Salarius Pharmaceuticals Inc (SLRX) 2014 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Flex Pharma year-end 2014 conference call. (Operator Instructions) As a reminder, this conference is being recorded.

And I would now like to introduce your host for today's conference, Elizabeth Woo, Senior Vice President, Investor Relations and Corporate Communications. Please go ahead.

Thank you, Samantha. Good morning. Thank you for joining us to discuss Flex Pharma's full-year 2014 financial results as well as our recent progress and outlook.

Earlier today we issued a press release announcing recent business highlights and detailing our full-year 2014 results. You can find these documents on our website at FlexPharma.com.

Today we will be making certain forward-looking statements about future expectations, plans, events, and circumstances, including statements about our strategy, future operations, and the development of our consumer and drug product candidates; plans for future potential product candidates and studies; and our expectations regarding our capital allocation and cash resources. These statements are based on our current expectations and you should not place undue reliance on these statements.

Actual results may differ materially due to our risks and uncertainties, including those detailed in the risk factors section of our prospectus on Form S-1 filed with the SEC and other filings we make with the SEC from time to time. Flex Pharma disclaims any obligation to update information contained in these forward-looking statements, whether as a result of new information, future events, or otherwise.

We will provide a brief overview; then open it up for Q&A. And I will now pass the call to CEO Christoph Westphal.

Thank you for joining us today. We are excited to be hosting our first conference call as a public company. Flex Pharma is focused on developing innovative and proprietary treatments for exercise-associated muscle cramps, nocturnal leg cramps, and spasms associated with severe neuromuscular conditions.

2014 was a very productive year for Flex. We established human proof-of-concept for a reduction in muscle cramps in healthy, normal volunteers and significantly expanded our executive management team and Board.

On the clinical front, we established the first human proof-of-concept data for our proprietary formulation in three separate studies in the electrically-induced muscle cramping model. The treatment demonstrated a statistically significant overall treatment effect [in humans], reducing cramp intensity by threefold compared to subjects taking a vehicle control with a P value less than 0.0001. Each of the three studies was also individually statistically significant.

We are honored that these data were recognized by the American Academy of Neurology, and in fact press released by them, and selected for an oral platform presentation at the annual meeting being held in Washington DC. Our scientific co-founder, Dr. Bruce Bean, who is a National Academy of Science member at Harvard Medical School, will present the platform presentation on Tuesday, April 21, 2015, from 3:45 to 4:00 PM. We hope to see many of you at the presentation and the poster session.

We significantly strengthened our financial position over the past year. In 2014, we raised net proceeds of $41 million in private funding from blue-chip public and private investors. At the end of January 2015 we completed our IPO, raising roughly $80 million in net proceeds from the sale of approximately 5.5 million shares.

Post-offering the Company has issued roughly 17.9 million shares of common stock. Based on our current cash position, we believe that we have sufficient capital to fund operations until the middle of 2018.

In 2015, we expect to make meaningful clinical progress with the initiation of trials in nocturnal leg cramps and potentially in other settings. We are solidifying our launch plans for our consumer product, which we expect to begin commercializing in 2016.

Marina Hahn has made tremendous progress since she joined in October as President of Consumer Goods. Marina has built an excellent team of brand builders and marketers, stemming from her success with Svedka vodka and years at Pepsi, a heritage she shares with our investor and Board member John Sculley. I will now hand the call to Marina, who will update you on our consumer plans.

Good morning, everyone. This is Marina Hahn. In less than six months we have accomplished a great deal on the consumer side. I have hired a very experienced team to support our vision and we have built a strong foundation for an amazing new brand.

We are defining a breakthrough consumer category, neuromuscular performance. We have put together the right team, including the former head of Pepsi R&D and innovation for 25 years, to develop our product. We are also working with the former head of the Gatorade Sports Institute to conduct research among athletes.

For branding purposes, we are targeting an aspirational audience first. It is the same way that Nike and Apple built their brands. Our natural aspirational target audience is the endurance athlete.

They have a high propensity to cramp. They are constantly on the hunt for products that will give them an edge. And they connect to our authentic back story, which originates with Rod MacKinnon, Nobel prize-winning neuroscientist, endurance athlete, and alpha achiever, who suffered debilitating muscle cramps while sea kayaking.

Rod, the genius jock, set out to find a solution, but soon discovered that all existing remedies that people believed to treat the muscle do not work. Bananas, hydration, sports drinks, salt pills are junk science. Then Rod had a major breakthrough. It's not about treating the muscle; it's about treating the nerves.

A four-year exploration led him to a genius solution to an unsolved medical mystery. The first sports beverage clinically proven to prevent and treat muscle cramps that can help millions of athletes become unstoppable is what we are talking about here. We will be creating a cult lifestyle brand among endurance athletes. We are taking a strategic approach, using a community-centric, word-of-mouth, social media, PR-based approach.

While we have accomplished a great deal in a short period of time, much remains to be done, including finalizing our supply-chain model, finalizing the product and packaging, executing a compelling launch marketing plan, and developing the creative materials to tell our story. Starting mid-2015, we will pre-launch the product. This means seeding the product with athletes, establishing credibility with the endurance sports community; also educating, evangelizing, and building demand with our target consumers. Then in mid-2016 we will launch the product via specialty retail in targeted geographies and e-commerce.

I will now handle the call back to Elizabeth Woo.

Thanks, Marina. Joining for the Q&A portion of the call we have Jennifer Cermak, our VP of R&D; John McCabe, our VP of Finance; and Tom Wessel, Chief Medical Officer.

Before opening the call to questions and handing it to the operator, I will just ask that participants ask no more than a couple questions to allow others to have their questions answered and then rejoin the queue. Operator, we can now open the call to take questions.

(Operator Instructions) Josh Schimmer, Piper Jaffray.

Great. Thanks for taking the questions. A couple for Tom and maybe one for Marina.

Tom, on the medical product, can you just share with us what additional work on the formulation needs to be done and completed before an IND is filed? And will that formulation work likely generate any new IP for the product? Then for Marina, I think you had mentioned conducting some research in athletes. I was wondering if you could elaborate on what specifically that research might be, thanks.

Josh, thanks for the question. I will go first and then I will let Tom add to it, and Marina will address the formulations and the product launch for the athletes.

As we described in our S-1, we're still working on an individual molecule or a combination of two individual molecules that could be sufficient to file an IND. Having said that, I think we all know that there are a number of products, and you have actually covered one of the great ones, GW Pharma, that are actually mixtures and mixtures of products. So we think that either way there's actually a path forward with an IND, but we plan to update you and others here over the next three to six months regarding our IND plans.

Tom, do you want to add to that? There is obviously IP protection. You've worked on several mixture products. Tom, I don't know if you want to add to that and then we'll hand it to Marina.

Just briefly, the goal of course would be to reduce it to a singlet or doublet approach to cover the TRPV1 and A1 channels in the mucous membranes of the mouth, the pharynx, and the esophagus and anterior portions of the stomach. So we think that both for the medicinal product as well as the consumer product, the mechanism really is going to be the same. We will cover the maximal surface of mucous membranes to stimulate these channels.

Got it, okay.

This is Marina. On the question of what are we doing to research athletes, we are starting studies right now to see how athletes in situ respond to the product; what their feelings are about efficacy, duration of efficacy, even down to what they think of calorie count, flavor profile, etc. We will have top-line results late April and we are conducting further research that is more robust where we will have top-line results late May.

Thank you.

Ryan Martins, Jefferies.

Maybe, Marina, if you could maybe talk about a little bit more for the seeding the product. When you say you are going to have it with some individuals, maybe some color around that. And if you have anything more you can add to when you talk about the distribution and supply chain, which obviously is critical for these consumer products.

Could you, Ryan --? We were not sure we understood the first part of that question. If you could repeat that again, that would be helpful, thank you.

Yes. On the first part of the question, it was -- well, I guess the question is more around the early adopters. I think Marina mentioned seeding the product with individuals. Maybe if you can give some more color around what the plans are there.

Certainly. So in the early stages we are calling it a soft launch where we are really seeding the discovery, and that means establishing endurance sport credibility and educating people and evangelizing. We want to really set a foundation of the science and also bring together early adopters in the sports world that would include experts in the field.

Some brand ambassadors who have huge following in the endurance athlete world, as well as in the pro-world, where they are within sports verticals that make sense for cramping. Everything from running, cycling, swimming, even tennis and football. Those are secondary, but those are the kinds of athletes that we are going to go after so that we can start to build a community, start to build the word-of-mouth before we actually formally launch the product in mid-2016. And that is when we are going to be turning on distribution.

You also asked, Ryan, about distribution. We are being very selective. We're not going mass. We will be starting with specialty retail, meaning bike shops and spas and gyms in select geographies, and that is really to bring the product to places where these athletes shop versus the masses.

But we are also going to be very heavily focused on e-commerce, because that's also how athletes shop today. So those two levers will be driving distribution early on and we like to call that brand-building distribution versus looking at pure sales.

Okay, thanks. Maybe the second one, just on -- if you could confirm the timeline for the nocturnal leg cramps study initiation. And on the second indication, have you decided on what that will be? Could it be MS spasticity or one of the other ones?

Ryan, thanks for the question; this is Christoph. On the nocturnal leg cramp timelines, we think it's important to articulate conservative timelines that we are comfortable that we can meet.

