PDS Biotechnology Corp (PDSB) 2017 Q2 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the Edge Therapeutics Second Quarter 2017 Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded.

I will now introduce your host for today's conference, Greg Gin of Edge Therapeutics. Please go ahead.

Thank you, Michele. Good morning, everyone, and thank you for joining us today. Today, we reported our second quarter 2017 financial results and recent corporate highlights. Joining me this morning are Brian Leuthner, President and CEO; and Bert Marchio, Chief Accounting and Administrative Officer and Interim CFO. Brian and Bert will make prepared remarks, and then we'll open up the call for our Q&A.

Before we begin, let me note that the press release we issued this morning is available on our website at www.edgetherapeutics.com. In addition, the live webcast of this call is also available on our website. To access the webcast, click the Investors link on the top of the navigation menu, then click on News & Events, then Events & Presentations on the left side. There will be a taped replay of this call, which will be available approximately 2 hours after the call's conclusion and will remain available for 7 days. The operator will provide the replay instructions at the end of today's call.

Today's conference call may contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. To the extent that any statements made on this call contain information that is not historical, these statements are forward-looking statements and are not guarantees of future performance and involve risks and uncertainties, including those noted in this morning's press release and in Edge's filings with the SEC.

Investors, potential investors and other listeners are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. Actual results may differ materially from those projected in the forward-looking statements. Edge specifically disclaims any intent or obligation to update these forward-looking statements, except as required by law.

With that, I will now turn the call over to Brian.

Thanks, Greg. What I'll do today is -- well, first of all, good morning, everyone. And what I'm going to do is I'll begin with a high-level summary of our second quarter and recent results before handing the call over to Bert for a review of our financial performance.

During the second quarter and in recent weeks, I've had discussions with many investors as the level of interest in Edge increases with the key milestones drawing near for our Phase III NEWTON 2 study of EG-1962. As you may recall, our NEWTON 2 study is designed to support potential registrations throughout the world for EG-1962 as a treatment for aneurysmal subarachnoid hemorrhage. We are comparing EG-1962 directly to the standard of care oral nimodipine, and we are excited about the EG-1962's potential to improve patient outcome by delivering targeted and sustained nimodipine drug exposure to the injured brain while potentially avoiding dose-limiting side effects, especially hypotension.

As a reminder, EG-1962 is being developed under U.S. and the EU orphan drug and U.S. Fast Track designation.

Right now, we remain focused on the NEWTON 2 study, and patient enrollment for NEWTON 2 is ongoing. Investigator interest in the study continues to be strong around the globe, and we now have 68 centers randomizing patients in North America; Europe; the Middle East, namely Israel; and Australasia.

Our clinical operations team continues to focus on site and data monitoring and on providing ongoing training to investigators and the clinical staff to ensure the quality of the data and also on appropriate patient selection for the study. Our clinical team and our clinical research organization have conducted many site visits around the world, and we continue to provide 24/7 medical monitoring to field questions from investigators and research coordinators.

Now regarding our time line, we remain on track for key milestones from our NEWTON 2 study. In particular, we continue to expect to report top line results according to the time lines that we've discussed on prior calls, including, if needed, full study data readout in late 2018.

Now there will be points in the coming quarters, however, where valuable data will be assessed. So first, in late 2017, we expect the NEWTON 2 independent Data Monitoring Committee, or DMC, to conduct a preplanned nonbinding analysis for futility upon completion of the 90-day follow-up visit of the first 150 patients. Now the DMC can recommend 1 of 2 possible outcomes from this analysis. One is to continue the study as planned; or two, stop the study due to futility. Now the futility analysis doesn't make any assessment for efficacy, so there is no statistical penalty for this analysis.

Second, in late first quarter of 2018, we expect the DMC to conduct a formal interim analysis for efficacy upon completion of the 90-day follow-up visit of the first 210 patients in NEWTON 2. At the interim, there is a possibility that DMC can recommend to stop the study for robust efficacy. However, I want to emphasize that there's a higher threshold for stopping the study for overwhelming efficacy at the interim time point.

