Novan Inc (NOVN) 2021 Q2 法說會逐字稿

Hello, and welcome to the Novan, Inc. Second Quarter 2021 Financial Results Webcast. (Operator Instructions) Note that this webcast is being recorded at the company's request and a replay will be made available on the company's webcast following the end of the event.

At this time, I'd like to remind our listeners that remarks made during this webcast may state management's intentions, beliefs, expectations or future projections. These are forward-looking statements and involve risks and uncertainties. Forward-looking statements on this call are made pursuant to the safe harbor provisions of the federal securities laws and are based on Novan's current expectations and actual results could differ materially.

As a result, you should not place undue reliance on any forward-looking statements. Some of the factors that could cause actual results to differ materially from these contemplated by such forward-looking statements are discussed in the periodic reports Novan files with the Securities and Exchange Commission. These documents are available in the Investors section of the company's website and on the Securities and Exchange Commission's website. We encourage you to review these documents carefully. I would now like to turn the call over to Ms. Paula Brown Stafford, Chairman, President and Chief Executive Officer of Novan. Please proceed.

Thank you, Misty, and good morning, everyone. Thank you for joining our first quarterly business update. The first half of 2021 has been transformational for Novan. I remain delighted with what we have been able to report. It is the first time in the company's history where we have clinical data that provide a pathway towards an NDA submission for one of our product candidates. At the beginning of the year, we said we would deliver results from our 3 priority programs in the second quarter of 2021, and we did just that.

And it just so happened that it was in the same work week in June. Not necessarily planned, but that's how it happened. We were delighted to report positive results from our SB206 lead product candidate for molluscum, our SB019 product candidate as a potential antiviral therapy for COVID-19, and our NVN4100 NCE targeting companion animal health. I'll say the results from our B-SIMPLE trial have in essence validated our Nitricil platform technology, showing both clinically and statistically meaningful results that can impact patients' lives. While we are laser-focused on getting SB206 through the regulatory submission and approval process for molluscum, we're also excited about the future of our proprietary platform technology, as you know Nitricil, and the potential that we have to advance other product candidates in other indications.

So also in June, we raised additional capital, as you know, through a public offering and therefore, strengthened our balance sheet. So now as a quick reminder, molluscum contagiosum is a contagious virus that is shared primarily among children ages 2 to 14. The prevalence exceeds 3 million, and the annual incidence exceeds 1 million lives. Today, there is no FDA-approved treatment for in-home use, and the only course of action today is via an in-office procedure or off-label use of prescription therapies that have no proven efficacy against molluscum. Our SB206 product candidate is for in-home use, self or caregiver administered.

So let's talk about our pivotal Phase III trial that we named B-SIMPLE4. We actually completed the trial in July, just a few weeks ago. And as you know, in June we reported top line efficacy and safety results from the 12-week treatment period. The trial randomized 891 patients to one of 2 treatment groups, SB206 or vehicle with a 1:1 randomization across 55 investigator sites in the U.S. The primary endpoint is complete clearance. And complete clearance is defined I like to say, as clearing all lesions visible at baseline and any lesions that erupted post baseline at or before week 12. I'm pleased to reiterate that SB206 demonstrated clinical evidence of efficacy by achieving statistical significance when compared to vehicle at week 12. As I mentioned, the last week-24 visit occurred in July for our last patient in the trial, and we will now report out our week 24 safety results before the end of September. Then we'll be laser-focused on our NDA preparation with an intent to submit no later than the third quarter of 2022.

So now just to recap those results that I am so, so delighted with, which is why we used the color green, because we're ready to go now. As I shared in June, our topline results from B-SIMPLE4, specifically across the primary endpoint and these 3 secondary endpoints, SB206 demonstrated that statistical significance, and we believe clinically meaningful treatment difference for each of these endpoints. So for complete clearance at week 12, we saw a nearly 13 percentage point difference with a p-value of less than 0.0001. And that's showing that 32.4% of the patients on our product had complete clearance at week 12.

