 31, 2013. The 2014 net loss included $0.6 million of non-cash stock-based compensation expense versus $10.9 million of non-cash stock-based compensation expense in 2013.

Our largest expense remains R&D, which totaled $6.7 million for the year ended December 31, 2014. This compares to $7.2 million for the year ended December 31, 2013. Please note that 2013's R&D expense included a non-cash stock-based compensation expense of $4.3 million. During 2014, chemistry and formulation studies increased by $1.8 million and clinical studies increased by $1.0 million. The change in these two line items account for more than three-quarters of the annual delta and reflect the larger scale production of aramchol for our clinical test as well as the cost of the studies themselves.

Turning to G&A, our general and administrative expense for 2014 totaled $2.5 million versus $7.4 million for the year ended December 31, 2013. The decrease in 2014 primarily resulted from higher stock-based compensation in 2013 of the $6.6 million versus $0.6 million in 2014. Excluding this non-cash line item, total G&A expenses increased by $1.1 million, which reflects significant increase in salaries and benefits, rent and office maintenance fees, and investor relation and business development expenses, as a result of our successful IPO and the hiring of a number of officers and employees to help us achieve our goals. We are content with our financial results during our first year as a public company and the prudent management of our financial resources remains of upmost importance.

Finally, I have had the chance to meet many of you during the last six months, but I would like to reiterate that I remain very accessible by email or phone as appears on today's press release. Please feel free to contact me at any time. I look forward to working closely with you in the future. Allen?

In closing, we are very pleased with our progress and the status of our clinical development program to date and look forward to continuing to execute our plans. With that said, Lisa, please provide instruction for the Q&A portion of the call. Thank you.

(Operator Instructions) Jason Kolbert, Maxim.

Congratulations on all the progress. A couple of questions. Maya, I know you were recently in New York and in Boston at the liver meeting and you were talking to me a little bit about all of the news flow that occurred in the space. Can you help me understand how the competitive landscape has changed a little bit? And how aramchol is positioned within that landscape, particularly in terms of understanding what the endpoints might be for a NASH trial?

Thanks for the question, Jason, and good morning, everybody. There have been two studies published lately. One is by Conatus and this is a small proof-of-concept study in NASH. We have only partial data, but we understand the study was in a small proof of concept -- 38 patients treated for one month with emricasan or placebo. And the primary endpoint was reduction in liver enzymes ALT, and apparently the endpoints were reached. We just want to repeat that this is a proof-of-concept aramchol test, proof of concept almost a few years ago. We had 60 patients treated for three months. The endpoint was much specific. It was imaging fat reduction by an MRI.

The other study that has been completed and communicated lately is GOLDEN study Genfit GFT505 study. We, again, have very few data. They are going to communicate the data at the coming European conference for liver disease and, therefore, I don't think I should be commenting on their data.

What I would like to underline is how our clinical -- how ARREST study differs from the GOLDEN study. The primary endpoint in ARREST study is disappearance of active steatohepatitis with no worsening in fibrosis. Now we have to be, as Allen mentioned, very careful in defining those endpoints in order to make sure that we achieve them. Referred to a disappearance of active steatohepatitis has been defined in two seminal articles. One appeared in 2014, and the other one already in 1999. And in those articles, the disappearance of active steatohepatitis has been defined as disappearance of ballooning.

I must understate again -- underline again that ballooning, which is a sign of cell death, is for early NASH what fibrosis is for late NASH. So disappearance of ballooning makes the difference between steatohepatitis which is an active form of NASH to simple steatosis. And this is what we have as a primary endpoint -- as the histological endpoint. As Allen said, the primary endpoint is set by NMRS, and those two endpoints are complementary.

When you -- we mean no increase in fibrosis, we mean no increase whatsoever in fibrosis core as opposed to other studies which allow for some advanced in the fibrosis score. So, our study -- our ARREST study to some would be -- these are periods of active steatohepatitis with no increase in fibrosis core.

Excellent. One down, Maya. Can you just opine with me a little bit, too, about what was involved in opening up the current trial to include US sites? What's the significance of that? And in terms of hiring additional people, particularly on the clinical front, have you made any progress?

Thanks for the question. Having US side, it's very relevant for us as it allows for quicker, quicker recruitment time. There are countries where the biopsies are less well understood than in the UK -- in the US, sorry. We have among our sites, I think, six academic sites and maybe two commercial. Those academic sites are affiliated with the centers that participated also in the NASH research group, and those are very well versed in MRI and in biopsies with high-quality data.

Also, we hope that by recruiting around a quarter or 30% of patients in the US we will have the FDA regard it as a US study, and we would not have -- again, we hope we cannot be sure because we did not discuss yet with the FDA. But this would mean that we would not have to repeat a Phase IIB in the US to validate our data, and this may be actually shortening the development plan. Of course, having aramchol be unknown by the American opinion leader [terms] of treatment will be a big asset to the Company. Will help us in the future studies and in penetrating to markets.