Now in the event that results from the interim analysis are sufficiently positive, meaning greater than about a 20% absolute difference in the proportion of favorable outcomes among EG-1962 treated patients versus oral nimodipine patients, then the DMC could recommend stopping the study.

Now in this case, we would meet with the FDA and other health authorities to discuss submission of a market application. If this level of efficacy does not materialize, the study could continue to enroll up to 374 patients with top line full data available to report in late 2018.

Now as a key point here is our customers, the neurosurgeons and neurointensivists, to them a clinically meaningful benefit is around a 10% to 15% absolute difference in outcome. And the sample size of our study is designed to detect that effect at 374 patients. Now as a point of reference, our Phase 2 NEWTON North American study for EG-1962 showed a 32% absolute difference between the 2 groups, that's EG-1962 and oral nimodipine, in the proportion of favorable outcomes across all tolerated doses.

So that's essentially an update on what we expect in late 2017 and 2018.

Now since our last quarterly call, we've also made some great progress with some important regulatory and pre-commercial activities for EG-1962. We received a product-specific pediatric waiver from the European Medicine Association, the EMA, for EG-1962 that applies to all subsets of the pediatric population. This waiver represents an important milestone in the regulatory process in Europe and will allow us to submit a marketing authorization application for EG-1962 to the EMA following completion of the NEWTON 2 study without the requirement to conduct clinical studies in a pediatric population either pre-approval or post-approval.

So let's switch to pre-commercial activities for EG-1962. In planning for the scenario in which the DMC recommends stopping the NEWTON 2 study at the interim analysis, we made the decision to invest now in our manufacturing and supply chain capabilities. With the supply agreement with Oakwood Laboratories that we announced last month, we achieved an important step in establishing the supply of EG-1962 for commercial -- for potential commercialization. We believe that this will provide adequate supply to address the estimated demand of EG-1962 at initial product launch and soon thereafter.

Now let me turn to our activities to further develop EG-1962. We are evaluating alternative routes of administration to expand the population of subarachnoid hemorrhage patients who may benefit from EG-1962. This includes our ongoing controlled safety and pharmacokinetic study of EG-1962 delivered directly into the basal cisterns of the brain in patients with a ruptured brain aneurysm.

With this study, we're focusing on those patients that undergo microsurgical clipping for securing of their ruptured brain aneurysm, but who do not -- who are not otherwise eligible for the NEWTON 2 study. Now we've enrolled several subjects to date and plan to enroll a total of 12 adult subjects for the study. 9 of the 12 will receive EG-1962 while 3 subjects will receive oral nimodipine. So the pharmacokinetic safety incidence of delayed ischemia and clinical outcomes will also be assessed in this study. Now we expect the data from this study to be available in late 2017.

Now over the longer term for EG-1962, we envision developing other ways for doctors to administer EG-1962 to any patient with subarachnoid hemorrhage who can potentially benefit from the medicine. Another potential way to administer EG-1962 to subarachnoid hemorrhage patients is via an intrathecal or a lumbar administration into the cerebrospinal fluid, or CSF, via a single injection into the lumbar region of the spine.

During the second quarter, we initiated an analyst study looking at the safety and pharmacokinetics of delivering EG-1962 via a single lumbar puncture. We hope to initiate a clinical trial in 2018 with lumbar administration.

In addition to helping additional subarachnoid hemorrhage patients, we are excited about the potential to use lumbar administration of EG-1962 to address other serious conditions with high unmet medical need and where there are few available treatment options.

Before I turn the call over to Bert, let me briefly comment on our business development efforts.

We continue to look at opportunities, including collaborating with other companies to utilize our Precisa development platform as well as acquisitions, in-licensing, partnering and other strategic options. We're assessing the landscape for some mid to advanced stage products in areas where we have core expertise at Edge, including the most obvious, which is the CNS, or central nervous system, and that's specifically in the neurology and neurosurgery area. But we also have clinical and commercial expertise in acute hospital conditions in the cardiovascular area. So for example, cardiology or cardiac surgery, acute oncology and also pulmonary.

So with that, I'll turn the call over to Bert for our financial review. Bert?

