PLx Pharma Inc (PLXP) 2018 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the PLx Pharma Q3 2018 Results Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host, Ms. Lisa Wilson, Investor Relations for PLx Pharma. You may begin your conference.

Thank you, Kyle. Welcome to PLx Pharma's Q3 2018 Earnings Results Call.

This is Lisa Wilson of In-Site Communications, Investor Relations for PLx. With me on today's call are Natasha Giordano, President and Chief Executive Officer; and Rita O'Connor, Chief Financial Officer of PLx. You can also access the webcast of this call through the Investors section of the PLx website at plxpharma.com.

Before we get started, I would like to remind everyone that any statements made on today's conference call that express a belief, expectation, projection, forecast, anticipation or intent regarding future events and the company's future performance may be considered forward-looking statements as defined by the Private Securities Litigation Reform Act. These forward-looking statements are based on information available to PLx Pharma's management as of today and involve risks and uncertainties, including those noted in our press release issued this morning and our filings with the SEC.

Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from those projected in these forward-looking statements. PLx specifically disclaims any intent or obligation to update these forward-looking statements except as required by law.

A telephone replay of the call will be available shortly after completion for 2 weeks. You'll find the dial-in information in today's press release. The archived webcast will be available for 1 year on our website, plxpharma.com.

For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded on November 9, 2018. Since then, PLx may have made announcements related to the topics discussed, so please reference the company's most recent press releases and SEC filings.

And with that, I'll turn the call over to PLx's CEO, Natasha Giordano.

Thank you, Lisa. Good morning, everyone, and thank you for joining us.

Last quarter, we were excited to reveal the new FDA approved name for our next-generation novel aspirin, Vazalore. We believe that the new name is more closely aligned with its unique clinical advantages for patients at risk of having a cardiovascular or cerebrovascular event.

Last spring, we announced that during the technology transfer process to commercial-scale manufacturing, we discovered some inconsistencies in an outsourced key ingredient in our formulation. Since that time, we've been singularly focused on identifying and testing an alternative.

Today, I am pleased to share with you some significant progress the company has made towards the development and future launch of Vazalore. First and foremost, we've identified a U.S.-based alternate supply of a key ingredient in Vazalore. The PLx team has achieved consistent, successful dissolution and stability results in initial testing of the new formulation. We have been confirmed -- which have been confirmed in 3 labs, including our internal lab. The new supplier of the key ingredient and their current good manufacturing practices have been confirmed.

As far as next steps, the path forward will include: manufacturing of the development-scale batches and preparation of the FDA pre-submission meeting briefing packet in Q1 of 2019, targeting the type C meeting with the FDA in Q2; completing the registration batches in Q3; filing the sNDA submission in the end of 2019; and launching Vazalore in mid-2020. We continue to focus on the consistency, safety and optimal formulation of our product as we advance our program to obtain approvals and ultimately, bring Vazalore to market. We're excited for the opportunity to address a critical unmet need in the market and position Vazalore as the new standard of care for the secondary prevention patient in cardiovascular disease.

With that, I will turn the call over to our CFO, Rita O'Connor. Rita?

Thank you, Natasha. In the third quarter of 2018, we recognized revenue of $216,000 compared to revenue of $62,000 for the prior year period. Revenue in both '18 and '17 periods is attributable to work performed on an award from the National Institutes of Health federal grant received in 2017. This grant is in support of PLx's novel formulation of aspirin for the chemoprevention of colorectal cancer.

Research and development expenses were $1.2 million for the third quarter of 2018 compared to $1 million in the third quarter of '17. The expense in both periods reflects continued product development and manufacturing activities for Vazalore. The third quarter of 2018 included development work on the new formulation of Vazalore. Future spending in this area will include manufacturing of development-scale batches, which will be used in the briefing package for the FDA type C meeting. After the FDA meeting, we'll be manufacturing registration batches on a commercial scale to be included in the sNDA submission planned for the end of 2019.

