MediciNova Inc (MNOV) 2011 Q1 法說會逐字稿

Good day ladies and gentlemen and welcome to the first quarter 2011 MediciNova Inc. earnings conference call. At this time all participants are in a listen only mode. We will conduct a question-and-answer session toward the end of the conference. (Operator Instructions) I would now like to turn the call over to Mr. Mark Johnson, Director of Investor Relations and Corporate Development. Please proceed.

Thank you. Thank you everyone for calling in today. On the call we have three members from MediciNova management. Dr. Yuichi Iwaki, President and CEO; Michael Coffee, Chief Business Officer and interim Chief Financial Officer and Dr. Kirk Johnson, Head of R&D and our Chief Scientific Officer. Dr. Iwaki and Mike Coffee will provide a business update presentation and afterward we will open it up for Q&A.

Please note the following Safe Harbor statement. Statements in this call that are not historical in nature constitute forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward looking statements include, without limitation, statements regarding our portfolio of clinical and pre-clinical product today, including patient enrollment information and expected timing of completion of trials and our outlook for our business development activities. These forward-looking statements may be proceeded by, followed by, or otherwise include the words, believe, expect, anticipates, intends, estimates, projects, can, could, may, will, would or similar expression. These forward-looking statements involve a number of risks and uncertainties that may cause actual results or events to differ materially from those expressed or implied by such forward-looking statements.

Factors that may cause actual results or events to differ materially from those expressed or implied by these forward-looking statements include, but are not limited to, the risks and uncertainties inherent in clinical trials, product development and the commercialization such as uncertainty in results of clinical trials for product candidates. The uncertainty of whether the results of clinical trials will be predictive of results in later stages of product development. The risks of delays or failure to obtain or maintain regulatory approval. Risks regarding intellectual property rights and product candidates and the ability to defend and enforce such intellectual property rights. The risk of failure of third party upon whom MediciNova relies to conduct it's clinical trials and manufacture its products candidates to perform as expected. The risk of increased costs and delays due to delays in the commencement, enrollment, completion or analysis of clinical trials or significant issues regarding adequacy of clinic trials design or the execution of clinical trials and the timing, cost and design of future clinical trials and research activities. The timing of expected filings with the regulatory authorities, MediciNova's collaborations with third parties. The availability of funds to complete product development plans and MediciNova's ability to raise sufficient capital when needed, and the other risks and uncertainties described in MediciNova's filings with the Securities and Exchange Commission included in its annual report Form 10K for the year ended December 31, 2010. And its subsequent periodic reports on Forms 10Q and 8K.

Undue reliance should not be place on these forward-looking statements, which speak only as of the date hereof. MediciNova disclaims any intent or obligation to revise or update these forward-looking statements. I will now turn it over to Dr. Yuichi Iwaki.

Thank you, Mark. And, thank you everyone for joining the call. MediciNova is encouraged by our progress in the first quarter of 2011. In clinical development, we continue to make great progress for our lead compound MN-221 for the treatment of acute exacerbation of asthma. In addition, our business development for MN-166 Ibudilast compound should enable us to complete the transaction that would allow its clinical development in [neuropathic pain], drug addiction and/or multiple sclerosis. I would now like to turn it over to Mike Coffee, for the business presentation.

Thank you Yuichi and good afternoon everyone. Thanks for joining us here today. Our goal with this call is to review several items. Our first quarter 2011 financial results, to discuss our recent developments, to remind everyone of our upcoming milestone, review our current financial status and provide conference call participants with the opportunity to ask questions.

First, let's get started with the 2011 financial results. For the first quarter ending March 31, 2011, MediciNova reported a net loss of $5.7 million, or $0.45 a share. There were no revenues in the quarter. Research and development expenses were $2.6 million. The research and development expenses were primarily due to spending on our prioritized asset MN-221, for the treatment of acute exacerbation of asthma and its ongoing Phase II clinical trial. G&A expenses were $2.4 million for the quarter ended March 31 2011.

As of March 31, 2011 we had $31.4 million in cash and cash equivalents excluding restricted cash. This includes net proceeds of approximately $7.9 million from underwritten public offerings that closed on March 29, 2011. And, on April 1, 2011, we paid approximately $15.2 million in principal, interest and fees to retire our outstanding loan with Oxford Financial Corporation. So, this leaves us with a net $16.2 million in unrestricted cash as of April 1, 2011. In addition, we had restricted cash of $28.7 million attributed to the holders of the convertible notes from the Avigen merger.

Now, with respect to clinical on MN-221, the ongoing Phase II trial has made significant progress as Yuichi mentioned in this quarter, with strong and steady enrollment. We remain optimistic that the trial will announce results by the end of the year. As we approach the summer months, we remain cautiously optimistic about continuing a steady enrollment rate and as a precaution we've identified at least three new sites to join the trial to help maintain our enrollment projections. Also, as I note in the first quarter with the signing of the letter of intent to develop a regional collaboration in China with Zhejiang Medicine Company. When we complete the JV contract later this year, MediciNova will be well-positioned to enter the rapidly growing Chinese pharma market with a leading Chinese pharmaceutical manufacturer.