Thank you, Brian. As of June 30, 2017, cash, cash equivalents and marketable securities were $108.7 million compared to $106.4 million at the end of the year and $95.6 million at March 31, 2017. Our cash burn of approximately $9.3 million was in line with our projections.

During the second quarter, we completed a registered direct offering of common stock that brought in $18 million of gross proceeds, and we drew down the remaining $5 million of our credit facility with Hercules.

Research and development expenses for the second quarter were $9 million, inclusive of approximately $0.8 million of noncash stock compensation expenses. R&D expenses in the second quarter reflected increased spending on our ongoing NEWTON 2 study for EG-1962, spending on other clinical programs and increases in personnel costs.

General and administrative expenses were $4.2 million for the second quarter, including approximately $0.8 million of noncash stock compensation expense. G&A spending during the second quarter reflected legal and professional fees, personnel-related costs and other expense. We reported a net loss of $13.5 million in the second quarter. As of July 25, we had 30.9 million shares outstanding.

As we look ahead, we expect operating expenses to increase as we continue enrolling subjects in our NEWTON 2 study of EG-1962 and as we continue to advance our other development programs, including lumbar and cisternal, and build our infrastructure. Based on our current plans, we expect our cash and cash equivalents to be sufficient to fund our operations through the end of full data readout from our NEWTON 2 study, which is anticipated to occur in late 2018.

And now I'll turn it back over to Brian.

Thanks, Bert. So in closing, let me summarize our upcoming milestones. We look forward to our NEWTON 2 study's upcoming data readout beginning in late 2017; top line efficacy results from the interim analysis in late first quarter 2018; and if needed, the top line results from the full study in late 2018.

Now there remains a significant unmet medical need to improve outcomes in patients with subarachnoid hemorrhage, and we look forward to receiving EG-1962 data in the coming quarters. So we're also looking forward to data readout from our EG-1962 cisternal PK study and to advancing the lumbar administration of EG-1962 and a second Precisa-based product into the clinic in 2018.

Thank you again for joining us today. We appreciate your continued support, and look forward to updating you as we continue to advance through NEWTON 2 and other developments at Edge.

Operator, we're ready to take questions now.

(Operator Instructions) Our first question comes from Vamil Divan, Credit Suisse.

So just a couple, if I could, regarding NEWTON 2, and you mentioned the futility analysis late this year. Well, you said it was nonbinding. Can you just explain what you mean by nonbinding futility analysis? I would think if the DMC recommends stopping the study, you would need to listen to that. But maybe I'm just misinterpreting what you mean.

And then second, on the interim, you went through some of what you're looking for in terms of the primary endpoint and what would be needed for the study to be stopped at that point. Is there any sort of protections you have or any sort of plan just around some of the important secondary endpoints around the health economic endpoints and length of stay and some of those things? Just so that if it hits on the primary, you don't sort of end up not being able to show enough on the secondaries where it might impact you commercially? So if you can just address those 2.

Sure. Thanks, Vamil. So okay, first question is going to be around to be futility. So yes, we -- as you know, futility analysis is routine practice for a pivotal study. When we talk about this analysis as nonbinding, it is truly nonbinding. The DMC can make a recommendation. And generally, yes, you do go along with the recommendation in the -- from the DMC, but it's -- this is a scenario where it is set up that it is nonbinding.

So the second thing with regards to the second question around NEWTON 2. Yes, we have -- so right now, we're looking at the primary endpoint being that proportional difference in favorable outcome between those treated with 1962 versus oral on the Glasgow Outcome Score Extended. The secondary endpoint is the MoCA scale. And interestingly enough, the MoCA generally trends along with the GOS-E scale. So again, we're powering it and we're only looking at the primary endpoint, not the interim.

We'll obviously look to see what happens with the MoCA. But generally, we've seen that the MoCA trends along with where the GOS-E. But again, the study is powered based on the primary endpoint. Does that answer the question?

Okay. Yes, it does.

Our next question comes from Paul Matteis of Leerink Partners.

A few questions. One them, Brian, I just wanted to again clarify the futility analysis. If the DMC were to tell you that their analysis deemed that the study was futile, but Edge decided to continue to proceed, would we on the outside, in the investment community know that's the case? How might this -- how might the result of this analysis be communicated?