And also, we hired -- to the last part of your question, we hired a very efficient, experienced, and energetic VP for all -- VP clinical, which we will communicate in a separate communication to the -- in a press release soon when she will start working, probably by tomorrow.

Vernon Bernardino, MLV.

I just have a few questions, and I was just wondering if now that you've completed your tox and PK studies, the doses that you have tested and also as to how they relate to the doses you might bring forward, let's say, in a Phase III trial.

We've recently completed a PK study on 66 subjects, both single and repeated doses for 10 days, with no serious adverse events. We have tested those escalation doses from 200 milligrams up to 600 milligrams, and the two doses that we will take forward for the ARREST study, the 400 milligram and 600 milligram is shown to be of no adverse events, and a very good PK showing, a very good PK profile.

Well, Phase III would seem --

Phase III, of course our Phase III we will repeat it. As you remember, Vernon, we also have an interim analysis after six months, after 120 patients complete six months of treatment. And at that time we will also look at the PK profile, and if we will see that there is no difference between the 600 milligrams and the 400 milligrams, of course we will revert to a single dose of the 400 milligrams. But most importantly, this would also establish the safety profile, the clean safety profile if aramchol as it was demonstrated so far.

And regarding the doses tested, I know eventually and I'm not sure if you've got achieved this yet. Have you now attained the maximum tolerated dose? Or that still needs to be done?

No. We have not reached -- in our chronic toxicology studies, the nine-month chronic toxicology study, we have not reached a maximum tolerated dose, MTD, and, hence, when consulting the regulator, the FDA, we were -- administrated animals, the maximum feasible administrated dose, which was found to be 1,500 milligrams per kilogram per day. This is equivalent to about 50 times -- 50 -- 50 times the therapeutic dose, and still we have not observed serious adverse events. So, there is no MTD, but the data -- and Maya would like to add another point.

You formulated the question: is this still to be done? We cannot continue giving more than that in order to reach an MTD because we see it's impossible to administrate. As Allen said, it's maximum administratable -- volume wise. So, this completes the requirement of the FDA, and we have updated the IND and we hope to -- if -- we hope not to hear from them in the next two weeks, which means that we can go forward. But we have no further toxicology studies to do as far as we know.

So in effect that means at the very least you have further confirmed the safety of aramchol. One question that I have and relates to a topic that Jason looked into, and that is, with the GOLDEN results, Genfit's data for GFT505, there were inconsistencies as far as these clinical sites were concerned regarding how they were treating these patients, as well as the kind of tests that they were capable of doing. I assume you've learned from their mistakes and those sites that are now part of ARREST and will be part of ARREST in the US, you are going to be able to control for those because that seemed to be a very big factor in the inconsistency of the results.

We -- I don't know. Maybe you know more details than we do. I think -- I'm not sure that the results should be influenced by the number of centers. But maybe I don't know exactly what were the mistakes done between the sites. What we can say is that we have a very close relationship with the site, and even in choosing the site we are very much involved -- Allen working in Latin America and --

Yes, I just returned this week in fact from spending a week with Professor Ratziu traveling to Mexico and Chile, visiting our key investigators and the key sites that will participate in the study. And we had a very pleasant surprise from the level of the quality of the -- both the investigators and the clinics themselves. Most of them are private clinics and with -- extremely experienced in clinical studies. So and we intend to do that. I mean, [intent on], I mean I'm going to do that, Maya. And we have an internal auditor that will also make regular audits to ensure the quality of the size are as we are hoping that they should be.

Yes. And I'm glad you mentioned Dr. Vlad Ratziu because he, as you know, was part of the GOLDEN study. And with the concerns that I had just mentioned as far as inconsistency across the capabilities of the clinical trial sites that he would know the mistakes and how to avoid them in the ARREST study for Galmed. So, thank you very much for taking my questions.

Yes. Absolutely. And, Vernon, we should also, I think, for the benefit -- we should also remember that the GOLDEN study was designed a number of years ago. And then maybe borderline NASH was still acceptable and which is clearly following the September 2013 workshop. Already it was made clear to everyone that the right population is only severe NASH as we have in our study, not 4 and above. And this is unfortunate. This is when we said that we had a privilege that -- in fact, the way it's paid for us by some of our other competitors is exactly what happened. We have the benefit of starting later, learning from other's mistakes.

Yes, I think so. And good luck and look forward to the next update.

Thank you, and look forward to see you soon.

(Operator Instructions) It appears at this time we have no additional telephone questions. I would like to turn the conference back over to Mr. Allen Baharaff for any additional closing remarks or comments.

I would just would like to thank you all again for your continued support over the last year. And as Josh mentioned earlier, we are always available for you for any questions. Josh, myself, Maya. Any question you might have, clarifications. We are -- we try to come as often as possible to the US and available in all other means. And thank you again for joining us today.

Ladies and gentlemen, this does conclude today's conference. And we do thank you for your participation.