General and administrative expense totaled $1.8 million in the third quarter of '18 compared to $3 million in the third quarter of '17. This decrease primarily reflects lower compensation expenses due to the non-recurrence of prior year merger and financing-related compensation payments.

Noncash stock-based compensation expense was $248,000 in the third quarter of 2018 versus $942,000 in the same period of '17.

Other income expense net totaled approximately $622,000 of net other expense for the third quarter of '18 compared to $118,000 of net other income in the prior year period. This change is largely attributable to the noncash change in fair value of warrant liability, primarily due to the fluctuation of the price of the company's common stock. An increase in the company's stock price causes an increase to the liability, thus higher expense for the period; whereas a decrease in the stock price causes a decrease to the liability, thus an increase in income.

Interest expense of $291,000 for the third quarter of 2018 includes $174,000 of cash interest related to our term loan with Silicon Valley Bank, and the rest of the interest expense includes the amortization of the debt discount and payoff fee at the end of the loan. The $7.5 million loan was entered into in August 2017 and thus, only accrued interest for 2 months of the quarter in 2017.

We are currently paying interest-only payments on the term loan, but starting in February 2019, we begin paying principal payments, equaling approximately $938,000 per quarter.

Interest income was also higher due to the higher cash balance in '18 as well as higher interest rates in '18 versus '17. Net loss for the third quarter of 2018 was $3.4 million or $0.39 per share compared to a net loss of $3.8 million or $0.44 per share for the third quarter of '17.

We ended September with $16.5 million in cash and cash equivalents, and our cash burn for the quarter was $1.4 million. We have successfully preserved cash through cost controls during the third quarter by doing some of the development work on the new formulation in our own Houston lab and carefully planning out our prelaunch marketing spend.

With that, I'll turn the call back to Natasha to discuss our plans leading up to the launch. Natasha?

Thank you, Rita. Now let's turn to our commercial strategy and the deeply experienced management team that has been assembled to execute it.

We believe that Vazalore, as the first-ever FDA-approved liquid-filled aspirin capsule, has the potential to address a critical unmet need and to become the new standard of care in the secondary prevention market of cardiovascular disease. Vazalore's novel mechanism of action, reliable and predictable antiplatelet efficacy and improved gastrointestinal, or G.I. safety, set it apart as the next-generation aspirin product. Our market research shows that physicians indicate a high intent to prescribe or recommend Vazalore for their secondary prevention patients, and we're extremely encouraged by these findings.

For those of you on the call who may not be familiar with the aspirin market or with Vazalore's unique qualities, I'd like to provide some background about why we're so excited as a management team about this product and why we believe that Vazalore has the potential to disrupt the aspirin market and positively impact these patient's health. Recently, 4 high-quality clinical trials reported top line results on more than 60,000 patients on aspirin treatment in both primary and secondary prevention. We view the aggregate results of these trials as highly positive and highly supportive and confirm our commercial strategy for Vazalore as therapy for the high-risk patients with established cardiovascular disease or atherosclerotic cardiovascular disease, which I'll refer to as ASCVD; and also is clearly indicative of the unmet need of a new generation aspirin product.

Vazalore's target market is ASCVD, which includes patients with a history of coronary artery disease, including events like an MI, have had stents implanted, CABG, stable and unstable angina, history of cerebrovascular disease, like a stroke or a TIA, plus a history of peripheral artery disease. And finally, diabetics without established cardiovascular diseases, these patients are at greater risk and fall into the secondary prevention market.

According to the American Heart Association, about 92 million people live with cardiovascular disease in the United States. Aspirin is considered a foundational treatment for these patients and the most extensively used worldwide. Of those 92 million people, many have ASCVD. About 43 million people need daily aspirin therapy, but because of common complaints such as G.I. upset, patients often fail to take their aspirin. This market opportunity represents a potential retail market of $10 billion for Vazalore at our pricing.