The second, the next one, endpoint, for the proportion of patients achieving complete clearance, as I just mentioned, or clearing all but one. So that's to say these patients would have 1 or 0 lesions at week 12. And here, you saw 43.5% of the patients on our product had completely cleared or only one lesion, and that was a 19-percentage point difference with a p-value also of 0.0001.

The third, measuring the proportion of patients achieving greater than 90% complete clearance at week 12, very similar, 43% versus almost 24%. So again, a 19-percentage point difference with again a p-value of 0.0001., And then finally, we measured complete clearance at week 8, seeing how early we had cleared. And you can see that there was total clearance for 20% of the patients on our lead product candidate here. So we also there had an 8 percentage point treatment difference, which is also a p-value of 0.001. So all of these are statistically, highly statistically significant. And we believe the robustness of the data across all of these endpoints demonstrate the clinical evidence of efficacy.

So following these tremendous results, our next steps are to finalize the analysis of safety following the week 24 visit, where we only collected safety data. So there's no more efficacy data that was collected. This is to be complete before the end of the third quarter or before the end of September, and then we will compile and finalize the final study report in the fourth quarter. Per our meeting with the FDA in April of 2020, we will prepare the NDA for SB206 in molluscum with the B-SIMPLE4 trial as the pivotal Phase III study and the previously conducted B-SIMPLE2 trial as the confirmatory trial. We're targeting that NDA submission no later than the third quarter of next year, 2022. In parallel, we will continue to evaluate our commercialization options, including a Novan-led solution or with a partner or partners.

Now moving onto our SB019 product candidate and its potential use to inhibit the viral replication of SARS-CoV-2 that's impacting all of us thanks to the delta variant. We have conducted a number of in vitro and in vivo assessments of SB019, and in June, we also reported our latest positive results. So specifically, that we observed dose dependent, statistically significant reduction, and that was another p-value of less than 0.0001. And the amount of virus in the lungs of the Syrian hamsters that were treated with SB019. We're currently conducting an intranasal IND-enabling safety study in the potential final formulation, which we believe is the last step now before submitting a pre-IND request to the agency, the FDA, seeking regulatory guidance and support to potentially move forward with a Phase I study.

Now, with regard to our NVN4100 NCE, we are targeting skin conditions in dogs. We conducted in vitro and in vivo investigations of NVN4100 during the past 12 months. And also in June, we reported results of the in vitro assessments which suggests efficacy against a wide variety of antibiotic-resistant and nonresistant strains and support bactericidal mode of action. And the in vivo assessments, which have informed us regarding a model that will allow for refinement of formulations or execution of further screening activities. We're currently speaking with a number of interested third parties regarding potential next steps.

Now our pipeline goes beyond these -- sorry, I think I skipped a slide in my own mind here. So the Novan strategy moving forward, in terms of now where do we go from here? We have the 3 positive results. We have robust SB206 clinical evidence. We now have options. We have optionality for a path forward. We're completing a thorough strategic review across our platform and evaluating with input from our Board and external experts, that best path which we intend to share in the third quarter, sharing our commercialization strategy and our pipeline prioritization of the remaining products in our portfolio. We will identify the best path to maximize shareholder value. And we're going through that process now, and I'm excited to share that with you before the end of the quarter.

So as I mentioned, we have other options. And those other options here are -- go beyond those 3 assets that I've just spoken of. The assets for acne, SB204, SB207 for women's health or EGW, external genital warts, or SB414 for atopic dermatitis. They are what I would call the most advanced opportunities outside of the previous 3 and we believe that in this ongoing in-depth review for our prioritization, we need to look at all 3 of those as well as others for how best to use the funds available. So I'm going to turn it to John Gay, our Chief Financial Officer, to highlight our financial results for the second quarter. John?

Thank you, Paula. Good morning, everyone, and thank you for joining our first quarterly update call. I'll touch on a few remarks with regards to our financial position and our current plans forward. For the 6 months ended June 2021, we had net cash provided by financing activities of $44.2 million, including the public offering that we did in June of $37.6 million. We ended the quarter with a cash balance of $65.8 million and positive working capital of $57.2 million. At the end of the quarter, we believe that our existing cash balance plus payments that we expect to receive in connection with our current licensing agreements should provide us liquidity to fund our current operating needs into the first quarter of 2023. This includes through the NDA submission for SB206 and beyond, as Paula noted.

