PLx Pharma Inc (PLXP) 2014 Q4 法說會逐字稿

Greetings and welcome to the Dipexium Pharmaceuticals year-end 2014 financial and operating results conference call. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, David Garrett, Vice President, Finance and Corporate Development. Thank you, sir. You may begin.

Thank you, Kevin. Good morning and welcome to the Dipexium Pharmaceuticals year-end 2014 financial results conference call.

This morning we issued a press release providing financial results and company highlights for the full year ended December 31, 2014. This press release is available on our website at www.DipexiumPharmaceuticals.com.

Joining me on today's call is David Luci, President and Chief Executive Officer of Dipexium, who will provide a corporate update and outlook for 2015. Following his comments, Rob Shawah, our Chief Accounting Officer, will provide an overview of the financial highlights from last year before turning the call back over to David for closing remarks.

As a reminder, during today's call we will be making certain forward-looking statements. These forward-looking statements are based on current information, assumptions, estimates, and projections about future events that are subject to change and involve a number of risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements.

Investors should consider these risks and other information described in our filings made with the SEC, including our annual report on Form 10-K filed yesterday, March 23, 2015, and our quarterly reports on Form 10-Q. You are cautioned not to place undue reliance on these forward-looking statements and Dipexium disclaims any obligation to update such statements at any time in the future.

In addition, this conference call contains time sensitive information that is accurate only as of the date of this live broadcast, March 24, 2015. Dipexium undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date and time of this conference call.

I will now turn the call over to David Luci.

Thank you, David. Good morning, everyone, and thanks for joining us on this morning's conference call to discuss Dipexium's financial results for the year-end December 31, 2014.

During today's call, we will discuss our full-year 2014 financial results and share some key corporate highlights. We experienced a strong period of growth in 2014 from many perspectives. In March 2014 we completed our IPO, generating gross proceeds of $38 million and net proceeds of $34.5 million.

With this additional capital, we expanded our team and were able to successfully complete two Phase 1 clinical trials, DPX-110 and DPX-120. And at the same time, we initiated two pivotal Phase 3 clinical trials in mild infections of diabetic foot ulcers, OneStep-1 and OneStep-2. As you know, we are enrolling in our Phase 3 studies now and have recently reported in February that we have passed 25% enrollment.

In addition, we have advanced our CMC, chemistry manufacturing and controls, program by completing production of our required cGMP registration batches of drug supply to support submission of our new drug application upon completion of the OneStep Phase 3 pivotal trials.

In Europe, we have initiated our regulatory activities and taken preliminary advice from the European medicines agency. Furthermore, we have commenced pilot work on an IV formulation of the new formulation of pexiganan, which as you know is currently being developed as a topical formulation. Progress in these areas has been encouraging and we hope to build on its momentum throughout the course of 2015.

I would now like to provide a more detailed update on our business by focusing on the aforementioned 2014 highlights, including the following vocational areas: clinical and regulatory development, microbiology, CMC, EU development and regulatory strategy, and last, the Company's expanding product pipeline, specifically with respect to the IV formulation.

For clinical and regulatory development, as we announced in February, our two pivotal Phase 3 clinical trials, OneStep-1 and OneStep-2, have now passed 25% enrollment. Thus far, we have 47 active clinical trial centers prescreening patients and we intend to add up to an additional 23 clinical trial centers in the first half of 2015.

You may recall we received a special protocol assessment, or SPA, agreement from the FDA on the Phase 3 program in December 2012. As designed, we will enroll 180 patients in each of the OneStep Phase 3 clinical trials simultaneously in a one-to-one randomized -- randomization of Locilex against placebo cream with twice-daily dosing for 14 days of treatment, with the final measurement on day 28 and no more measurement thereafter.

The primary endpoint of the OneStep studies is infection resolve in the judgment of the treating physician using the diabetic foot infection treatment guidelines published in 2012 and used by the Infectious Disease Society of America. Secondary endpoints in the OneStep studies include microbiological response and wound measurement. Standardized wound care, which involves debridement and offloading as outlined in our Phase 3 trial protocols, is applied consistently in both arms of the OneStep studies. We continue to track towards a data readout on these pivotal Phase 3 clinical trials in the second half of 2015.