Initially, enteric-coated aspirin, which today represents more than 90% of the aspirin market, was developed to address these G.I. concerns. Yet, studies have shown that enteric-coated aspirin has variable and unreliable antiplatelet efficacy and does not have improved G.I. safety. Because enteric-coated aspirin offers only unidirectional protection as it enters the stomach and does not protect the G.I. tract, it can actually cause gastric ulceration. Once the tablet passes into the duodenum, it disintegrates, releasing free aspirin, which refluxes back into the stomach, potentially inducing surface injury.

By contrast, what makes Vazalore unique is its mechanism of action, which takes advantage of our patented PLxGuard delivery system to selectively release drugs into targeted areas of the G.I. tract. The process happens in 4 steps. First, the capsule dissolves in low pH, releasing the lipid matrix content. Second, digestive agents and rising pH emulsify the lipid matrix with aspirin now free for absorption. Third, aspirin is absorbed in a distilled duodenum. And fourth, the content -- when the contents reflux back into the pH environment, the lipid matrix reassembles, thus protecting the stomach from direct contact with aspirin.

This process offers clear and distinct advantages, namely: greater absorption, efficacy, safety and tolerability and is the reason for our strong and lengthy patent life. We have recently developed a new Vazalore mechanism of action video that health care professionals will be able to access on our website that depicts these advantages as our capsule travels through a simulated G.I. tract.

Another way to understand the product benefits of Vazalore is to look at what is called a complete aspirin response. A complete aspirin response means that the antiplatelet therapy suppresses surges of thromboxane at an inhibition level of 99%. Both the FDA and clinical practitioners consider thromboxane inhibition to be the best marker of aspirin effectiveness. What sets Vazalore apart and what we believe will lead to a disruption in the market is that Vazalore is far more likely to achieve a complete aspirin response compared with the current standard of care, enteric-coated aspirin.

Our data suggest that Vazalore has a 71% lower risk of acute gastric ulceration than regular aspirin. We believe that interventional cardiologists and other specialists will find this data to be very compelling when they consider options for caring for their patients. In fact, feedback from specialists, including cardiologists, neurologists and endocrinologists, has been especially encouraging, with over 80% indicating a high intent to prescribe or recommend Vazalore for their high-risk patient.

To further our commercial preparedness, we are continuing our efforts in engaging the medical community about Vazalore's exciting potential and to build awareness. Last May, we attended the EuroPCR conference, the world-leading course in interventional cardiovascular medicine. There were nearly 12,000 professionals in attendance, and it was the perfect opportunity to engage with key thought leaders. Most recently, we attended the European Society of Cardiology conference and the TCT conference, one of the largest and most important educational meetings specializing in interventional cardiovascular medicine.

Dr. Deliargyris, our Chief Medical Officer, an interventional cardiologist and internationally recognized expert in thrombosis, is leading our efforts to connect and engage with key thought leaders as we raise awareness around the unmet need for a better aspirin formulation and articulate the clinical value proposition of Vazalore to specialists around the world. Dr. Deliargyris is collaborating with our esteemed scientific advisory board, which continues to guide our path forward. These world-renowned thought leaders represent specialties across cardiology and gastroenterology. They believe in Vazalore's broad market potential and see this as an important opportunity to educate the medical community and address this significant unmet medical need. Their continued advocacy is critical as we take steps to bring Vazalore to market and as we look to change the standard of care in the treatment of ASCVD.

We're also pleased to announce that Dr. Roxana Mehran of Mount Sinai has recently joined our scientific advisory board. Dr. Mehran is a professor of medicine at Mount Sinai school of medicine, Director of Interventional Cardiovascular Research and Clinical Trials and Chief Scientific Officer of the clinical trial center at the Cardiovascular Research Foundation. We are continuing discussions with the retail trade, including the top chain drugstores and mass merchandisers. As we emphasize how Vazalore can help patients, and based on their feedback, together, we believe that Vazalore has the potential to breathe new life into this category.