On business development -- the business development update for MN-166, efforts for our Ibudilast program continue to be on track and we expect to complete a partnership transaction allowing further, fully funded development for treatment of neuropathic pain soon. Although it's difficult to predict exactly when these deals will occur, we feel that these negotiations are proceeding very well and we are proceeding towards concluding either a regional or global transaction before the end of the quarter.

Let me conclude now with a review of the financial status. The completion of the financing of the first quarter was doubly important for MediciNova, as it assured us the free cash to operate at least through Q1 2012, and it also allowed us to pay back the structured debt on our balance sheet. The addition of a net of $7.9 million from the recent fund raising allows us to complete the MN-221 Phase II clinical trial and report on it towards the end of this year as well as to provide additional runway for partnering transactions. We anticipate our 2011 operating cash burn will be approximately $16 million, and our operating burn during the first quarter has us right on track towards that budget.

On May 6, we filed for a $15 million at-the-market issuance with the bank, McNicoll, Louis & Vlak MLV. As with any development company, MediciNova needs adequate cash capital, and at this stage in our development, equity is preferred over debt. Our plan is to add value to our programs with the least amount of dilution to our current shareholders. But if we can raise money at attractive prices we want to be in a position to be able to do that. The ATM vehicle allows us to do so. Any money raised through the ATM vehicle will be done at the then current NASDAQ market prices for MediciNova at the time of the transaction. We don't anticipate to raise money at a current valuation, but want to be in a position to potentially raise money after positive news flow by completing our laid out milestones, which we've mentioned here before this afternoon.

Finally, let me update you on a restricted cash in our balance sheet tied to the convertible notes from Avigen shareholders. The strike price at which those notes convert is $6.80, and the last conversion date is at the end of the month, May 31. We have sufficient restricted cash to repay all of the convertible notes.

So in summary, we've accomplished much in the first quarter and we continue to be optimistic about our upcoming milestones. The milestones for the remainder of 2011 are -- 1) to complete the contract for the Chinese JV, 2) secure a strategic partnership for Ibudilast, and 3) most importantly, complete the MN-221 Phase II trial and report on that by year-end. Now, we know you appreciate the shareholder value that will be created with the accomplishment of these goals. We thank you for your continued support and are committed to rewarding our shareholders with solid accomplishments. So with that let me turn this back to Mark to open it up for questions and answers. Mark?

Thank you, Mike. Please take this opportunity to ask management any questions you might have. If you have further questions after the call, please feel free to reach out to us at any time.

(Operator Instructions) Matt Kaplan with Ladenburg. Please proceed.

Thanks for having the call today. At few questions. Could you give us an update in terms of how the enrollment's going in the [CL007] study? And the MN221 (inaudible) for acute asthma exacerbation?

Matt, I think what we can tell you is that as we said previously, we're past the half-way mark, we're over the hundred and we're moving forward. I don't know that we want to provide any specific numbers beyond that. But what I can say is that we are still in line to complete enrollment and be able to report by the end of the year. And the only further guidance that we are giving is that we're adding a couple of sites because we are facing the summer and that is a time period when we could see [varying] enrollment.

And in terms of the work you are doing in terms of the development with 166, you still seem confident that you could complete something by the end of the quarter. Could you talk a little bit more about the business development efforts there?

Yes. I think what we can say is that we are proceeding in that path. There is no guarantee, but we are deeply into it and we expect that this transaction is likely to be an option to license transactions will be complete before the end of the quarter. So again it's a process which takes a good bit of time. There's a lot of diligence and a lot of work that's being done right now to make sure that we move towards completing that at the end of the quarter. But we stand by that, that's our expectation.

Do you think this will be a worldwide deal? Or is it more likely to be a regional type of deal?

Matt, we're looking at two things at the same time right now. One is regional and one is not. So, I can't tell you which one. I can't handicap that right now. I like the fact that there's 2 there right now. So it could be either one. We'll see how that works out.

Talk a little bit more about MN221 and how it fits into the current standard of care treatment right now for acute asthma exacerbation? And how you think it can be used in a real-world setting?

Matt, let me have Dr. Johnson comment on that.

Hi, Matt. I think that the real world use of MN221 will be essentially almost exactly as it's being used in the current phase 2 trial. We're not looking -- the entire product profile for MN221 is not intended to replace the standard of care, but to the be adjunctive to the standard care and to offer significant, additional clinical support and improvement to patients that are not immediately responding to standard care. I think as you know, but for the benefit of others, standard of care for acute asthma exacerbation is presenting at the emergency room enclosed nebulized beta-agonist, Albuterol, as well as anti-cholinergic, Ipratropium. And then often that standard of care includes your IV or oral corticosteroids, sometimes magnesium. But in fact what occurs with a good number, perhaps even 50%, of those subjects is that there is not any initial bronchodilation as a result of that standard of care. So it is those patients that after one or two rounds of most commonly applied nebulized standard of care, and the oral or IV steroid, then they are prime subjects for MN221 IV infusion to provide that additional bronchodilation. Now ultimately we perceive with success in phase 2 and phase 3, that the use may even be moved up, it may be front-line along with standard of care. That's just based on feedback from investigators in KOL. But at this point in time, our phase 2 design and what we intend for phase 3 is pretty consistent with the target product profile.

