Salarius Pharmaceuticals Inc (SLRX) 2015 Q2 法說會逐字稿

Good day ladies and gentlemen and welcome to the Flex Pharma Inc. Q2 2015 Earnings Conference Call.

(Operator Instructions)

As a reminder, this call will be recorded.

I would now like to introduce to your host for today's conference Ms. Elizabeth Woo, Senior Vice President of Industrial Relations, please go ahead.

Thank you, Catherine. Good morning and thank you for joining us to discuss Flex Pharma Second Quarter 2105 Financial Result as well as our progress and outlook. Earlier today, we issued a press release announcing recent business highlights in detailing our Second Quarter 2015 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 our future potential products and studies and our expectations regarding capital allocation and cash resources. These statements are based on our current expectations and you should not place undue reliance on this statement.

Actual results may differ materially due to our risks and uncertainties including those details and the risk factor section of our 10-K filed with the SEC and other filings we make with the SEC from time-to-time. Flex Pharma disclaimed any obligations, update information contained in these forward looking statements whether as a result of new information, future events or otherwise.

We'll provide a brief overview and then open it up for Q&A and joining us on the call today, Dr. Christoph Westphal, Chairman and CEO Flex Pharma, Dr. Tom Wessel, Chief Medical Officer, and Marina Hahn, President of Consumer. I'll now pass the call to Flex Pharma CEO, Christoph Westphal.

Thanks, Elizabeth. Thank you for joining us today. At Flex Pharma, we are motivated to leverage the important discovery by Rod MacKinnon and Bruce Bean [for trying this] chemical neuro-stimulation to treat and prevent muscle cramps and spasms in order to develop solutions for patients and consumers in need from the healthiest of human to the endurance athletes to the millions who suffer regularly from nocturnal leg cramps, for patients suspected by severe neuromuscular condition such as MS, motor-neuron disease such as ALS and many other serious diseases.

In recent months, there have been a number of positive developments at Flex Pharma. First, we continue to strength our board in SAP, Jeff Capello, former CFO of Ortho-Clinical Diagnostics and Boston Scientific joined our Board of Directors and is Chair of our audit committee, Dr. Al Sandrock, CMO of Biogen and Dr. John Winkelman of MGH both joined our SAP. Dr. Winkelman's development experience in restless leg syndrome and Dr. Sandrock's neuro-development expertise will be valuable as we move forward.

Second, recall that the activation of ion channel forms the basis of Flex Pharma Scientific approach. Flex Pharma Co-Founder, Dr. Rod MacKinnon was awarded the Nobel Prize in 2003 for his work determining the structure of ion channels and showing the mechanism by which they select for particular ions. In April, Nature published the co-crystal structure of small molecules complex with TRPA1 thus within the past 18 months, the co-crystal structures with small molecules of both TRPV1 December 2013 and TRPA1 targets have been published in the journal Nature.

Third, we have made significant progress into finding our drug candidate. We've expect to nominate a clinical drug candidate consisting of one or two highly pure GMP synthesized, potent TRP activators. This will represent an important step forward in our drug development path.

Fourth in his comments, Dr. Tom Wessel our CMO will discuss developments including CAA and platform presentation of our human efficacy data. Upcoming scientific meetings for Flex Pharma will present data, the nocturnal leg cramps study initiated in April and our plans for studies in MS and motor neuron diseases such as ALS as added opportunities.

Fifth, on the consumer side, Marina Hahn our President of Consumer and our Board Member and investor John Sculley have a strong track record of bringing brands to market and establishing a leading market positions. Marina has built an excellent team of brand builders and marketers to ensure a solid rule out. The team has been busy with the pre-launched preparing for commercial launch in the first half of the 2016.

With NSF certification in May, we have started sampling to a number of pro-athletes and teams. The website is the nerve.com was launched in June as part of our campaign to educate endurance athletes, professional sports teams, coaches and trainers. In July, we reported results from an initial study of athletes who train several times a week. The proprietory treatment reduced muscle cramps during a two-week workout period by more than 50% when compared to the prior two-week baseline observation period.

We believe this is the first time a consumer beverage has shown a statistically significant reduction of naturally occurring muscle cramps in athletes. Marina's team has initiated pre-launch activities in Boulder, Boston and Los Angeles preparing for our launch in the first half of 2016. In fact, Marina and her team were in Boulder just last week at the endurance coaches' summit. I hope many of you are able to view the short film that tells the back-story of the breakthrough discovery by our scientific co-founders Rod and Bruce.

The show is part of our strategy for launching the first clinically proven consumer product to prevent and treat sports cramps. We wanted to share it with you. Directed by Selena Roberts former Sports Illustrated Senior Writer and New York Times Columnist, this film captures the spirit of our co-founders. It is now live on our site and a thank you page users receive once they provide their email address to gain access for the whitepaper.

With our end of June cash position of approximately $106 million, we believe we have sufficient capital to fund operations until the middle of 2018 assuming no revenues from product sales and no outside support (inaudible) deals. For a deeper dive into our R&D and consumer efforts, we will host an investor day later this year in November in New York City.

I will now hand the call to Tom, who will update you on our clinical progress.

Thanks, Christoph. On the clinical side, we continue to make progress with several achievements in recent months. Firstly, as Christoph mentioned in his opening remarks, we have advanced our research efforts and expect to nominate a clinical drug candidate consisting of one or two highly pure GMP synthesized, potent TRP channel activators. We are in the process of selecting the lead drug candidates.

Defining our drug candidate is an important step toward our future development path. We will update you next quarter on our progress. Our Scientific Co-Founder and National Academy and Science Member, Dr. Bruce Bean presented our human proof of concept data at an invited oral platform presentation in April at the academy of -- annual academy of neurology meeting in Washington D.C. These data represents the first human proof of concept data for our proprietary formulation in separate studies in the electrically induced muscle cramping model.

The treatment demonstrated a statistically significant overall treatment affect in humans, reducing cramp intensity by three-fold compared to subjects taking a vehicle control with a P-value of less than 0.0001. Each of these three studies was also individually statistically significant. Just last week, we announced the two abstracts relating to the role of TRP ion channel activators to control muscle cramps have been accepted at the ECTRIMS Meeting in Barcelona and for the society for neuro-science conference in Chicago.

We look forward to these upcoming opportunities to share our clinical results with the basic neuroscience and MS research communities. With our ongoing and future clinical development programs, we expected to define the impact of this noble therapeutic approach harnessing chemical neuro-stimulation to prevent muscle cramps and spasms in different clinical settings. With our study in nocturnal leg cramps underway, we are now focusing on multiple sclerosis and motor-neuron diseases such as ALS as our next added opportunities.

We expect to initiate a proof of concept efficacy study ex-US and MS spasticity in the second half of this year and are evaluating plans for ALS. Our human proof concept efficacy data in nocturnal leg cramps with the beverage formulation initiated in April is on track, the randomized blinded placebo control crossover study is expected to enroll at least 40 subjects who experience nocturnal leg cramps at four nights a week. We expect to report these results by mid-2016.

Nocturnal leg cramps can cause severe pain, interrupted sleep, reduced quality of life and interference with activities of daily living. In the United States, an estimated 4 million adults over the age of 65 suffer from leg cramps every night. This represents a significant unmet need since there are no approved drugs in the United States for nocturnal leg cramps. With the aging population demographics in the U.S. and the known association of nocturnal leg cramps with age, we expect the number of people suffering regularly from nocturnal leg cramps to continue to increase. As a neurologist, I've seen firsthand how much need there is for therapeutic option to treat nocturnal leg cramps since the FDA has banned the use of quinine for nocturnal leg cramps. We hope our efforts will ultimately help the millions who are suffering from this painful condition.

And finally, to support our consumer product, we conducted an initial study of athletes who train several times a week intended to evaluate the efficacy of the proprietary treatment as measured by the incidence of cramps during training sessions. The study showed a statistically significant result, p less than 0.01 by Poisson regression demonstrating that Flex Pharma's treatment reduced muscle cramps during a two-week workout period by more than 50% when compared to the prior two-week baseline observation period.

The study also demonstrated a trend towards a reduction in cramp duration. The data was consistent with other measures favoring the Flex product. This study evaluated the Flex Pharma's proprietary treatment in a total of 23 athletes who frequently suffer from muscle cramps while engaging in high-intensity sports. Participants included men and women that trained 3 to 4 times a week. Participants administered the treatment 15 to 30 minutes prior to exercise. In the baseline period, cramps occurred in 47% of workouts compared to only 20% workouts when the product was consumed before workouts in the subsequent two-week period.

In another arm of the study, 21 healthy athletes administered the product an acute treatment administered at the onset of muscle cramps. This data showed positive trends with approximately two thirds of athletes claiming relief within five minutes when the proprietary treatment was taken at the onset of muscle cramp. This is the first study to demonstrate that our treatment prevents cramps occurring at a natural setting and adds to the growing body of data that TRP channel activators maybe an effective new treatment in individuals suffering from cramps and spasms. As Christoph mentioned we believe that this is the first time any consumer beverage has shown a statistically significant reduction of naturally occurring muscle cramps in athletes.

I'll now hand the call to Marina to discuss the consumer product.

Thanks, Tom. Good morning everyone. As marketers and brand builders, we are very excited to incorporate the recent data in athletes that Tom reviewed in our pre-launched campaign and shared these results with consumers. We feel it is critical to customer product in real life athletic scenarios as we prepare to launch our product in the first half of 2016.

In our consumer studies, we have seen anecdotal evidence that the proprietary treatment provides co-benefits around recovery and we plan to explore these co-benefits further in the future studies. We are very pleased to report that we have continued to make great strides in the developments of our consumer brand during the second quarter. As our talented team works to develop and bring to market a proprietary formulation for consumers based upon Dr. MacKinnon's breakthrough scientific insight, we have been seeding a version of the product with athletes establishing credibility with the endurance sports community and also educating, evangelizing and building demand with our target consumers.

The past few months have only strengthened our belief that we're developing a real game changer literally and figuratively for high achievers that want to be unstoppable and are interested products that optimized athletic performance and provide peace of mind. We believe that our proprietary formulation has a potential to create a new consumer category neuro-muscular performance which is based on synching muscle and nerve.

The nerve controls the muscle. When the nerves are destabilized by any number of factors that athletes often face such as fatigue, heat, severe electrolyte loss, reduced blood flow and excessive firing of motor neuron occurs and thus the muscles performances negatively impacted even cramping. This can have serious consequences for athletes. Conversely, when the communication between the nerve and muscle is perfectly stable and in sync the muscles can function properly and athletes can perform at a higher level. Leveraging breakthrough neuromuscular science [rooted] in TRP channel activation, our sports nutrition contains natural inorganic ingredients that have been precisely calibrated to synchronize your nerves and muscles; thereby, maximizing your neuromuscular performance.

In May, our proprietary formulation earns certification from NSF International Certified for sport program. The program certifies ingredients and test products to ensure they do not contain contaminants or banned or prohibited substances and is used by the MLB Players Association, NFL Players Association, PGA, LPGA and the Canadian Center for Ethics and Sport. NSF Certification represents an important step forward as it allows professional athletes to sample our product. Over the summer training season, we have provided samples to several professional athletes and pro-team. Initial feedback has been positive.

In June, we hosted an event in New York City targeted at endurance athletes and begin our pre-launched of the brand. As part of the campaign to educate endurance athletes, professional sport teams, coaches and trainers about Dr. MacKinnon's discovery, the website it's the nerve.com went live in early June and began to provide foundational information necessary to begin creating anticipation and excitement for our brand. If you go to the website, you can see a preview of how we expect to market our product and download the whitepaper describing the origin story and the science behind the discovery.

As Christoph mentioned, the short film featuring Rod and Bruce is live on our site on a thank you page users received once they provide their email address to gain access to the whitepaper. These are important tools in communicating our authentic and compelling back-story. As we continue the stealth launched we discussed quarter, we have hired field representatives in Boulder, Boston and Los Angeles and my team has initiated activities in these markets with the high preponderance of endurance athletes and a solid intersection of brains, brawn and buzz in preparation for the launch in the first half 2016.

Just last week, we were in Boulder at the endurance coaches' summit discussing our science and data with athletes and coaches. We also used this opportunity to sample the product with Ironman Boulder Tri-Athletes. The response has been overwhelmingly positive and more people are willing to try the product because it's also one of their greatest fears in racing. We believe that this is because most of the athletes suffer from cramps, twitches, fasciculation in this longer format races.

During these events, several people who have tried the product during our pre-race sampling told us that the spicy profile underscores that the product is working for them. People are generally intrigued by the science and impressed with our pharma efforts which validates that our product is rooted in science. Working with the former head of the Gatorade Sports Institute, we continue to conduct further research towards demonstrating an efficacy of the product in athletes.

We are still optimizing the product inspired by Rod's original formulation and believe the final product will be organic which will enable us to tap into a high growth segment of the consumer market. Additionally, we have expanded our team in the past few months with several level executives with senior level executives to build our expertise in a couple of important areas including distribution and supply chain logistics.

As far as marketing and publicity, we continue to take the strategic approach to the launch of this product using a community centric word of mouth digital media, social media PR based approach. We are currently working on a range of important marketing initiatives which include identifying potential endorsement opportunities, price elasticity work and finalizing the product and proprietary packaging supporting its premium positioning. As we approach the official launch of the first half of 2016, you can expect that we will provide considerably more specifics about our product and business approach in consumer markets.

I will now turn the call back to Elizabeth.

Thank you, Marina. We are now going to prepare to open up this call for Q&A and joining us for the section is Jennifer Cermak our VP of R&D and John McCabe our VP of Finance. So, I'll just ask that for participants to ask no more than a couple questions and then rejoin the queue so that everyone has a chance. Operator, we are now ready to take question.

Thank you.

(Operator Instructions)

And our first question comes from Josh Schimmer with Piper Jaffray. Your line is open.

Great, thanks for taking the question, a couple for Tom and one for Marina. Tom, you've mentioned your selecting the lead to drug candidate ,what criteria are you using, what is -- what kind of parameters are you using to determine which is the lead demand for the data at ECTRIMS and that the society of neuroscience, will there be any new clinical data presented there?

So, firstly as far as this individual compounds go, these are synthetic compounds that are the chemical counterparts [two] constituents that are in the biological extract and obviously what we want to establish is a continuity and consistency in the data that are generated pre-clinically to those that we will generate in various clinical paradigm. So, we'll update you on that as we proceed in the third quarter of this year. As far as the abstracts go, those abstracts will be presented at the ECTRIMS Conference that will be in Barcelona this year and then later in the year at the Society for Neuroscience Meeting those will summarize the data that we've generated thus far in the electrically induced cramping model.

So that's will be the results that we haven't seen yet?

No, this will be the results that we have previously generated.

Got it.

Yes, we'll also have some data we've present -- that we've announced on the athlete studies -- the initial athlete study as well as some plans for our MS studies.

Got it. And then Marina I guess you said you'll give us more specifics that the consumer launches we get closer to that that time point but just more generally can you give us the sense of how the actual launch would differ from the pre-launch activities, is it going to be kind of smooth and seamless from one end to another or is it going to really mark a new infliction point in promotional activities, is it going to be nationwide or are you still going to focus on specific works early next year? Thanks.

So, pre-launch to launch will be seamless. Pre-launch is really about educating the early adapter endurance athlete market, educating them on this issue around it's the nerve not the muscle which is a totally new way to think about how muscle cramps are created. So, it's education through digital media, through word of mouth, through community centric efforts everything I spelled out it's also building awareness and building pent-up demand so we have a running start when we launched.

We will have collected emails and we will be creating a community centric initiative during pre-launch so that we sustain engagement among this early adapters and then seamlessly we will move into launch which will be more promotion around the real-life product that will be shown in our distribution channels and you will be able to purchase this so that's the big difference. The other difference is that we won't be needing we think to educate as much as we want to promote the brand. So, it will be more about brand building and more about launching a campaign that speaks to this new product.

And can you talk a little bit about the supply chain where ultimately you expect the product to be made available, is it primarily going to be online ordering or in the stores and if so which stores should we be thinking of?

Well, we're still working through all that but the two-key distribution channels will be retail -- especially retail offline and e-commerce. We are early adapter shop, so we want to make sure that we emotionally connect as well as give them the product where they like to shop. You are what you sell so we want to make sure that we're also in those distribution channels where the audience is receptive and interested in buying our kind of product.

Right.

And Marina I think Josh also ask about kind of which markets versus profitably national?

