Savara Inc. (SVRA) 2019 Q4 法說會逐字稿

Welcome to the Savara Conference Call. (Operator Instructions). An audio webcast that 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 or transmission of this call without the expressed written consent of Savara is strictly prohibited. As a reminder, today's call is being recorded.

I would now like to turn the phone over to Anne Erickson, Head of Investor Relations and Corporate Communications at Savara.

Good afternoon, and thank you for joining us today. A press release reporting our fourth quarter end of year 2019 financial results was issued earlier today, March 12, 2020, and can be found on the Investors section of our website at savarapharma.com. If you've not received this release or if you would like to be added to the company's distribution list, please e-mail me at ir@savarapharma.com. This call is also being webcast live and approximately 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 also be available through March 19.

Please note that 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, March 12, 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 to not place undue reliance on any of the forward-looking statements, which speak only as of today. As usual, we'll take analyst questions at the end of the call. However, we also encourage shareholders to submit questions via e-mail to ir@savarapharma.com. Time permitting, we will address these questions alongside any others received.

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

I'll now turn the call over to Rob.

Well, thank you, Anne. Good afternoon, everybody, and welcome to our fourth quarter and year-end call. I do appreciate you joining us. And today, we'll provide a recap of the last quarter and summarize results we just announced today from 2 clinical studies in Molgradex, including positive data from the open-label period of the IMPALA study that showed clinical outcomes were sustained or improved over a longer duration on drug. Finally, we'll share our plans for advancing our pipeline in 2020.

I am pleased to say we ended 2019 with positive momentum. Notably, we secured additional financing by closing a private placement, with total potential proceeds of up to $75 million. We strengthened our Board of Directors and executive leadership team and announced Molgradex for aPAP, our lead development program, w granted breakthrough therapy designation by the FDA.

Regarding the financing, the deal was led by Bain Capital Life Sciences with participation by existing and new investors. The additional funding means we find ourselves entering 2020 in a very strong cash position and able to execute on all our corporate priorities. Specifically, the net proceeds from the financing should sufficiently fund the second Phase III study for the Molgradex aPAP program as well as other operational expenses. As always, we're grateful for the support of our investors like yourselves that believe in the company and our vision.

In order to help us achieve this vision, we recently broadened the depth of our Board of Directors. Last December, we announced that Dr. An van Es-Johansson was appointed to our Board. An has deep expertise in orphan drug developments and an extensive background in the development of FDA- and EMA-approved orphan drugs. Additionally, as part of the financing, we welcome Dr. Ricky Sun, partner at Bain Capital Life Sciences, to our Board. Ricky's experience includes leadership roles within biotech companies as well as health care investment funds and equity research on Wall Street.

Beyond the border, we expanded our executive leadership team with the appointment of Dr. Badrul Chowdhury as Chief Medical Officer sitting with me here in Austin. Badrul's appointment comes at a pivotal time as we advance Molgradex aPAP program through the next regulatory milestones. Badrul has 2 decades of regulatory leadership experience as director of the FDA's Pulmonary, Allergy and Rheumatology division, the very division responsible for reviewing Molgradex and aPAP, when he presided over numerous drug element programs and approvals for pulmonary and orphan disease medicines. He's on Board as he will be instrumental in devising our regulatory strategy for our development programs and guiding our interactions with regulatory bodies. For more information on Badrul's impressive background and to hear about why he joined Savara, I'd encourage you to read our most recent blog post which you can find on our IR page of our website.

We're pleased to have attracted these highly experienced and thoughtful industry leaders to Savara. Each of their respective talents complement our existing team and will no doubt prove invaluable as we capitalize on the many opportunities that lie ahead.

Running out the events from last quarter, I'll quickly touch on the breakthrough therapy designation that the FDA granted to Molgradex for the treatment of aPAP. We believe this designation, which was announced at the end of 2019, reflects the significance of Molgradex as an investigational product and is an important development as we embark on the second Phase III study for the program. Breakthrough designation is granted to drug candidates for which preliminary clinical evidence as indicates that the drug may demonstrate substantial improvement over available treatment. Additionally, this designation allows for us to have increased collaboration and more frequent dialogue with the FDA as we enter this critical development period.

I will now ask Badrul to summarize the IMPALA open-label results we announced today and share his perspective on what this all means for the Molgradex aPAP program in 2020.

Thank you, Rob, and hello, everyone. This is my first quarterly call with Savara. I'm happy to be here and pleased to be speaking with you.

Let me take a few minutes to introduce myself. I'm a medical doctor, U.S. board certified in internal medicine and in allergy and immunology and also have a PhD in immunology. I've spent a large portion of my career in public health, having served nearly 20 years at the FDA year. During my last 15 years at the agency, I was the director of the division of Pulmonary, Allergy and Rheumatology Products, Center for Drug Evaluation and Research. Just prior to joining Savara, I was a Senior Vice President at AstraZeneca and the Chief Physician Scientist in AstraZeneca's respiratory, inflammation and autoimmunity group.

I've been asked why I left a big pharma to join Savara. For me, the decision was simple. Savara focuses on developing drugs for rare respiratory diseases, and that is aligned with my expertise and interest. The allure of a small biotech like Savara is different than big pharma as it gives me the opportunity to be involved in many aspects of drug development and to have a broader impact across the organization. And perhaps most importantly, Savara has an attractive pipeline with notable programs like Molgradex in aPAP. Having had the opportunity to evaluate the IMPALA data even before joining Savara, and now having reviewed the impressive open-label data from the study, I truly believe Molgradex has the potential to transform the lives of patients living with aPAP. I hope that my experience and expertise can help usher this investigational therapy through the final phase of development and gain regulatory approval.

Today, I will provide you with an update of both the open-label period of the IMPALA study as well as IMPALA-X, our extension study. Let's start with the highlights of the open-label IMPALA data we just announced. This data, which demonstrate sustained or continued improvement after a longer exposure to drug reaffirm our confidence in the aPAP program. As a reminder, IMPALA consisted of 2 treatment period. Period 1 was the 24-week double-blind placebo-controlled portion of the study in which patients were randomized to receive either Molgradex once a day continuously; Molgradex once per day every other week, otherwise called intermittent dosing or matching placebo. This was followed by period 2, a 24- to 48-week open-label period, during which all patients received intermittent dosing of Molgradex.

During period 1, the double-blind period, we observed a dose frequency dependency in the key endpoint with continued administration of Molgradex resulting in higher efficacy than placebo and continuous dosing appearing to result in higher efficacy than intermittent dosing. Therefore, for simplicity, today's call will focus on the group that had received continuous dose of Molgradex during the double-blind period versus those that have received placebo, both of which received intermittent dosing during the open-label period.

I'm happy to report that in the open-label period, improvements from baseline in A-a gradient as well as the other gas exchange ratio, the diffusion capacity of carbon monoxide, or DLCO, which was a prespecified secondary endpoint, were maintained or progressively continued to improve in the continuous dosing group. And importantly, A-a gradient and DLCO improvement seen in patients who were on placebo but transitioned to active drug showed similar improvements to those seen in patients who have been in the continuous dosing group. After looking at these 2 independent measures of gas exchange, we believe these data demonstrated that removing surfactant from a patient's lung translates into a meaningful improvement in gas exchange data. And those improvements continued after patients who were treated with Molgradex over a longer duration of time. While improvements in these gas exchange ratios are certainly important, understanding how they translate into a clinical benefit is equally, if not more, important.

Let's now turn to our key secondary endpoint starting with St. George's Respiratory Questionnaire, or SGRQ, which is a patient-reported outcome measure. As reported, when we announced the IMPALA top line data, we observed an impressive improvement with both active treatment groups compared to placebo in the SGRQ. Encouragingly, we were happy to see that as shared, the improvements observed in the continuous dosing group during the double-blinded period of the study were maintained and even further increased by the end of the open-label period. Additionally, as with the gas exchange measures, patients who had been on placebo demonstrated improvement in SGRQ scores after receiving active drug, improvements that essentially caught up with those seen in the group of patients who received continuous dosing of Molgradex. Similar trends were seen in the 6-minute walk distance with changes from baseline maintained or improved.

With regard to whole lung lavage, the rate ratio of this procedure between the continuous dosing group and placebo was quite encouraging at week 24 of the double-blind period of the study. So the 3 whole lung lavage procedures were conducted, including 9 whole lung lavage procedures in the continuous dosing group compared to 17 in the placebo group. Importantly, reduction in the frequency of whole lung lavage continued during the open-label period of the study with only 5 whole lung lavage procedures conducted during the open-label follow-up period. These data suggest that treatment with Molgradex has the potential to considerably reduce the need for whole lung lavage, and this outcome was not only sustained over time but was further reduced with a longer exposure to treatment.

Lastly, it is worth noting that the dropout rate in the IMPALA study was quite low. A total of 128 patients completed the open-label period at period 2 of the study, which puts the dropout rate at only 7% across the entire study. In our opinion, data from the IMPALA open-label period could not have been more convincing. These results reinforce our confidence in the program and provide additional support that Molgradex has the potential to become the fourth approved drug for patients with aPAP. While we announced the top line data from the open-label period of IMPALA today, please note that we expect to present more comprehensive data from the study at an upcoming scientific conference and eventually in a peer-reviewed journal. We will keep you updated on these events.

Looking beyond period 2, the open-label period of the IMPALA study, let me take a minute to bring you up to speed on IMPALA-X. This is our ongoing open-label extension study that allows patients rolling off IMPALA to continue treatment for up to 3 additional years and will help to determine the longer-term safety and use of Molgradex in patients with aPAP. I'm happy to report that in February of this year, IMPALA-X was fully enrolled with a total of 60 out of 64 eligible patients. Following the whole lung lavage trend I just described in the IMPALA study, to date, only 3 whole lung lavages have been performed among the 60 patients in the IMPALA-X. Additionally, there have been no dropouts reported in the extension study.

Now what does this all mean for the Molgradex aPAP program in 2020? It means that the direction for our lead program is very clear. Our #1 priority is to plan a second base preclinical study, which is likely to be known as IMPALA 2. We are in discussions with the FDA regarding the IMPALA 2 study design and endpoints. I will initiate the study as soon as possible. While we can't yet guide on the timing of the study start or comment in detail on the potential design, we are confident that the next study will only have one active drug arm, that being a daily dosing regimen of Molgradex compared to placebo. The dose of Molgradex in the IMPALA 2 will likely be the same dose that was used in the IMPALA study. Fortunately, breakthrough therapy designation means we will get more frequent interaction with the FDA on a shorter time clock, and the agency will work with us on the design of the study. As conversations with the FDA progress and key decisions are made, we will share material outcomes with you.

Now having already run a global Phase III study across 38 sites, we believe we have the relationships and knowledge to get another study up and running with high efficiency. In order to start the study as soon as possible, however, we must concentrate our efforts on the related priority projects. Therefore, we are no longer considering the regulatory filing based on the current data in any geography, rather, we will focus on activities that support a timely initiation of the next Phase III study.

Thank you for your time. I will now pass the call to Taneli, who will brief you on the other programs.

Thank you, Badrul. Good afternoon, everyone. Rounding out the update on Molgradex, I would like to touch on the microbiology results we announced today from OPTIMA, our 48-week exploratory open-label noncontrolled Phase II study that assess Molgradex for the treatment of nontuberculous mycobacteria, or NTM, lung infection in patients not affected by cystic fibrosis. The study, which enrolled patients with either Mycobacterium avium complex, or MAC, or the more difficult-to-treat Mycobacterium abscessus was divided into 2 treatment groups, both of which received Molgradex administered once daily. Patients in both treatment groups were sputum culture positive, with patients in treatment group 1 being on antimycobacterial regimen, while patients in group 2 were not. All patients in the study were quite sick. They suffered from chronic infection and was treatment refractory. The primary end of the study was sputum culture conversion defined as at least 3 consecutive time points of sputum samples without growth of NTM during the treatment period.

Results from the ITT population showed that 5 out of 24 patients with MAC or 21% achieved a sputum culture conversion, with 2 of those patients remaining culture-negative through the 12-week follow-up period. Such culture conversions were not observed in patients with abscessus infection. Among the 32 patients, 14 experienced serious adverse events, 1 of which was considered potentially treatment-related. The most common SAE was infective exacerbation of bronchiectasis as one might expect. Reflecting the severity of the disease in this patient population, 3 patients died during the study with all deaths unlikely related to the study drug. While the results were not quite what we had hoped for, we will continue to assess the full data set of OPTIMA to better understand the clinical outcomes. Once we have results from our other NTM study called ENCORE, which is evaluating Molgradex for the treatment of NTM in people living with CF, we will review our options and make decisions about the future of our NTM program. In the meantime, we expect to submit comprehensive data from OPTIMA at an upcoming scientific conference.