One more quick question with respect to that (technical difficulty) presentation about COPD, (technical difficulty).

You cut out on a lot of that, but what we think you asked was will, MN221 in this fashion be useful for COPD, is that correct? COPD exacerbation?

Actually, his line has dropped.

Okay, so I'll go ahead and answer that because I think that's what Mr. Kaplan was asking. And the answer is yes, and we do believe that MN221 can be extended into that indication as well. And as many of you know we've completed a phase 1B clinical trial in moderate to severe stable COPD patients, showing a nice dose response and impressive bronchodilation. The ultimate development plan would be to extend this into perhaps a phase 2 COPD exacerbation trial. But that's really depending on funding or maybe perhaps more likely in collaboration with a partner.

Christopher James, MLV

Hi, thanks for taking my questions. I apologize for the background noise, I'm in an airport. My first question has to do with the additional enrollment sites. Have you identified the location for the additional enrollment sites? Or can you qualitatively speak to how that would increase enrollment?

Well yes, in fact 2 of the sites will the coming online and should be able to start enrolling by the end of the month. So, obviously it's been pre-qualified. There's been a lot of visits and interactions with them, including visits by our physician this week. And there's additional procedures and training going on perhaps even as we speak. Qualitatively, it's hard to say -- to assign a patient number per month and we're reluctant to do that. We wouldn't be adding them if we didn't think that they could be as good or better than our upper half of performers on the current trial. So, maybe in a relative sense you could think of them in that manner.

You've given previous guidance, cash guidance at least, of, I believe, $16 million for the year on operating expense guidance. Going forward, the split between R&D and G&A, should we expect the same run rate with respect to the split?

Right now, Chris, it's about 50-50, pretty close to 50-50. But as we wind down the trial, clearly we get into fourth quarter, and the first quarter next year that's going to be moving down to where the SG&A is going to be the primary expense at MediciNova. So I think that's the way to look at it. We will spend $16 million, and then it tiers down from it's heaviest in the first quarter and then moves down as we get to the end of the year. So with the assumption that the trial is completing in that second half of the year that's going to taper down and we've been running at a rate of somewhere right around $2 million a quarter after the trial is complete.

That should be and around the first quarter of 2012? Should we expect that quick drop off?

That's correct.

(Operator Instructions) Matt Kaplan, Ladenburg.

Hi, guys, I think I lost you there for a minute. But, I don't know if you heard, my second question with respect to MN221 and it's potential use. I'm at the ATF conference right now and there is a lot of discussions and presentations on COPD exacerbation. What role do you think MN221 could play in that effect?

We thought that's what you were asking. It got cut off, so we actually, while you were reconnected, provided an answer. But just real briefly, yes, we do believe that MN221 administered in this fashion with standard of care can be effective for COPD exacerbation. And that's not only based on the clinical pharmacology, and enabling package, but it's actually as you probably remember the 010 phase 1B clinical trial that we completed and reported on in stable and moderate to severe COPD patients wherein we saw a nice dose response and increased bronchodilation. Now as you know and as you are seeing at that meeting, clearly there's some differences in the pathology of COPD and ultimately this will have to be validated in a phase 2 trial. COPD patients also tend to have additional co-morbidities and so it is actually advantageous that the experience that we are having on the current trial with good safety tolerability results so far should help facilitate enrollment of those types of co-morbidity patients in the future. We hope to expand to that, but that too will be dependent on either additional funding or a partnership.

Okay, good. And just one other quick question, on the 007 trial. You'd commented previously I think in other presentations that the protocol amendment that you instituted last year started to have an impact on the rate of enrollment and you've seen that. Has that been consistent with what you are seeing more recently in April and the beginning of May as well, in terms of that protocol amendment having impact on enrollment?

Yes, I think it is. I think probably the best way to look at it, is to look at the period from the middle of the summer last year to the current, and it has substantially increased and improved enrollment. Now, we've seen a little bit of sluggishness in the last couple of weeks, it's a little premature to say whether that's a transient zone or something longer-lasting, but as Mike commented we're prepared in advance for any potential slowdown in the remaining spring and summer and are trying to act on that. So, we'll see. It's a little bit premature to say what's going on right now.

Ladies and gentlemen, this does conclude the question-and-answer session for today's call. I would now like to hand the call over to Mr. Mark Johnson for closing remarks.

Great, thank you. Well, we hope this call has been helpful to all of you. We truly appreciate all your questions and hope we have answered them appropriately. If you do have further questions, please follow up with us at any time. Thank you everyone for your participation today, and have a wonderful night.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect.