Savara Inc. (SVRA) 2020 Q1 法說會逐字稿

Good day, and welcome to the Savara Conference Call.

(Operator Instructions) An audio webcast of this call will be available on the Investors section of Savara's website at savarapharma.com. This call is subject to copyright and is the property of Savara. All recordings, reproduction and transmission of this call without the express written consent of Savara is strictly prohibited. As a reminder, today's call is being recorded.

I would now like to turn the call over to Anne Erickson, head investor of relations (sic) [Head of Investor Relations] and Corporate Communications at Savara. Please go ahead, ma'am.

Good afternoon and thank you for joining us today.

A press release reporting our first quarter 2020 financial results was issued earlier today, May 7, 2020, and can be found on the Investors section of our website at savarapharma.com. If you've not received this release or you would like to be added to the company's distribution list, please e-mail me at ir@savarapharma.com.

This call is being webcast live, and 1 hour after the call, a replay will be available on the company's website and will remain available for the next 30 days. A telephone replay will be available through May 14.

Today's conference call and webcast contain forward-looking statements within the meaning of federal securities laws, including statements regarding the company's strategy, goals, product candidates, clinical studies and financing matters. Such statements are subject to significant risks and uncertainties, including those described in our press release issued today, Thursday, May 7, 2020; and our recent SEC filings on Forms 8-K, 10-K and 10-Q. Actual results or performance may differ materially from the expectations indicated by our forward-looking statements due to those risks and uncertainties. We caution you not to place undue reliance on any of the forward-looking statements which speak only as of today.

We will take analyst questions at the end of the call. However, we encourage shareholders to submit questions via e-mail to ir@savarapharma.com. Time permitting, we will address these questions alongside any others that we've received today.

Joining me on the call today are Rob Neville, Chief Executive Officer; Badrul Chowdhury, Chief Medical Officer; Dave Lowrance, Chief Financial Officer; and Taneli Jouhikainen, President and Chief Operating Officer.

I'll now turn the call over to Rob.

Thank you, Anne. And thank you, everybody, for joining us on the call this afternoon, appreciate that.

I wanted to start by saying that, despite the widespread and far-reaching impact of COVID-19, we've enjoyed a strong start to the new year. This is a testament to the commitment and talent of my colleagues and has allowed us to navigate these uncharted waters with confidence and an eye on the future. While no one knows how long the uncertainty of the situation will last, Savara's Board and management team, alongside our employees, remain focused on our mission. Against the backdrop of COVID-19, our commitment to patients has never been more important, and that commitment is reflected in everything we do.

With regard to our programs, we've -- are about to continue discussion with the FDA about IMPALA 2. We believe we now have a design for this confirmatory study, of which Badrul will share the details with you in a few minutes. We are grateful for the collaborative nature of our conversations with the agency and are confident that we have aligned on a feasible study design that will successfully evaluate the efficacy and safety of Molgradex in aPAP. Additionally, we've strengthened our pipeline with a new Phase III asset that gives us another shot on goal to grow and expand our business. We have always sought to develop new therapies that address unmet therapeutic need for orphan lung diseases, and now with the addition of Apulmiq to our late-stage pipeline, we have another opportunity to bring a drug candidate to market that could transform the standard of care for patients who have no other treatment options available.

Finally, while all companies have been impacted by the pandemic to some extent, we believe we can navigate the challenges we now face with 2 of our clinical studies in cystic fibrosis, specifically the Phase III AVAIL and Phase II ENCORE studies. Due to practical limitations caused by COVID-19 concerns, both studies stopped enrolling new patients at the end of March. And in adherence to FDA guidelines, best efforts are being made to allow those who are already enrolled to continue with study treatments and site visit protocols. I'm happy to report that these efforts are proving effective. To date, we've been able to keep the majority of patients in studies through close collaboration with the research centers and by allowing telemedicine visits where possible. In this regard, we are monitoring the situation closely and continue to follow guidance from government bodies about study conduct. Fortunately, we reached numbers close to our target enrollment in the AVAIL study, which is evaluating AeroVanc in methicillin-resistant staph aureus or MRSA lung infection.

Enrollment in the adult population completed with 55 patients out of the target of 50. The primary analysis population, and that is the younger patients between 6 and 21 years of all -- of age, enrolled 133 patients out of the target of 150. While we remain hopeful, enrolling fewer patients will have some impact on the study's statistical powering. However, we won't have a more accurate estimate of that impact until the study is complete. We continue to expect top line results in early 2021 and look forward to sharing those data with you then. The exploratory ENCORE study was nearly half enrolled with 14 patients out of a total of 30. Stopping enrollment due to COVID-19 concerns was clearly a disappointment, but we believe the data from these 14 patients will provide valuable information on the safety and potential efficacy of Molgradex in nontuberculous mycobacterial or NTM lung infection. Once ENCORE concludes, we will determine next steps for the NTM program, which also includes the recently completed Phase II OPTIMA study.

I am pleased to report that we aren't just reacting to the challenges that COVID-19 has created. We are also contributing to the fight against the pandemic. We are in discussions with the University of Giessen in Germany to supply drug for investigator-initiated clinical study in COVID-19 pneumonia. A placebo-controlled multicenter study will assess the potential efficacy of Molgradex in preventing progression of COVID-19 pneumonia to acute respiratory distress syndrome or ARDS, a serious lung condition that causes respiratory failure and has a very high fatality rate. Scientifically, the study is based on the belief that, prior to the development of ARDS, inhaled GM-CSF may stimulate the innate immune system function, leading to improved gas exchange, reduced morbidity and less need for mechanical ventilation. We are happy to support academic research institutions which are exploring the scientific potential of our investigational drugs to address this health crisis. You can find more information on the design, enrollment criteria and other details on ClinicalTrials.gov once it's posted. Because this is not a Savara-sponsored study, we are not in control of its execution other than supplying Molgradex and matching placebo. Therefore, we cannot provide you with additional details on the timing of enrollment or anticipated completion. Alongside patients in the health care community, we look forward to learning the results of this exploratory study and are proud to play a role in advancing the research and knowledge needed to help combat this pandemic.

Looking forward, we have an exciting and busy year planned; and we'll focus on our main priorities, which are advancing our Phase III programs. We are in a strong cash position and believe we are adequately resourced to execute our strategy and deliver long-term growth.

With that, I'll now hand the call back to Badrul, who will update you on our key R&D priorities for 2020.

Thank you, Rob. And hello, everyone. It is nice to be speaking with you again.

The direction for our lead program, Molgradex in aPAP, remains clear. Our #1 priority is to finalize plans for IMPALA 2. I'm pleased to report that, following discussions with the FDA, we now have a good understanding of the IMPALA 2 study design. We expect it to be a 48-week, double-blind placebo-controlled study with 2 arms: Molgradex 300 micrograms administered once daily compared to placebo. The lung function test of diffusing capacity for carbon monoxide or DLCO, which is a gas exchange measure that showed a nice separation between drug and placebo in the IMPALA study, will serve as the primary end point in IMPALA 2. The DLCO end point will be supported by 3 secondary end points that we believe measure direct patient benefit. Those end points are St. George's Respiratory Questionnaire or SGRQ, including the SGRQ total score and SGRQ activity component; and exercise capacity using a treadmill test. SGRQ has 3 components, which are symptoms, activity and impact. SGRQ total score combines all 3 and was a key secondary end point in IMPALA that demonstrated a good effect. For IMPALA 2, we separated out SGRQ activity, as it is most applicable to aPAP and also worked well in IMPALA. While the efficacy end points will be assessed at week 24 for primary analysis, the duration of the study will be 48 weeks. The reason for this is because the 48-week placebo-controlled treatment will help us to better support the durability of treatment effect; as well as long-term safety of the drug, which is intended to be administered chronically.

At a high level, this is the design of IMPALA 2. However, please be advised the final protocol is still being determined as we work through additional details of the study. Once the protocol has been finalized, we look forward to updating you on that as well as the details of the study, including timing for the study start and sample size. In the meantime, we are also initiating internal operational activities that can be completed now in order to get the study up and running as soon as possible following the finalization of the protocol. We are very excited by this progress, appreciative of the hard work and insightful contributions of our clinical team and external clinical experts, and are anxious to initiate a study that we believe will confirm the potential of Molgradex to treat aPAP.

Now I would like to shift gears and turn your attention to our newest Phase III program. In late March, we obtained the global rights to develop and commercialize Apulmiq, a late-stage investigational inhaled ciprofloxacin being evaluated for the treatment of non-cystic fibrosis bronchiectasis or NCFB. This program fits well with our specialized pipeline of inhaled investigational drugs targeting orphan lung diseases and is particularly compelling as there is substantial unmet medical need. With no approved pharmaceutical treatment options available for more than 150,000 patients in the U.S., Apulmiq could represent a blockbuster opportunity for Savara. We are very excited about the potential of this late-stage program and believe it is a nice complement to our other development programs.