Yes, yes. And again, the futility analysis, although routine practice, this one's a little different because we're withholding the standard of care. So the futility analysis includes a combination of the statistical analysis, which everyone is familiar with, but also there's a clinical judgment by the DMC of how the 2 groups are performing in comparison to each other. So if indeed, it came back and we wanted to have discussions, the Chief Medical Officer, Herb Faleck, and Loch Macdonald would have a discussion with the DMC. So I think on that area, that's how the process would be. And we haven't really discussed -- well, we've discussed internally, but obviously we have to let people know the results of that discussion at the futility point.

Okay. And then just clarifying, Brian, on the powering. So you've talked about this first interim analysis being powered for something like a 20% drug placebo numerical difference on the rate of favorable outcomes. What does this assume for the performance of the oral nimodipine control arm? Does it assume better-than-usual performance like Phase II? Or does it assume a performance rate that's more in line with the historical data?

Yes. Well, so when we sized the study initially, we assumed -- we had several data points that we looked at from a historical perspective, but we were conservative in doing that. So we assumed that the oral nimodipine would do 28%, which is what we saw in the NEWTON study, the Phase II study. Historically, there are some other historical data points where oral did worse, but we assumed that 28% on oral nimodipine would have a favorable outcome. So with that, we'd need to see roughly at the interim approximately about a 20% absolute difference. So if you do the math, you'd need to see a favorable outcome rate of about 48% with EG-1962.

Okay. And one last one. Can you just talk a little bit about how internally you're contemplating success or failure with respect to the intracisternal study?

Yes. I mean, with the cisternal one, we're looking really at PK and because we've got a large amount of data, both in the animals, but as well as in humans. We've got the NEWTON looking at PK. So we're really looking at these plasma concentrations and the safety of the cisternal administration. Obviously, we'll be looking at some DCI and also the instance -- well, like I said the instance of DCI, and then we'll be looking at the outcomes. But we're really also looking at the safety. The primary purpose was really safety and PK on that.

Our next question comes from Jason Butler of JMP Securities.

Just first one about the lumbar animal study. Can you just talk about what this trial can teach you about this route administration? And how you can compare and contrast the data to what you saw from animal studies with both cisternal and interstitial administration?

Sure. So the question is, what are we looking at in the animal PK study? And again, we've got now a very large database of animals that we're looking at around PK, given that our whole tox program that we did with both the intraventricular and the cisternal. And then what we're doing here is we're looking again at the PK, whether the plasma concentrations, if you administer it via lumbar, does it perform similarly in the animals as it did with the -- as we did in the EVD administration.

I think from that perspective, in the subarachnoid hemorrhage, I think that's important. And then I think that does potentially open it up to areas outside of subarachnoid hemorrhage. So since the '80s, nimodipine's been studied in many different indications. In fact, if you just go on ClinicalTrials.gov, you can just get a sense of the many conditions where it's been evaluated. So we're beginning to receive some interest from investigators. And we're talking to them about perhaps what other indications outside of subarachnoid hemorrhage EG-1962 might have the best fit. So that's kind of why we're really interested.

We can use it potentially in subarachnoid hemorrhage patients that don't have an EVD and don't undergo microsurgical clipping, so we can address the larger population -- or the other half of the population that we can't get in subarachnoid hemorrhage, but as well in other potential indications outside of subarachnoid hemorrhage.

Okay, great. And then just a question on business development priorities. I know time lines here are always tough to pinpoint. But just from a big-picture perspective, are you contemplating completing something in licensing or acquiring another asset before the 1962 interim results are available? Or is this something we should think about once we have data from 1962?

Yes. So with business development, basically, we just want to say we're actively looking for potential assets. Our goal here is to build a fully integrated biotechnology company. Really our strategy is we're going to look at EG-1962 and exploit every other possible use that we could have with 1962, whether it's in subarachnoid hemorrhage or outside.

We're then looking at other Precisa-based programs and products. Obviously, we have 1964. We've got some other ones we're looking at internally. But then if there are -- if other companies have assets that maybe using a Precisa development platform could enhance that product, we're looking there. But then we're also looking for other areas -- or other products that would fit within our core expertise in-house. So that's kind of what we're doing, and we're actively doing that along with developing EG-1962.