So, we're going deep into the three markets we have discussed Boulder, Boston and L.A. as a start and that's for marketing purposes as well as distribution. We have no plans to launch nationally yet as we have discussed building the [cult] following and building a [cult]-like brand in nurturing that in select areas so that we can expand aggressively in those areas and have a halo of PR and social media to amplify those efforts.

Got you.

Operator, we can take the next question.

Thank you. Our next question comes from Chris Howerton with Jefferies. Your line is open.

Hi, thanks for taking the question. Josh, I think has some great question. It's just I had a followup on the MS study and I guess for the ALS that you're kind of (inaudible) as well, are those days going to be with the beverage as well or within potentially the new drug product candidate?

So, the MS study is about to start in Australia and we were using a beverage that is very similar to what the consumer product is going to be. Obviously, there are many moving parts right now in terms of what the final composition of the consumer products will be as well as our ongoing effort to really understand how these individual compounds that are in the chronologic extracts actually interact and how the bases of these responses is related to synergistic [spec] at the TRPV1 and A1 channels. So, this is really a fundamental process in determining what is really the optimal composition for both the consumer product and the eventual pharmaceutical product.

Got you and I guess for just the pre-launch activities and the thing that hires that you've made Marina, is there any significant activities towards securing the supply chain, any things of those nature or we will get those updates later on? Thanks.

I can tell you that we have a very seasoned supply chain senior director on staff full-time who is aggressively moving towards launch and in addition we hired the ex-head of operations for Pepsi who spent 30 years driving that is a key consultant so we are moving aggressively on the supply chain side.

Okay, that's great. Thanks. That's been great [quarter].

Thank you. Our next question comes from Monica Gorman with Cantor Fitzgerald. Your line is open.

Hi, this is Monica, thanks so much for taking the question. I was just wondering if you had any key steps that you think would be really important for us to look out for with the commercial launch next year and then I just was also wondering if I could get a little bit more detail on the formulation of the drink and are you expecting to have one flavor, multiple flavors or varieties, or any more colors you can provide from that perspective?

So, we will be launching with one product similar to what Red Bull did and many brands that I've been associated with where you really want to solidify the base before you want to extend and dilute that franchise. With that said, we have plans for robust product portfolio but not initially. So, you will expect to see one flavor. So, the other question you ask with milestones, I think -- stay tuned for that but we are well on our way to be ready for a successful launch mid-next year.

Thank you, great.

Thank you.

Operator?

Thank you.

(Operator Instructions)

And our next question comes from Bryan Czyzewski with JMP Security. Your line is open.

Hi, this is Bryan, thanks for taking the question. Curious if you can clarify that endpoint that you've talked about in your exercise associates in muscle cramp study where there was a significant reduction in the frequency of cramps, was that a reduction in the cramps that occurred during the session or overall just curious about some clarity on that number.

Yes, so the way we measure that is simply the number of workouts that were associated with cramping or not so that's the basis of that. But obviously, we asked a number of different questions that are important in terms of the cramping event as it occurred during the exercise but also in the follow-up period during the night and even during recovery the next day. So, what we're really trying to establish here is the impact on overall neuromuscular performance and as you know for athletes it's very important to overcome their cramp but also to get back into the race. So, as Marina pointed out, either things that we're going to be dissecting further and looking at very carefully in the follow one studies that we're doing out in the field.

And will you guys be sharing some of that data at the upcoming meetings?

Yes.

Great. And then second question on the launch itself and the pre-launch, curious when we might be able to see something about branding and some details if you'll be sharing on a sampling rates and what event sampling will be occurring?

Yes. So, we've just started sampling and we're not having up our support in market until September-October, so we will be able to share results from those sampling efforts in late fall. In regards to branding, that exercise takes awhile and you want to make sure you nail the big idea, so we're in the process of developing that work as we speak, but that's the process that take some time and as I say we won't be launching anything until first half next year, so we are well in advance of that timeline.

Great, thank you very much.

Operator, can you just ask one more time for people to enter the queue.

If you have a question, press the star then the one key on your touchtone telephone. And I'm showing no further question, so I would now like to turn the call back to Christoph Westphal for any closing remarks.

Thank you for joining us this morning at Flex Pharma. We are excited to be building the leading neuromuscular company built on our strong foundation of excellent people and great science. We hope to see many of you at our November Investor Day in New York City. Thanks so much.

Thank you very much.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone, have a great day.