A word about the management team that has been assembled here at PLx. Each and every one of us has joined PLx because we believe in the promise of Vazalore and how it can impact patients and how PLx can change the aspirin category overall. Our Board of Directors and executive team is made up of deeply experienced executives that have launched both Rx and OTC products quite successfully, to name just a few, products like Mucinex, LIPITOR, Neurontin and Lyrica; and Rx-to-OTC switches like Zantac, Claritin, Zyrtec, Rogaine, Lamisil and MOTRIN, each of us bringing unique and distinct capabilities that will differentiate Vazalore for patients and their health care providers.

Let me conclude by saying that we are actively engaged on all fronts: manufacturing, thought leader engagement, retail distribution and consumer messaging, to take the interim steps toward approval and the ultimate launch of Vazalore in mid-2020. We believe in our product and the outstanding opportunity to fill a significant gap in the secondary prevention market. Our highly credentialed management team is excited and passionate about improving the performance of established therapeutic agents using our proprietary PLxGuard targeted delivery platform and is committed to improving the lives of many at-risk patients. We take pride and inspiration from the enthusiastic response we have received from key thought leaders and experts in the field as we move Vazalore towards commercialization.

With that, I'd like to open the call for questions. Operator, please go ahead with the instructions.

(Operator Instructions) Your first question comes from the line of Kenneth Trbovich.

Natasha, I appreciate you gave the path forward, but unfortunately, it was so fast. I didn't catch it all. You said the briefing documents or the pre-submission briefing package would be submitted first quarter and the type C meeting, second quarter. What follows that?

Sure. So the -- we're targeting the type C meeting with the FDA to be held in Q2. And then we are targeting to complete the registration batches in Q3, filing the sNDA submission in the end of 2019 and then launching Vazalore mid-2020

Got it. And remind us again, this is a manufacturing supplement, so we're not looking at a standard sort of 6- or 10-month review that we would normally see with an NDA?

Correct, Ken. This -- our assumption is that this will be a CMC supplement. We've had communications with the FDA in that regard. But of course, when we submit our briefing package to the FDA and we have our meeting, we will then understand the things that they need. This is not a -- there's no need for clinical studies to be done. This is purely a manufacturing supplement to show the FDA that we're manufacturing both doses in the same way.

Right. Because the NDA is already approved on the 325-milligram dose, so it's a lower dose, no reason to look at it from anything other than manufacturing side.

That's right, nicely said.

Okay. So -- well, yes, it's -- sometimes, it can be confusing, and I know you had to convince me of that last year, so I'm just reflecting back, trying to make sure I recall those details correctly. Rita, one question for you. I know, obviously, there was a slight uptick in R&D, which is a positive sign, certainly, given the fact that you guys have identified a new source of supply for the key ingredient. How should we be thinking about those commercial batches and the sort of the implications for R&D next year? I would assume that we're talking single-digit millions for those commercial batches, but wasn't sure if -- because you're going to have to do batches for the initial submission and then do commercial batches after that, sort of whether the cumulative costs start to look more like double digits or not.

No, I don't think it will look double digits. But the manufacturing -- so if you put it in overall cash burn, thought process for the rest of '18, we'll probably burn about the $3 million that we had been burning. And then, as you get into '19, as you so eloquently put, we're going to start first the development batches, which are smaller in scale, that will go into the briefing packet, and then we'll do larger scale for the registration. So yes, you can see the cash burn increasing more like $4 million for the operations. But then, as I also mentioned, we're going to start paying back our principal payments on our term loan starting in February, so that will bring that up closer to $5 million.

And then from a perspective -- and I apologize, this will be my last question, I promise. From a perspective of looking at the submission, is there a filing fee due for this type of application or no?

No.

No. We -- that's been confirmed as well from the FDA.

Your next question comes from the line of Elliot Wilbur .