NCFB is a growing medical problem. The disease is characterized by a vicious cycle of infection, inflammation and structural lung damage. Patients with NCFB are sick and can experience daily cough, productive sputum and exacerbations which can lead to hospitalizations. Managing the disease is difficult, especially given there are no approved medicines, and we believe it is important to continue advancing drug candidates for this devastating disease. The Apulmiq program was attractive to us because its previous development efforts have yielded a wealth of information and essentially provide us with a guide for a future confirmatory study. Apulmiq was evaluated in 2 Phase III clinical studies called ORBIT-3 and ORBIT-4 in a total of 582 patients randomized 2:1 for drug and placebo. On the time to first exacerbation, which was the primary end point in these 2 studies, treatment with Apulmiq did not result in a statistically significant difference from placebo on protocol-specified analysis for ORBIT-3 and marginally missed statistical significance in ORBIT-4. However, after Aradigm, company who previously owned the program, provided a re-review and re-adjudication of the pulmonary exacerbation events, ORBIT-4 did show a statistically significant difference for the time to first exacerbation. Subsequently, following an agreed-upon process with the FDA, an independent third-party evaluation of the data also concluded that ORBIT-4 showed statistical significance.

With regard to an important secondary end point, frequency of exacerbations, a separation between drug and placebo was seen in both studies, with robust effect demonstrated in ORBIT-4. For Pseudomonas aeruginosa bacterial load, which is decay efficacy measure for antibiotic effect, there was a demonstrated benefit showed in both studies. And favorably, Apulmiq was considered safe and well tolerated in the ORBIT studies, which is important as many off-label inhaled antibiotics currently used to treat NCFB are poorly tolerated and can cause tightening in the airways. Based on the results of the ORBIT studies and discussions between Aradigm and the FDA as well as our own assessment which we will verify with the FDA, we believe that one successful confirmatory study will be required for approval in the U.S.

We have learned a lot from previous development programs that will allow us to optimize the next study design. The extensive data from the ORBIT studies as well as other previous studies of inhaled antibiotics provide us with valuable knowledge that can be applied to the future development program, such as enrolling patients with historically high number of exacerbations and using frequency of exacerbation as the primary end point rather than time to first exacerbation. Operationally, our next steps will involve speaking with the FDA to discuss the parameters of the confirmatory study. This is a process and accounted for multiple regulatory interactions. It will take some time to ensure we get it right. As progress is made and key decisions are finalized, we will communicate with you.

As we can imagine, with 3 Phase III programs to manage, we have a lot of important work to do and exciting times ahead. I can tell you that we have the core expertise to execute on our plans and are implementing additional processes and procedures to ensure our operational maturity within our R&D organization. 2020 is sure to be a productive year.

I'll now turn the call over to Dave, who will provide you with a financial update.

Thanks, Badrul. And hello, everyone.

I'll start by updating you on our cash position. As of March 31, 2020, we had cash, cash equivalents and short-term investments of approximately $105 million, with approximately $25 million of debt. Under our current operating plan, including the anticipated second tranche of $46 million from our December financing, we believe we have sufficient capital to fund planned operations well into 2022.

With respect to our quarterly results, Savara's net loss for the 3 months ended March 31, 2020, was $15.4 million or $0.27 per share compared with a net loss of $12.1 million or $0.34 per share for the 3 months ended March 31, 2019.

Research and development expenses were $13.2 million for the 3 months ended March 31, 2020, compared with $10 million for the 3 months ended March 31, 2019. The increase was due to $5.4 million related to the acquisition of the development and commercialization licensing rights to Apulmiq. This upfront license expense was partially offset by decreased development costs associated with Molgradex and AeroVanc in the amount of $1.7 million and $0.5 million, respectively. General and administrative expenses for the 3 months ended March 31, 2020, were $3 million compared with $2.8 million for the 3 months ended March 31, 2019. The increase was primarily due to noncash stock-based compensation charges, personnel costs and corporate insurance costs.

I'll conclude my remarks by reiterating that our cash position enables us to execute our strategy and deliver long-term growth.

Now I'll hand the call back to Rob.

Thank you, Dave. And thank you to Badrul earlier.

In summary, I wanted to leave you all with just one thought, and that is Savara is not defined by any one of our programs. Our focus is on gathering and strengthening the components required to become the orphan lung disease company, including the development of a diverse pipeline of drug candidates targeting multiple rare respiratory diseases. While I would love for the drug development process to be far quicker, with 3 late-stage programs, we continue to see this vision take shape and are more committed than ever to getting drugs to market and into the hands of patients. That is why 2020 and beyond will be all about operational excellence, ensuring we have the right processes in place to execute our strategy flawlessly.

We do thank you all for your continued support. And I'll ask Chuck, the operator, to open the call for analyst questions.

(Operator Instructions) And our first question will come from Michael Higgins with Ladenburg.