The microbiological update. Last month we submitted two microbiological study updates to the FDA. One of these study updates demonstrated the potent activity of pexiganan against contemporary gram-positive and gram-negative bacteria found in diabetic foot infections as well as other skin and skin structure infections, including bacterial isolates that are resistant to many currently available antimicrobials. These data were presented in a poster presentation at the ICAAC meeting in September 2014 and published in the March 2015 addition of Antimicrobial Agents and Chemotherapy, which is available online.

The second submitted study update demonstrated that pexiganan was highly active against a broad spectrum of bacteria resistant to currently used or investigational topical antibiotics. We intend to submit these data for publication later this year.

In terms of CMC, we continue to make great strides in our CMC efforts. At present, we have completed production of the required three cGMP commercial scale batches of drug product to support our new drug application submission for Locilex. We anticipate that we will have adequate stability data on these batches well ahead of completion of the OneStep Phase 3 clinical trials.

EU development strategy. We launched our European development initiative in the second half of 2014. In January 2015 we submitted a briefing package to the European Medicines Agency, or EMA, and attended a preliminary meeting with the EMA just last month. Inclusive of the data from the ongoing OneStep Phase 3 clinical trials, we hope to have sufficient clinical data to support the intended filing of a marketing authorization application with the European Medicines Agency under the centralized process without conducting any additional clinical trials and we hope to confirm this regulatory strategy with the Committee for Medicinal Products for Human Use, or CHMP, in the second quarter of this year.

Our regulatory strategy is based upon our assessment of European guidelines and the advice we've received from our scientific advisors. If we receive favorable advice from the CHMP regarding our regulatory strategy, we would anticipate filing for approval in Europe at or shortly after the time we are able to file the NDA in the US. Until we finalize our process with the EU regulators, we won't know if this is possible, but we do note that this is a positive development that we didn't anticipate at the time of our IPO in early 2014.

If things go well with our anticipated EU strategy, we would proceed with our tax structuring initiative and likely explore establishing a wholly-owned subsidiary with the required physical presence in Europe prior to the end of 2015 to start the process of capitalizing on the commercial potential of our antibiotic in Europe, the second-largest worldwide market.

Now I would like to discuss the formulation history and our new IV formulation project. Many of you may recall that our drug development project for pexiganan is what the National Institute of Health refers to as a drug rescue project, for a drug that was initially rejected by FDA in 1999 due to manufacturing problems that existed with the original formulation.

In the process of inventing a new and more robust formulation, we continued stability testing on the original formulation to determine whether or not the product we acquired was, in fact, stable enough to get FDA approval. In stability testing over the past four to five years, we can report that the original formulation that we bought from the prior sponsor continues to show physical instability and in our view is not suitable for FDA approval.

We continue stability testing on the original formulation even now so that we can continue to assess its merits and limitations, but at this time we believe it was a good strategy to discontinue development efforts with the original formulation; switching over to our new topical formulation, for which we would file for approval with the FDA in mild DFI.

Fortunately for Dipexium, scientists working on our behalf were able to invent this new and different formulation that is novel and not based on any prior knowledge generally available in the world of peptide development, including the original formulation. And it is this new formulation that we have adopted and positioned for FDA approval. Obtaining a patent on this new formulation was a critical step to securing commercial viability and led to the closing of our IPO in the first quarter of 2014.

With the foregoing in mind, we are currently conducting pilot work to determine if pexiganan, the API in Locilex, can show meaningful results when administered intravenously. This would be a benefit because it would constitute a second product candidate and target one or more clinical indications inside the body. We look forward to sharing more information relating to our IV formulation later in 2015.

I will now turn the call over to Rob Shawah, our Chief Accounting Officer, to guide you through the highlights of our 2014 financial results.

Thank you, David. As mentioned earlier, our 2014 full-year financial results were included in our press release issued earlier this morning.

Our cash position for the year ended December 31, 2014, was $27 million compared to $3.9 million for the year ended December 31, 2013. The increase was primarily attributable to the net proceeds of $34.5 million from the Company's initial public offering.

Cash used in operating activities for the year ended December 31, 2014, was $11.3 million versus $2.2 million for the year ended 2013. Research and development expenses were $8.9 million for the year ended December 31, 2014, compared to $1.7 million for the year ended December 31, 2013. The increase is primarily due to the Phase 1 and Phase 3 clinical trial costs, as well as increased manufacturing costs related to producing product used in the clinical trials.

General and administrative expenses were $4.7 million for the year ended December 31, 2014, compared to $2.3 million for the year ended December 31, 2013. The increase was primarily due to an increase in compensation-related expenses, due to an increased number of employees as well as increases in professional fees and office-related expenses. As a result, the Company reported a net loss of $13.6 million, or $1.73 per diluted share, for the year ended December 31, 2014, compared to a net loss of $4 million, or $0.87 per diluted share, for the year ended December 31, 2013.

Dipexium Pharmaceuticals received gross proceeds of $37.9 million from its March 2014 initial public offering with net proceeds of $34.5 million. The Company had 8,538,329 common shares outstanding as of December 31, 2014.

With that, I will turn the call back over to David.

Thank you, Rob, and thank you all for joining us for today's earnings conference call. I would now like to open up the call for questions. Operator?

(Operator Instructions) Akiva Felt, Oppenheimer.

Good morning, thanks for taking the question. A lot of good updates today. It seems like you guys are making some really good progress.

Couple questions on some of the different areas. I guess first, if the EMEA feedback is indeed positive, and this seems like it would be a nice surprise, what would be the incremental cost in 2015 to expand your presence and lay the groundwork in Europe?

Then also, I wanted to ask about the Phase 3 Locilex studies. The enrollment-boosting initiatives that you guys laid out earlier in the year, have you seen that they have been making a material impact on improving enrollment rates? And what is your confidence level for having the study fully enrolled and reading out data by year-end? Thanks.

Thank you, Akiva, and thank you for dialing in this morning. For your first question, the additional incremental costs for positive feedback in the second quarter from the European Medicines Agency is negligible for the second half of 2015.

The costs include in the second half of 2015, immediately prior to year-end, opening a very small office in an area in Europe that will be the product of our tax structuring project. May very well be Ireland. Initially we will have just a couple of employees in that office and it wouldn't open until probably December.

The other costs that we are starting incurring now is preliminary market research so that we can more fully elaborate, especially for the analyst community, including yourself. If we get favorable feedback from the EMEA, we want to make sure to be able to advise more fully what the commercial potential is in Europe and that market research will include epidemiology, target vocational areas where the doctors will be selling through, as well as pricing and reimbursement.

And that project would be followed by a second, more fulsome market research project that would be conducted in 2016.

If we build out Europe, the primary cost, the big costs would be incurred in 2016, including the appointment of a sales director and a marketing director in the European office. But we would sell through a contract sales organization, as I had in a prior experience, such as a Quintiles or an inVentiv Health, and proceed accordingly. So really the main thrust of the cost would be in 2016, not in 2015.

In terms of your second question, we continue to discuss with our scientific advisors the enrollment and making efforts and headway into increasing the enrollment rates in the studies. One of the big things we have done in order to stick with our timelines is to increase the number of trial centers that we are targeting for inclusion. So we have now gone and announced just today that we are going up from 60 to 70 trial centers in the studies and, in our view, that goes a long way to getting the enrollment that we need in the second half.

Great. Thank you, guys.

Ben Haynor, Feltl and Company.

Good morning, gentlemen. Any update that you can provide on enrollment or at least color on how things have progressed since you hit the -- in the 25% when you put the press release out? Have things accelerated since then as more trial centers have come on or has it continued at a similar pace as the prior month?

No, I'd say it's been almost a month since we came out with that press release and we are kind of pleased with the progress we have made this month. In addition to identifying new sites, we have probably five new trial centers coming on board this month and we have identified other methods that we are going to be employing over the next few months in order to try to get enrollment enhanced.

We look back on 2014 and identified the things that we believe worked to enhance enrollment during the different months in 2014. So one of those things is these rejuvenation meetings that Warren Joseph will be meeting at territorially in the various regions of the country where we are conducting the trials. Those seemed to work very well last year and we are going to pick up the pace with those as we progress in 2015.

Okay, great. Then with the increasing number of sites going from 60 to [70], does that add a whole lot of incremental costs or is it relatively negligible?

It does add some cost, but the main thing for us under our contract is we primarily pay in large part based on hitting various enrollment levels. So the payments that we have to make to our CRO, in large part -- not entirely, but in large part, are due when they hit certain levels. So we don't have to worry about carrying a large piece of overhead for a long period of time.

And I can remind you that 75% or so of our overall costs are R&D-related. So as the trials wind down, a big portion of those costs will be removed, only partially offset by an increase in the budget [in era].

That's helpful; that makes sense. And then on the IV preclinicals, how soon do you believe you will have an idea whether or not that IV formulation might be possible? And if it is feasible, I'm imagining that you see it useful in moderate and severe DFI. But what other types of infections do you see that it might be potentially useful in?

We will have our product development guys down at RRD International and our Chief Medical Officer, Mike Silverman, will do an analysis after we look at the animal studies that we are conducting. But it could also include things like gastrointestinal infections, UTIs, intra-abdominal infections, some of the bigger area of incidents for internal infections that you see from some of the other antibiotic development companies targeting.

We think we would good -- if we can get a similar concentration of our topical formulation inside the body, we think we would be good for a lot of these internal infections because of the broad-spectrum nature of the bugs that we kill.

Okay, great. Then the last one for me. With your meeting with the EMA, do you have any insights what might be their potential concerns about allowing a European submission without European trials? Or will that be something that you learn this quarter?

Well, we will definitely learn it this quarter. Thus far, we haven't heard any sort of negative feedback in the preliminary meeting on the likelihood that we could file for approval without European data.

The lion's share of the content of the preliminary meeting with the EMA was 80% fine-tuning our briefing package, and I'd say the other 20% was a discussion involving the extent of the label indication that we would be applying for. Whether it be narrow, being approved to treat infected diabetic foot ulcers -- which as narrow as it is, is more broad than the US label that we are targeting -- or broad, being labeled to treat skin and soft tissue infections that are appropriate for topical therapy, including those caused by resistant bacteria.

So somewhere between those two goalposts we hope to get regulatory advice in Europe agreeing that we don't need to do any more clinical trials specifically in Europe in order to apply for approval with our existing and the Phase 3 data we are generating now and some new microbiology data, for something in between those two goalposts.

Okay, great. Thanks for taking the questions, gentlemen.

(Operator Instructions) [Kurt Rhysfil], Capital Strategies.

Good morning, gentlemen. Most of the questions that I had have actually been covered, but I will just ask sort of point blank, all these new initiatives -- the EMA rollout or prep work, the intravenous -- were those all in original cost plan? And how well-funded are you through all of these activities?

We are very well-funded. We feel we have cash that gets us at least somewhere in the middle of the second half of 2016, if not beyond.

Work on the IV formulation was picked up in the use of proceeds from our IPO. The work that we are doing in Europe in 2015 is part of what would mitigate the decrease in expenses in our R&D program as time goes by.

So we are picking up small amounts of expense through the course of 2015 in Europe, including the market research that we are doing, but it's more dribs and drabs. Wouldn't amount to more than a couple of hundred thousand dollars by the end of the year. The IV formulation work is less than $100,000 all-in, at least as we see it.

So these aren't gigantic costs for the commercial potential that they provide and they don't dramatically change our burn. And recall that we raised a few million dollars extra than we anticipated in the IPO due to the demand.

I do remember that, yes. Well, great work so far, guys. Thanks for the update.

Thank you. We've reached the end of our question-and-answer session. I'd like to turn the floor back over to management for any further or closing comments.

We would just like to thank our analysts and shareholders for participating in today's call. And we look forward to the first-quarter update in the middle of May.

Thank you. That does conclude today's teleconference. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.