Included in this cash forecast are anticipated costs related to the B-SIMPLE4 trial and its completion, costs associated with preparing for and seeking regulatory approval of SB206, our continued build-out of our new headquarters and manufacturing capability, certain drug manufacturing capability transfer activities, or tech transfer, related to our third-party CMOs, development activities in certain priority therapeutic areas, such as SB019 and SB204, and initial efforts to support potential commercialization of SB206. I'll refer you to our 10-Q filing and our press release regarding the specifics of our operating results for the quarter, including our R&D spend, primarily on SB206, and other supportive costs. With that, I'll turn it back to Paula.

All right. Thanks, John. So in summary, quarter 2 of 2021 was a turning point for Novan. And based on the positive Phase III trial results that I just shared with you, we have an opportunity to submit our first ever NDA no later than the third quarter of 2022. And as John shared, we have a strong balance sheet to support these efforts. We're now preparing to shift towards commercialization and accelerate the further development of our Nitricil platform. This concludes I guess my presentation, my formal presentation. I'll now turn it back to Misty to facilitate a Q&A portion of the call. Misty?

(Operator Instructions) Your first question is from the line of Jonathan Aschoff with ROTH Capital Partners.

Thank you. Hi, Paula and John, and congrats on the progress last quarter. I was curious -- what kind of products are you looking to buy? And is that a thought for the future or currently an active process?

Thanks, Jonathan. Good to hear from you. I would say that we are open to we are open to that discussion. We have had conversations, but we, as you know, if anything were more formal, we would be sharing that, but there's always that option. We have been a nitric oxide-based medicine company to date, but with the cash that we have on hand and in terms of the strategic process, it's always something that we should and will consider. But right now, as I said, we're laser-focused at the moment on SB206 and all that entails an NDA submission for that.

Okay. I was going to ask you about the hierarchy of development for your pipeline, but it sounds like you just said that. That's going to be forthcoming, right?

We are, we're working on that now. We have so many options in a sense, when you look at how many different products and different indications that we've been in the clinic, it's a matter of matching our funds with the right strategy and the best shareholder return that we can bring forward. So that's what we are evaluating, while again, staying laser-focused on SB206 with those great results, which really validate the platform for us and then fuel that potential growth going forward.

Your next question is from John Vandermosten with Zachs.

Let me start out with a question on just some of the factors that will impact the timing of the NDA submission. What are the variables out there that you're looking at that will maybe pull that forward from the 3Q '22 target or perhaps keep it with that target?

Thanks, John, appreciate it. And good to hear from you. There are a number of components really to the NDA. I'm trying to do everything I can to bring it forward, but there are things between us and submitting. And really, we have to close out as I mentioned, the B-SIMPLE4 trial and complete a clinical study report. We then need stability data for our drug substance, and that will come from our manufacturing facility here at Novan. We need our drug product stability, which will come from our CMO, and we continue to work on that. And then there's just the actual compilation of the NDA. And those are the big components. But it's mainly around getting the stability data for our drug substance and our drug product available in a timeframe that allows us to submit to the agency.

Okay, great. And you mentioned on the call and we've talked about this before about your numerous opportunities to commercialize internally, externally and in co-development. How has your thinking been refined I guess over the last few months since we last touched on this in terms of that process and maybe how to do it?

Yes. No, it's a great question, and it's something that we are working on daily. So we are building that plan, a preliminary plan and determining. And obviously, we have estimated costs for commercializing it ourselves, and this is going into our strategic planning process as we speak. So we have those estimates. I feel good about the plan that we have in front of us, and we'll share more in the coming 6 or 7 weeks.

Great. Looking forward to that. And last one for me is just on the Animal Health program. Are there any commercial livestock, commercial veterinary opportunities here? Or is this mostly targeting companion animals? I think that's what you had mentioned before, companion animals, but is there a broader application here?

Yes. No, that's also a good question, John, because we looked at -- there are companion animals and then what they call production animals. And we obviously could look into both, but the regulatory path is a little bit different for those two. So we have been more focused on having conversations initially around the companion health, but it is potentially something, with again, the proving out of the Nitricil technology that it could potentially go into production animals in the future, but the regulatory path is a little bit different for companion animals.