(Operator Instructions) Our next question comes from George Zavoico of JonesTrading.

Two questions. One about the basal cistern application. Is that pretty -- are you going to limit that to the basal cistern? There are a number of cisterns in the brain, and the basal cistern is probably where a lot of the -- where many of the subarachnoid hemorrhages occur because that's where the basal artery comes out of, where it bifurcates. So that's one question about that.

And the follow-up on that is how much of an enlargement of your eligible population would that add to, to the way you're already administering it through the EVD?

Sure. Thanks for the question, George. So first question is, when you look at the basal cisterns, are there other cisterns potentially you could put this in? And we focused on the basal cisterns because our customers, the neurosurgeons, have come to us and asked us about this kind of study. If they are already operating and microsurgically clipping, they have access to the basal cistern. So I think based on what our customers, the neurosurgeons, are asking for, that's why we designed the study to look at the basal cisterns.

And then the second question was the incremental (inaudible), yes, so if you -- we're still doing finalization of kind of these market segments. But I think we're pretty comfortable. About half of the patients out there will have external ventricular drains, so we can capture that. Over the last 10 years, the amount of microsurgical clipping to treat the ruptured aneurysm has decreased pretty significantly. Right now, I think somewhere around 30% -- maybe 30%, 35% of all aneurysms are clipped. So I think it's clearly a smaller market than the EVD.

And I think there's other -- and I think probably the lumbar -- the opportunity in lumbar is a little bit bigger than the cisternal. But we haven't specifically quantified those numbers. But we do believe that the EVD is probably at least half the patients out there, and then probably lumbar can capture them. And then again, the neurosurgeons have come to us asking about -- looking at the cisternal administration.

So collectively, we want to make sure that we're providing an avenue that, if a patient that suffers a subarachnoid hemorrhage, can benefit from EG-1962, that we've looked at the safety and everything, so that they could potentially benefit from the medicine.

And just to make sure I heard clearly, you said that the microsurgical clipping procedure is -- the frequency of that is decreasing? Or did you say increasing?

Yes, it's decreasing. Endovascular coiling is becoming more prevalent going forward and microsurgical clipping is going down throughout the globe, actually.

Even with coiling, you still have access to the subarachnoid space. You still have to get the coil to the hemorrhage site.

Yes, but you're on the inside of the vessel. On endovascular coiling, you're on the inside of the vessel.

And you don't want to put another hole in it -- into it to put it into the subarachnoid space, right?

Correct, correct, correct, yes.

Yes, okay. And my next question is about the supply chain and Oakwood. This just happened like a couple months ago, I guess. What's the first step there? Is there going to be -- are you going to do a scale-up, are you transferring the manufacturing now? What's the first couple of steps that they're going to do now to prepare for the commercialization?

Yes. No, Oakwood made our Phase III supply. So now we're just working with them. We're happy that we've got an agreement on the commercial supply, and just our CMC team is working closely with those guys to continue to get things rolling forward. In the event that we actually hit the interim -- I mean, internally how we operate is, we plan on hitting a positive win on the interim. We have to make sure from a manufacturing perspective, we have drug to supply and all that. But clearly, on a financial perspective, the way we look at things is we look at -- that we're going now to 374 patients, so that we have enough money to take us through full data readout at 374 with a cushion. And I think that's the important thing I mentioned earlier.

If you talk to neurosurgeons, they'll say we'd like to see an absolute difference of 10% to 15%, that's key for them. That's a clinically meaningful point. So that's what we sized this study at 374. So if we don't hit it at the interim, we're still -- if we win at 374, that is still very clinically meaningful for our customers, that 10% to 15%.

There are no further questions. I'd like to turn the call back over to Brian Leuthner for any closing remarks.

No, just again, later this year and 2018 is going to be a very exciting year for Edge. And we appreciate everyone's support, and thank you very much. Have a nice day.

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That does conclude our conference for today. Thank you for your participation in today's conference. You may now disconnect at this time.