First, couple of questions around the alternate supply source, obviously a name or entity that's already known to the FDA, since you mentioned the fact that they are a GMP-compliant supplier. But with respect to the actual ingredient itself, is it something that they currently supply as part of a commercially approved product? And I guess the question is sort of directed along the lines of, is the active -- as part of your submission, is that going to require some sort of pre-approval inspection by FDA? Or is that not required, simply because this is an inactive ingredient?

Okay. So remind me if...

Yes. Go ahead.

So we don't think that there'll be an FDA inspection. However, we know that this company has had their site FDA inspected. So we have no concerns there. They are a cGMP compliant, which is also an added benefit. We've done an audit there quite successfully, with no findings at all. So we're very encouraged and confident with this new supplier. And the first question was what?

He was talking -- you answered it.

I answered it? Okay.

Well, I was just trying to get a sense if the secret ingredient is -- if they currently produce it as part of -- or if it's contained in a commercially approved product, not yours, obviously, but another one.

Yes.

Yes.

Okay. And I guess, with sort of respect to resubmission of the 81-milligram, remind me again of what the duration of required stability data is.

3 months.

3 months?

3 months long term and 3 months accelerated.

Okay, okay. And then just last question. Natasha, you talked quite a bit about some of the recent medical events that the company has attended. And just maybe curious about your interactions there and whether or not -- the practitioners and opinion leaders that you spoke with, do you think they really understand the efficacy messaging of Vazalore? I know there's been quite a bit of new research out on the aspirin market in the last 12 to 18 months, probably more so than last decade. And just sort of wondering how that may be influencing what is ultimately going to be an efficacy message on your part and whether or not these interactions provided any feedback or observations that might prove useful as you head toward the FDA submission or ultimately, commercialization.

Yes. We're very excited about the interactions that we've had. I mentioned Dr. Deliargyris. He came here to this company. He certainly had other opportunities to go to larger companies, more established. But yes, what drew him here was the product and his conversations with me, with the key thought leaders at the top of the pyramid, Elliot. These are the people that really drive the narrative in terms of cardiovascular medicine and how these secondary prevention patients should be treated. You're right in that there was significant aspirin clinical trials released and reported on in the last several weeks, and we've found that to be very encouraging, although those trials were in both primary and secondary prevention. And I think, for primary prevention, it's all about weighing the benefit and risk ratio. But our very specific strategy in commercialization of Vazalore is targeted towards that secondary prevention patient, and that's where our discussions with these key thought leaders, people like Drs. Deepak Bhatt, Gabriel Steg and others, feel that this really can address a critical unmet need in the market. Here, we have a patient group of 43 million people in this country that need to have that efficacy so that they don't have their first event or their second, which could be fatal. And that's where the efficacy message really resonates. The GI message also resonates because in order to get the benefit of Vazalore -- of aspirin, in general, you have to take it every day. And so with our data in both efficacy and improved safety, we feel that we have something that will absolutely breathe new life into a category that's been quite stale for many years. So we're very encouraged. And it does feed into our commercialization strategy and our confidence in that we want to reach out to the specialist first, make sure that they understand the new data and supplement that with some consumer messaging as well. So we're excited to bring this market -- out to market. We're about 18 months away, so it's coming soon.

I am showing no further questions at this time. I would now like to turn the conference back to Ms. Natasha Giordano.

Thank you very much. So we see a tremendous market opportunity as we focus on ASCVD within this addressable patient population representing a potential retail market of $10 billion. We're confident that Vazalore has a potential to reenergize the aspirin market and to be the best-in-class therapy for ASCVD. We are excited about launching Vazalore in mid-2020 and addressing a critical unmet need in treating ASCVD. We believe that Vazalore, our next, novel generation aspirin, has the potential to transform the standard of care.

Thank you again for joining us this morning, and have a great day.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation, and have a wonderful day. You may all disconnect.