And your final question is from the line of Jennifer Kim with Cantor Fitzgerald.

Congrats, guys, on some wonderful progress. It seems like a very exciting time for the company. I have a couple of questions. Maybe first, just logistically, what's the format going to be for when you share your commercialization strategy and pipeline this quarter? Is that going to be a call or presentation? Is it going to be an Investor Day? Or how should we expect that to come out? And then second, with all of the efficacy and safety data that's available at hand, have you gone to physicians with that latest data? And how have they reacted? And then my last question, focused on 206, we're fast approaching the potential approval of a competing product, an in-office procedure in molluscum. If that gets approved and launched, do you think the launch dynamics there could be a good indicator for SB206's opportunity? Or in general, how should we think about the similarities and differences between where they're targeting versus you? Thanks.

Okay. Thanks, Jennifer. Let me see if I can hit all of those. The first, in terms of an update regarding our strategy, we're working on that now, and it will at minimum be a press release, but we will -- that is a little bit yet to be determined, but we will definitely be back in touch and share that as we finalize that strategy. So good question, but I presume we will likely have a call and go into more detail. In terms of the physicians, and we -- the trial didn't end until the end of July, and so we didn't want to get out there and start having any conversations until the trial had officially completed.

So we're now in that process, and our Chief Medical Officer, Tomoko Maeda-Chubachi, she will be continuing to have discussions. I can tell you that the physicians who participated in the trial, even we know from patients and caregivers, we saw really great support for our product and both the efficacy and safety. So we will be moving forward, and that's part of really the commercialization strategy that we have, which is to get out there and share what information we can about the studies to date and the data that we have. Regarding our competitor that has a PDUFA date in September, I of course wish them well and hope that they do get to the market.

It certainly creates more awareness around molluscum. I'm always amazed at people that I talk to, certainly my age and even a little bit younger, who say, oh, I never knew that what I had or what my sibling had or what my friend had was molluscum. And there's just an awareness in the fact that, yes, it does resolve on average 13 months, but we had patients that were well over 2 years who came into our study. And so we know that with the launch of Verrica, potentially their launch, would bring this awareness that there is an opportunity, and we would like to piggyback on that awareness basically and get our message out there.

And we do believe that it could be an indicator for us in measuring the -- better measuring the market size and the market landscape, etc. As you know, their product is an in-office use, and it requires multiple visits. Our product is an in-home, self-administered or caregiver-administered, meaning a parent for their child. And in our previous slides, we shared the average age in B-SIMPLE4 was 6.5 years. So these are young patients that generally need a caregiver to apply it, but this is a once-a-day application for up to 12 weeks, but maybe less.

Okay. Great. That's super helpful. And then I have one more question unrelated to 206. With the validation of your platform technology, I'm just wondering, are you more excited about the current early pipeline that you have? Or is the excitement really more about the optionality towards new opportunities?

Oh, it's really both. I am excited because 206 was so successful in the B-SIMPLE4 trial and really was consistent with what we'd seen and even better than what we saw in B-SIMPLE1 and 2. But then the fact that we're able to, because we know we're being able to treat a virus with molluscum and inhibit that viral replication, and then when we see something so similar with SB019, but then we know in women's health that external genital warts has very few solutions there. You have an opportunity because that's also a virus.

So it's in the dermatology area, but on the bookends of SB019 in between, but being a virus not necessarily dermatological, not at all. But anyway, we've got that, those 3 components that come together. But then when we look at acne and there still have been, I guess, there's now one approved product in the last 20 years, and the opportunity for us to have a safe product that patients who don't want to go on an antibiotic, we have that option. So we continue to be excited about some of our, if you will, older data, but it's just validated by the newer data.

I will now turn the call back over to Paula for closing remarks.

Okay. Thank you, Misty. Thank you, Jonathan, John and Jennifer, for your questions. We look forward to our continued opportunities to update you, and we look forward to hopefully talking to you again within the quarter. So thank you for all attending. Have a great day.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Presenters, please hold.