This is Edward Marks on for Michael. Just 2 quick ones from me. Wondering what the timing on the discussions with the FDA for the NCFB program as you're looking to initiate that trial.

Yes. This is Taneli. We will be expecting to do this discussion as a priority during this year, but given the fact that there may be several interactions, we cannot really give specific guidance as to when exactly we will be able to report clear outcomes.

Okay. And then looking at IMPALA 2. With the caveat that was provided in the prepared remarks about how the design isn't 100% solidified yet, I'm just wondering if you could talk about any changes, if any, that are being made in this trial versus the first IMPALA trial.

Badrul, could you please go ahead with that?

Sure. There are a couple of highlights I would like to point out. Broadly, the trials are similar. The highlights of differences are the intermittent dosing which was in IMPALA, which was not as robust for the continuous dosing, is being dropped. So the IMPALA 2 will have 2 treatment arms, the continuous dosing and the placebo. The primary end point for IMPALA was A-a gradient, which is a gas exchange measure. For IMPALA 2, the primary end point will be DLCO, which is also a gas exchange measure. The placebo-controlled treatment period for the IMPALA was 6 months. For IMPALA 2, the placebo-controlled treatment period will be 48 weeks. So these are the high-level differences. Thank you.

I will now turn the call over to Anne Erickson. Please go ahead.

We've gotten a few questions in by e-mail, so I'll just read through the first one. First one is, will COVID-19 impact the start of the IMPALA 2 start or the study conduct?

Well, it is really a little too early to know that right now. If things get back to close to normal in the coming months, then probably not, but having said that, there is, of course, the possibility of a second wave of coronavirus later in the year, which is why we really need to make our study as COVID proof as we can. This would, for instance, include designing options that allow participation in the study with less frequent visits to hospitals or care providers and assessment of end points accordingly as much as possible. And again, so on this topic we will know much more as the planning progresses and, hopefully, have more clarity also on what to expect in terms of the pandemic progression as the year continues.

Thank you. Chuck, back to you.

Our next question will come from Suji Jeong with Jefferies.

So I have one question about the IMPALA study 2 -- IMPALA 2 study for aPAP. So is the trial design going to be different for EU? Have you guys had any discussions about the design with the EMA?

I am Badrul. Conceptually, the trial design is unlikely to be different because IMPALA was same across the world, including EMA. As far as interaction with other regulatory bodies, we will get back to you once we have those interactions and have firmed up the protocol.

Our next question will come from Liisa Bayko with JMP Securities.

Can you maybe talk a little bit about patient selection and what kinds of patients you'll be honing in on specifically for the PAP study?

The patients will in a broad sense be similar to the IMPALA study, meaning they would have to have a diagnosis of PAP, which is obvious. And this is autoimmune PAP, so they will also have to have the antibody to justify the autoimmune designation. And the primary end point being DLCO, we will look to enroll patients who are impaired on the DLCO so that they have got room for improvement. So those are the highlights which we can share right now. Thank you.

I will pass the call back to Anne Erickson for any additional questions.

Yes. We received 2 more over e-mail. The first one is, do you have enough cash to get through the IMPALA 2 study?

So there are still several open factors that are going to impact the size and the time lines of our study. That's going to include the potential effects of the pandemic as well. So we're currently working to finalize our study protocol and all the practical arrangements, including CRO selection and CRO agreements. Once we have all those factors known, we'll be able to have better estimates on the study budget and time lines.

Okay, thanks. The next question that came in is, "You mentioned operational maturity efforts. Can you talk to us specifically what you're talking about?"

Yes. So what we mean with that is that successful execution of Phase III studies does require very robust and well-defined internal processes; as well as top-notch external vendors to ensure that we get the highest possible quality in all of our study activities; as well as, of course, robust study oversight. Well, this is not anything new as a focus in Savara. We are putting a lot of effort now in implementing improvements to our operations and also strengthening our resources in order to have the highest probability of success in our studies going forward.

Okay, thanks. I'm sorry. One more question came in, and it is around the Apulmiq program. Do you have enough capital to get through the Apulmiq Phase III study?

So just let me start by saying that the first priority is the IMPALA 2 study, and our resources and cash are allocated to that program. Apulmiq, on the other hand, it's a bolt-on to Savara and is not currently fully funded. We do have the necessary resources, though, to get through the initial activities, which are the negotiations with the FDA; and all the prep work for ORBIT-5, as we expect calling it. However, prior to initiating that study, we will then determine what resources are needed and how best to fund it.

Okay, thank you. That was the end of the questions that came in over e-mail. So this is the conclusion of the call. Thank you, everybody, for dialing in.

Thank you. Stay safe.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.