On the second point, it's a great one. There are probably well over 80 different indications that have cramping or spasms as part of the core issue, and so we think there's a whole range of more orphan-type indications and also several indications that are affecting a lot of individuals. And so we are quite excited about moving beyond nocturnal leg cramps at some point in the next couple of years.

We probably have to move on to the next question, Elizabeth, just for time.

(Operator Instructions) I am showing no questions at this time. I would like to turn the call back over to management.

Well, that's disappointing. There are all these people on the call; there should be more questions. We will wrap it up, Elizabeth, unless you feel we should take another question.

There's actually one in the queue, so the operator will put that through.

Monica Gorman, Cantor Fitzgerald.

This is Monica Gorman on for Mara Goldstein. I was just wondering if you could provide any more color on the packaging and the branding, and when do you expect to have maybe a label prototype and how you will be testing those kinds of things.

It's Marina again. We are in this process of creating our graphic design for our label, which is in the works right now. We're in the process also of looking at packaging that speaks to the brand, because we want to work on something that speaks to actually the positioning and want to do something proprietary. That all takes time and it will be ready, as I say, for the launch mid next year.

Great, thank you so much.

We have another question.

Ryan Martins, Jefferies.

Thanks. This question actually is for John. John, I know you are probably not going to give any guidance, but how should we think about expenses in 2015?

Yes, let me take that first and then I will, in fact, hand it to John. We are actually giving no guidance, as you said, and our guidance really is that we have cash on hand to lead us to the middle of 2018, assuming no partnerships and no revenues. So it's quite conservative guidance.

But, John, do you want to add a little bit to that?

No, I think you said it well. I think we're going to look for -- we are going to spend where there's good opportunities, but we are also going to be careful with our cash. And we expect it to last mid-2018 with what we have on hand.

Okay, thank you.

Great. Elizabeth, it sounds like I am ready to go to the closing portion.

No, actually we have another question in the queue.

Bryan Czyzewski, JMP Securities.

I was just curious if you could discuss a little bit about the proof-of-concept trials that you guys are going to run: the sites that they will be held at and any details. Thanks.

Great, I will take a first stab at that and then Tom or Jennifer could add to it. First, the great news is that there are well over 4 million Americans who suffer from nocturnal leg cramps every night. That's only counting those who are over the age of 65, so it is an extremely prevalent disorder. There is no drug on the market; quinine having been banned by the FDA.

So we think that recruiting individuals who, unfortunately, suffer from these debilitating and painful nocturnal leg cramps is going to be very straightforward. And we feel confident in the US and, in fact, in areas such as Europe or Australia that we can find such patients and enroll them.

Then, in terms of how many of those do well on the agent or have any sort of placebo response, in fact we are really defining this area, much like Tom and others define restless leg syndrome. We think we have an enormous opportunity to define the space, define endpoints, and to get into dialogue at the appropriate point with the FDA.

But, Tom, do you want to add anything to that?

Well, I will make a general comment and then I will let Jennifer talk about the specific trials that we are doing. This is a huge opportunity for our company because, much as Christoph just alluded to, we can actually as a company define this space.

What that means is that we will work very closely with the experts in the field, here in the United States and elsewhere, to really come up with what are valid endpoints, how do you actually compare objective endpoints to patient-reported outcomes, and so forth. And how do we deliver a data package to the FDA that is really convincing?

So that's really our goal. We're going to be doing a lot of work to really create the scientific and clinical foundation to address these important questions for nocturnal leg cramps.

Jennifer, do you want to talk a little bit about the specifics?

I think at this point, how Christoph summarized the ongoing studies, we are on track and making good progress to launch in one of those countries, either the US or Europe.

Great, thank you very much.

Any other questions, Elizabeth?

Operator, do you see any other questions in the queue?

There are no further questions.

Great, so I will then close. First of all, I would like to thank the dozens of people who joined us today. Of course, it's our first earnings call, but I think everybody on the call understands this is a disorder and an issue that pretty much anyone can immediately understand, so there is really extraordinary interest in what we are working on from various sources. From the consumer, but also from those suffering from various diseases.

Really, with Rod MacKinnon and Bruce Bean's discovery, which led to the formation of Flex Pharma, we believe that this may represent the unifying theme and underlying cause for cramps and spasms. This, in fact, allows us to address solutions for a broad spectrum of conditions: from the healthiest of humans, the endurance athlete, to those millions who suffer regularly from nocturnal leg cramps to patients affected by severe neuromuscular conditions such as MS, ALS, Parkinson's, and dozens of others. At Flex, we are building a first-in-class neuromuscular company with excellent people.

Thank you very much for joining us on our first earnings call today. We very much appreciate your interest and support. Thank you. Goodbye.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program and you may all disconnect.