In closing, I'll provide you with a quick update of AVAIL, our pivotal Phase III study evaluating AeroVanc for the treatment of MRSA lung infection for people with CF. As we have guided on previous calls, the target enrollment for this study is 200, and we are nearing completion. The adult population has been fully enrolled for quite some time and as of this month, the primary analysis population, which is patients between 6 and 21 years of age, have enrolled 133 patients out of a target of 150. So this leaves 17 to go. Given our past enrollment speed and considering the coronavirus concerns, we will only continue to enroll patients in AVAIL until the second quarter of this year. Taking into account our current enrollment over the last few quarters, we believe we will be able to enroll approximately 140 younger patients. AVAIL has a 24-week placebo-controlled period, followed by an open-label period. Thus, we anticipate sharing top line results with you early next year.

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

Thanks, TJ, and hello, everyone. Let me begin by updating you on our cash position following the recent finance. As of December 31, 2019, we had cash, cash equivalents and short-term investments of approximately $122 million, which includes receipt of the first tranche from our most recent finance. The second tranche from the financing includes milestone warrants that are exercisable at any time prior to the earlier 30 days following a defined clinical milestone or 2 years after the closing date of the finance. We ended the fourth quarter of 2019 with approximately $25 million outstanding in debt on our balance sheet, which, as reported in the Subsequent Events section of our 10-K, was refinanced with Silicon Valley Bank in January of 2020.

With respect to the fourth quarter, Savara's net loss was $31.7 million or $0.72 per share in 2019 compared with a net loss of $10.5 million or $0.29 per share for 2018. Research and development expenses were $8.7 million for the fourth quarter of 2019 compared with $9.9 million for the fourth quarter of 2018. General and administrative expenses were $3.3 million for both the fourth quarter of 2019 and 2018.

And now, with respect to our yearly results, our net loss for the year ended December 31, 2019, was $78.2 million or $1.95 per share, of which $26.9 million was a noncash charge to goodwill compared with a net loss of $61.5 million or $1.85 per share for the year ended December 31, 2018, of which $21.7 million was a noncash charge to in-process R&D. Research and development expenses were $38.8 million for the year ended December 31, 2019, compared to $37.2 million for the year ended December 31, 2018. The increase of $1.6 million or 4.3% was primarily due to development and regulatory costs associated with Molgradex for the treatment of aPAP, NTM and NTM in patients with CF as well as development costs associated with the enrollment and other Phase III study activities of the AeroVanc program.

General and administrative expenses were $13.1 million for the year ended December 31, 2019, compared to $10.7 million for the year ended December 31, 2018. The increase of $2.4 million or 22.8% was primarily due to commercial costs related to market research and similar activities for Molgradex as well as increases in personnel, legal accounting, insurance, business development and other operating activities.

I'll conclude my remarks by commenting with the recent equity financing, we believe we are well positioned to execute upon our current business plan, including our upcoming IMPALA 2 study. And now back to Rob for closing remarks.

Thank you, Dave, as well as Badrul and Taneli. While the last year came with considerable challenges, we closed the year on high note and are extremely encouraged by positive data from the open-label period of IMPALA. These data strengthen our belief that Molgradex could be a potential game changer in the lives of people living with aPAP. And I would like to thank all the patients and their families and the investigators who participated in the study. We're grateful for your commitment in helping us to advance research in this debilitating disease.

With regard to Molgradex in aPAP, we move into 2020 with renewed clarity on how to execute on our priorities, focusing our attention on IMPALA 2. We look forward to keeping you updated as we make progress on this front.

As for NTM, we will continue to assess the outcomes of OPTIMA in combination with the results from ENCORE once they're available so we can make a more informed decision about the future of this development program. As always, we appreciate your continued support. And thank you, everybody, for dialing in.

And let me hand the call back to Allison for analyst questions.

(Operator Instructions) Our first question today will come from Josh Schimmer of Evercore ISI.

First on Molgradex for PAP, can you comment on any underlying discussions with the FDA for a potential accelerated approval based off of the IMPALA data prior to really the second Phase III trial?

And then for the NTM indication, can you talk a little bit about some of the other potential in terms of these features. I know in the past there's some commentary that GM-CSF may improve patient outcomes, such as anorexia or weight loss and fatigue?

And also, did you discuss the balance of the efficacy profile that you're seeing against the risk of pulmonary or disease exacerbations -- characterize the exacerbations and their severity just balancing the risk-benefit of that -- of the product in that indication?

Can you repeat the question that you asked on aPAP? The line was not very clear, sorry.

Sorry, I was just asking about the status FDA dialogues for potential accelerated approval filing off of the IMPALA study prior to, I think, the second Phase III trial.

Yes, this was an ongoing discussion within the company, and we also had discussions with regulatory bodies. At the end, this was a decision taking into consideration everything, including the business decision, our priority going forward with the second study and the strength of the data from the IMPALA study itself. In large part, we took into account our priorities internally with the focus on in IMPALA 2 as well as what the progress in terms approval are there in the FDA with the type of data that we had from IMPALA. So at this point, our comp is very clear to do a definitive Phase III study and use that study along with the IMPALA study to have a clear path for approval. The IMPALA study itself has shortcomings that we did not feel very strongly committed for regulatory filing.

And then, Josh, the second part of your question was on the NTM study. So I'll hand over to Taneli, but we didn't quite hear all of your -- all of your questions. Did you catch -- did you get it Taneli?

Yes. So Josh, thank you for your question. As I heard your question, you wanted to know a little more about the known microbiology findings and specifically made point about potential improvement of anorexia and maybe some other outcomes. And so we have looked at some of the second endpoints systematically in terms of the descriptive statistics. And we have no clear sign that on average we could see improvements in factors such as weight loss or 6-minute walk distance. And this being an open-label study, it is, of course, incredibly hard to make judgments in small patient populations for endpoints such as this in NTM. So we feel the microbiology result is the most relevant here, but we will be looking into anecdotes in the single patient cases more carefully to see if there is some pattern that isn't obvious in the averages, and this is what we mean when we say that we'll be still evaluating the outcomes more and putting that together eventually with the ENCORE data as well.

Okay. And then a comment on the exacerbations in the NTM study and their severity and the extent to which they may offset all the benefits?

So this would fall into the same category of patient anecdotes over that and, like, it's very difficult in this type of a study to make a judgment as to, like, are we reducing exacerbation rates when we have no control group. But that said, like I spoke about the other types of clinical outcomes, we will be looking into some cases where perhaps, regardless of the microbiology, there might still be some suppression of infection and there could be some impact on exacerbation frequency. That's definitely possible of that.

(Operator Instructions) Our next question will come from Suji Jeong of Jefferies.

This is Suji. So I have a question about the AeroVanc Phase III trial. You said you're going to enroll about 140 patients for the primary analysis group instead of 150 originally planned. So I was wondering if that would impact the powering assumption.

Well, obviously, any adjustment of sample size downwards has some effect. In this case, it is a few percent points so it is not a very big impact.

Okay. And then my second question is on the IMPALA -- the second IMPALA study. Could you guys comment on the interactions with the EMA so far?

On the second IMPALA study, our initial interaction will be with the FDA. And through that interaction, we would like to come up with a design that is agreeable with the FDA, and then we will consider to discuss that with the EMA.

Okay. That's good to know. And my last question is the number of deaths that you saw in the OPTIMA study. So just wondering if that 3 deaths that you saw, is that similar to -- is that what you would have expected given the severity of the disease?

Yes. I mean, obviously, a small study, so the numbers just reflect the severity. We have often old subjects who have chronic disease and advanced disease as well. There is not much more to it.

Ladies and gentlemen, this will conclude our question-and-answer session. At this time, I'd like to turn the conference back over to Rob Neville for closing remarks.

And actually, we got one question over e-mail so I'll just read it out. Have you seen the coronavirus impacting your business at all? And if so, what are you doing about it?

Yes. Well, thank you for that question. The exact impact of the outbreak obviously is a concern. We're doing all the necessary precautions from a company standpoint. The impact, as you heard earlier on the AVAIL study, especially in patients living with cystic fibrosis, travel is going to be an issue. So the exact impact is unknown. And this is why we're going to -- we've made the decision to close the enrollment for that study at the end of Q2 versus waiting until we get the 150. But we are monitoring the situation and implementing whatever practices that are needed to protect the safety of our employees, our business operations as well as our patients.

I think that's it. Thank you, everybody. We will always be here for conferences with investors should it be needed. Thank you. Goodbye.

The conference has now concluded, and we thank you for attending today's presentation. You may now disconnect.